Foto cedida. Santander, reconocido como mejor banco de España y América por la revista The Banker
The Banker magazine has granted Banco Santander the award for Bank of the Year in the Americas and Spain. The publication highlighted Santander’s “ability to innovate and to adapt solutions developed in one market to other businesses within the group”, as well as its ability to deliver returns, gain strategic advantage and serve their markets.
The Banker -founded in 1926- also emphasized Santander’s “outstanding commitment” to responsible banking, including its efforts to promote education, social welfare and financial empowerment with initiatives such as Superdigital, a platform which offers access to financial services to underbanked and individual micro entrepreneurs in Latin America, and Santander Ayuda, which promotes local projects for vulnerable people in Spain.
After receiving the recognition, Santander group chief executive officer, Jose Antonio Álvarez said that throughout 2020 their teams have worked hard to ensure they remain close to their customers in every market. “To be recognised by The Banker as the bank of the year across many of our markets is a great testament to their efforts in a challenging year”, he added.
The group’s diversification across both geographies and products remains one of the firm’s key strengths, with its South American region contributing 41% of underlying profit this year, North America, 20% and Europe 39%.
In Brazil, the magazine –which is part of the Financial Times group- recognized a number of innovation made by Santander during the year, including products like Sim, a fintech that provides quick and affordable loans; EmDia, a debt renegotiation platform that connects creditors with consumers in arrears, Santander Auto, a car insurance business or Pi: a fully digital investment platform, with an open architecture.
In Argentina, The Banker noted the new services and products the bank now provides for female entrepreneurs and younger customers. For example, iU, a new product with benefits designed specifically for young people. The bank also offers a comprehensive proposition which focuses on female entrepreneurs, owners of SMEs and professionals.
Lastly, in Spain, they pointed out the extraordinary measures Santander has made to support its customers during the COVID-19 pandemic: “Through a commendable mix of product innovation and business agility, Santander Spain has played an invaluable role in assisting the country’s businesses and consumers through an unprecedented economic and health crisis,” the publication said.
Pixabay CC0 Public Domain. Savills IM amplía la alianza con Vestas con el lanzamiento de un fondo de logística de gestión discrecional
Savills Investment Management, international real estate investment manager, has announced in a press release the launch of a pan-European logistics investment fund in partnership with Vestas Investment Management.
The Vestas European Strategic Allocation Logistics Fund (VESALF I) is amongst the first ever ‘blind’ funds that has been raised solely from Korean institutional investors to invest in European real estate. It will target core and core-plus logistics assets of between 40 to 140 million euros across all key European markets.
Savills IM will be the European fund and asset manager in partnership with Vestas, who has raised 200 million euros which, combined with manager co-investment and up to 60% gearing, will give the fund a target gross asset value of 450-500 million euros, as estimated by the firms. The strategy will be seeded with the recent acquisition of a new 115,000 square meters unit leased to DSV in Tholen, the Netherlands.
“Having advised and worked closely with Vestas for several years, we are delighted that the relationship has now led to us jointly establishing the first blind logistics fund for Korean institutions. It is a key milestone for both of our firms, and a clear sign of how the Korean market is maturing. Institutions are increasingly willing to back partners they trust, to better access stock in competitive markets and to achieve greater portfolio diversification”, said Jon Crossfield, Head of Strategic Partnerships at Savills IM.
Meanwhile, Salvatore Lee, Managing Director at Vestas Investment Management, pointed out that they are very pleased to set up this blind logistics fund with Savills IM “and to be able to bring a valuable new product to my proactive Korean investors in such a dynamic and competitive logistics market”. In his view, this is a big step for Vestas and builds on their five-year history of overseas investments.
“We are very grateful to the Savills IM team who have supported and are now partnered with us. We are excited to continue deploying the capital on behalf of VESALF I over the next two years”, he added.
Pixabay CC0 Public Domain. Inversis apuesta por una cartera diversificada, con la atención puesta en emergentes y en EE.UU.
Allfunds, wealthtech and fund distribution company, has been selected by China Merchants Bank (CMB) Group as its B2B investment fund platform partner. Therefore, it will become the provider of access to third-party funds for its all overseas PWM&PB centers, especially in Hong Kong and Singapore markets.
Allfunds revealed in a press release that, with this agreement, CMB group will use its “proficient fund distribution capabilities to support its fast growing private wealth management and private banking business globally”. This move is also in line with the bank’s strategy of continuing to deploy overseas business, and to make sustainable development and investment.
By selecting Allfunds, CMB’s overseas businesses will be able to gain access to the world’s largest fund distribution network with a broad range of investment funds and take advantage of the asset services the wealthtech provides in Asia and globally. This include data & analytics, portfolio & reporting tools, research and regulatory services. Also, CMB aims to use Allfunds’ automatic dealing to increase the efficiency and boost the growth of its fund business.
Allfunds believes that the cooperation with the leading private bank in China -and Top 10 banking brands according to The Banker magazine- will provide an opportunity to further expand and strengthen its position in Asia Pacific, as well as enhance its comprehensive and integrated solutions for third party funds. The Asian market is a core part of its growth strategy and an extremely important region for the wealthtech.
“We are very pleased to partner with CMB, a highly reputable and leading private bank in China. We are excited about the huge opportunities ahead in the Asian and Chinese wealth management markets, which is an important part of our growth strategy as we continue to expand the global fund distribution network. We look forward to supporting CMB’s continuous expansion in the region”, said Juan Alcaraz, Founder and CEO of Allfunds.
Meanwhile, David Pérez de Albeniz, Regional Manager for Asia, stated that CMB is well-established with the position of an innovation-driven digital bank in the region. “As a leading wealthtech company, our team in Asia is committed to client experience, innovation and digital solutions. We are delighted to be able to help CMB move forward on the vision and support its growth ambition with our value-added and cutting-edge wealthtech solutions”, he added.
Allfunds has a branch in Singaporeand a team of 17 employees who bring in-depth knowledge of the particularities of the Asian markets as well as substantial experience in the region. Earlier this year, they opened a new office in Hong Kong as the hub for its North Asia business, broadening its ecosystem with new distributors and fund managers coming from the region.
Pixabay CC0 Public Domain. Bank of America confía en que las vacunas impulsen el crecimiento en un entorno donde la incertidumbre dominará el corto plazo
With a surge in COVID cases and uncertain fiscal policy, Bank of America believes the near-term outlook is “weak and uncertain” but expects the roll out of multiple vaccines to boost global growth, particularly in the developed market economies with the biggest problems containing COVID, but with the best access to vaccines.
In the firm’s report for 2021, global economists Ethan S. Harris and Aditya Bhave point out that “we are not out of the woods yet” due to the surge in COVID cases and uncertain fiscal policy, but in their view more stimulus and “wide vaccine distribution” should boost growth mid-year.
For the United States, they think it will be a transition year, “moving back to services from goods, to private from public and to in-person from virtual” as “the scars from COVID will remain”. Specifically, they look for the economy to grow 4.5% in 2021. In the Euro area, after falling a 7% in 2020, they expect a 3.9% and 2.7% growth this year and in 2022.
Meanwhile, in Latin America they forecast GDP growth to rebound to 3.8% in 2021 after a decline of 7.4% in 2020 and fiscal deficits to likely improve. “But many countries will still be far from stabilizing their debt ratios and will need to develop credible exit strategies”, they warn.
In the near term, the most important uncertainties for Bank of America are around the US: “We are still very much in the rising part of the COVID curve and it will take a number of weeks to gauge the damage to public health and the economy. Fiscal policy is equally uncertain, with a potential stimulus package of anywhere from zero to a trillion dollars”, the report points out.
That’s why, medium term, the speed of a vaccine roll out is “critical”. “Of importance is not only the supply of doses but also the demand, i.e. the degree to which vaccine skepticism will slow progress towards herd immunity. If delays in vaccine rollouts in emerging markets are even longer than expected, investors should look for developed markets growth outperformance in 2021”, says the firm.
Four growth drivers
The bank identifies four major cross currents in the global economy that will be key drivers of growth: the evolution of the pandemic, the distribution of vaccines, another round of fiscal stimulus and a “more organized” trade war.
“The outlook is quite stable for countries that have done a good job containing the virus with effective testing, tracing and quarantining systems. By contrast, countries that have not contained the virus are super sensitive to the near-term surge in COVID cases and the medium-term surge immunizations”, the experts say.
That’s why, in their opinion, the roll out of highly effective vaccines will be the key driver for global growth. “A key part of our forecast is that we expect some vaccine nationalism, with countries that manufacture vaccines first immunizing large parts of their own populations before exporting to the rest of the world”. Thus the US likely will get most or all of the initial doses of the Moderna vaccine. And in general, developed economies will tend to get the vaccine faster than emerging markets. Among the second ones, China will probably be the first to get herd immunity.
The firm expects another round of fiscal stimulus worldwide. For the US, they are forecasting 750 billion dollars fiscal right after the Presidential Inauguration on January 20 and across Europe they expect more moderate stimulus of 1-2% of GDP.
The last cross current to watch is the trade war, which, after Joe Biden’s presidential victory, they expect to be “smaller and more organized”. Biden has said he will try to work with US allies to present a united front for dealing with “bad actors.” For Bank of America’s economists, that would include a continued push back against Chinese violations of intellectual property rights, national security concerns and human rights issues. “We would expect him to dial back battles with Europe, Canada, Mexico and allies in Asia, while seeking to reform rather than sideline international organizations. This means a much less uncertain climate for multinational businesses”, they conclude.
Inflation, deflation
Lastly, the experts reveal their outlook for inflation: “Inflation refused to budge before the pandemic, despite a long economic recovery and apparent full employment in much of the world. In our view, this stickiness was mainly due to the fact that many years of low inflation had lowered inflation expectations even as labor markets finally started to tighten. The effect was to both flatten and shiſt down the Phillips Curve”.
In their opinion, the COVID crisis has punched a hole in inflation, and whatever inflationary pressure was in the global economy has now leaked away: “It will take a number of years for most central banks to hit their targets”.
Pre-pandemic, vulnerabilities in some EM economies had mounted amid slowing economic growth. As Fig. 1 shows, countries in the bottom right (Brazil, Egypt, Ukraine, South Africa) had limited fiscal space going into the health crisis as they already had high public-debt-to-GDP ratios.
Since the onset of the current crisis we have seen a surge in debt ratios as recession hit. For the moment there is a tolerance in markets towards higher fiscal deficits and public debt (that we closely monitor), but actions to restore fiscal sustainability will be required once the recovery gets underway.
Tracking debt sustainability
Our proprietary ‘Debt Sustainability Score’ looks for a potential negative drift in government indebtedness before it becomes irreversible, using a range of tested inputs. Our ‘Shorter-Term Debt Score’ model detects shorter-term momentum shifts based on quarterly inputs. In fig. 2 below we combine the latest readings of both models.
This chart shows us two things. First it identifies countries with good debt dynamics in the green quadrant: Taiwan particularly and Eastern Europe, especially Bulgaria. Conversely the red quadrant shows us less favourable markets: foremost Brazil (of which more from our EM debt team below), South Africa and Egypt.
Second it flags markets which are seeing short-term shifts that might point to improvements or deteriorations in their longer-term debt sustainability score. Improving on the margin are Chile and Turkey.
Meanwhile a range of markets are seeing short-term deteriorations with possible long-term consequences: foremost the Philippines, but also Malaysia, China and Romania.
A view from our EM Debt Team on Brazil
Brazil has been one of the worst affected countries during the Covid-19 crisis, with a large number of virus cases, significant restrictions and economic disruption.
The fiscal and monetary policy response has been timely and very powerful – involving large social transfers and a significant widening in fiscal balances as well as monetary policy easing and liquidity provision.
The large fiscal impulse in Brazil presented below, during a time of mounting debt to GDP, has unsettled market participants. Very low interest rates have also weighed on the currency, further exacerbated by a difficult environment for EM FX globally.
More recently however, it is becoming clear that the Brazilian real (BRL) has become an increasingly domestic/idiosyncratic story, heavily centered around the outlook for fiscal policy. While we expect the external environment to improve, through a gradual although somewhat uneven global recovery and the prospect of a vaccine in 2021, we believe that BRL will continue to be dominated by domestic fiscal news flow and policy coordination.
The way forward...
In particular, we believe that Brazil needs to set out clear policies for maintaining the fiscal spending ceiling by allowing a gradual expiry of temporary fiscal measures, identifying spending cuts and pushing ahead with a more ambitious reform agenda. Should such a scenario materialize, likely over the next few months, we believe the risk premium specific to Brazil can be priced out from the currency, allowing the BRL to strengthen.
Restoring fiscal credibility in Brazil together with an improving growth/virus picture, strong commodities backdrop and a positive external balance picture should translate into a reversal of this year’s significant underperformance. Of course, if there is evidence that the spending cap is not being respected it could mean further currency weakness, as the debt sustainability issue becomes the dominant driver of Brazilian assets.
By Sabrina Khanniche, Economist in the Fixed Income team, and Mary-Therese Barton, Head of Emerging Market Debt at Pictet Asset Management.
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Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to risks and uncertainties that could cause actual results to differ materially from those presented herein.
Important notes
This material is for distribution to professional investors only. However it is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation. Information used in the preparation of this document is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning. Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.
This document has been issued in Switzerland by Pictet Asset Management SA and in the rest of the world by Pictet Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority, and may not be reproduced or distributed, either in part or in full, without their prior authorisation.
For US investors, Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act.
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Foto cedida. BlackRock compra el proveedor de índices personalizados Aperio
BlackRock has entered into a definitive agreement to acquire Aperio, a pioneer in customized index investing, for 1.05 billion dollars. The asset manager announced in a press release that they will buy the business from Golden Gate Capital, a private equity company, and will incorporate Aperio’s employees.
BackRock is already a provider of SMAs for U.S. wealth management-focused intermediaries, specialized in customized actively-managed fixed income, equity, and multi-asset strategies. The firm pointed out that this acquisition will boost its SMA assets by roughly 30% to over 160 billion dollars.
It also “expands the breadth of personalization capabilities available to wealth managers from BlackRock via tax-managed strategies across factors, broad market indexing, and investor ESG preferences”. In its view, the combination with Aperio will set a new standard for personalized whole portfolio solutions in the SMA market.
“The wealth manager’s portfolio of the future will be powered by the twin engines of better after-tax performance and hyper-personalization. BlackRock and Aperio, working together, will bring unmatched capabilities to meet these objectives. The combination will bring institutional quality, personalized portfolios to ultra-high net worth advisors and will create one of the most compelling client opportunities in the investment management industry today”, said Martin Small, head of BlackRock’s U.S. Wealth Advisory business.
Meanwhile, Aperio co-heads, Liz Michaels and Ran Leshem, commented that the they have been “honored” to earn the trust of the most demanding wealth managers by always putting investors’ interests first and partnering with advisors to solve the complexities of UHNW investors through research integrity and excellence in human-centric client experience.
“With BlackRock, we have found a like-minded fiduciary firm with long-standing roots in tax-efficient indexing, a commitment to sustainable investing, and diversity, equity and inclusion, and a track record of delivering consultative whole portfolio solutions to wealth management intermediaries. We are excited to harness BlackRock’s capabilities and reach to keep innovating on behalf of an even larger base of wealth managers and institutional investors”, they added.
Vertical integration
Aperio is a pioneer in customizing tax-optimized index equity SMAs to deliver wealth managers capabilities that “embrace the uniqueness of each investor and enhance after-tax performance”. It also pioneered individually personalized ESG portfolios that enable investors to elevate the purpose of their wealth and make an impact on causes deeply important to them.
Aperio’s high-touch consultative client service model focuses on ultra-high net worth households and institutions served by private banks and the fast-growing independent registered investment advisor (RIA) market. The U.S. retail and wealth SMA market totals approximately 1.7 trillion dollars in assets and is growing at approximately 15% annually and 35% among RIAs. With over 36 billion dollars of assets under management as of September 30, 2020, Aperio has outpaced the industry with an average annual organic asset growth rate of nearly 20% over the past five calendar years.
BlackRock plans to operate Aperio as a separately branded, vertically integrated team within its U.S. Wealth Advisory business. Aperio will retain its investment, business development, client service, and ESG-SRI processes under the leadership of Ran Leshem and Liz Michaels, who will become co-heads of the team. Their current CEO, Patrick Geddes, will maintain his role as Aperio’s Chief Tax Strategist and become a BlackRock senior advisor, focusing on broadening portfolio construction research and tools for taxable investors across asset classes.
“We are thrilled to welcome the Aperio team to BlackRock. We look forward to bringing Aperio’s innovative mindset in financial services to BlackRock and drawing on the team’s decades of experience to expand our offerings to even more advisors and their clients. This transaction deepens our presence in the San Francisco area and reflects the critical importance to BlackRock of tapping the innovation taking place on the West Coast of the U.S”, said BlackRock’s Chief Client Officer, Mark McCombe.
Pixabay CC0 Public Domain. NN IP lanza un fondo de crédito alternativo destinado a la financiación del comercio global
NN Investment Partners has launched the fund NN (L) Flex Trade Finance, offering institutional investors access to a conservative portfolio of short-dated trade finance loans which are sourced globally. The asset manager announced in a press release that they will partner with Channel Capital Advisors LLP to enhance sourcing and pipeline management of the strategy.
“Trade finance allows institutional investors to enter a USD 15 trillion market that has been dominated by banks until recently. In trade finance, investors can find a potent portfolio diversifier that offers a yield pickup over liquid credit and that is efficient from a solvency capital perspective”, they pointed out.
The asset class is short in tenor which, in NN IP’s view, provides natural liquidity and allows portfolio managers to react quickly to changing circumstances. The investment strategy focuses on well-rated loans that facilitate a specific sale of often essential goods, which are supported even under stressed market conditions.
“Strict investment guidelines ensure a highly diversified portfolio in terms of geography, sector and counterparties, without employing leverage”, they said. Also, portfolio construction is aimed at properly diversifying risk whilst still allowing for a robust analysis of each individual transaction on credit and environmental, social and governance (ESG) criteria.
In this sense, the firm will assess each transaction of the strategy on ESG criteria using a specific framework for trade finance and align each of these with the Sustainable Trade Criteria from the International Chamber of Commerce. In addition to this, they will apply proprietary policies with a focus on financing sustainable goods with positive social impact (encouraging responsible consumption) and restricting the financing of goods with negative impact (such as coal, crude oil and tobacco).
Suresh Hegde, Head of Structured Private Debt, commented that, in the current low-interest-rate environment, there is growing demand for trade finance amongst institutional investors. “Building on our 10-year track record in financing international exports, we have spent a considerable amount of time assessing the short-dated trade finance market. We are delighted to offer a strategy which allows institutional investors to benefit from the attractive characteristics of these assets in a robust and responsible manner, without adding undesirable idiosyncratic risk”, he added.
A sub-fund with monthly liquidity
The asset manager revealed that the NN (L) Flex Trade Finance has a medium-term target return of USD LIBOR + 3-4% gross with a weighted average credit rating of BBB-/BB+, and an average maturity of less than one year. It offers institutional investors quarterly interest income distribution and monthly liquidity.
The strategy is a sub-fund of NN (L) Flex, established in Luxembourg. NN (L) Flex is duly authorised by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg. Selected share classes of the sub-fund are currently registered in Luxembourg, Netherlands, Germany, France, United Kingdom and Italy.
Climate change will cause enormous damage to economies, especially in the emerging world. People in China could be 25 per cent poorer by the end of the century than if there were no further climate change if we do nothing more to slow the rise in global temperature. For Brazil and India the shortfall is likely to exceed 60 per cent, according to modelling by a team of environmental economists at Oxford University’s Smith School in a new report sponsored by Pictet Asset Management.
Globally, that deficit could reach some USD 500 trillion – as a worst case, nearly half of the world’s potential economic output would be lost by the end of the century compared to potential in the absence of further global warming. But this impact won’t be spread evenly. Some of the world’s biggest emerging economies are at greatest risk, particularly if they leave the heavy lifting on slowing climate change to the developed world and do little themselves. Vulnerable to rising sea levels, drought and severe weather events, these countries need to take action to limit climate change.
Fortunately, they increasingly recognise that the effort will be worthwhile. Worldwide, people are aware of the challenges presented by climate change, understanding that it leads to a loss of biodiversity, more flooding, arid farmland, forest fires and the like. And so governments are being forced into action. Thankfully this now makes the worst case a relatively unlikely one.
But merely sticking to current policies doesn’t do enough either. The loss in potential GDP per capita would be smaller, but not by much. At best the loss in potential GDP per capita might be reduced to 32 per cent from 46 per cent. And that’s without factoring in impossible-to-predict cascading effects where small incremental changes lead to a suddenly catastrophic outcome.
But were countries to act collectively, they could make up a significant chunk of that foregone output. That means action by developed and developing countries.
The Oxford team’s “current policies” scenario is that global warming would be some 2.8 degrees Centigrade above pre-industrial levels if efforts were limited to the richest countries, with 1 degree of that warming having already occurred. Should that temperature increase be cut to 1.6 degrees under an ambitious programme that included emerging economies, potential losses could shrink to a quarter or less.
And right now, there is a unique opportunity for countries, rich and poor, to make radical progress towards limiting the likelihood of catastrophic climate change. The COVID-19 pandemic has been a huge global shock. Public health measures, such as lockdowns, have inflicted huge financial costs. Governments were quick to respond and have committed vast sums to economic recovery. In many cases it makes financial sense for this expenditure to be directed towards measures that mitigate climate change.
Read more about the Oxford-Smith paper at this link.
Except otherwise indicated, all data on this page are sourced from the Climate Change and Emerging Markets after COVID-19 report, October 2020.
Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to risks and uncertainties that could cause actual results to differ materially from those presented herein.
Important notes
This material is for distribution to professional investors only. However it is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation. Information used in the preparation of this document is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning. Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.
This document has been issued in Switzerland by Pictet Asset Management SA and in the rest of the world by Pictet Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority, and may not be reproduced or distributed, either in part or in full, without their prior authorisation.
For US investors, Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act.
Pictet Asset Management Inc. (Pictet AM Inc) is responsible for effecting solicitation in North America to promote the portfolio management services of Pictet Asset Management Limited (Pictet AM Ltd) and Pictet Asset Management SA (Pictet AM SA).
In Canada Pictet AM Inc is registered as Portfolio Managerr authorized to conduct marketing activities on behalf of Pictet AM Ltd and Pictet AM SA. In the USA, Pictet AM Inc. is registered as an SEC Investment Adviser and its activities are conducted in full compliance with the SEC rules applicable to the marketing of affiliate entities as prescribed in the Adviser Act of 1940 ref. 17CFR275.206(4)-3.
Pixabay CC0 Public Domain. Tikehau Capital planea lanzar un fondo de descarbonización de private equity centrado en Norteamérica
With President-elect Joe Biden facing a split Congress, investors could welcome the resulting “Biden-lite” agenda, which may include portions of his spending plans -such as fiscal stimulus and infrastructure investment- but little in the way of tax increases.
Biden’s apparent victory in the US presidential election marks an end to months of political uncertainty and turmoil. While both his victory and the outcome of the Senate races have yet to legally finalized, the base case in markets seems to be a Biden presidency and split Congress. This outcome may usher in a more diluted Biden policy agenda.
Indeed, the market narrative seemed to shift in the final days before the election: hopes of a Democratic “blue wave” turned into cheer around “Biden lite”, as Treasury yields declined and equity investors rotated from cyclical value stocks towards opportunities in growth and technology.
More broadly, the financial markets seemed relieved that this major political event was concluding, leading to a wave of risk-on sentiment in the US and globally. With a more incremental approach to policy changes under a Biden administration, we could see markets perform favorably as they benefit from more stable trade relations and better growth prospects heading into 2021. Markets may be buoyed by a return to a more multilateral approach to foreign policy, and the reduced uncertainty that may result.
Perhaps the key concern for markets under a Biden presidency was his proposed USD 4 trillion in tax hikes, including increasing corporate tax rates, capital gains taxes, and personal taxes on wealthy individuals. However, if Congress is divided, most -if not all- of these tax policies will be difficult to enact. And importantly, the Biden team may not view these as a year-one priority, as the pandemic and economic relief take center stage again.
Top priorities of a Biden-Harris administration
As President-elect Biden and Vice-President-elect Kamala Harris consider their key priorities in the weeks ahead, these focus areas could include:
1. Creation of a new pandemic taskforce: As the coronavirus pandemic remains rampant in the US and globally, one of the first priorities will be to address the virus head-on, with support from a new pandemic taskforce of scientists and medical officials. This will set guidelines to stop outbreaks, double down on testing and contact tracing, and invest heavily in vaccine distribution. This will mark a return to “relying on the science” as a fundamental pillar in managing the pandemic.
2. Fiscal stimulus: One area of agreement for both Democrats and Republicans is the need for an additional fiscal stimulus to provide pandemic relief. Thus far, Congress has issued nearly USD 3 trillion in stimulus, and Democrats and Republicans have proposed competing packages for a next round of stimulus of USD 2.2 trillion and USD 500 billion respectively. Both packages cover unemployment benefits, small business relief, and another round of stimulus cheques to households. We could certainly see stimulus passed early in the next presidential term, which is likely positive for risk assets.
3. More executive orders on climate and clean energy: Biden’s plan includes a USD 2 trillion investment in areas of clean energy, including wind, solar and renewable energy. While this policy would likely face opposition in a split Congress, we may still see a Biden presidency seek to push forward his climate and sustainability agenda via executive order, and he may appoint more “environmentally friendly” leaders to his cabinet. Overall, we could see new opportunities for sustainable investing. Some actions that he could take without the support of Congress may include rejoining the global Paris climate accord, reversing some of Trump’s executive orders on energy or signing executive orders to cut emissions.
4. Infrastructure investment: Another area where both Democrats and Republicans may ultimately agree is infrastructure investment. Both Biden and Trump have talked about investing in traditional infrastructure -such as the rebuilding of roads, bridges and airports- as well as technology like 5G and artificial intelligence. While the Biden team proposed a USD 1.3 trillion infrastructure package, we may ultimately see a smaller package approved by both sides, perhaps in the USD 750 billion range. This would nonetheless represent an important investment in US economic growth and potential jobs. It could also stimulate opportunities in the private markets space to help finance these critical projects.
5. Returning the US to the world stage: In addition to rejoining the Paris climate accord, Biden has also talked about restoring US membership in the World Health Organization (WHO), as well as repealing via executive order the travel ban on majority Muslim countries. Overall, a Biden administration would favor the US returning to the world stage as an ally and leader, aligning itself once again with its historical allies and perhaps coordinating globally on climate solutions. In terms of US-China relations, while Biden has pledged to be “tough on China”, he has indicated he prefers a less unilateral approach than his predecessor and plans to bring US allies, labour groups and environmental organisations to the negotiating table.
Reaching across the aisle
With a focus on reconciliation, a Biden administration may “reach across the aisle” for Cabinet and key position appointments. Indeed, there has been speculation that Biden may maintain Trump appointee Jerome Powell as chairman of the Federal Reserve and consider Republican senator Mitt Romney for the position of US Treasury secretary. Markets may welcome this balanced approach to governing, particularly in key roles impacting financial policy.
Markets like evolution, not revolution
Overall, the theme of a Biden victory and split Congress seems to be evolution rather than revolution -perhaps what voters and investors welcome most when it comes to government policy-. This outcome also lessens the probability of unintended consequences that we may have seen from a “blue wave”, such as rapidly rising interest rates which could be disruptive to markets. Also note that, historically, investors have seen seasonally stronger market returns from election day through year-end.
Implications for investors
Against this backdrop, we could see a broadening of participation across asset classes, with cyclical parts of the market performing alongside growth technology, and non-US markets playing catch-up, especially given more congenial global relationships and perhaps an ongoing softer US dollar. Notably, China and north Asia could benefit most from a thawing of tension, alongside better virus outcomes in that region overall.
In credit markets, with yields expected to remain stable and low, we would continue to see investors “hunt for income”. Our preferred credit risk includes parts of selecthigh-yield assets (including “fallen angel” strategies), convertible bonds (which can participate in equity upside as well) and curve-steepened strategies that benefit from better growth and inflation potential.
Finally, we see potential areas of opportunity outside of traditional value/growth strategies, including infrastructure, clean energy, US housing, and technology infrastructure like 5G, all of which could thrive in a post-election environment.
A column by Mona Mahajan, US Investment Strategist in Allianz Global Investors
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My position on the creation of Registers in the British Virgin Islands (BVI) is well known and, in this commentary, I will fully explain my reasons to reject this potentially very harmful (and unnecessary) initiative.
In my opinion, there are at four relevant arguments worth exploring as they put my stance on the right side of history. There are none, as far as I can see, for the opposing view.
Privacy
When the Income Tax was first created, with the main aim of covering extraordinary expenses (like wars), the current arguments used by detractors against taxes were not why private individuals had to pay for crises they had not created, or even why the Government thought that it was appropriate to “rob” citizens in order to do so, but what many among us still see and defend as something fundamental in these times: the individual’s right to privacy.
Mid-19th century taxpayers thought the Government had no right whatsoever to know how much money they earned. They were already paying consumption taxes and they were not willing to let the Government meddle with their private lives.
Income Taxes evolved over time: one war led to another, and even in the absence of armed conflict, inefficient governments decided to impose them without any extraordinary circumstances. And so, more and more countries started to adopt them.
As a result, individuals started to seek ways to avoid these taxes lawfully, often by using structures in jurisdictions where this type of tax was considered akin to expropriation. They also created juridical structures aiming to protect their privacy. There is nothing to condemn in either behavior and BVI, alongside other jurisdictions that have created a framework for these business opportunities, has played a crucial role in this industry, providing the best context for these individuals to achieve their wealth planning goals.
Let us add that offshore jurisdictions were not created to capture investments by other countries’ fiscal residents, but it was the latter that drove away their own citizens by overlaying exorbitant taxes (on their income first and then on their assets) leading to an unsustainable amount of fiscal pressure. Then, continued intrusion into individual freedoms reached levels considered too high by those individuals who think privacy is an unalienable right.
The solution to this tension is not that complicated at law: When two different, individual rights oppose each other, the arising conflict is always resolved by determining which right prevails in hierarchy. When there is a “conflict” between a fundamental human right and a mere interest of the State, there can be no discussion.
Personal safety
This section would not be relevant if the entire world enjoyed the levels of legal certainty and personal security of the U.S. or Europe. This is not the case. And the vast majority of BVI users live in insecure countries, most of them in Latin America, Asia and Africa, where unfortunately violence is already part of their day to day lives.
For these individuals, the critical need for privacy that was discussed above is also relevant for other reasons. In fact, these individuals are people who live in countries where the need to protect wealth does not have anything to do with the desire to pay less taxes or the right to privacy as a right in itself (which would, of course, be understandable), but to protect their physical security. In Latin America, for example, crime levels are extremely high and that includes kidnap for extortion of high-income citizens, theft, torture and murder. What is the use of privacy then? To protect assets, of course, but also to protect life itself.
Forty-two of the 50 most violent cities in the world in 2020 are in Latin America, most of them in Mexico and Brazil. Out of the remaining 8, Durban and Mandela Bay in South Africa, and Kingston, Jamaica, stand out. Only two are in developed countries: St. Louis and Baltimore. As for the countries with the most extortion kidnappings, Brazil tops the list with 54.91% of incidents, followed by Mexico with 23.40%.
The BVI SOLUTION already exists
In BVI, there is an established system that allows authorities to know the identity of the shareholders and owners of the companies established in the territory in a matter of hours if necessary: the notorious BOSS, copied and implemented by many competing jurisdictions.
We do not deny, that under certain circumstances, this information must be provided to the authorities. Unlike those who criticize our position with regards to implementing this new BO Register, we put ourselves in their shoes and we tell them that they are right in their aims, but not in their arguments or, even less, their proposals.
In other words, the interests that this new Register is intended to protect are appropriately protected already. There is no need for further infrastructure: why would we reinvent a wheel that is not broken?
Economic arguments
If the world ever adopts this idea holistically, the offshore industry will be effectively cancelled. This would be a death knell for BVI, other offshore jurisdictions and the individuals using them with strictly lawful goals.
But why get ahead of ourselves and give away our lifeblood on a silver platter to other jurisdictions when the existence of public registries of UBOs is far from being a world standard nowadays? This would be one of the most detrimental political decisions the jurisdiction could make as it will lead to loss of business and the migration of trust and wealth planning companies out of BVI.
My fear would be that companies doing business in the BVI would be forced to move their operations and clients to jurisdictions which will not have these registers in place, such as Belize or Nevis, in order to maintain some sense of privacy for their clients. We would also face scrutiny from HNW and UHNW advisors and clients in emerging markets with regards to them having to place themselves and their clients in harm’s way in order to comply with this Register. This is simply not good for business.
Means and ends
Again, it is clear that governments have a legitimate interest in knowing the wealth status of their taxpayers, but as I always say: sometimes, the cure can be worse than the disease. What is the cost? Is this worth it if there are other, less invasive, mechanisms that lead to the same result? Do we need to lose all aspects of privacy to conform to what a few people think is the solution?
Column by Martin Litwak,lawyer specialised in international wealth management and investment fund structuring
