Duration risk: if not now, when?

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Duration is a measure of how sensitive the value of a bond (or a portfolio) is to changes in yields. If yields fall – all things remaining equal – a bond with a higher duration should experience a higher total return than a shorter duration bond. Equally, they should fall more in value in percentage terms when yields rise.

A cruel quirk of fixed income assets is that the more expensive they get (the lower the yield) the riskier they become, as their duration risk rises. This created the ingredients for the perfect post-pandemic storm that struck the bond market, causing it to have one its worst years on record in 2022.

Nothing lasts forever, though. Various factors have emerged that favour taking risk. So the question for investors is: if not now, when?

As Exhibit 1 shows, government bond markets have experienced an extreme repricing since their yield lows of 2020. Since then, 10-year UK Gilt and US Treasury yields increased by almost 450 bps, with 10-year yields in Germany rising by around 350 bps over the same period. This repricing was necessary to reflect the macroeconomic backdrop of the time, and in many markets pushed yields to their highest levels since the financial crisis.

The opportunity to buy ‘risk-free’ assets at yields around 4% is not to be sniffed, especially after years of investors being forced into taking ever more risk to achieve any sort of yield or income. As a key cornerstone for any investment decision, government bond market valuations are compelling again, creating a solid foundation for future total returns.

Another support for improved valuations is that duration can again act as a risk-off hedge. With a higher starting point than in recent years, yields now have room to fall in a flight-toquality situation. We saw this when the US regional banking stresses emerged in March, and then again when First Republic failed in early May. With duration acting as a stabilising factor again, this adds to its attraction at a time of macroeconomic uncertainty.

The unprecedented fiscal and monetary stimulus in response to the Covid-19 crisis drove the initial sell-off in government bonds. There followed a jump in commodity prices in 2022, which saw inflation reach multi-generational highs, with central banks increasing interest rates aggressively in response.

We are now seeing this in reverse. After peaking in the summer of 2022, US Consumer Price Inflation (CPI) has fallen steadily from over 9% to less than 5%. As Exhibit 2 shows, headline inflation in both the UK and Europe peaked in October 2022, with prices in Europe already falling sharply. In the UK, we expect the more modest falls so far will give way to sharper declines in the coming months.

On the growth side, the picture is similar. Economic activity is slowing, with forwardlooking indicators and survey data highlighting that risks are skewed to the downside around the consensus view of a ‘managed slowdown’. Some recent data releases have stood out:

• German GDP slipping into negative territory in Q1, alongside a collapse in European lending.

• The sharp fall in UK mortgages, with net lending falling to zero in March.

• Cracks emerging in the US labour market, with the rise in weekly jobless claims and the fall in job openings, as measured by the US JOLTS report.

None of this feels consistent with the need for government bond yields to be higher. Instead, it increasingly supports the case for yields to be lower.

Falling inflation, weaker forward-looking data and tensions in the financial system all point to central bank rates not needing to move much higher. We believe we are now entering the end game for the hiking cycle of the major central banks. After almost 18 months of global rate hikes that were kicked off by the Bank of England, the lagged impact of monetary tightening is now starting to bite: the arguments against hikes and in favour of a ‘pause’ are growing.

For investors in bonds with any duration risk, this is a crucial development. Central banks reaching their terminal rate helps to put a ceiling on yields, reducing the downside risk to holding bonds. The debate over whether to favour a short duration vs. long duration stance has become more clear-cut, with conviction now higher on the need for additional interest-rate risk.

The focus will then shift to how long central banks can keep rates on hold. Given the current macroeconomic outlook, the balance of risks would be biased towards interest rates being reduced rather than increased after they pause. Again, this would be supportive for duration risk.

After the fall-out of the great-repricing of 2021-22, investors now no longer need to fear duration risk. With the risk of higher yields now much diminished – replaced with the potential for lower yields – and government bonds acting more like a ‘risk-off’ hedge again, the benefits to investors of embracing duration risk within their fixed income allocations are clear.

Of course, nothing ever moves in a straight line. The need to actively manage duration will continue to be key – both in terms of overall level of risk and which markets to get our duration from. But our starting point is to hold more rather than less duration risk.

Piece of opinion written by Colin Finlayson, Investment Manager, Fixed Income at Aegon Asset Management. 

BofA Data Finds Men’s Average 401(k) Account Balance Exceeds Women’s by 50%

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Bank of America released its 2023 Financial Life Benefits® Impact Report, revealing that the average 401(k) account balance among men is 50% greater than women’s overall ($89,000 vs. $59,000).

However, this gender imbalance is closing among younger generations. Baby Boomer (ages 58-76) and Gen X (ages 43-57) men have significantly greater account balances than women in their generations (87% vs. 53%, respectively). However, the gap between Millennial (ages 28-42) men and women is only 23%. Gen X continue to have the highest 401(k) participation rate (65%) across generations, followed by 57% of Baby Boomers and 55% of Millennials.

“The gender savings gap is an issue we can and must address. It carries personal implications for many, as well as macroeconomic implications for us all,” said Lorna Sabbia, Head of Retirement and Personal Wealth Solutions at Bank of America. “We are encouraged by the strides young, female employees are making, and want to encourage everyone to invest in their futures and leverage the workplace benefits available to them.”

Based on data across Bank of America’s proprietary employee benefits programs, which serve more than 25,000 companies and more than 6 million employees, the Financial Life Benefits Impact Report examines trends within 401(k) plans, Health Savings Accounts (HSAs), equity compensation and employee banking programs.

When looking at 401(k) savings plans as of the end of last year: Participation rates dropped only slightly to 56% from 58% in 2021; Average contribution rate declined to 6.4% from 6.6% in 2021; 26% of participants increased their contribution rate as compared to 8% of participants who decreased their savings rate; The number of participants contributing small amounts (less than $5,000) increased to 66% (from 61% in 2021), while only 9% took full advantage of their 401(k) plan by contributing the maximum amount allowed; Overall account balances declined by 17% related to stock and bond market declines; When 401(k) plans include an auto-enroll feature, most employees (85%) participate, compared to just 36% participation without this feature; Plans with auto-enroll that also have auto-increase rose (57% vs. 55% in 2021).

In addition to 401(k) savings plans, employees are leveraging other benefits such as HSAs, equity awards and other financial resources to pursue their goals. Top findings related to these benefits include more employees received equity awards in 2022, though values were lower; HSA account holders are evolving from “spenders” to “savers; financial education resources are top of mind; participants want to engage digitally.

“Employers serve an important role in ensuring that their employees are equipped with the best possible tools, resources and solutions for financial success and retirement planning,” said Kevin Crain, Head of Retirement Research & Insights at Bank of America. “We’re committed to working with employers to meet the needs of their employees, wherever they are in their financial journey.”

Candriam and New York Life Investments Partner to Expand Candriam’s offshore business

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Candriam and New York Life Investments announced their expanded partnership to deliver offshore capabilities and solutions reaching global investors whose wealth is managed in the US.

With this expanded partnership, investors in the US offshore market will gain access to certain Candriam multi-billion-dollar flagship UCITS funds with deep expertise, long track records, global investor bases and sizeable assets under management.

The range of UCITS funds cover strategies including US high yield corporate bonds, emerging market equity and debt, and thematic strategies that are actively involved in areas such as cancer research, innovative technologies, and biotechnology. In some cases, Candriam will be able to offer clones of existing US mutual funds, managed by its affiliates, for the first time to these investors.

New York Life Investments’ sales teams will use their on-the-ground relationships in the US and leverage the company’s scale to support introductory conversations with US-based broker-dealers and financial firms. This approach aims to unlock new opportunities, enabling these groups and their end clients to benefit from Candriam’s proven investment strategies.

Jac McLean, Head of U.S. Distribution at New York Life Investment Management, said: “With Candriam’s investment excellence and track record in Europe and across the globe, combined with our relationships with major platforms in the US, we are well positioned to leverage our scale, resources, and distribution channels to meet the evolving needs of US offshore clients. Our daily conversations with US advisors enable us to see first-hand how tricky market dynamics are driving their offshore clients to seek new investment ideas; these insights, in turn, empower our sales teams to work closely with intermediaries and platforms to deliver best-in-class solutions to this market segment.”

“Expanding access to Candriam’s renowned global strategies in the US offshore market aligns with our commitment to continue to provide a range of new and creative investment opportunities for intermediaries and end clients.”

Keith Dixson, Head of International Development at Candriam, continued: “There is a significant opportunity in the US offshore market to match evolving investor demand in these regions with innovative solutions. International investors are seeking high yielding strategies, along with diversifiers for their portfolios which are increasingly centered on global thematic solutions that take advantage of structural trends.”

“We look forward to expanding these solutions for clients and working closely with intermediaries to bring new opportunities to their clients in these markets. This increases our global coverage and is a natural next step to growing the business.”

Candriam is a first mover in multiple strategies. The firm was one of the first market participants to offer a range of long-term thematic investments driven by megatrends, and now has over 20 years’ experience and $16bn AUM across thematic strategies.

Candriam’s growth in the US offshore market will support ongoing sales efforts in Latin America, led by Candriam’s sales team in Spain.

The 10 most common mistakes made when investing in an ETF

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The team at FlexFunds, a fund manager specialising in the creation and launch of customised investment vehicles (ETPs), discusses in the following article the advantages of ETFs for an investor, as well as the most common mistakes that are often made and how they can be avoided:

What are ETFs, and how do they work?

One of the possibilities for investing in the stock market when you have little experience and fundamental knowledge is to do so through passive management funds, since they are usually characterized by their greater diversification and lower risk, in addition to having lower commissions.

An ETF is a publicly traded investment vehicle comprising a basket of assets such as stocks, bonds, and commodities. Its operation is simple, and the most common replicate indices, such as the S&P 500 and NASDAQ-100, metals such as gold, or sets of shares, are grouped by sectors such as biotechnology, information technology, or geographic markets.

Advantages of ETFs: liquidity, transparency, and lower volatility

In addition to lower volatility, their main advantages include being listed on the stock exchange, which enables them to be traded like shares, improving their liquidity. Additionally, their commissions are low, as the vast majority of them are passive management products, and their great transparency, as the assets that make up the ETF portfolio and their net asset value are published daily. If, in addition, as numerous studies have shown, the managers of actively managed investment funds are not usually able to outperform the indexes they replicate, their high fees are unjustified, which improves the attractiveness of ETFs for investors.

Although ETFs are an excellent investment vehicle, their high demand among beginners and experienced investors has encouraged the design of different types, from traditional to synthetic, inverse to leveraged, and different variations that can be created in a portfolio. But sometimes, the product is not known, and mistakes and misinterpretations can be made, leading to unpleasant surprises. For this reason, FlexFunds has a specialized team that can guide you through the process of structuring investment vehicles similar to ETFs, allowing you to expand access to international investors for any investment strategy you design.

The 10 most common mistakes when investing in ETFs

Among the most common mistakes, made by those who invest in ETFs, are those that are due to the lack of attention to certain key factors such as:

  1. ETF Investment Strategy

Not analyzing the investment strategy of the ETF or its composition is one of the most common mistakes since it is essential to understand what underlying the ETF follows to see if it adapts to the investor’s objectives. On the other hand, knowing what you are investing in and understanding it is decisive. It must be analyzed to what extent the return of the ETF is close to that of the index that it replicates and how consistent the monitoring is.

  1. Buyer Investment Plan

Not having a long-term investment plan, which allows the roadmap and the objectives to be pursued, as well as the risks to be assumed to be designed, can lead to making decisions based on emotions, impulsive, and not very rational. Having a roadmap and setting goals for the future, along with a contingency plan, can be a good idea to avoid disappointment.

  1. Monitor the portfolio and its evolution

Not monitoring the portfolio regularly and thinking everything will be fine is a bad decision. A certain majority of listed ETFs have a high probability of underperforming and disappearing. Portfolio monitoring is key to avoiding upsets and making the necessary adjustments.

  1. Associated expenses and commissions

Buying and selling too frequently can lead to higher-than-expected expenses, eroding profitability. Readjusting an investor’s ETF portfolio means facing sales commissions, purchase commissions for the new ETF, and taxing capital gains. The associated expenses erode the returns obtained and the gap compared to those expected.

  1. Liquidity

Not analyzing the liquidity of the ETF can generate losses or problems when it comes to recovering the money in the sale. Suppose the values that make up the index that replicates the ETF are not negotiable or are not very liquid. In that case, the ETF can be listed at a premium, in the purchase, or at a discount in the sale; the range of purchase and sale prices will be wider. It may be listed at a premium when the price is higher than the net asset value or at a discount in sales operations when the price is below said value. In these cases, buying or selling orders should be limited instead of at market prices.

  1. Structure and internal functioning

ETFs have a structure and operation that is important to know before investing because it can impact your level of risk, commissions, and losses. Assessing it in depth allows you to understand how it follows the index you want to replicate and what assets can form it, which affects risk and cost. It can be a full replica ETF (investing in the same assets as the index) or synthetic, supported by futures and derivatives issued by a third party, increasing risk exposure for both the underlying and the third party.

  1. Profitability

Assuming that the past performance of the ETF is going to be transferred to the future tends to occur in less seasoned investors since, many times, they are attracted by the announced historical performance without taking into account the period of time where it has been reached and if it has been done continuously or punctually. The consistency of this aspect in the long term should be one of the criteria to consider since if the announced return is similar to the average of the last five years, the probability of being faced with a good choice will increase. However, this does not guarantee that any change in the environment won’t affect negatively.

  1. Changes in volatility

Many times, an ETF is bought without considering the factors that drive its greater volatility, which may be derived from the volatility of the underlying or the lack of liquidity of the ETF itself. In both cases, the consequence is a widening of the price range, which can be detrimental. Another similar situation is their operation when the price variation is greater, such as during the first and last minutes of the opening and closing of the market where they are listed, respectively. Thus, avoiding trading in these time intervals helps to deal with less volatility and, therefore, less risk.

  1. The ETF Market

Care must be taken with the geographic exposure of the ETF since it can focus on a specific market that may not adapt to the investor’s interests or not mitigate the risk due to overexposure to a certain market. The net asset value of an ETF is calculated at the close of the local market, which can cause problems if you wish to operate when the associated underlying market has different hours than the market on which the ETF is listed. The latter is listed at a value other than the net asset value, therefore, increasing the premium or discount, due to the existing divergence between the prices. Therefore, it is advisable to diversify geographically and by asset class.

  1. Taxation

As with investing in other financial products, you must always take into account their taxation and the tax obligations that it entails since failure to comply with some of them can bring significant sanctions that dilute the final profitability of the ETF. In some countries, unlike index funds, transfers from one ETF to another are not exempt from tax. On the other hand, if the broker has the depository abroad, likely, it will not notify the treasury of the country where the holder resides, neither the yields nor the capital gains generated and, therefore, it is the investor himself who must make the corresponding informative declarations, being able to carry a sanction if it does not do so.

Although many other risks are associated with ETF trading, those detailed above are often the most common. Therefore, great attention should be paid to all of them, especially by those investors who could be blinded by the benefits of this product and make inappropriate decisions for their profile.

For more information on the setup and issuance of investment vehicles similar to ETFs, please get in touch with our specialists at info@flexfunds.com.

Rookie Advisors Are in Short Supply 

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The number of new advisors entering the industry is barely offsetting retirements and trainee failures as firms struggle with high wash-out rates. To help advisors succeed, firms across all channels must work to build a diverse talent pipeline and enhance rookie development programs, according to the latest Cerulli Edge—U.S. Asset and Wealth Management Edition.

Financial advisor headcount grew by just 2,579 advisors in 2022, after a rookie advisor failure rate of more than 72%. In response to high attrition, financial services firms must work on developing sustainable talent pipelines that capture a wider range of talent.

Currently, new advisor recruiting is driven largely by word-of-mouth referrals—nearly two-thirds (64%) of rookie advisors were recruited this way. This informal recruiting process makes it more challenging for firms to reach a broad cross-section of applicants.

“Rookie advisors come from all different backgrounds,” says Stephen Caruso, research analyst. “Just 15% of rookies report financial advisor as their first career and only 43% of rookie advisors have previously worked in financial services. Broker/dealers (B/Ds) and registered investment advisors (RIAs) must find new avenues for connecting with potential candidates and spreading awareness about the profession,” he adds.

Within the firm, structured training programs will be key to advisor success. Almost half (45%) of rookie advisors report that their responsibilities include managing small-balance accounts for a senior advisor, which can be a great learning opportunity for rookies who need client-facing experience. However, keeping rookies in a support role for too long can limit their growth and make it difficult for them to develop their own clients, given that 69% are responsible for building their own client base from scratch.

“A well-structured training program should gradually shift rookie advisors into production and provide a natural progression of their roles and responsibilities, so that practices can capitalize on a new resource without boxing a rookie into an operational or support role,” says Caruso. “RIA custodians and B/D home offices should actively support this transition process by providing best practices and a framework advisors can use to train future successors.”

Overall, as advisor headcount weakens, firms will need to focus their efforts on developing talent in-house. While historically, large B/Ds have driven headcount growth primarily by luring away experienced advisors from competitors, firms will need to shift gears to the growth and development of rookie advisors.

Emerging Markets are Thriving Amid a Slow Global IPO Market

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Globally, year-to-date (YTD) 2023 recorded 615 IPOs with US$60.9b capital raised, a 5% and 36% decrease year-over-year (YOY).

Larger deals came to the market in Q2 compared to Q1, even though it has been a slow recovery. These modest results reflect slower global economic growth, tight monetary policies and heightened geopolitical tensions. However, some emerging markets are booming with IPO activities, as they benefited from the global demand for rich mineral resources, their vast population, growing unicorns and entrepreneurial small- and medium-sized enterprises (SMEs). These and other findings are available in the EY Global IPO Trends Q2 2023.

While the technology sector continues to be the leading sector in IPO activities to date in 2023, IPO proceeds raised by companies of the energy sector have dwindled on the back of softer global energy prices. As well, cross-border activity has experienced a significant surge in both volume and proceeds, primarily attributed to the growing influx from China into the US and a steady flow into the Swiss Stock Exchange.

The special purpose acquisition company (SPAC) market continued to be challenged with negotiations becoming increasingly complex. There is still an exorbitant number of SPACs yet to announce or complete a de-SPAC, which are facing liquidation by the expiration period in the next six months. However, we do expect SPAC IPO activities to return to a more sensible and sustainable level that were seen pre-2021.

Overall regional performance: Q2 performed better than Q1

While the number of IPOs remained flat, the Americas region saw an increase in proceeds of 86%, raising US$9.1b, YOY. This growth was primarily attributed to a single mega spin-off IPO, which happened to be the largest US IPO since November 2021. The US experienced an uptick driven primarily by a few large deals and recent improvements in market sentiment could be a sign for more US IPO activity later in 2023 or 2024. However, despite the positive developments, it may take the overall Americas IPO market longer to recover than many market participants forecasted at the beginning of the year due to the unforeseen banking crisis in 2023.

YTD, the Asia-Pacific IPO market has maintained its position as the global leader in IPO volume and value, with an approximate 60% share. Of the top 10 global IPOs, half were from Mainland China and one was from Japan. The region saw 371 IPOs raising US$39.4b in this period, a YOY fall of 2% and 40% respectively – proceeds were down significantly due to a cooler-than-expected Mainland China IPO market, with many large IPOs waiting on the side-line. For the first time in more than 20 years, Indonesia has surpassed Hong Kong in the global stock exchange rankings by deal number.

EMEIA IPO activity has continued to shrink, with 167 listings raising US$12.4b YTD, a 12% and 50% fall YOY, respectively. Despite this, the region kept its position as the second largest IPO market with 27% of all IPO deals, and saw the second biggest IPO at US$2.5b. India exchanges also broke a two-decade streak, jumping to the top spot in deal count. However, inflation levels in most European countries remain challenging, and the lack of liquidity continues to hold back IPO activity.

2H 2023 outlook: pipeline still in holding

A resurgence in global IPO activity is anticipated to start late 2023 as economic conditions and market sentiment gradually improve with the tight monetary policy entering its final stage.

After the one mega spin-off IPO debut in the US that outshone all other traditional IPOs, there are strong indications that this trend will persist. Large corporate spin-offs and carve-out listings will likely surface across major markets, as companies seek to create more shareholder values through divestiture while investors lean toward mature, profit-making businesses amid a yet-to-revive IPO market.

Understanding the different requirements of each IPO market that companies plan to enter is essential to meet investor expectations and avoid potential delays due to regulatory issues. Investors will continue to be more selective, orienting toward companies with solid fundamentals and proven track record. All options, from alternative IPO processes (direct listing or de-SPAC merger) to other financing methods (private capital, debt or trade sale), should be considered.

Big Banks Are Well Positioned to Weather a Severe Recession, Fed says

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The Federal Reserve Board on wednesday released the results of its annual bank stress test, which demonstrates that large banks are well positioned to weather a severe recession and continue to lend to households and businesses even during a severe recession.

“Today’s results confirm that the banking system remains strong and resilient,” Vice Chair for Supervision Michael S. Barr said. “At the same time, this stress test is only one way to measure that strength. We should remain humble about how risks can arise and continue our work to ensure that banks are resilient to a range of economic scenarios, market shocks, and other stresses.”

The Board’s stress test is one tool to help ensure that large banks can support the economy during economic downturns. The test evaluates the resilience of large banks by estimating their capital levels, losses, revenue and expenses under a single hypothetical recession and financial market shock, using banks’ data as of the end of last year.

All 23 banks tested remained above their minimum capital requirements during the hypothetical recession, despite total projected losses of $541 billion. Under stress, the aggregate common equity risk-based capital ratio—which provides a cushion against losses—is projected to decline by 2.3 percentage points to a minimum of 10.1 percent.

This year’s stress test includes a severe global recession with a 40 percent decline in commercial real estate prices, a substantial increase in office vacancies, and a 38 percent decline in house prices. The unemployment rate rises by 6.4 percentage points to a peak of 10 percent and economic output declines commensurately.

The test’s focus on commercial real estate shows that while large banks would experience heavy losses in the hypothetical scenario, they would still be able to continue lending. The banks in this year’s test hold roughly 20 percent of the office and downtown commercial real estate loans held by banks. The large projected decline in commercial real estate prices, combined with the substantial increase in office vacancies, contributes to projected loss rates on office properties that are roughly triple the levels reached during the 2008 financial crisis.

The $541 billion in total projected losses includes over $100 billion in losses from commercial real estate and residential mortgages, and $120 billion in credit card losses, both higher than the losses projected in last year’s test. The aggregate 2.3 percentage point decline in capital is slightly less than the 2.7 percentage point decline from last year’s test but is comparable to declines projected from the stress test in recent years. The disclosure document includes additional information about losses, including firm-specific results and figures.

For the first time, the Board conducted an exploratory market shock on the trading books of the largest banks, testing them against greater inflationary pressures and rising interest rates. This exploratory market shock will not contribute to banks’ capital requirements but was used to further understand the risks with their trading activities and to assess the potential for testing banks against multiple scenarios in the future. The results showed that the largest banks’ trading books were resilient to the rising rate environment tested.

The individual results from the stress test factor directly into a bank’s capital requirements, mandating each bank to hold enough capital to survive a severe recession and financial market shock. If a bank does not stay above its capital requirements, it is subject to automatic restrictions on capital distributions and discretionary bonus payments.

Asset Manager Fintech Dominion Brought Together 100 Financial Advisors in Buenos Aires

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Photo courtesy

Dominion Capital Strategies held a conference in Buenos Aires where it brought together 100 advisors from the Americas, a meeting that also served to introduce its partner Pacific Asset Management.

The event, held on May 3th and 4th, was attended by Pacific Asset Management CEO Matt Lamb and several of the Portfolio Managers, such as Christian Cole, from the Global Trends team, and Dani Saurymper, who presented one of the novelties of the Longevity & Social Change fund, which is categorized by the PRI as an Article 8 fund.

With some 20,000 accounts created worldwide, the Guernsey-based firm is a strong investor in technology (50% of employees are IT) and at the Buenos Aires event presented new investment options with a focus on multi-market strategies.

The company has two types of investment solutions, a recurring contribution account starting at $250 per month for a given term, and an investment account starting at $10,000, with a focus on flexibility and liquidity.

The investment alternatives are proprietary strategies, a core multiasset alternatives, a protected capital strategy and an S&P500 tracker, along with other individual solutions. Pacific Asset Management has managed the funds (17 in total) since 2023.

The group of companies is licensed and regulated in multiple jurisdictions, such as the GFSC in Guernsey.

HSBC to distribute Capital Group’s Global Corporate Bond Fund to Investors Globally

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Photo courtesyMike Gitlin, Director Global de Renta Fija de Capital Group

Capital Group and HSBC will extend a long-standing relationship through the distribution of the Capital Group Global Corporate Bond Fund (LUX) (GCB) to HSBC’s clients globally.

HSBC will work with Capital Group to launch the fund globally across its Global Private Banking, Wealth Management, and Retail client segments, in several markets globally.  

The GCB fund aligns with the HSBC Global Private Banking and Wealth CIO’s high conviction theme Opportunities in Quality Credit, which focuses on global investment grade corporate credit. GCB’s global approach provides diversification across markets and greater liquidity, while its focus on high quality may offer a degree of long-term stability. The fund could form a core allocation in clients’ investment portfolios, where appropriate for that client, with high-quality credit potentially playing a stabilising effect due to its low correlation to equities, should volatility remain elevated.

Launched in 2018, over the past five years the Luxembourg-domiciled UCITS fund outperformed the reference index and peer group3. The portfolio, driven by fundamental research, is managed by a lead portfolio manager and a global team of 16 sector analysts investing in their highest convictions. 

Mike Gitlin, Global Head of Fixed Income, Capital Group, said: “We are delighted to deepen our partnership with HSBC as Capital Group celebrates 50 years of fixed income investing. We’re proud to be one of the largest, active fixed income managers globally with around US$470 billion in assets2. 

“While markets have been challenged over the last few years, the return of income to fixed income means that investors can benefit from putting cash to work in high quality bonds with attractive yield for potential future income. Harnessing Capital Group’s strong fixed income capabilities and the Global Corporate Bond fund’s track record with HSBC’s global distribution network, we look forward to supporting more clients around the world to build a balanced portfolio.” 

Annabel Spring, Chief Executive of HSBC Global Private Banking & Wealth, said: “We are pleased to be working with Capital Group to offer our clients access to its Global Corporate Bond Fund (LUX). This fund firmly aligns with our CIO view to focus on quality bonds, where current yields are at a decade high and we are nearing the end of the Fed’s tightening cycle. Historically, investing at current levels has provided investors with attractive total returns from income and capital growth.  

“This arrangement further enriches our strong mutual funds offering and underscores our approach of offering a wide range of leading investment solutions to help clients unlock opportunities globally.”

SEC Charges Florida Resident for Operating Ponzi Scheme that Targeted Haitian-American Community

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The Securities and Exchange Commission announced charges against Broward County, Florida resident Sanjay Singh and his trucking and logistics company, Royal Bengal Logistics Inc., with fraudulently raising approximately $112 million from as many as 1,500 investors through an unregistered securities offering that primarily targeted Haitian-Americans.

The SEC’s complaint alleges that, from at least 2019 through 2023, Singh, through Royal Bengal Logistics Inc., offered and sold investors high-yield investment programs that purportedly generated 12.5 to 325 percent in guaranteed returns. As alleged, Singh and Royal Bengal promised investors the company would use their money to expand operations and increase its fleet of semi-trucks and trailers.

According to the SEC’s complaint, defendants assured investors that these investment programs were safe, and that Royal Bengal generated up to $1 million in revenue per month. In reality, the SEC alleges, Royal Bengal has operated at a loss and used approximately $70 million of new investor funds to make Ponzi-like payments to other investors.

As alleged in the complaint, Singh misappropriated at least $14 million of investor funds for himself and others, who did not provide any legitimate services in exchange for those investor funds. Singh also allegedly diverted more than $19 million of investor funds to two brokerage accounts he controlled, engaged in highly speculative equities trading on margin in those accounts, and, as a result, lost more than $1 million of investor money.

“As alleged in our complaint, Singh targeted many members of the Haitian-American community to raise money in a Ponzi-like scheme to enrich himself,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “We are committed to holding accountable individuals like Singh who prey on investors through lies and deceit.”

The SEC’s complaint, filed in U.S. District Court for the Southern District of Florida, charges Singh and Royal Bengal with violating the registration and anti-fraud provisions of the federal securities laws. The complaint also names Sheetal Singh, the spouse of Sanjay Singh, and Constantina Celicourt, the spouse of Royal Bengal Logistics’s Vice President of Business Development, as relief defendants.

The District Court granted the SEC’s request for emergency relief, including preliminary injunctive relief, asset freezes, the appointment of a Receiver, and an order prohibiting the destruction of documents. The SEC is also seeking an officer and director bar against Singh and permanent injunctions, civil money penalties, and disgorgement of ill-gotten gains with prejudgment interest against both of the defendants and the relief defendants.

The SEC’s Office of Investor Education and Advocacy and the Division of Enforcement’s Retail Strategy Task Force have issued an Investor Alert with tips on how investors should avoid investment decisions based solely on common ties with someone recommending or selling the investment.

The SEC appreciates the assistance of Florida’s Office of Financial Regulation, the U.S. Attorney’s Office for the Southern District of Florida, the FBI’s Miami Field Office, and the U.S. Department of Transportation, Office of Inspector General, Southern Region.