Foto: Xenan. Interior of ING House, headquarters of the ING Group in Amsterda. ING IM Appoints Two Senior Portfolio Managers to EMD Team
ING IM has announced two senior appointments to its Emerging Market Debt team. The company is also in the process of hiring a credit analyst to join the team in The Hague with the view to them assuming fund management resonsibilities at a later date.
Marcin Adamczyk joined ING IM as Senior Portfolio Manager EMD Local Currency, based in The Hague.
Marcin has more than 15 years of experience in EMD Fixed Income markets and joins from MN, a Dutch pension fund fiduciary manager, where he was Senior Fund Manager Emerging Market Debt. Previously, Marcin worked at Lombard Odier Investment Managers in Amsterdam and Geneva, and was a senior portfolio manager for EMD. Before that, he worked as EM local markets trader at various banks, based in London and Warsaw.
Marcin holds a Master’s degree in Economics from the Krakow University of Economics.
Alia Yousuf joins ING IM as Senior Portfolio Manager EMD Local Currency, based in Singapore.
Alia has 13 years of experience managing EMD portfolios and joins the company from ACPI Investment in London where she was Head of Emerging Market Debt. Alia also had various fund management roles at Standard Asset Management and First State Investments. She started her career at the World Bank as a research analyst.
Alia holds a Master’s degree in Economics from the London School of Economics (LSE). She is also a CFA charter holder.
Both report to Marcelo Assalin, Lead Portfolio Manager EMD Local Currencies based in Atlanta, USA.
The team currently manages $7.9 billion in assets. It has more than 25 investment professionals that are based in The Hague, Atlanta and Singapore.
AXA Investment Managers has appointed John Porter as Global Head of its Fixed Income division. John Porter will replace Theodora Zemek who has decided to leave the company. Based in London, Porter will become a member of AXA IM’s Management Board and report to CEO Andrea Rossi.
John Porter joins AXA IM from Barclays where he was Managing Director and Global Head of Portfolio and Liquidity Management. He was also on their Management Committee. John joined Barclays in 1998 from Summit Capital Advisers where he was Chief Economist and Principal performing macro-economic analysis and developing investment strategies in North America, Europe and Japan for this fixed income and currency- based hedge fund.
John has an MA in International Economics and Certificate in European Studies from Columbia University, a Doctorate in Psychology from the Sorbonne, attended the Ecole Normale Superieure and has a BA in Psychology and Social Relations from Harvard.
“We are thrilled that John will be joining us to oversee the next stage in the growth of our Fixed Income division. He has had a very diverse and hugely successful career and brings with him extensive experience from across the fixed income spectrum, as well as a strong understanding of the challenges facing our clients”, said Andrea Rossi, CEO of AXA IM.
Commenting on his appointment John Porter said: “I am pleased and excited to be joining AXA IM. I am inheriting a very strong and diversified Fixed Income business and my goal will be to work with this hugely talented and experienced team to continue to grow our third party assets under management through the same investment approach and philosophy, compounding current income and avoiding principal loss through fundamental credit analysis and macroeconomic research.”
Photo: silvernet2. Calypso Technology Expands Offices in Santiago, Chile
Calypso Technology has expanded their offices in Santiago, Chile. This expansion is in response to a rapidly growing client base and increasing opportunities in the Latin American markets.
The office serves as a professional services hub as well as a sales and marketing base for the region. The territory had previously been managed from Calypso’s New York office, but with recent sales momentum and growth of Calypso’s local and regional client portfolio, including COMDER, Banco Penta, Banco de Crédito del Perú, Banco Crédito e Inversiones en Chile, a local presence was required.
Working with exchanges and banks in the Latin American markets, Calypso provides a cross-asset front-to-back office platform that meets the trading and operational needs of a region that is modernizing and consolidating its capital markets infrastructure. Calypso provides OTC derivatives clearing and processing infrastructure to the world’s top clearing houses, including COMDER, CME, Eurex, BM&FBovespa, TSE, SGX, HKEX and ASX.
Calypsocustomers in Latin America are among the leading users and dealers of a broad range of asset classes including interest rate derivatives, settlement and non-settlement currencies, money market indexed loans, fixed income instruments, FX products and derivatives hedging.
Carlos Patino, Director of Business Development, Latin America & the Caribbean, comments, “Key to our strategy as a global leader has been to identify, understand and implement solutions to meet the challenges faced by local financial institutions particular to their markets. We see great demand for our cross-asset capabilities from banks in the region who are looking to increase market share – both locally and globally, as foreign investors continue to focus on the region. These currents are also being driven by a need to comply with multiple regulatory regimes, while moving quickly to capitalize on current opportunities. We look forward to playing a critical role in evolution of the regional markets and supporting institutions as they grow.”
CC-BY-SA-2.0, FlickrFoto: Chinnian. A vueltas con el libre mercado
Just the other week I was in Hong Kong, which is an easy place to be in many regards. It’s efficient, lively and not at all bureaucratic. It is where I married my wife years ago, even though she is not from there and we were both living in South Korea at the time. Hong Kong is just a marvelously easy place to pursue happiness!
But this time, as I was waiting in the airport, I heard a chilling announcement over the loudspeaker system. Anyone caught trying to leave Hong Kong with more than a few kilograms of baby milk powder would be subject to a HK$500,000 fine (approximately US$65,000) or face imprisonment. What was this all about? Well, following a recent series of scandals over milk and milk formula quality in China, people have been desperate to buy quality brands. They have been willing to pay large premiums to secure high quality formula, and since much of this is available in Hong Kong, the baby formula market there has started to suffer shortages.
As consumers in Asia move into middle class lifestyles, they have begun to care more about the environment, social and safety issues.
Essentially, this is an issue of product quality. And there are several ways to deal with it. This may include tightening regulations surrounding product quality in China, which the country has been doing but with slow progress. Bureaucrats have lost their liberty and one even lost his life over such scandals. You could also seek to limit exports of the product from Hong Kong by deeming it “smuggling” and arresting people who break the new law—and this has been the choice of Hong Kong regulators. You could even try to clamp down on “profiteering” by those “high quality” producers who are enjoying premium pricing in China—and this has been the reaction of the mainland authorities. Or you could allow the free market to do its work. I suspect that this final approach to dealing with the issue would, over the long term, be the most powerful.
If there is money to be made by obsessive attention to quality, then firms will either improve the quality of their products or (in areas where they already lead the market) increase their production. Demand for better products generally increases brand value and customer loyalty. The pricing signals of the market are then reinforced by increased brand awareness. This all saves consumers the trouble of a panicked search for better product. And in the case of adulterated food products, that could mean saving lives.
It also seems to me that the actions of the authorities in Hong Kong and the mainland, whilst they may help with some short-term issues, are at odds with the long-term process of the market. After all, Hong Kong is preventing mainland consumers from getting the quality product they want in the quantities they desire. Meanwhile, mainland authorities are interfering with the price mechanism by which people can identify the best products and by which the manufacturers would be incentivized to supply more.
Ultimately though, it seems likely we’ll continue to see issues like this crop up. As consumers in Asia move into middle class lifestyles, they have begun to care more about the environment, social and safety issues. Those companies that can attain a reputation for quality, health and safety—be it in baby formula, fast food, preventative health care and the like should be able to add huge amounts of value to their firms and shareholders. After all, people are willing to risk hefty fines and going to jail to smuggle baby milk formula because the demand is so high. Just imagine the incentives if the market were allowed to work with fewer impediments.
Opinion column by Robert Horrocks, PhD, Chief Investment Officer – Matthews Asia
The views and information discussed represent opinion and an assessment of market conditions at a specific point in time that are subject to change. It should not be relied upon as a recommendation to buy and sell particular securities or markets in general. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Matthews International Capital Management, LLC does not accept any liability for losses either direct or consequential caused by the use of this information. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. In addition, single-country funds may be subject to a higher degree of market risk than diversified funds because of concentration in a specific geographic location. Investing in small- and mid-size companies is more risky than investing in large companies, as they may be more volatile and less liquid than large companies. This document has not been reviewed or approved by any regulatory body.
Better than expected US macroeconomic data and a somewhat more hawkish perception of the Fed have increased the probability of Fed tapering on December 18. Although ING Investment Managament still believes that tapering will not start before March 2014, it is wise to assess the broader market consequences of such a move.
Markets seem to have adapted to the concept of Fed tapering. Evidence is emerging that they have ‘learned’ to understand the Fed better as they have started to appreciate the difference between tapering and tightening.
EM currencies remain vulnerable to tapering (expectations)
Probability of tapering in December has increased
A number of better than expected US macroeconomic data, combined with a somewhat more hawkish than expected Fed statement after its last meeting on 30 October has brought back speculations in the market that Fed tapering could start rather sooner than later. Although we must not be fixated too much on one month’s data, the assumption of many market pundits that corporate confidence and hiring intentions would take a hit from the government shutdown and the budget discussion does not seem to materialize.
The asset manager still believe that the tapering of the Fed’s asset purchases is more likely to commence somewhere in the first quarter of next year, also because the December meeting will coincide with the conclusion of US budget discussions, which given past precedence have a high probability of failure. Still, the odds of December tapering have increased. It is therefore crucially important to take the balance of risk surrounding our view into account. Moreover, we need to assess what the broader market consequences of such a policy move will be.
Emerging market assets remain vulnerable
Most vulnerable to tapering still are emerging market (EM) assets. As we can see in the graph on the front page, EM currencies (represented by the JP Morgan ELMI+ index) have moved largely in line with the US Treasury yield since the start of the taper talk in May. After the last Fed meeting on October 30, the Treasury yield resumed its rise while EM currencies started to weaken again after an impressive rally since early September. As EM assets have attracted so much foreign capital since the Fed and other central banks introduced their unprecedented monetary policies, they remain vulnerable to capital outflows. As with the US Treasury yield, we do not expect a sharp move comparable to the May/June period, but the risk of further weakening is likely.
You can view the complete story on the attached document.
Value-add real estate, which are properties exhibiting marginal operational or physical challenges, offer better total return prospects than core real estate, according to a white paper from CenterSquare Investment Management
The paper, Era of Execution, written by P.J. Yeatman, head of private real estate for CenterSquare, and Jeffrey Reder, senior vice president, private real estate, for CenterSquare, focuses on the potential of value-add strategies to generate attractive risk-adjusted returns in private real estate. Value-add strategies involve acquiring real estate at an attractive cost basis and then resolving the property’s deficiency, stabilizing the income stream, and increasing the overall value of the property for disposition.
Core real estate, generally defined as high-quality assets in prime locations with stable cash flows, is traditionally viewed to have the least risk. These properties were the first to attract significant institutional capital from risk-averse investors following the Global Financial Crisis. As a result, this segment of the private real estate market was the first to recover, according to the report.
But now these core properties appear to be over-valued, and better investment opportunities can be found within value-add real estate, CenterSquare said.
“Our view is that we have entered an era in which value creation through strategic execution offers the most compelling risk-adjusted returns,” said Yeatman.”The raw materials for a value-add real estate strategy can still be acquired at an attractive cost, particularly when compared to core properties, which appear to be overbought.”
Reder added, “We see assets that are not functioning optimally, but can be improved so that their value and ability to deliver returns to investors are both significantly increased.”
CenterSquare also noted that in past market cycles, recovery of private market values have lagged that of public real estate market values. “Based on the public market value recovery we’ve seen since 2009, we can infer that we are in the midst of an optimal private market investment period,” said Yeatman.
Another advantage of value-add real estate strategies singled out by the report is that because of the low cost basis at which they can be acquired, they are better positioned to withstand potential shocks to the market. In the white paper, CenterSquare said the most attractive value-add properties are primary assets in secondary growth markets and secondary assets in primary growth markets.
Photo: Dori. Nexxus Capital Raises $550 Million for its Sixth Private Equity Fund
Nexxus Capital announced the final closing of its sixth institutional private equity fund, Nexxus Capital VI, with capital commitments of $550 million. The Fund was oversubscribed, significantly exceeding its original target of $400 million.
In addition to strong support from existing and new local institutional investors, Nexxus Capital VI has attracted commitments from new investors from North America, Europe and the Middle East. Pension plans, sovereign wealth funds, and endowments account for the majority of the investor base.
Nexxus VI is comprised of two vehicles: a Mexican public vehicle listed on the Mexican Stock Exchange and an Ontario limited partnership. Both vehicles will co‐invest on a pro‐rata basis according to total available resources of each vehicle.
MVision Private Equity Advisers acted as lead global fundraising adviser. Santander and Citigroup acted as joint‐bookrunners for the Mexican vehicle.
Nexxus Capital VI expects to make equity and equity‐related investments in midsize companies primarily in Mexico, where there is an opportunity to institutionalize family or entrepreneurially owned businesses. Nexxus Capital’s approach focuses on the implementation of operational efficiencies and maximizing liquidity value after taking portfolio companies public or selling to strategic or industry buyers, which is a continuation of the successful investment strategy applied to its prior funds.
White & Case LLP served as US legal counsel to the Fund, General Partner and Manager, and Stikemann Elliott served as Canadian legal counsel to the General Partner.
Janet Yellen, Federal Reserve Chairman nominee. Shifting Sands
“Risk-on, risk-off” may have been the leitmotif of 2011 and 2012 but there is no denying that 2013 has also seen an element of regime change, even though equity markets have broadly trended up.
For the first five months of this year, markets rode a liquidity-fuelled rally, binging on the generosity of the US and Japanese central banks. Punctuated by a small correction in early summer, equity markets resumed their upward trajectory, only this time on a wave of upbeat economic data until nervousness grew that this would encourage the US Federal Reserve (Fed) to taper (reduce) the asset purchases that form its quantitative easing (QE) programme. The Fed’s decision not to taper in September allowed markets to regain their positive momentum through September and October, in renewed faith that central banks would continue to provide cheap liquidity.
Yet for how long can Fed tapering remain out of the game? The Fed has been at pains to stress that any move towards less accommodative monetary policy will be data dependent, yet reading the economic runes has been made challenging by the government shutdown in October, which has muddied the economic data.
So while we remain strategically bullish on equities, we are not fully invested
The jump in non-farm payrolls from 163,000 for September (a figure that was revised up from an earlier reading of 148,000) to 204,000 for October was therefore not wholly unexpected. The Institute for Supply Management’s composite manufacturing and services survey held up, suggesting were it not for the government shutdown, jobs growth might have been stronger still. Gasoline prices in theUS have also fallen back sharply: this acts as an automatic stabiliser in the US, effectively delivering the equivalent of a tax cut to US consumers.
We remain constructive on the US economy. So, whilst we expect the pace of economic growth to slow in the fourth quarter, the outlook for 2014 is brighter. Consensus estimates are for gross domestic product growth of 2.6% and inflation to average 1.8% in 2014 (figures from Bloomberg, 11 November 2013). Assuming that the forthcoming fiscal negotiations are resolved constructively, fiscal drag should be significantly lower in 2014 than this year. The downbeat economic data, which has led to statistics surprising to the downside, might soon reverse. This could bring Fed tapering back as a story over the coming months.
We retain our preferences for the US and Japan
Beyond the US, however, the global picture is still patchy. Forecasts for global growth have stabilised in recent months, having been drifting lower earlier this year. In broad terms, upgrades to growth forecasts for Japan and the UK have offset the downgrades in the US. Estimates for growth in the eurozone and China have steadied but forecasts for the other emerging economies are still under pressure.
Whilst we can envisage the US economy reviving in the new year we are more sceptical about the eurozone. We see numerous impediments to growth, not least the ability of the eurozone to withstand the recent appreciation of the euro. It is difficult to believe that the cut in the European Central Bank’s policy rate to 0.25% was solely induced by undershooting inflation without a nod to demands for leniency from European exporters.
For now, markets seem prepared to chase equity markets higher, despite the anaemic economic outlook. While faith in policy and liquidity can allow equities to decouple from macroeconomic momentum in the short term, a decent economic recovery is ultimately needed to turn the current rally into something more sustainable.
So while we remain strategically bullish on equities, we are not fully invested. We think there will be better opportunities in the months to come to put cash to work. We retain our preferences for the US and Japan. Within fixed income we are underweight duration (sensitivity to changes in interest rates) because relatively low yields offer little in the way of potential capital upside but greater downside risk.
The new year brings a change of Fed chairman. Given that markets are so sensitive to liquidity there is plenty of newsflow that could test market nerves, particularly when the valuations of many asset classes look fairly rich. Growth is the only viable long-term substitute for liquidity – let’s hope for a smooth handover.
Foto: Mylius. Latinoamérica experimenta crecimientos de doble dígito en fondos mutuos y de pensiones
According to new research from Cerulli Associates, a Boston-based global analytics firm, the major Latin American mutual and pension fund markets of Brazil, Mexico, Chile, Colombia, Peru, and Argentina have experienced double-digit growth in the past five years.
“The Latin American region’s mutual fund industry has seen a21.3% five-year compound annual growth rate between 2008 and 2012, ending 2012 with USD $1.1 trillion in assets under management,” comments Nina Czarnowski, senior analyst at Cerulli. “On the pension side, the region has seen a 15.1% increase in assets under management between 2011 and 2012. The mandatory nature of contributions to the private pension systems in Chile, Colombia, Mexico, and Peru further highlights their potential as assets continue to grow even if market conditions are unfavorable.”
Cerulli‘s latest report, Latin American Distribution Dynamics 2013, is an annual report focused on distribution and product development trends in the six major markets – Argentina, Brazil, Chile, Colombia, Mexico, and Peru.
“We have seen similar growth in each of the major markets in this region,” Czarnowski explains. “In Brazil, mutual fund assets grew 15.6% from 2011 to 2012, and the Mexican mutual fund industry closed 2012 with a 13.9% increase over 2011. In Colombia, the mutual fund industry has averaged growth of more than 20% annually for the last five years, as has the pension fund industry, while the Chilean compulsory and voluntary pensions’ assets under management rose 10% year-over-year.” Czarnowski goes on to indicate thriving opportunities for global managers wishing to expand into the region, as both mutual funds and pension funds have been increasing allocations to cross-border vehicles, in particular to ETFs.
The report outlines challenges and opportunities in the non-resident and local private clients’ segments, as well as underlines the growing importance of the region’s private pension systems for foreign asset managers, and further points out important structural changes in the Brazilian market to keep the industry evolving.
Cerulli believes that the rise of the middle class, low unemployment, and improving salaries will contribute to further industry growth in this region. In addition, insufficient market depth, and local economic and market pressures will continue to push local authorities to open doors to global markets.
Photo: Roland Zh. Merger of Julius Baers' Infidar and WMPartners to Create Top Independent Asset Manager in Switzerland
Infidar Investment Advisory, part of the Julius Baer Group, and WMPartners Wealth Management are to merge. The move, which will create one of the largest independent asset management companies in Switzerland, is intended to consolidate their leading market position. The transaction is expected to be completed in the first quarter of 2014.
Established in 1954, Zurich-based Infidar Investment Advisory employs a staff of 26 and has been led by Markus Gonseth since 2007. WMPartners Wealth Management, which also has 26 employees and is headquartered in Zurich, was set up in 1971 and is owned by its three partners Willi Leimer, Balthasar Meier and Heiner Grüter. Both companies are already amongst the leading independent asset managers in Switzerland.
In a first step, the Julius Baer Group acquired the shares in WMPartners, and in a second step Infidar will merge with WMPartners. The parties have agreed not to disclose the terms of the transaction.
Employing around 50 staff and managing client assets worth over CHF 4 billion, the new company will be one of Switzerland’s largest independent asset managers and will work together with around 30 custodian banks.
Once the transaction is complete, Heiner Grüter, currently partner and CEO at WMPartners, will head up the new company as its CEO. He will continue to pursue the same proven, client-focused strategy, supported by the existing combined management team and the employees of the two constituent companies. The present CEO of Infidar, Markus Gonseth, will focus on client advisory in future.
All the partners in both companies will continue to have a hand in operations after the merger has gone through. Markus Gonseth, Willi Leimer and Balthasar Meier will also have a seat on the new company’s Board of Directors. “The two companies complement each other perfectly. We will be able to guarantee our clients the surest possible continuity while also being even better placed to meet our existing and future client requirements with our combined strengths,” explained Heiner Grüter.
“The new company will remain completely independent with regard to investment decisions and choosing its custodian banks. At the same time, it will be able to handle the increasingly complex requirements that we are seeing nowadays, while also enjoying the backing of a strong partner in the form of Julius Baer,” said Yves Robert-Charrue, Head Independent Asset Managers & Global Custody at Bank Julius Baer. “By bundling our skills and expertise, we are creating one of the largest independent asset managers in Switzerland,” he added.
