Foto cedidaFoto: Trevor Greetham, Asset Allocation Director at Fidelity. Slowing Bernanke's QE program, favorable to the dollar
The FOMC statement last night was broadly unchanged but Bernanke set out a clear timetable for how QE would be wound down starting later this year and ending next summer if the labour market continues to improve as they expect. He used the familiar central bank driving analogy of easing off on the gas as opposed to hitting the brakes and stressed there would be a considerable length of time between the end of QE and the first rate hike. My feeling is still that the Fed will end up tightening later than this all suggests. Lead indicators are weak and the markets will want to force the Fed to take the drop in inflation more seriously, probably via a further large drop in commodity prices.
The most noteworthy thing about the initial market reaction is the strength of the US dollar despite a further drop in risk assets. This suggests the counter-intuitive dollar weakness we have seen since Fed tapering was first raised has run its course and was mostly likely a temporary phenomenon related to the selling of dollar-linked assets in the emerging markets.
In terms of investment strategy, we will stay overweight the US dollar but we are likely to further deepen our underweight positions in bonds and dollar-sensitive commodities including gold, off hard today.
We are likely to maintain a small overweight position in stocks in aggregate. Investor sentiment was already depressed before the Fed meeting and in the long run stocks are much less exposed to the risk of tightening than bonds are. We will stay overweight US equities, where we see good fundamentals, while moving further underweight emerging market equities.
Japan could come out of the current sell off looking good. Sentiment towards Japan is at a very low ebb but dollar strength should trigger the next wave of yen weakness, we expect Japanese exports to the US to remain strong and there are increasing signs of a pick up in activity at home.
Trevor Greetham is Portfolio Manager and Asset Allocation Director at Fidelity.
Wikimedia CommonsBy David Tuggy. 3.77% Decrease in Investment in Government Debt by Afores
According to data provided at the end of May 2013 by (Consar), “Comisión Nacional del Sistema de Ahorro para el Retiro” (National Commission of Savings System for Retirement), the Afores administered resources worth 1,994,319.7 million pesos (USD 156.936 million), which in accordance to the valuation of the instruments that make up the investment portfolio at market prices on May 31, 2013, represents a 3.88% fall from the previous month.
Regarding the portfolio composition, we note that government debt continues to lead but decreases from 53.2% to 51.2% of the resources invested, while domestic private debt increases from 17.5% to 18.3%, followed by international equities with 15.2%. Mexican equities stand at 9.3%, structured funds at 3.9%, international debt remains stable at 2.1% and commodities are at 0.055% of the portfolio.
In the first month with decreases in the managed resources this year, basically all types increased their share except for government debt which fell by 3.77% and commodities which were stable.
Foto cedidaGino Lorenzini . “Felices y Forrados” Evaluates Starting an AFP
“Felices y Forrados” continues to create controversy within the pension fund industry. Gino Lorenzini, founder of the website, said he is evaluating the possibility of opening an AFP to compete in the market, following the polemic that has ensued by the mass transfer of contributors from one fund to another.
As stated by him in an interview with Radio Cooperativa, they have already begun their search for capital.
“I will seriously assess the raising of capital, and that’s what I’m doing, to form an AFP and compete one on one with the AFPs themselves, from there on we’ll let the market decide. Don’t you love a free market? I’m fascinated by it, but I like a real free market, not a colluded one. We’ll face it head on,” Lorenzini said to Radio Cooperativa.
The founder of the website said he was prepared to lose his venture should the multiple pension funds be ruled out and the AFPs regress the law back to its original 1980 version, which would restore the 5% fluctuation reserve fund, the mechanism which guaranteed against losses and which, in the event of high yields, these were passed on to the members.
“Felices y Forrados” is a consulting firm dedicated to providing pension fund transfers to improve profitability, and was precisely responsible for most of the recent profile changes which led to the revision of the regulations.
Foto cedidaMauricio Cárdenas (middle), Colombian Ministry of Finance and Public Credit. Colombia Streamlines and Increases the Transparency of the Investment Fund Industry
The Colombian Ministry of Finance and Public Credit has undergone a major change which affects the management of investment funds and securities custody activities respectively. These changes are the result of a coordinated effort between various Colombian financial market players, lasting over a year and a half.
Mauricio Cardenas, Colombian Minister of Finance and Public Credit, said on Monday that these decrees allow Colombians easier, safer and more reliable access to the stock market. “These rules aim to boost this industry which on a worldwide basis is one of the most efficient means to channel the savings of individuals and companies to the capital markets,” the official assured.
In this regard, the Ministry issued Decrees numbers 1242 and 1243 of the year 2013, which amended Decree number 2555 issued in 2010, in connection with the administration of collective investment funds and securities custody activities, respectively.
The main issues covered by the decrees are:
In order that ordinary people may access collective investment funds as an efficient and safe method for saving their resources in the capitals market, the specialization of the different activities necessary for the operation of the aforementioned aspects (management, administration, distribution and custody) is permitted. This allows the reduction of costs for investors and provides greater access to these types of products.
Investors may turn to brokerage firms, trust companies and investment management companies to invest their resources in collective investment funds. Relevant studies will be conducted in those institutions as to their risk profile and other aspects which will allow determining the most appropriate investment for each investor, therefore adequately protecting their interests.
It eases the process of authorization and distribution of collective investment funds which invest in traditional assets such as stocks and bonds, creating a faster channel in which the Financial Superintendence of Colombia authorizes fund families for this type of products.
For funds which invest in non-traditional assets (invoices, commodities, court decisions, etc.), on which most investors do not have a very deep understanding, the standards of obligations of expert advisors are broadened, and should be provided by institutions conducting the distribution of investment funds individually, to each of the investors who require it. Establishing special cases such as funds with any type of borrowings above the amount of fund resources (leverage), in which the type of client that may access them shall be limited.
In order to protect investors’ resources and prevent them from being used to fulfill transactions belonging to either the management companies or to other clients, securities custody activity is introduced into national regulation, which involves the obligation of guaranteeing the custody of securities of collective investment funds with a trust company. This development puts the country in line with international safety standards and transparency in managing funds’ resources.
Additionally, in order to encourage the implementing of the aspect of custody in the stock market, the possibility of exercising it voluntarily in the administration of third party resources by brokerage firms and investment trusts administered by trust companies is established.
The Colombian government expects that this reform will speed up the development of this important, although still small industry, which manages assets of close to 6% of GDP, which is low compared to other economies in the region such as Chile where funds manage 15 % of GDP, or Brazil, where it reaches levels similar to those of advanced economies with 60% of GDP.
Wikimedia CommonsDonald Trump Jr speaking in Miami. Donald Trump Jr: “Latin America Has Been and is on Our Radar”
Donald Trump Jr, executive vice president of Trump Organization, made a stopover at Miami on Monday to deliver a lecture as part of the Terrapinn Private Equity World & Real Estate World Latin America Forum, which on Monday and Tuesday gathered more than 300 private equity industry and real estate professionals focused mainly in Latin America or with interests in the region.
Speaking to Funds Society, Trump Jr said that his organization has always had, and continues to have Latin America on its radar and that wherever they have spotted interesting opportunities and wherever investors have sought to take advantage of a luxury brand like theirs, they have closed deals and will continue to do so in the future. “Those interested in Trump understand the premium they pay for a brand like ours,” he stressed.
“México, if not now, later”
As regards Mexico’s specific case and the potential investment opportunities or agreements there, he emphasized that in recent times he has traveled to Mexico about 30 times, it’s a country which he knows very well and which “has wonderful places. If not now, it will be later, “added Donald Trump’s son, who along with his siblings, Ivanka and Erik, works very closely in expanding real estate interests, both in the residential, commercial and golf clubs in the United States and outside of the brand.
Just last February the brands Donald J. Trump Signature Collection (hotels), and Trump Home signed an agreement with P & L Global Networks, which they appointed as the exclusive company to implement and launch new developments in Latin America.
Currently, the American real estate giant is present in the region in Panama, Puerto Rico and has a residential development in Punta del Este (Uruguay), plus it is engaged in the development of Puerto Maravilha in Rio de Janeiro, one of Brazil ‘s most ambitious projects and to which the Trump organization lends its brand.
“Trump Towers Rio: Realizing the potential of Porto Maravilha”
It was precisely “Trump Towers Rio: Realizing the potential of Porto Maravilha” which was the theme of yesterday’s presentation before a large group of professionals by Trump Jr. and by Stefan Ivanov, CEO of Trump Towers Rio and CIS of MRP International, co-developers of the project with the company Even.
The project is backed by strong support from Rio’s City Hall and from the Brazilian government, who have committed 4,000 million dollars in works of infrastructure. Amongst them, 4 miles of tunnels, 85 miles of sewerage system, 70 miles of street repaving, 650,000 meters of sidewalks and 32 kilometers of transport system lines from the local airport to the area, to name just a few.
As for the project’s investment opportunity, Ivanov stressed that it is a “unique development in Latin America” and a unique opportunity in the city, which today has only 6% of office space. Ivanov also said that the Brazilian government should give a good boost to projects like this because of the proximity of the celebration of the 2016 Rio Olympic Games and the 2014 World Cup in Brazil.
Wikimedia CommonsFoto: Joseph Plotz. Lucent Strategic Land, un fondo que aprovecha el déficit de viviendas en Reino Unido
The lack of sufficient buildable land with planning permission in the UK puts the British residential market in short supply for a huge demand, a situation which has not gone unnoticed by Lucent Group, who launched the Lucent Strategic Land Fund (LSLF) in September 2010 to take advantage of those market shortages.
Given this situation and the need to increase the housing stock, Lucent saw an opportunity to focus on those areas of greatest growth in England, as explained by Kevin Ballard, Business Development Manager for Lucent Group in an interview with Funds Society.
Ballard reaffirms that residential development land in the UK is a limited resource, so it is an asset that institutional investors increasingly incorporate to their portfolios. “This shortage will only increase, because as the population increases land will become increasingly scarce, so its value will continue to rise.”
Due to the strict Government National Planning & Policy Framework guidelines it has been difficult to meet planning requirements but as LSLF was created from an established land site assembly company all the expertise, experience and contacts to be able to deliver sites is available ‘in house’. With housebuilding in the UK at its lowest since the point in over 50 years and the failure to satisfy the constant increase of the housing demand in recent years has created a ‘structural deficit’.
The experts on the field acknowledge that the shortage of residential development and land with planning consent is the key constraint for increasing the housing supply; “this is exactly what LSLF delivers”. The proof of that is in last years amendments to the National Planning Policy Framework, in order to focus the effort on make more dynamic the house building process, as well as to work towards a sustained development in the country, among other objectives.
The British Government is trying to increase the housing supply. But up to the present day, there are not enough sites with planning consent to meet the large demand for houses in the UK, where historically, the land is some of the most valuable in the world.
The Fund can only seek control over land that has already been identified for residential development by a local council/authority and typically close to large towns or cities in areas of identified growth. This greatly reduces risk. Lucent then undertake all the work involved in the planning process to achieve planning consent. This planning stage can take between 1-3 years.
The next step is selling the land to national housebuilders, Lucent do not get involved in the development of it. As well as not being involved in the building process, neither do they invest in land if they do not see a clear opportunity. “If the land is not expected to generate a 21% return on it, we do not buy”, stated Ballard. Independent pre acquisition financial modelling is used to reverse engineer the anticipated return.
Ballard also explained that before they buy, they run 12 physical Tests to determine the situation of the land and viability of the site.
“This targeted acquisition strategy is aimed at mitigating planning risk while enabling shareholders to benefit from the largest capital gain anywhere within the real estate cycle”, Said Ballard.
The Lucent Strategic Land Fund (LSLF) is Open Ended, domiciled in Luxembourg and regulated by the “Commission de Surveillance du Secteur Financier” (CSSF), the Luxembourg financial services authority. LSLF commenced operations in September 2010 with the objective of providing capital gains in excess of 12% net of fees to the investors. It has returned 62% since launch.
The Fund is distributed through broker dealers and IFAs with an increasing focus on institutional investment. LSLF is available via numerous insurers, Banks & investment platforms including Pershing.
LSLF has a truly global investor base with the main markets being: Far East, Middle East & Latin America. Lucent are focusing on expanding their LA investor base and were in Miami to meet Pershing broker dealers as the Fund has recently been added to their platform.
Wikimedia CommonsFoto: Robert Swier. Headwinds mount for emerging markets
One of the victims of the market correction are emerging market assets. They suffer from outflows due to less favourable carry trade opportunities and weak Chinese data. More structural issues rise to the surface too, however. ING Investment Management have underweight positions in both emerging market equities and debt.
Indiscriminate selling has been seen in those areas of financial markets that have seen the largest capital inflows in recent years, with corporate credit, emerging market debt and “stable growth” equity sectors as obvious victims. Parts of these market segments had clearly come over-extended on the back of relentless investor inflows during the last two years and could have been expected to correct at some point.
Growth differential between EM and DM is narrowing
Pressure on emerging markets is mounting
In the current environment, emerging market assets are vulnerable as investment flows into the region are likely to weaken due to market concerns of early tapering of quantitative easing (QE) by the Fed and a narrowing interest rate differential (‘carry’). Moreover, we also see more fundamental weakness threatening emerging market assets.
In the developed world, we have seen more structural change since the outbreak of the global financial crisis, which creates room for positive growth surprises compared to the emerging world. The combination of better economic data in the US and disappointing growth in China is clearly negative for emerging markets. Growth in EM in the past years has been driven primarily by Chinese demand and carry trade related flows. Both sources of growth are coming under more pressure now; the former because of increasing evidence of the structural slowdown in China and the latter because of increasing market nervousness about the Fed’s QE policy.
To view the complete story, click the document attached.
Wikimedia CommonsBy Paulo Miranda. Rebuilding Europe
For several quarters now, forecasters, analysts and the media have been steadily churning out disaster scenarios about Europe. Whilst the region is still plagued by some deep-seated problems, the markets seem to have factored them in and risk premiums on some assets have dropped, according to UBP’s research.
New foundations
Financial markets have begun to pick up and are probably right to be optimistic because the trend in the economy seems to be reversing: monthly indicators are showing better data than expected, such as falling unemployment in Spain and a rebound in corporate sentiment. Besides, the policy mix (the combination of budgetary and monetary policies) is shifting and the spiral of recession should now be reversible.
“Perhaps it is time to reassess our view of Europe and adopt a more positive outlook. Because even though credit is still frozen in the eurozone, the reforms implemented since 2008 and the determination shown by some governments – especially in the periphery – are paving the way out of the recession and towards a rebuilding of Europe” says Patrice Gautry, UBP’s Chief Economist. He lists five crucial steps in this revival:
If budgetary policy-makers loosen their austerity, they can make some room for growth to take hold, provided this is combined with structural reforms, a sharp fall in long rates and the prospect of budget harmonisation;
The current debate on taxation will most likely force Europe’s governments to consider some more daring reforms, which would be positive for the region in the long term;
With the US regaining competitiveness through its new-found shift towards energy independence, the future of Europe depends more than ever on its re-industrialisation. Reforms, resulting in lower labour costs and higher productivity, have already enabled some countries to regain market share;
Combining this rebound in productivity with a comprehensive economic policy for an integrated zone should allow the eurozone to avoid a Japanese-style “lost decade” and the threat of deflation;
Lastly, the ECB is taking a more aggressive stance. What is needed now is new lending stimulus, which would encourage demand and further cut refinancing costs, thereby reducing the debt service burden for all economic actors.
A medium-term investment opportunity
“This battery of measures for lifting Europe out of recession is very positive. However, both analysts and the market remain sceptical, which is creating an opportunity”, remarks Alan Mudie, Chief Investment Officer at UBP. He adds: “Given this we prefer equity markets, and more specifically European and Japanese stocks, which have great potential”. Portfolio strategy will therefore be built on the following seven pillars:
Equity markets should continue to benefit from this favourable environment, especially as there should now be inflows from the fixed-income segment;
More specifically, European equities – which have further to climb to get back to their pre-crisis highs – remain undervalued compared to US equities; within the eurozone our focus is on companies which are positioned to profit from the recovery;
European convertible bonds also offer a more attractive performance outlook than their US peers;
Given the macroeconomic data and the current climate, the euro still looks overpriced and a decline would be a windfall for the eurozone: we prefer the dollar;
In bonds we recommend the shortest maturities with a focus on corporate credit. However, given the reforms being undertaken in the eurozone’s periphery, the time has come to reassess the opportunities available in peripheral sovereign bonds, such as Italian ones;
The current environment is less propitious for safe-haven assets, but gold has not lost all its appeal for the medium term, and remains an excellent shield against central banks’ monetary excesses;
Lastly, alternative investments should benefit from the slight uptick in volatility and the lower correlation between asset classes, which reflect improving confidence and a return to normal on the markets; this environment is well suited to long/short and global macro strategies.
Foto cedidaFoto: Maria Elena Isaza. Maria Elena Isaza Joins Schroders as an Offshore Sales Director
Schroders has announced that Maria Elena Isaza has joined their team as an Offshore Sales Director, based in Miami.
Maria Elena joins Schroders from Goldman Sachs Asset Management and will be responsible for providing intermediary sales coverage of our suite of offshore products to the Southeastern US and the Caribbean, with emphasis on the Miami-area international markets.
She has built an impeccable track record of adding value and has a stellar reputation for building strong interpersonal relationships with advisors over her 15 years of industry experience in investment and wealth management.
Prior to Goldman Sachs, Maria Elena began her career at Merrill Lynch. She had various roles within Merrill Lynch including Loan Officer, Business Analyst for the Latin America Divisional Management team and Assistant Sales Manager for Merrill Lynch Miami International Complex. Maria Elena was selected to join the Managed Solutions Distribution Group as Managed Solutions Latin America Specialist where she was primarily responsible for sales and training of financial advisors on fee-based advisory platforms. She was then promoted again to Managed Solutions Divisional Marketing Manager for U.S. Southeast Division
Isaza graduated with a Bachelor degree in Business Administration in Finance from Florida International University.
The Dreyfus Corporation, a BNY Mellon company, announced this thursday that it has launched the Dreyfus Opportunistic Emerging Markets Debt Fund, an actively managed mutual fund. The fund’s objective is to seek to maximize total return by investing across emerging market debt asset classes including local and hard currency denominated debt issued from government, government-related and corporate issuers.
“We have seen a great deal of investor interest in finding ways to leverage the expanding opportunities and higher economic growth rates being experienced in many emerging economies,” said Dreyfus President Charles Cardona. “The difficulty arises in gaining access to these markets or possessing the necessary research capabilities to navigate these opportunities. Dreyfus Opportunistic Emerging Markets Debt Fund looks to address these issues by providing professional money management and institutional access to help investors benefit from the growth occurring within the capital markets of emerging economies.”
The fund, which is sub-advised by Standish Mellon Asset Management Company, is managed by Alexander Kozhemiakin, managing director of emerging market strategies and senior portfolio manager responsible for managing all emerging market debt portfolios at Standish and Javier Murcio, portfolio manager and senior sovereign analyst.
“The investable universe of debt issued in emerging market countries has grown substantially in size and breadth over the last 30 years,” Kozhemiakin said. “Emerging market debt, once predominately issued in U.S. dollars by government entities, has expanded to include hard and local currency denominations issued by sovereign, as well as corporation issuers. We employ an investment process that looks to take advantage of this expanded opportunity set by identifying shifts in country fundamentals and consider the risk-adjusted attractiveness of currency, issuer and duration returns for each emerging market country.“
“Using these inputs,” Kozhemiakin concluded, “We seek to identify the best opportunities on a risk-adjusted basis across emerging market debt instruments (including those issued by sovereign, quasi-sovereign and corporate issuers), currencies, and local interest rates.”
