Citi has announced a landmark commitment to lend, invest and facilitate a total of $100 billion within the next 10 years to finance activities that reduce the impacts of climate change and create environmental solutions that benefit people and communities. Citi’s previous $50 billion goal was announced in 2007 and was met three years early in 2013.
With this $100 billion initiative, Citi will build on its leadership in renewable energy and energy efficiency financing to engage with clients to identify opportunities to finance greenhouse gas (GHG) reductions and resource efficiency in other sectors, such as sustainable transportation.
As part of a commitment to helping cities thrive during this period of unprecedented urban transformation, Citi will seek to finance and support activities that enable communities to adapt to climate change impacts and directly finance infrastructure improvements that increase access to clean water and manage waste, while also supporting green, affordable housing for clients, including in low- and moderate-income communities.
“Citi has demonstrated its deep commitment to not only taking environmental consequences into account, but also finding innovative ways to finance projects that lead to sustainable growth,” said Michael Corbat, Chief Executive Officer of Citi. “For more than 200 years, Citi’s mission has been to enable progress by facilitating economic growth and financing transformative projects. The core mission hasn’t changed, but the way we approach it has. Incorporating the principles of sustainability into everything we do improves our own operations, enhances our clients’ work, and contributes to a better world.”
“Reducing carbon emissions and becoming more climate resilient is a key priority and major challenge for the world’s megacities and their business communities,” said James Alexander, Head of the Finance and Economic Development Initiative at C40 Cities Climate Leadership Group, a network of the world’s biggest cities working to become more sustainable. “C40’s ongoing partnership with Citi is helping global cities overcome their climate finance challenges. Today’s announcement from Citi will add further opportunities to help cities achieve their climate targets, and allow businesses to become more sustainable.”
Large institutional investors are likely to make significant shifts in asset allocation in 2015 in response to divergent market and macro-economic trends, a new BlackRock survey has found.
The poll of 169 of BlackRock’s largest institutional clients representing $8 trillion in assets, found these investors are focused on growth rates in developed economies, divergent monetary policies and the potential for deflation. As a result, respondents predicted significant moves in their portfolios towards alternative investments and less traditional fixed income strategies that aim to provide returns across varying market conditions. Senior investment professionals at the surveyed institutions also expressed concerns about escalating geo-political tensions.
“Mixed economic growth forecasts and shifting monetary policies are significant challenges for our clients. These conditions are testing investors’ ability to generate sufficient returns to meet their long-term liabilities,” commented Mark McCombe, Senior Managing Director and Global Head of BlackRock’s Institutional Client Business. “In today’s environment, we advocate proactive risk management. We believe institutional investors should also consider alternative and non-traditional asset allocations, particularly longer dated ones that allow institutions to ride out the expected near-term volatility.”
Low rates, deflation fears in Europe and Japan
Investors are challenged by historically low interest rates and patchy economic growth in many developed economies, although they retain near universal confidence in central bank policy, according to the survey.
Investors are anticipating continued low rates with 74% believing it was unlikely the US 10-year Treasury note would rise above a 3.5% yield over the next year, while 88% also believe it is unlikely the Fed will tighten too much too soon. Meanwhile, 56% believe Europe will likely enter a deflationary regime. However, 63% believe that the European Central Bank will maintain its credibility with investors. More than two-thirds of respondents (69%) believe China’s growth will dip below 7%.
Real estate, real assets and flexible fixed income strategies favoured
Senior investment professionals expressed increased appetite for allocations to real assets, real estate, private equity and unconstrained fixed income. Six in 10 anticipate increasing allocations to real assets and approximately half plan to add to real estate (50%) and private equity (47%). Conversely, more than a quarter (26%) anticipate decreasing allocations to cash and 39% will decrease investment in fixed income. Fixed income portfolios are also changing, as many investors are moving out of core and long duration strategies while increasing allocations to unconstrained (35%), emerging market debt (38%), US bank loans (33%) and securitised assets (23%).
Mr. McCombe added: “The trend towards alternatives isn’t new, but what is surprising is the level of conviction institutions towards physical assets like real estate and infrastructure. We believe many institutions are structurally under-invested in real assets, and it is great to see they are more bullish on these strategies than they were 12 months ago. The moves in fixed income are also significant and highlight the importance of manager selection and mandate flexibility in a time of yield scarcity.”
Regional Results
European institutionsstrongly favour real assets and real estate: In Europe, senior investors were even more bullish on real assets and real estate. 69% anticipate increasing allocations to real assets against 2% saying they would decrease allocations, while 66% plan to add to real estate versus 9% who said they would decrease allocations. 36% intend to increase allocations to private equity against 14% who would decrease, while contrary to the global trend a net 9% said they would increase allocations to public equities (40% to increase versus 31% to decrease).
Asia-Pacific institutionsallocation changes in line with global investors: In Asia Pacific, institutions are showing similar appetites for increasing allocations in real assets (64%), real estate (54%) and private equity (43%) as their global peers while 44% of them anticipate moving out of fixed income. Within fixed income, allocations to high yield and long duration are expected to decrease, with unconstrained (41%), emerging markets (38%) and short duration (32%) gaining favour.
US and Canada institutionspare equity and cash exposure and add to alternatives: US and Canada respondents’ reactions to the sustained bull market in equities were to reduce their exposure with 39% indicating they would decrease equity allocations. Additionally, 20% of respondents in this region are planning on reducing cash holdings. As with their counterparts around the world, alternative strategies and assets are attracting interest, with more than a third of the respondents saying they would increase investment in private equity (46%), real estate (34%) and real assets (53%).
Global investors are significantly more positive on the outlook for Europe after the European Central Bank’s announcement of quantitative easing to reflate the region’s economy, according to the BofA Merrill Lynch Fund Manager Survey for February.
An overall total of 196 panelists with US$559 billion of assets under management participated in the survey from 6 February to 12 February 2015. A total of 157 managers, managing US$459 billion, participated in the global survey.
Europe’s profit outlook is at its best since 2009, according to panel members. A net 81 percent of regional specialists see the economy strengthening in the next year. Against this background, a record net 51 percent make the region their top pick in equities over a one-year horizon, up from January’s net 18 percent. A net 55 percent are already overweight.
The U.S. has been the main loser from this rotation. Overweights on U.S. equities have declined to a net 6 percent, down 18 points versus last month.
Overall, fund managers have increased their allocations both to stocks (a net 57 percent overweight, up six points month-on-month) and cash (a net 22 percent overweight, a five-point rise). This is at the expense of bonds, which are now seen as overvalued by a net 79 percent. Bonds are also perceived as the asset class most vulnerable to increased volatility this year.
Despite exuberance over Europe, the global growth outlook is little changed. This reflects declining expectations on China. A net 58 percent of respondents now expect that country’s economy to weaken over the next 12 months, the survey’s lowest reading on this measure in nearly two years.
“The ECB has successfully vanquished global deflation fears and induced the return of reflation trades in February,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Research. “Sentiment has gotten ahead of the fundamentals on European equities. It is as if there is not a single bear left. We will need to see a strong recovery very soon to keep the bulls happy,” said Manish Kabra, European equity and quantitative strategist.
Eurozone only
Investors’ new bullishness on Europe is strongly focused on the Eurozone. Non-Euro markets are out of favor. Last month, France and Italy stood out as their worst picks, but a net 42 percent of regional fund managers now intend to underweight the U.K. and Switzerland this year. They have also shifted to a negative stance on Sweden.
Autos are now European regional investors’ favored sector. A net 26 percent are overweight, a month-on-month gain of 12 percentage points. The travel and leisure area has also gained support with a 10-point rise.
In contrast, banks and insurers saw notable declines in sentiment. Month-on-month falls of 32 and 20 percentage points, respectively, have taken both into underweight territory. Utilities are now the region’s least favored sector.
Inflation fuelled
Anxiety over potential Eurozone deflation has declined with the ECB’s QE announcement. Indeed, inflation expectations are picking up. A net 29 percent of fund managers expect global core CPI to be higher in a year’s time, up from a net 14 percent a month ago.
A potential geopolitical crisis is now clearly respondents’ major tail risk. One in three identifies it as their major concern.
Gold glisters again
China’s weakening outlook is weighing on Global Emerging Markets equities, but net underweights on GEMs have declined by 12 percentage points since January to a net 1 percent.
Sentiment towards gold is also improving. Forty percent of survey participants expect the price to be higher in 12 months’ time. Last month, bears on the precious metal still outnumbered bulls.
Only a net 3 percent now considers gold overvalued, compared to a net 20 percent as recently as December.
Many investors continue to see value in oil. A net 39 percent regard crude as undervalued, down slightly from January’s reading.
The European Central Bank (ECB) pulling the trigger on QE was the first big news of 2015. According to the Generali Investments Europe analysts, this will set the tone for financial markets for quite some time to come.
“Core government bond yields will stay extremely depressed”, said Klaus Wiener, Chief Economist of GIE, in his Market Perspectives for February 2015. “With core yields so low, investors will be pushed into riskier assets; as a result, Euro area stocks will rally with double-digit total returns now likely both this year and next”.
Over the past few months, the outlook for the euro area economy has improved due to a number of factors. Above all, as the ECB’s various programs increasingly unfold their impact, faster loan growth in the private sector is likely. In addition, the euro area economy will benefit from the sharp decline in oil prices and the strong depreciation of the euro. All in, while some significant headwinds remain (e.g. geopolitical risks, weaker growth in emerging markets) a relapse into recession has become increasingly unlikely. If anything, some macro indicators of the euro area could start to surprise positively over the next few months.
On the fixed income side, yields have continued to drop, in some cases even to new historical lows. Since US yields are likely to rise in response to solid domestic conditions and the nearing of a first key rate hike, the transatlantic yield spread will reach new highs. Non-financial corporate bonds are still attractive in relative terms.
Just like the economy, equities stand to benefit from the weaker euro and the much lower oil prices. Even more importantly, with the low-yield environment to persist as a result of the ECB’s QE, investor demand will remain high for this asset class. As a result, GIE expects euro area stocks to outperform many of its peer markets in the developed world over the coming months.
Since Joaquim Levy took over as Brazil’s finance minister, Brazilian markets have been surprisingly resilient. On the back of Levy’s commitment to produce a primary surplus of 1.2% of GDP, expectations that Brazil will avoid losing its investment grade status had increased sharply prior to the Petrobras downgrade last week. As a consequence the real gained 4.8% against the dollar, and 10-year sovereign bond yields were down since Levy’s appointment (see Chart 10).
Although gross public debt and the fiscal deficit have deteriorated sharply since 2011, many view Levy’s presence as enough to prevent a sovereign downgrade. Such confidence that Brazil will evade a downgrade indicates a belief that Levy can and will do whatever it takes to solve Brazil’s fiscal problems. This assumes that he will be given autonomy by President Dilma Rousseff to implement fiscal reforms and that Congress will pass a budget with sufficient cuts to achieve the targeted primary surplus. Given the scope of the recently announced deficit, we are not confident that Brazil will be able to achieve its fiscal target and are sceptical that Brazil will avoid a downgrade.
The 2014 Brazilian deficit, the largest since 1999, increased sharply from last year. The Brazilian central bank announced a primary budget deficit of 32 billion Real ($13.76 billion) for 2014, equal to 0.63% of gross domestic product. This was the first primary deficit in over a decade and a sharp fall from the 91.3 billion Real surplus of 2013 (see Chart 11). The country’s overall budget gap, which takes into account debt servicing costs, doubled in 2014 to 6.7% of GDP, one of the highest among the major economies according to the IMF. Additionally, the steady decline of public sector finances is leading to a wider current account deficit, despite weaker growth and low investment.
Levy appears committed to repairing the severely unbalanced macro conditions through deep fiscal adjustment. However the true extent of the fiscal gap is unclear and it is doubtful Levy will have support from Rousseff and Congress to implement the necessary reforms. Due to Rousseff’s lack of fiscal transparency in her first term, additional outlays exist which make the deficit even larger; an investigation by the Federal Audit Court may conclude that 40 billion Real ($15.6 billion) in expenditures were improperly accounted for since 2012 and must now be fully recognized in the government’s budget; and as much as 8 billion Real ($3.1 billion) of an estimated 30 billion Real ($11.7 billion) in public investment subsidies that have been deferred since 2012 will need to be registered in 2015. This off-balance-sheet spending will deepen the fiscal shortfall and complicate Levy’s efforts to produce a primary budget surplus. Levy recently announced plans to raise taxes on fuel, financial transactions and imports, which will boost revenues by 0.4%of GDP. However, the reforms represent the limits of his powers to improve fiscal conditions without additional congressional approval. As the unfolding Petrobras scandal increasingly occupies Rousseff’s attention and impairs her ability to govern, congressional gridlock is becoming more likely. Despite the optimism surrounding Levy’s efforts, once the true extent of his challenge comes to the fore, markets could be brought back to reality.
Opinion article by Alex Wolf, Emerging Markets Economist at Standard Life Investments
Foto: Nguyen@NYCity, Flickr, Creative Commons. La Française compra el 49,9% de la gestora Alger, especialista de renta variable con sesgo growth
La Française, an international multi-class asset manager, announces the signing of a strategic partnership (pending regulatory approval) with Alger Management, Ltd. La Française will take a 49.9% interest in Alger, an affiliate of Fred Alger Management, Inc., a U.S. asset management firm. Two executives of La Française will sit on the newly appointed five member Board of Alger.
This alliance offers a unique opportunity to create synergies in distribution, market development, and product diversification, says the firm. La Française, through its European network and with the support of its majority shareholder, Credit Mutuel Nord Europe, will provide distribution capabilities and acceleration capital, and Fred Alger Management, Inc. will contribute its recognized expertise in growth equities.
For more than 50 years Fred Alger Management, Inc. has been considered a globally recognized pioneer of growth style investment management, focusing primarily on U.S. equities with additional capabilities in international and alternative equities. It has a long-standing track record and has been recognized numerous times in Europe as a Lipper Funds Awards winner.
Fred Alger Management, Inc. manages approximately $22.4 billion (31/12/2014). Its investment philosophy, in place since its founding in 1964, seeks to identify the best investment opportunities for clients by focusing on companies undergoing “Positive Dynamic Change.” This philosophy, and its analyst-driven investment process, is built on original, fundamental, bottom-up research provided by a more than 40 person investment team.
Patrick Rivière, Managing Director of La Française says, “We pride ourselves in bringing institutional quality investment solutions within everyone’s reach. Together, with Alger, we’ll be developing new markets and building on its well-merited reputation among American retail and institutional investors as a high-standing and innovative asset manager. These past three years of intensive international development have led to this ultimate partnership, completing our now established equities expertise.”
“Establishing this relationship with La Française is another step we are taking to build our presence outside the U.S.,” said Dan Chung, CEO and Chief Investment Officer of Fred Alger Management. “La Française is one of the leading asset managers in Europe, and I am quite pleased that Alger will be working together with La Française to provide expertise in U.S. equities as we build this partnership.”
Lyxor Asset Management announces a new partnership with Quantmetrics Capital Management to join Lyxor’s AIFM managed account platform. With this partnership, Lyxor will launch its first AIFMD-compliant strategy on the platform.
In a context where the environment for CTAs has significantly improved in 2014, this strategy could appear as a strong diversifier to deliver positive and uncorrelated returns to investors.
James Fowler, Founder of Quantmetrics, commented: “With the current environment, institutional investors have difficulties to source opportunities that can offer sustainable performance. Our strategies have been developed to generate returns across different market environments. This is especially true during volatility peaks, where we believe our niche strategies can exploit short term opportunities in highly liquid futures. We are pleased that Lyxor has chosen to partner with Quantmetrics, and we expect institutional investors’ portfolios to benefit from our strategy.”
With over 80 managers running a diverse range of alternative strategies, Lyxor’s Managed Account Platform gives access to a broad universe of best-in-class talent. Superior capabilities in hedge fund selection, portfolio construction and risk management, combined with a high level of customization in terms of transparency or liquidity provide value to investors and address their key decision criteria.
Investment manager Neuberger Berman has announced the launch of its Neuberger Berman Global Real Estate Securities Fund a sub-fund of its Irish-Domiciled UCITS fund umbrella, Neuberger Berman Investment Funds plc.
The Fund invests in a portfolio of global real estate securities with the aim of outperforming the FTSE EPRA/NAREIT Developed Index. The portfolio will typically hold 50-70 securities, diversified by geographic region, countries and property sectors.
It is managed by the Neuberger Berman Global Real Estate Securities Group led by Steve Shigekawa. The team has on-the-ground regional resources, with portfolio managers Steve Shigekawa and Brian Jones based in the US, Gillian Tiltman in Europe and Anton Kwang in Asia Pacific. The Group manages approximately $2.7bn (€2.3) in AUM.
Steve Shigekawa, head of the Global Real Estate Securities Group, commented: “This new fund is a natural extension of our existing US strategy and has been launched in response to increasing interest from clients for global strategies. We have the right people in the right locations to build a focused and differentiated global real estate portfolio.”
Foto: Carlescs79, Flickr Creative Commons. Standard Life Investments convierte su trust de real estate en un REIT
Standard Life Investments has converted its Property Income Trust (SLIPIT) to a REIT (Real Estate Investment Trust) to ensure greater accessibility and tax efficiency for investors.
Accordint to the company, REITs are ideal for wholesale investors who want to buy into the commercial property sector, using the real estate expertise and team ethos within a reputable fund management house.
SLIPIT was launched as a Guernsey-based investment company in December 2003, to provide investors with an attractive level of income with the prospect for income and capital growth by investing in a diversified portfolio of UK commercial real estate. Standard Life Investments has managed the trust since inception and Jason Baggaley has been the manager since 2006.
SLIPIT hasa market cap of £191m (at 31 Dec 2014), and an investment portfolio of direct assets valued at £269.9 million. The Company pays a quarterly dividend, which at the end December 2014 represented an annualised yield of 5.9%.
Gordon Humphries, Head of Investment Companies, Standard Life Investments said: “SLIPIT has been a very successful investment vehicle for the past ten years and we fully expect it to continue to deliver robust returns for investors. We see a growing trend for Guernsey property investment companies to convert to REITs as they offer investors a more established, accessible and liquid form of investment, with greater tax efficiency going forward. Our priority is always to existing shareholders, protecting their value and ensuring there is no dilution. Jason Baggaley will continue to take an active approach to managing the property portfolio in the Company to maximise returns and currently has a fully invested portfolio of office, industrial and retail assets that we believe provide the prospect for attractive returns as rents and capital value increase at this point in the real estate cycle.”
In 2014 SLIPIT won two awards: the Property category at the ‘Investment Company of the Year’ awards, hosted by Investment Week in London and the Investment Adviser 100 Club Awards. In 2014 SLIPIT’s equity base doubled through share issuance and strong investment performance.
Also in 2014 (November) SLIPIT purchased a portfolio of five industrial and logistics units for £23.75 million, reflecting an initial yield of 7.25%. The purchase was funded from equity raised earlier that month. The five assets in Manchester, Birmingham, Cheltenham and Milton Keynes total 390,490sqft. The units are all single-let and have scope for further asset management.
. Laurent Crosnier, CIO de Amundi Londres, asistirá al Fund Selector Summit Miami 2015
Laurent Crosnier, CIO Amundi London, is set to present on the topic of ‘global fixed income in an absolute world’, when he takes part in the Fund Selector Summit Miami 2015, being held 7-8 May at the Ritz-Carlton Key Biscayne.
The event – a joint venture between Open Door Media, the owner of InvestmentEurope and Miami based Funds Society – is targeting locally based fund selectors with the opportunity to hear input from a range of managers.
As 2015 continues to present a complex environment for fixed income investors, Crosnier will argue that alpha generation will be a key driver of return at a time when high liquidity and low interest rates combine to limit the sources of return.
Crosnier began his career in the financial industry in 1989 as a futures trader at ODDO, a European investment banking boutique. He joined Amundi in 1991 as a Euro Fixed Income manager and has been focusing on Euro Corporate management since 1997.
He was was appointed head of Inflation, Duration & Credit management in 2006 and then promoted head of the Euro Fixed and Credit Department in 2008. In April 2010, he was appointed CIO of Amundi London Branch.
You will find all information about the Funds Society Fund Selector Summit Miami 2015 through this link.
