Wikimedia CommonsPhoto: Darwin Bell. Real Estate Equities Are in A Sweet Spot
After a disappointing 2013, returns on real estate beat equity returns by a wide margin year-to-date. Improving fundamentals and attractive valuations, coupled with a relatively stable bond yield environment translate into a sweet spot for real estate. These are the conclusions of a recently published report by ING IM, which holds an overweight position in global real estate equities.
Real estate underperformed in 2013
Real estate equities – or real estate investment trusts (REITs) – underperformed the broader equity market substantially in 2013. As the graph clearly shows, the strong rise in bond yields (sparked by Ben Bernanke’s taper talk) and as a consequence in mortgage rates in the US was the main factor behind the underperformance and overruled the stabilization and/or improvement in the underlying fundamentals.
Year-to-date, real estate equities are the best performing asset class. Both in the US and Europe, real estate is outperforming equities. Japan is the odd man out with real estate underperforming an already weak equity market.
Economic backdrop is improving
The strong year-to-date performance of real estate is not a big surprise to us, as the environment has improved in recent months. An improving global macroeconomic backdrop, illustrated by increasing real estate prices and transactions is combined with relatively stable global bond yields.
You may access ING IM’s full report through this link.
Wikimedia CommonsLéopold Arminjon manages the Henderson Horizon Pan European Alpha. How ‘Absolute’ is Your Absolute Return Fund?
Absolute return funds aim to deliver a positive return through all market cycles – but that is often where their similarities end.
Such is the variety of strategies utilised by the funds within the Investment Management Association (IMA) ‘Targeted Absolute Return’ sector that the IMA itself counsels against attempting performance comparisons across the whole sector. Undoubtedly, however, their popularity with cautious investors as a ‘core holding’ has soared in response to the volatility experienced over the last several years, with £2.2 billion in net retail sales ploughed into the sector in 2013 according to the IMA. Even for January 2014, they were reported to be the month’s top-selling sector, with net retail sales of £343 million.
Diversification and risk control are usually sought by these investors but the methods used by individual funds to achieve these objectives are many and varied. They may include a variety of ‘alternative’ assets and utilise investment techniques such as short selling, derivatives and arbitrage. Others have a relatively ‘vanilla’ approach to absolute return investing, using a straightforward long/short equity methodology devoid of complex derivative or quant strategies.
As Léopold Arminjon of Henderson’s Pan European Alpha strategy explains: “We aim to deliver a disproportionate amount of market performance given the risks we take and we are extremely sensitive to drawdowns. The strategy – to which the Pan European Alpha has been aligned since December 2012 – has delivered positive returns in 2011, 2012 and 2013”.
Many equity markets soared to record highs in 2013 and this blunted the appeal of absolute return investment in a ‘risk on’ environment. However, volatility returned early this year and the VIX index (or ‘investor fear gauge’) leapt on weakness in emerging markets, while central bank tapering and the slowing Chinese economy presage further trouble ahead. Where risk-averse investors might traditionally seek sanctuary in bonds, the effect of quantitative easing has driven down government bonds to the extent where shorter-dated bond yields offer little or no compensation for inflation. At the same time, interest in the absolute return approach is being stoked by fears that equities have had a strong rally and are due a correction.
However, the job of absolute return fund managers was made harder in recent years by macro-economic conditions, often driven by central bank interventions, resulting in a high degree of correlation between markets and asset classes. Aside from the rout of 2008, 2011 was the worst year for long/short strategies since 1994 as equity performance was volatile but driven by herd instinct rather than by stock fundamentals.
Show me the stock dispersion
The problem many managers found during that period was the lack of dispersion between single stock names due to the limited differentiation between price actions of individual equities from mid-2011 until mid-2012. Macro-economic concerns, mostly emanating from Europe, caused investor sentiment to veer between risk on and risk off, cyclicals and defensives. During this phase little attention was paid to company fundamentals, which are essential for a long/short manager’s success – fund managers cannot realistically be expected to generate alpha if their longs and shorts are all moving together and will be warmly welcoming the return to a more benign environment for long/short strategies.
With their potential to preserve capital while delivering upside with less volatility than a long-only approach, the appeal of absolute return funds will continue for a broad swathe of investors given the risks in equity markets which remain as we enter the second quarter of 2014.
Wikimedia CommonsIgnacio Fuenzalida. MFS IM Strengthens Commitment to Chile with Ignacio Fuenzalida
Global asset manager MFS Investment Management has announced the addition of Ignacio Fuenzalida as Director of Sales for Chile. Fuenzalida, who will be based in Santiago, will support MFS’ retail clients in Chile. Fuenzalida will work with Chilean private banks, local brokerage firms, funds of funds, family offices, multifamily offices, and insurance companies.
“We are thrilled to welcome Ignacio to MFS,” said Jose Noguerol, managing director of South America with MFS. “He brings a wealth of knowledge of the professional buyer marketplace and he will help us build on our success in the region.”
Fuenzalida joins MFS from JP Morgan Asset management, where he helped oversee the firm’s distribution of mutual funds and served as a client advisor in Latin America. Prior to that, he was a portfolio manager and head of foreign equities and balanced portfolios for Cruz Del Sur AGF S.A. Fuenzalida began his investment career in in 2007 as a foreign equity analyst and trader with AFP Provida. He holds an MSc in Finance and a B.A. in Business Administration from the Universidad de Chile.
MFS has managed money for Latin American clients since 1989. MFS manages more than US$420 billion as of 28 February for clients worldwide.
MFS is an active, global asset manager with investment offices in Boston, Hong Kong, London, Mexico City, São Paulo, Singapore, Sydney, Tokyo and Toronto.
Wikimedia CommonsPhoto: Ignacio Deschamps. . BBVA Changes its Organization to Accelerate The Group's Digital Transformation
BBVA is taking a significant step in its transformation process by creating the business area of Digital Banking, led by Carlos Torres Vila. The new division’s initial priorities are to accelerate the Group’s transformation and boost development of new digital businesses. Furthermore, BBVA has appointed Jaime Saenz de Tejada as the head of Strategy & Finance. At the same time, the bank is creating a new division that includes South America and the global retail business lines, which will be led by Ignacio Deschamps. Cristina de Parias joins the Executive Committee as head of Spain & Portugal.
Francisco Gonzalez, BBVA’s chairman, said, “The new structure will be an important factor in converting an efficient and profitable analogue bank into a digital knowledge-services business. After setting up the platforms, which are the foundations of our digital project, we can now accelerate the creation of new products and services for 21st century customers.”
The prime goal of the Digital Banking area will be to lead the digital transformation of all Group businesses in all regions. Therefore Digital Banking will be in charge of all commercial offerings, the multi-channel strategy, the distribution model and the design of commercial and operational processes. It will have the necessary local resources for this purpose.
Another priority of Digital Banking will be to develop new business lines. As a result, it will combine internal developments such as Wizzo with the bank’s startup investments involving BBVA Ventures and the acquisition of innovative companies such as Simple, which was announced recently.
To achieve its goals, Digital Banking will develop a culture that reflects active execution and the management of projects through small autonomous teams, incorporating internal and external talent.
With the creation of Digital Banking, the second phase of the Group’s transformation begins after completing the development of the new technological platforms.
Carlos Torres Vila joined the Group in 2008 as head of Strategy & Corporate Development. He was previously head of Strategy and CFO at Endesa. He graduated from the Massachusetts Institute of Technology with a BS in Electrical Engineering and a BS in Management Science in 1988 and obtained an MBA in 1990 at the Sloan School of Management. The new area Digital Banking will report to Angel Cano, BBVA’s chief operating officer.
“Customers are changing the way they relate to their banks and BBVA is anticipating this change,” said Mr. Cano. “The new structure will allow us to respond better to today’s customers and to those of tomorrow.”
Jaime Saenz de Tejada will take over the Strategy & Finance unit. Until now he was head of Spain & Portugal, and prior to that he was head of BBVA Banco Continental in Peru, and manager of Corporate and Investment Banking in the Americas, in addition to other appointments. In Strategy & Corporate Development he will assume the responsibilities previously handled by Carlos Torres Vila. In Finance he replaces Manuel Gonzalez Cid who, after 12 years of an outstanding job as CFO amid a very complex regulatory and financial environment, will now join the chairman’s office as adviser for strategic affairs.
BBVA is also setting up a new division that includes South America and the global retail business lines, which will be led by Ignacio Deschamps. This area will be responsible for the South American franchises and for the global businesses of Insurance, Asset Management and Consumer Finance. It will also provide liaison and support for Garanti in Turkey and for the retail team in China. The division will be responsible for markets and businesses with strong growth potential and will be critical to the Group’s income generation. The new area will be named Global LOBs & South America. The Payment Systems business line will be part of Digital Banking. Ignacio Deschamps joined the Group in 1993 and was named member of the Executive Committee in 2006, when he was head of BBVA Bancomer.
Cristina de Parias joins the Group’s Executive Committee as head of the Spain & Portugal area. Prior to this appointment she was head of the Central Region in Spain. She joined BBVA in 1998 and has held positions in digital business development, payment systems, Uno-e and consumer finance, among others. Cristina de Parias holds a degree in law and earned an MBA from IESE.
Foto: ComReal. Deutsche Asset & Wealth Management compra Las Olas Centre en Fort Lauderdale
Deutsche Asset & Wealth Management’s (DeAWM) real estate investment business announced that it has acquired 350 and 450 East Las Olas Boulevard, Fort Lauderdale, Florida on behalf of one of its clients.
The property, consisting of two towers, offers 468,000 square feet of office and retail space in the central business district. The Centre occupies approximately 3.4 acres and 600 feet of frontage on Las Olas Boulevard in Downtown Fort Lauderdale.
The project, certified LEED Gold with the U.S. Green Building Council, is one of very few options for trophy quality Class A office space in a desirable location due to walking distance to shopping, restaurant and entertainment precincts, as well as proximity to airports, highways and executive housing.
“Las Olas Centre is a great addition to our portfolio. We believe Las Olas Centre is the premier office asset in the market with exceptional amenities including its retail tenancy. Our view is that the buildings’ improvements and central location in the Fort Lauderdale CBD will continue to attract top tier tenants at market leading rents – positioning the property to deliver strong long term returns for our client,” said Todd Henderson, Head of Real Estate, Americas, at Deutsche Asset & Wealth Management.
Deutsche Asset & Wealth Management’s real estate investment business (formerly RREEF Real Estate) has been investing in real estate assets for more than 40 years. As part of the Alternatives and Real Assets platform, this business today has more than 450 employees around the world and US$47.0 /€34.1 billion¹ in assets under management as of December 31, 2013 , and offers a diverse range of strategies and solutions across the risk/return and geographic spectrums, including core and value-added real estate, real estate securities, real estate debt and opportunistic real estate. The real estate investment business employs a disciplined investment approach and aims to deliver superior long-term risk adjusted returns, preservation of capital and diversification to its investors, which include governments, corporations, insurance companies, endowments, retirement plans, and private clients worldwide.
Standard Life Investments, the global fund manager, has announced the launch of Global Focused Strategies (GFS) an absolute return portfolio that aims to generate high, positive returns irrespective of market conditions. Available for institutional investors, GFS targets a return of cash +7.5% per annum over rolling three-year periods. It is expected that this return will be delivered with between 6% to 12% volatility.
GFS is managed by Standard Life Investments’ award winning multi-asset investing team, using the established investment platform and risk infrastructure that underpins the Global Absolute Return Strategies and Absolute Return Global Bond Strategies portfolios. This infrastructure supports the construction of a diverse portfolio, with the result that GFS can perform well in a wide range of conditions and is resilient to stress scenarios.
Commenting on the launch, Guy Stern, Head of Multi-Asset and Macro Investing, Standard Life Investments, said: “Standard Life Investments continues to develop innovative investment strategies to meet global client needs. GFS is an advanced fusion of our macro and micro capabilities, underpinned by our team-based approach and multi-asset risk and portfolio management expertise. It benefits directly from the experience and insights of our equity, fixed income, real estate and money market specialists. This allows GFS to fully exploit our investment views to enhance portfolio efficiency.
Operating with broad investment freedom within rigorous risk controls, GFS invests actively within and between all major asset classes and across the corporate capital structure. It can also make extensive use of derivatives to implement positions and mitigate risk. This allows GFS to access a diverse array of strategies, so it can generate positive returns irrespective of the economic environment.
GFS was launched in December 2013 with international support totalling €110m. Clients include pension funds and discretionary wealth managers from three countries. It is a Luxembourg SICAV with share classes in multiple currencies. It is accessible and priced daily with no notice-period and has a flat fee of 1.2% per annum, with no performance-related component.
According to research from global analytics firm Cerulli Associates, U.S. mutual fund product launches tripled in the second half of 2013, compared to the first half of 2013.
“We have seen an increase in development, across stock, bond, and international asset classes,” states Pamela DeBolt, associate director at Cerulli. “More specifically, there was an increase in the number of launches in international strategies, including global equity, emerging markets equity, and bond strategies, as well as U.S. equities including large blend and large value.
In the Products and Strategies 2013: The Changing Landscape of Product Development and Delivery report, Cerulli focuses on asset managers’ product strategy and development across different asset classes (e.g., fixed income, alternatives) and vehicles (e.g., collective trust funds, exchange-traded funds, CEFs, and mutual funds), and product groups’ organizational structures and governance processes.
“Many firms disclosed that they expected product development to slow last year, and it in fact accelerated,” explains DeBolt. “Nearly 50% of managers reported they planned to launch less than 4 new products in 2013. Only 13% of firms indicated they planned to launch more than 6 new products in 2013, which was down from 18% in 2012.”
“The demand for income is the main driver of retail product innovation,” DeBolt continues. “Managers that are innovative in their approach to provide income-oriented solutions will be well positioned to gather flows from both the retail and institutional marketplaces.”
Product developers have expressed the desire to focus on selling their existing product repertoire, rather than put more resources toward new development ideas. However, pressure from sales makes it challenging to slow product development.
Robeco has been working on the development of its strategy for 2014-2018 since the acquisition of a 90 percent stake in Robeco Groep N.V. by ORIX Corporation in July 2013. The revised strategy is based on the growth ambitions of Robeco and its majority shareholder. With ORIX as the new majority shareholder and the successful completion of Robeco’s strategy 2010-2014, the next step for Robeco is to focus on growth in the coming years.
Robeco’s strategy 2014-2018 will further build on the foundations laid in the previous strategy period. During that period Robeco’s assets under management have grown from EUR 132 billion at the start of 2010 to EUR 205 billion at the end of 2013, of which 47% are institutional. Robeco expects to exceed an AuM level of EUR 300 billion in 2018 from organic growth, what means a 46% growth. The EBIThas increased by 84% from EUR 157 million in 2010 to EUR 290 million in 2013.
Robeco has also been successful in realizing attractive investment returns and outperformance for clients; in 2013 75% of its products outperformed their benchmark (over a three-year period, gross of fees). Despite a year of ownership change, Robeco managed to attract a net inflow of EUR 1.5 billion and realized a net profit of EUR 118 million in 2013.
Strategy 2014-2018
The strategy 2014-2018 focuses on growth in three regions, the US, Europe and Asia. In these regions Robeco and ORIX have a strong presence and foundations on which further expansion can be realized. Growth is expected to come from existing and new activities expanding from Robeco’s current base. Robeco expects to exceed an AuM level of EUR 300 billion in 2018 from organic growth. During this period Robeco and ORIX will also look for acquisition opportunities.
Roderick Munsters, CEO Robeco: “Robeco has an 85 year heritage in servicing clients with asset management services and we want to remain a trusted long-term partner for our clients globally. We expect substantial growth in the US, Europe and Asia. At this time, approximately half of our AuM and clients originate from the US and we see strong growth potential in this market. We also see good potential in Asia and Europe, where we will expand in the coming years. The Netherlands remains a key market, in which we offer attractive investment products, solutions and service levels to our clients.”
Foster growth in the US
Robeco expects strong growth of its subsidiary Robeco Investment Management (RIM) by focusing on the strength of RIM as a value equities manager. RIM’s Value Equity capability has an excellent performance record and is expected to meet strong client demand in the strategy period. In addition to fostering growth at its subsidiary Harbor Capital Advisors, Robeco will also strengthen the distribution of Robeco products in the US.
In the US, Robeco opened a new office two years ago in Miami, Robeco Miami B.V., dedicated to the distribution of Robeco’s international funds among the key players in the Americas region in the offshore and Latin American arena. During the past two years this office has successfully signed agreements with the main broker dealers and international private banks in the region.
The successful execution of the strategy 2014-2018 requires a corporate structure that will support further international growth, especially in the US. ORIX and Robeco are assessing the possibilities of adjusting Robeco’s corporate structure. The corporate restructuring should secure a level playing field for Robeco among its international competitors by establishing a new holding company, and should simplify the organizational setup.
Invest in Asia
In Japan, besides looking for suitable acquisition opportunities, Robeco is further developing its sales set up and leveraging on the ORIX network. In addition to the current sales offices in Asia, Robeco is considering the opening of an office in Singapore with a focus on sovereign wealth funds and key accounts. The investment capabilities based in Asia will continue to focus on Asia Pacific Equities, but Robeco also has the ambition to expand into Asian fixed income.
Scale up in Europe
Robeco will expand its European sales by adding further resources to existing sales offices and setting up an office in the UK focusing on key account management, consultant relations and the UK institutional market. In Europe, Robeco expects to realize growth with its quant capabilities, pension solutions and sustainability integration. As well as continuing to offer and develop pension solutions in the Netherlands, Robeco plans to enter the German and Swiss markets with multi-asset pension solutions. Robeco sees that client demand is shifting from products to solutions and believes that in the longer term it can provide suitable services to meet this demand and grow from this shift.
Robeco’s activities in Rotterdam, the Netherlands, will remain unchanged and Robeco will move to its new Rotterdam offices in 2016 as announced earlier.
ABN AMRO Amsterdam. CACEIS to Administer the First Two ABN AMRO Basic UCITS ETFs
ABN AMRO Investment Management B.V. has launched the first two ABN AMRO Basic UCITS ETFs which have been listed on Euronext Amsterdam.
Following a long RFP process, ABN AMRO awarded the fund administration mandate to CACEIS, which is responsible for providing accounting and related services to the funds.
The two ABN AMRO Basic UCITS ETFs respond to the strong demand for passive investment fund solutions in the market. The Dutch domiciled funds invest in a physical basket of shares which replicates the complete composition of the tracked index. The funds do not make use of securities borrowing and lending, and therefore there is no counterparty risk with the ETFs. They can be bought in the orderbook or on the closing NAV of the day.
According to Bart Mantje, Director at ABN AMRO Investment Management, “We are delighted to be able to offer these high quality investment solutions to the market. We believe that ABN AMRO Investment Management, combined with the advanced ETF fund administration services of a leading provider like CACEIS demonstrates our willingness to respond to the market’s demands for simple and transparent investment opportunities”.
Joseph Saliba, Deputy CEO of CACEIS said, “We have been working closely with ABN AMRO Investment Management to ensure that our market-leading ETF servicing capabilities are precisely tailored to our client’s requirements. The CACEIS group is also strengthening its commitment to the entire Dutch market, as our new banking license enables us to greatly extend the range of services available to clients through our Amsterdam office.” About CACEIS
BNP Paribas Securities Services, a global custodian with over USD 8 trillion in assets under custody, and AXA Investment Managers have announced the extension of an existing partnership to include settlement agency services in Latin America through BNP Paribas’ membership to the National Securities Clearing Corporation (NSCC) regional clearing platform.
The deal represents a significant move by AXA IM to capitalise on the trend for fund managers distributing into the Latin American region. Investors and, crucially, local regulators are becoming ever more open to opportunities to connect local investors with inbound international funds. Connecting to NSCC through BNP Paribas enables AXA IM to make its fund ranges accessible to the largest brokers active in Latin America. This step is part of AXA IM’s ongoing efforts to expand and strengthen its geographical footprint.
Joseph Pinto, Chief Operating Officer, at AXA IM said, “Latin America is a key target market for us as the doors into the region are opening. This deal sees the extension to Latin America of AXA IM’s ‘Offer to meet Needs Everywhere’ (ONE) – a highly successful client service platform already in place in Europe and Asia. We want to make it as easy as possible for clients to invest with us and the ONE platform was designed to provide simple and efficient access for investors to AXA IM’s fund ranges. BNP Paribas has shown constant support in our international expansion, providing expertise in regulatory change and distribution trends locally. We are pleased to be partnering with them in our efforts to make our funds available to investors in Latin America.”
Jean Devambez, head of asset and fund solutions, BNP Paribas Securities Services said, “We applaud AXA IM for this move into Latin America and are very happy they have chosen to appoint us. European asset managers have their sights fixed on Latin America, but there are several barriers which are causing them to hesitate. We believe that a fuller understanding of the region will allow many more managers to take advantage of the opportunities there.”
BNP Paribas, in conjunction with SAGALINK consulting, recently produced a white paper on the five most important target destinations for fund distribution in Latin America. The white paper is designed to aid fund managers navigate the nuanced local regulatory environments and understand investor behaviours.
Devambez continued, “Latin America has become a hot spot for fund distribution, attracting a growing number of foreign funds and asset managers attempting to capture rapidly growing local interest in foreign securities. We understand the challenges our clients face when entering new markets, and look to stand by them throughout the process.”
