Pixabay CC0 Public Domain. XP Inc y Moneda Asset Management firman un acuerdo de distribución de fondos en Brasil
XP Inc., a leading, technology-driven financial services platform, and Moneda Asset Management, one of the largest independent investment management firms in Latin America, announced a partnership to offer Brazilian-based investors access to offshore products via new local funds.
XP has launched the Moneda Latam Credit Advisory Feeder fund, a Brazilian domiciled fund dedicated to investing into the hedged (BRL) share class of the Latam Corporate Credit fund offered by Moneda Asset management in Luxembourg.
As interest rates continue to decline globally, the search for better yields has become a focus. Specifically in Brazil, this decline has shifted the focus from a traditionally home bias investment approach, to one which focuses on searching beyond Brazil’s borders in order to improve the risk/return balance in portfolios. By dedicating local funds to investing in Moneda Asset management products, XP seeks to give investors enhanced access to investment strategies from an experienced investment manager with a compelling track record.
Today, the majority of investments in Brazil are concentrated in local managers. XP’s strategy is to open a new avenue and bring the top managers in the world to the platform and expand investment options through local feeder funds. In this context, selecting Moneda Asset Management is aligned with XP’s strategy of partnering with top-tier managers in the world.
“Starting this partnership with Moneda is a remarkable milestone for XP. Through an award-winning debt strategy uniquely managed by Moneda, we aim to provide Brazilians enhanced access to one of the best-in-class investment firms in Latin America. We are all very thrilled with this promising partnership.”, explains the Funds Specialist at XP, Fabiano Cintra.
Alfonso Duval, CEO at Moneda Asset Management stated that “we are excited to partner with XP to provide Brazilian investors with greater access to Moneda´s Credit expertise. This is a project that has been in the making for many years, and with the combination of the new macro environment, coupled with the growth of the asset class and the new investment demand, it is now the ideal time to launch this product for the Brazilian investor to take advantage of this opportunity”.
Moneda has a globally recognized investment management expertise and XP has outstanding distribution capabilities, coupled with educational engagement that seeks to guide investors in intelligent diversification that makes sense in the current domestic and international scenarios.
“This is extremely healthy for the development of the fund industry and very good for investors. And XP has used its size and innovative DNA to lead this front and improve this disproportionate domestic bias that we still see in Brazil”, says Leon Goldberg, partner at XP.
Foto cedida. Lynk lanza Buyside Power Women Initiative
Lynk, a pioneer of the knowledge-as-a-service industry, announced the launch of Buyside Power Women, an editorial series that aims to increase visibility of female leaders and male allies in the investment management industry.
Peggy Choi, Founder and CEO of Lynk, said: “As a woman coming from the buyside myself, I have seen many women, despite being qualified for the roles, choose to opt out of a career on the buyside for reasons such as lifestyle or absence of sponsorship. Now, as a CEO, I strive to create an environment that is inclusive for all our team members, regardless of one’s background, and see driving diversity within the industries that we serve as part of Lynk’s mission. As you can see from the leaders in this Buyside Power Women series, there are many tangible ways for firms to help women take more calculated risks on a more even playing field.”
With regular editorial articles and live events, Buyside Power Women features top industry leaders on the buyside from all regions to highlight how advocacy for diversity could influence future capital allocation. Among the leading voices featured are top executives from global firms including PIMCO, AIA, Schroders, BNY Mellon Investment Management alongside regional buyside firms.
Kimberley Stafford, Managing Director and Head of APAC of PIMCO, sees increasing the talent pool on the buyside as a top priority, “we have been seeing a decline in terms of female MBA students opting to focus on finance…When we asked them about the reason why, the majority of them told us they just could not envision how they could integrate a career on the buyside and the personal life that they want. So one thing the buyside needs to do more is spend time demystifying how it is possible to have a fruitful personal life and career life on the buyside as this will help increase the talent pool.”
Mark Konyn, CIO of AIA Group, an outspoken advocate for women empowerment on the buyside, said, “I’ve worked alongside many great women who contributed significantly and consistently over time. Yet, as I reflect back, have women fulfilled their potential at senior levels? Probably not. If you go back 20 years in Asia, you could say women representation was still nascent and needed time to develop, but that’s no longer an excuse in 2020.”
Virginie Maisonneuve, Founding Partner and CEO of MGA Consulting, suggested, “if financial firms are required to report on sustainability and ESG, and if regulators also ask for those reporting, companies across the globe will have to think more about sustainability and diversity. If we start measuring everything, the bigger picture will become clearer.”
Of a total of 114 CKDs that have been issued since 2009 to date, 80 have been capital calls, 29 pre-funded and 5 direct investments in the 11-year life of the CKDs.
The resources committed to the CKDs with capital calls amount to 16.468 million dollars (md), which represents 75% of the total (80 CKDs), 4.708 million dollars were in pre-funded instruments (22%) and 721 md in direct investments (3%). In total, the 114 CKDs have committed capital of 21.897 md, while the CERPIs 8.426 million dollars as of June 30.
The initial mechanism of the CKDs at its birth in 2009 was pre-funding. In mid-2012, CKDs began to be seen with capital calls, as is the international practice in private capital. The pre-funding stopped the development of the CKDs in the beginning since only those projects that were visualized that could overcome the negative carry were those that were placed, so when the capital calls began, this asset class began to have a higher dynamism.
According to estimates by Homero Elizondo, an expert in CKDs and CERPIs, he considers that the cost of pre-funded CKDs is between 300 and 500 basis points depending on the speed at which the administrator (GP) manages to invest the amount committed by the investors. This without considering the issuance, legal and operational expenses among others.
Of the 29 pre-funded CKDs, 22 were issued between 2009 and 2012 and 7 between 2014 and 2016.
Since 2016, the appearance of joint venture CKDs has been seen, where resources are channeled to specific projects that in many cases are already pre-funded because the money is used immediately.
Of the 29 pre-funded CKDs, two closed the cycle during 2020. Four CKDs have generated an IRR greater than 10% and five have until June 2020 an IRR between 8% and 9%. The real result will be obtained when each CKD concludes its divestment cycle.
Regarding the expiration dates of the pre-funded: 6 pre-funded expire in 2020 (2 have already expired); 8 in 2021 and 15 will expire between 2024 and 2040. As the pre-funded CKDs expire, it will be possible to see if their IRRs were competitive.
Markets have rallied sharply on unrelenting policy stimulus, but Covid-19 has yet to be defeated. Fears of a second wave and mounting political risks argue for investor caution. Below, Pictet Asset Management (Pictet AM) shares their views on Equities regions and sectors:
Europe shines but time to cut back on financials
Whether the vantage point is the economy, the political landscape or Covid-19, Europe appears to be in better shape than the US. Which is why Pictet AM retains an overweight position in European stocks. EU member states’ endorsement of the Franco-German led EUR 750 billion recovery fund last month and the ECB’s continued monetary stimulus put the European economy on a much firmer footing; Pictet AM has consequently raised their forecast for the region’s GDP growth for 2021 by 1 percentage point to 7 per cent.
Crucially for investors, Europe’s stock markets do not yet discount the region’s improving economic prospects. Particularly when compared to their US counterparts. At current levels, the gap in US and European price to book ratios (3.7 vs 1.7) implies American corporations’ return on equity will further outpace that of European firms, widening from a differential of 5 percentage points to over 10 percentage points. Such an outperformance looks highly unlikely.
US stocks are already very expensive in any case. For US equities to maintain their current price-earnings multiple of around 24, corporate profit margins would have to remain stable. That is a stretch, particularly when factoring in the US’s continued failure to contain Covid-19, the growing regulatory backlash against Silicon Valley and uncertainty surrounding the outcome of the November Presidential election. Mindful of these risks, Pictet AM remains neutral US stocks.
With an increase in consumer spending a feature of the recovery taking hold in parts of the world, Pictet AM is attracted to consumer staples stocks. The sector has failed to keep pace with the broader market rally, which has been led by cyclical stocks. As Fig.3 shows, consumer staples trade at just a 10 per cent premium to the broader global market – down from over 20 per cent in March and the 10-year average of 25 per cent. Consumer staples companies’ improving earnings growth suggests their stocks warrant a higher premium.
To maintain a defensive tilt in their equity allocation, Pictet AM has reduced their weighting in financials to underweight. Although banks’ bad debt provisions resulting from pandemic-induced lockdowns have been largely in line with expectations, they remain acutely vulnerable to any setback to the smooth reopening of economies.
Moreover, dividend payments are unlikely to recover for the foreseeable future. Regulators across the world– including the ECB, the Fed and the UK’s Prudential Regulatory Authority – have moved aggressively to either cap bank dividend payments or temporarily suspend them. This greatly reduces the investment appeal of financial stocks.
Please click here for more information on Pictet AM’sInvestment Outlook.
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.
The market for green bonds has been booming. Demand for investments with an environmentally-friendly pedigree has increased hand in hand with a growing awareness of the need to control climate change and pollution, to prevent the erosion of biodiversity and ensure a sustainable future.
But as with every new asset class that takes off, investors need to be wary of the pitfalls.
A decade ago, the market for corporate green bonds barely existed. By the end of April 2020, it was worth USD 347 billion.
In a nutshell, green bonds are debt raised to finance specific environment-related projects. Part of their investment appeal is driven by regulation: governments keen to encourage green projects often offer tax breaks for holding these instruments. But they’re also attractive because they signal the sort of management farsightedness that tends to equate with long-run corporate success.
For firms, the benefits are that demand for these bonds tends to diversify their investor base. And data suggest green bond investors tend to be more committed and hold the instruments longer than they do conventional debt.
Green bonds shoot for the stars
Size of corporate and government green bond market, ICE Bank of America Merrill Lynch Green Bond Index, USD bn
Source: ICE Bank of America Merrill Lynch Green Bond Index. Data as at 30.04.2020.
One attraction for issuers is these bonds’ longer maturities, which means refinancing can be less frequent. For example, green bonds (corporate and government) have an average duration of just under 8 years, compared to 7.2 years for global investment grade corporate debt, perhaps reflecting the fact that environmental projects have long time horizons.
And recently, issuance has been broadening along the credit spectrum. Although corporate green bonds are mostly rated investment grade, high yield issuers like recycling and waste management company Paprec, wind turbine manufacturer Nordex and glass manufacturer O-I Packaging Group have also made forays into the market. And more could find themselves there. Fallout from the Covid pandemic could see some of the 44 per cent of the green bonds that are rated BBB – a smaller proportion than the wider corporate debt markets – become fallen angels by dropping into high yield territory.
The risk facing investors is of confusing bonds that exist out of a company’s genuine desire to push forward a green programme with those that are little more than greenwashing. That’s to say, companies issuing debt as green bonds, but then using the money raised for other purposes, such as to refinance existing debt.
There’s no clear demarcation between where the one ends and the other starts. Partly, this is because green bonds aren’t necessarily ring-fenced project financing, but rather tend to sit on the issuing company’s balance sheet and thus are part of the total mix of assets – which is why green bonds are generally assigned the company’s credit rating. But rating agencies could still downgrade green bonds on environmental, social or governance (ESG) considerations as they increasingly factor these into their analysis.
For instance, Italian electricity producer Enel was accused of greenwashing when it issued a bond linked to its commitment to increasing its use of renewables. Failure to meet targets would force the company to pay a higher coupon on the bond. That’s ostensibly green, but critics argued that in fact it was little more than an option to produce dirty power.(1)
Or take Teekay Shuttle Tankers, owner of one of the world’s largest fleets of oil tankers which set out to raise at least USD 150 million to build four new fuel-efficient ships with a green bond. It fell short, in part because investors questioned how green even a fuel-efficient oil tanker could possibly be.(2)
Grey areas in green bonds
Complicating matters is how some issuers are further slicing up this class of securities, for instance ‘blue’ bonds that are related to investment in water, or ‘transition’ bonds that promote the shift to a lower-carbon economy. Meanwhile, ‘social’ bonds that promise wider societal impact have seen renewed interest following the global coronavirus epidemic.
Sometimes it makes sense to look past the green label and to invest in ordinary securities issued by a truly green company. Some firms with a strong environmental pedigree have shied away from issuing green bonds because of the still small size of the market and its specialised nature, or because they calculate they are not being compensated for the additional compliance costs associated with green bond.
So, for instance, only three car companies have so far issued a green bond, and Tesla, leader in the field of electric vehicles, isn’t one of them. And that’s notwithstanding the sector’s wider push into green transport, particularly electrification. Indeed, the green bond market is still relatively concentrated with more than 70 per cent of issuance by financials and utilities.
But for all the grey areas in green bonds, matters are improving. Some of that improvement comes from best practice, some comes from industry bodies, and some from regulators.
For instance, having issued three sustainable bonds, culminating with a USD 1 billion debt raising in 2019, American coffee chain Starbucks has created a template for other companies to follow. Its aims of shifting the sourcing of its coffee beans to sustainable producers and making its retail operations greener attracted widespread investor support.(3) The company, in turn, became an information resource for other firms seeking to raise green finance.
A voluntary industry code determines what qualifies as a green bond, which is verified by an approved party certified by the Climate Bonds Standard and Certification Scheme. This, in turn, is reinforced by a second opinion from independent external agencies, such as Sustainalytics, that review the greenness of the bond.
Finally, government agencies have been getting involved. The European Union has led the way in December 2019 by establishing rules governing which financial products qualify as “green” or “sustainable”. These rules require firms to fully disclose what proportion of their investments is environmentally friendly or sustainable. A mere 17 per cent of the market value of the green bonds held in the MSCI Green Bond Index would meet the requirements of EU Green Bond Standard (EU GBS)
But quantifying what are often qualitative aspects of operations is a challenge and the field is still new. Agencies that rate companies on environmental, social and governance criteria can provide wildly differing assessments, depending on the weights they give to various factors, such as industry, operating region and management intentions.
Given all the complexities involved, investors need to take a careful, analytical approach. Some green bonds are greener than others. Some ordinary corporate bonds issued by green companies will be greener than green bonds. And sometimes, ordinary debt finance raised by companies in dirty industries will be put towards environmentally worthy investments – especially when the firm is looking to fundamentally change the nature of its operations. Balancing environmental credentials with social factors demands taking a broad view of the market. No single green bond should be assessed in isolation of the issuing company’s overall strategy towards a greener more sustainable business model.
Column written by Stéphane Rüegg, Client Portfolio Manager at Pictet Asset Management.
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 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.
U.S. equities moved higher in July against the daunting backdrop of renewed Coronavirus surges that are raising risks for the nascent U.S. economic recovery. During the J.P. Morgan second quarter conference call, CEO Jamie Dimon said, “You’re going to have a much murkier economic environment going forward than you had in May and June, and you have to be prepared for that.” Investor confidence that monetary policy and another fiscal stimulus package will continue to backstop the U.S. economy and markets provides major support for stock prices.
GAMCO expects to see more mergers, some facilitated by SPACs (special-purpose acquisition companies), private equity, or corporations looking to grow. Amazon may decide buy a filmed-entertainment company to gain new content.The outlook for deals and financial engineering brightened during the Honeywell International earnings call when CEO Darius Adamczyk said, “the balance sheet is very strong and well-protected, well-funded. So in short, we’re very much open for business, both from an M&A perspective, as well as potential buyback perspective… the M&A environment is just a little bit slower just because everybody is focused on battling the crisis. But we think that that may open up a little bit more here in the second half, and we hope to be active.”
Among GAMCO’s Private Market Value (PMV) with a Catalyst™ stock research ideas highlighted as ‘stock picks’ during BARRON’S 2020 Midyear Roundtable, published in the July 13 issue, were: NextEra Energy Partners (NEP), which manages renewable-energy projects, Maple Leaf Foods (MFI), equipment rental supplier Herc Holdings (HRI), Vivendi (VIV), Sony (SNE) and GCP Applied Technologies (GCP), a specialty construction chemicals, building materials, and packaging sealants producer. Catalyst Starboard Value, an activist investor, recently won eight board seats.
The recent Coronavirus spike slowed the rally in value, small cap stocks, and the U.S. dollar as economic slowdown fears resurfaced. A weaker dollar will make the U.S more competitive in global trade.
Column by Gabelli Funds, written by Michael Gabelli
To access our proprietary value investment methodology, and dedicated merger arbitrage portfolio we offer the following UCITS Funds in each discipline:
GAMCO MERGER ARBITRAGE
GAMCO Merger Arbitrage UCITS Fund, launched in October 2011, is an open-end fund incorporated in Luxembourg and compliant with UCITS regulation. The team, dedicated strategy, and record dates back to 1985. The objective of the GAMCO Merger Arbitrage Fund is to achieve long-term capital growth by investing primarily in announced equity merger and acquisition transactions while maintaining a diversified portfolio. The Fund utilizes a highly specialized investment approach designed principally to profit from the successful completion of proposed mergers, takeovers, tender offers, leveraged buyouts and other types of corporate reorganizations. Analyzes and continuously monitors each pending transaction for potential risk, including: regulatory, terms, financing, and shareholder approval.
Merger investments are a highly liquid, non-market correlated, proven and consistent alternative to traditional fixed income and equity securities. Merger returns are dependent on deal spreads. Deal spreads are a function of time, deal risk premium, and interest rates. Returns are thus correlated to interest rate changes over the medium term and not the broader equity market. The prospect of rising rates would imply higher returns on mergers as spreads widen to compensate arbitrageurs. As bond markets decline (interest rates rise), merger returns should improve as capital allocation decisions adjust to the changes in the costs of capital.
Broad Market volatility can lead to widening of spreads in merger positions, coupled with our well-researched merger portfolios, offer the potential for enhanced IRRs through dynamic position sizing. Daily price volatility fluctuations coupled with less proprietary capital (the Volcker rule) in the U.S. have contributed to improving merger spreads and thus, overall returns. Thus our fund is well positioned as a cash substitute or fixed income alternative.
Our objectives are to compound and preserve wealth over time, while remaining non-correlated to the broad global markets. We created our first dedicated merger fund 32 years ago. Since then, our merger performance has grown client assets at an annualized rate of approximately 10.7% gross and 7.6% net since 1985. Today, we manage assets on behalf of institutional and high net worth clients globally in a variety of fund structures and mandates.
Class I USD – LU0687944552
Class I EUR – LU0687944396
Class A USD – LU0687943745
Class A EUR – LU0687943661
Class R USD – LU1453360825
Class R EUR – LU1453361476
GAMCO ALL CAP VALUE
The GAMCO All Cap Value UCITS Fund launched in May, 2015 utilizes Gabelli’s its proprietary PMV with a Catalyst™ investment methodology, which has been in place since 1977. The Fund seeks absolute returns through event driven value investing. Our methodology centers around fundamental, research-driven, value based investing with a focus on asset values, cash flows and identifiable catalysts to maximize returns independent of market direction. The fund draws on the experience of its global portfolio team and 35+ value research analysts.
GAMCO is an active, bottom-up, value investor, and seeks to achieve real capital appreciation (relative to inflation) over the long term regardless of market cycles. Our value-oriented stock selection process is based on the fundamental investment principles first articulated in 1934 by Graham and Dodd, the founders of modern security analysis, and further augmented by Mario Gabelli in 1977 with his introduction of the concepts of Private Market Value (PMV) with a Catalyst™ into equity analysis. PMV with a Catalyst™ is our unique research methodology that focuses on individual stock selection by identifying firms selling below intrinsic value with a reasonable probability of realizing their PMV’s which we define as the price a strategic or financial acquirer would be willing to pay for the entire enterprise. The fundamental valuation factors utilized to evaluate securities prior to inclusion/exclusion into the portfolio, our research driven approach views fundamental analysis as a three pronged approach: free cash flow (earnings before, interest, taxes, depreciation and amortization, or EBITDA, minus the capital expenditures necessary to grow/maintain the business); earnings per share trends; and private market value (PMV), which encompasses on and off balance sheet assets and liabilities. Our team arrives at a PMV valuation by a rigorous assessment of fundamentals from publicly available information and judgement gained from meeting management, covering all size companies globally and our comprehensive, accumulated knowledge of a variety of sectors. We then identify businesses for the portfolio possessing the proper margin of safety and research variables from our deep research universe.
Class I USD – LU1216601648
Class I EUR – LU1216601564
Class A USD – LU1216600913
Class A EUR – LU1216600673
Class R USD – LU1453359900
Class R EUR – LU1453360155
Disclaimer:
The information and any opinions have been obtained from or are based on sources believed to be reliable but accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss arising from the use of this information. The information is expressed at its date and is issued only to and directed only at those individuals who are permitted to receive such information in accordance with the applicable statutes. In some countries the distribution of this publication may be restricted. It is your responsibility to find out what those restrictions are and observe them.
Some of the statements in this presentation may contain or be based on forward looking statements, forecasts, estimates, projections, targets, or prognosis (“forward looking statements”), which reflect the manager’s current view of future events, economic developments and financial performance. Such forward looking statements are typically indicated by the use of words which express an estimate, expectation, belief, target or forecast. Such forward looking statements are based on an assessment of historical economic data, on the experience and current plans of the investment manager and/or certain advisors of the manager, and on the indicated sources. These forward looking statements contain no representation or warranty of whatever kind that such future events will occur or that they will occur as described herein, or that such results will be achieved by the fund or the investments of the fund, as the occurrence of these events and the results of the fund are subject to various risks and uncertainties. The actual portfolio, and thus results, of the fund may differ substantially from those assumed in the forward looking statements. The manager and its affiliates will not undertake to update or review the forward looking statements contained in this presentation, whether as result of new information or any future event or otherwise.
Credicorp has made changes to its management leadership this August. Juan Pablo Galán takes on the position of Country Head Colombia, while Luis Miguel González undertakes a new challenge as part of the Board of Directors of Credicorp Holding Colombia.
Carlos Coll (current COO of Credicorp Capital Advisors and Ultralat) will act as interim CEO of Ultralat in Miami.
It is expected that in a few months Felipe García, current Head of Capital Markets at the regional level, will additionally become Country Head of Credicorp Capital US (which includes the RIA -Credicorp Capital Advisors- and the Broker Dealer -Ultralat Capital Markets and Credicorp Capital Securities that are in the process of merging-).
According to a press release, under the leadership of Galán, Credicorp Holding Colombia, a Holding company of the Credicorp Group that is regulated by the Colombian Financial Superintendence, will take a new and more commercial approach, with the aim of promoting the development of its businesses and contributing to the fulfillment of the firm´s strategies in the country.
Eduardo Montero, CEO of Credicorp Capital said: “I welcome Juan Pablo to this new stage for the organization, congratulate him on this new role he is assuming and give him all the confidence in this endeavour.”
Galán has more than 25 years of experience in the financial sector, having held important roles as MD at Corredores Asociados, CEO of Alianza Valores and, for the last 4 years, as CEO of Ultralat in Miami. He has a BA from CESA (Colombia) with an MSc in Investment Banking and International Markets from the University of Reading – Henley Business School (England).
According to Jon Mawby, Head of Investment Grade Credit at Pictet Asset Management (Pictet AM), investors need to rethink the way they manage risk in their fixed income portfolios. Coming from a decade of double-digit US bond yields in the late 70s and early 80s, the “Total Return Fund” era started in the late 80s and during the last 35 years has benefited from the counter-cyclical monetary policies exercised by the Federal Reserve. In more than three decades, US government and corporate bond yields have experienced lower highs and lows. This has been largely driven by the monetary policy response implemented by Alan Greenspan, Ben Bernanke, Janet Yellen, and Jerome Powell, former and current Chair of the Federal Reserve Board, through a series of financial crises.
More recently, all the stimulus that has been pumped into the system to fight the coronavirus crisis, -the successive cuts in interest rates, the unlimited QE and the several lending programs that were announced back in March-, has left US bond investors facing close to zero or negative yields. This is a hugely different environment in which traditional bond investment can lead to losses in capital or in purchasing power, hence the need of investors to reevaluate the way they manage their fixed income portfolios.
The challenges faced by investors today
In Pictet AM’s opinion, after the Global Financial Crisis, the starting point for asset allocators of a traditional 60/40 portfolio is largely misguided. This is broadly driven by the fact that global government bonds in traditional fixed income portfolios were considered a vehicle to store value that offered a reasonable yield and that, in a wider portfolio context, had lower or negative correlation to risk assets. These three characteristics allowed traditional fixed income funds to deliver attractive returns and diversified risk across a wider risk asset portfolio over several cycles.
US 10-year Treasuries and many other government bonds in developed markets are now offering yields below the 1% threshold. At this level, government bonds have a limited upside and a potentially large downside risk if economies move from a deflationary to an inflationary environment. Therefore, investors can no longer rely on the traditional model to produce the same risk-return characteristics going forward.
This leaves investors with essentially two traditional choices in terms of long-term asset allocation, equity like risk assets (corporate credit, direct equity, or private equity) and cash. Hence, even though investors may not realize it, portfolios that follow this traditional 60/40 asset allocation mix are by design riskier than historical models will predict. This applies both generally to risk asset portfolios and more specifically to credit and fixed income products.
The macro drivers
The Fed has cut rates from 2,5% down to 0%, but the compressions in corporate bond yields came from 150 basis points to 75 basis point, this is quite little to cushion investors from the volatility around the credit markets. Hence, investors need a different way to think about how they manage risk in their fixed income portfolios.
In Mawby’s opinion, investors need to be a bit contrarian and value driven. They can no longer rely on their government bond exposure to offset the equity like risk exposure in their portfolios. Investors now need to think about managing fixed income in a more proactive way, it is no longer enough to have some degree of credit and equity risk long to effectively diversify a portfolio.
What are the investment implications of the COVID 19 crisis?
This crisis leaves some opportunities to explore. It has created dislocations in price, generating potential opportunities to pick up companies with strong balance sheets at attractive valuations. At the current levels, selected corporate hybrids and out of the money convertible bonds offer attractive opportunities. But investors need to remain highly selective in primary markets amid a deluge of corporate issuance. Additionally, the intervention of central banks continues to distort investment grade credit curves while US Treasury bonds volatility has recently receded back to pre-crisis levels.
On the other hand, there are many risks that need to be considered. There are ‘cheap’ value traps given associated with solvency, downgrade, and default risks. The path to emergence from lockdown remains mixed and fraught with potential obstacles for some industries, particularly for those associated with the service sector, like restaurants and airlines.
Meanwhile, dispersion is increasing across the credit market- there is a need to retain optionality in the form of risk overlays and downside protection, as there is still potential for further liquidity challenges in credit. This claims for an up in quality stance across both US and Europe.
Particularly, one of the areas that Pictet AM is a bit more cautious on is the subordinated debt in the financial sector, the Additional Tier 1 hybrids bonds could be affected by potential regulatory risk and this could have a ripple effect for coupons and dividends.
Given this backdrop, managing volatility is going to be especially important in the next 6 to 18 months in terms of navigating another downturn. When looking back in time, crises seem to be occurring in 18 to 24 months cycles – Sovereign debt crisis in Europe in 2012, taper tantrum in 2013, oil crisis in 2014 and 2015, Brexit in 2015, “Trumpflation” in 2017 etc.-, as intervention and rhetoric are driving more and more the alternation of increased volatility periods with other periods of yield and volatility repression. This gives an advantage to investors that think about volatility in a less traditional way.
Broader portfolio themes and opportunities
Starting with the “Powell pivot”, as the last monetary stimulus package launched by the Federal Reserve has become known, the new measures have brought interest rates back to 0 and have followed a QE program at unprecedented levels. In turn, these actions have created distortions and mispricing opportunities that can be exploited by investors, especially in convertibles, corporate hybrids, and QE eligible bonds. On the other hand, they have also created agency issues in the corporate sector related to historically low rates.
In addition, there are also opportunities driven by the increase of volatility, as uncertain environments create dispersion and dislocation in prices that can be released if investors think about risk in a proactive way.
Then, looking at high yield and idiosyncratic positions in the portfolio, sources of yields can be added when they make sense, selecting names with limited cyclicality, event-driven names, and rising stars (companies that are deleveraging their balance sheets and considered as credit upgrade candidates).
Looking to the medium-term, there is a probability that at some point the narrative could shift as lookdown emergence continues. The possibility of developed markets seeing double digit growth is a potential bullish catalyst for risk assets and is something the team will be monitoring closely. Therefore, it is important to keep a close eye on data releases and how they shape sentiment in the short-term.
Conclusion
Downside risks have increased, and fixed income portfolios have become riskier by design. In Mawby’s view, traditional fixed income strategies will no longer deliver what investors need from their asset allocation when they need it. Hence, it is necessary to rethink risk and how to navigate the cycle. Moreover, central bank and investor actions have distorted the playing field, that is why fixed income investors need to consider a contrarian and value driven stance, to get advantage of volatility when it occurs and to get what they want out of bonds: diversification, downside protection and income.
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.
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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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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.
Stocks moved slightly higher in June as investors remain optimistic over the benefits of a reopening economy. However, a growing number of COVID-19 hotspots in several US states has threatened the momentum of a recovering economy and created concern over the potential resurgence in recovering states. Information technology stocks continued their success from previous months and consumer discretionary companies benefited from encouraging data from auto suppliers and homebuilders.
Tensions continued to rise between the relationship of the United States & China. Uncertainty exists between key Chinese diplomats and US officials over their trade-agreement commitments. Investor attention is increasingly turning to the upcoming US presidential election between President Trump and the presumptive Democratic nominee, Joe Biden.
The Fed had signaled their objective to continue supporting an economic recovery. Both Congress & the White House expressed their intentions for another round of stimulus funding. The potential for expanded unemployment benefits, tax cuts or industry-specific stimulus could provide direct aid to households and help jumpstart the economy.
As investors eagerly wait for more news in regard to a vaccination, markets have been volatile and fragile during this bumpy recovery. We continue to use this volatility as an opportunity to buy attractive companies, which have positive free cash flows and healthy balances sheets, at discounted prices, and seek companies that can both withstand continued economic fallout from the pandemic as well as thrive when it ends.
In the Merger Arbitrage world, returns in June were largely driven by completed deals, as well as continued progress on deals in the pipeline. Notably, we have seen some spreads revert to pre-COVID levels. We are retaining some dry powder, but we continue to deploy capital in situations that present the highest likelihood of success and certainty of value.
We are seeing early signs of a return to deal making as we move beyond the air pocket created by COVID-19. The Federal Reserve and other central banks have unleashed unprecedented liquidity that should provide an accommodative market for new issuances and M&A. CEOs and Boards of Directors continue to seek ways to create shareholder value in an increasingly global marketplace, while competing with disruptors and a consumer base that is shifting online at an increased pace. This includes both M&A and financial engineering, which can spur deal activity. We previously mentioned that Grubhub and Uber were in deal discussions, which led to two separate transactions in the food delivery space, propelled by the evolving consumer environment: Grubhub/JustEat and Uber/Postmates.
Column by Gabelli Funds, written by Michael Gabelli
To access our proprietary value investment methodology, and dedicated merger arbitrage portfolio we offer the following UCITS Funds in each discipline:
GAMCO MERGER ARBITRAGE
GAMCO Merger Arbitrage UCITS Fund, launched in October 2011, is an open-end fund incorporated in Luxembourg and compliant with UCITS regulation. The team, dedicated strategy, and record dates back to 1985. The objective of the GAMCO Merger Arbitrage Fund is to achieve long-term capital growth by investing primarily in announced equity merger and acquisition transactions while maintaining a diversified portfolio. The Fund utilizes a highly specialized investment approach designed principally to profit from the successful completion of proposed mergers, takeovers, tender offers, leveraged buyouts and other types of corporate reorganizations. Analyzes and continuously monitors each pending transaction for potential risk, including: regulatory, terms, financing, and shareholder approval.
Merger investments are a highly liquid, non-market correlated, proven and consistent alternative to traditional fixed income and equity securities. Merger returns are dependent on deal spreads. Deal spreads are a function of time, deal risk premium, and interest rates. Returns are thus correlated to interest rate changes over the medium term and not the broader equity market. The prospect of rising rates would imply higher returns on mergers as spreads widen to compensate arbitrageurs. As bond markets decline (interest rates rise), merger returns should improve as capital allocation decisions adjust to the changes in the costs of capital.
Broad Market volatility can lead to widening of spreads in merger positions, coupled with our well-researched merger portfolios, offer the potential for enhanced IRRs through dynamic position sizing. Daily price volatility fluctuations coupled with less proprietary capital (the Volcker rule) in the U.S. have contributed to improving merger spreads and thus, overall returns. Thus our fund is well positioned as a cash substitute or fixed income alternative.
Our objectives are to compound and preserve wealth over time, while remaining non-correlated to the broad global markets. We created our first dedicated merger fund 32 years ago. Since then, our merger performance has grown client assets at an annualized rate of approximately 10.7% gross and 7.6% net since 1985. Today, we manage assets on behalf of institutional and high net worth clients globally in a variety of fund structures and mandates.
Class I USD – LU0687944552
Class I EUR – LU0687944396
Class A USD – LU0687943745
Class A EUR – LU0687943661
Class R USD – LU1453360825
Class R EUR – LU1453361476
GAMCO ALL CAP VALUE
The GAMCO All Cap Value UCITS Fund launched in May, 2015 utilizes Gabelli’s its proprietary PMV with a Catalyst™ investment methodology, which has been in place since 1977. The Fund seeks absolute returns through event driven value investing. Our methodology centers around fundamental, research-driven, value based investing with a focus on asset values, cash flows and identifiable catalysts to maximize returns independent of market direction. The fund draws on the experience of its global portfolio team and 35+ value research analysts.
GAMCO is an active, bottom-up, value investor, and seeks to achieve real capital appreciation (relative to inflation) over the long term regardless of market cycles. Our value-oriented stock selection process is based on the fundamental investment principles first articulated in 1934 by Graham and Dodd, the founders of modern security analysis, and further augmented by Mario Gabelli in 1977 with his introduction of the concepts of Private Market Value (PMV) with a Catalyst™ into equity analysis. PMV with a Catalyst™ is our unique research methodology that focuses on individual stock selection by identifying firms selling below intrinsic value with a reasonable probability of realizing their PMV’s which we define as the price a strategic or financial acquirer would be willing to pay for the entire enterprise. The fundamental valuation factors utilized to evaluate securities prior to inclusion/exclusion into the portfolio, our research driven approach views fundamental analysis as a three pronged approach: free cash flow (earnings before, interest, taxes, depreciation and amortization, or EBITDA, minus the capital expenditures necessary to grow/maintain the business); earnings per share trends; and private market value (PMV), which encompasses on and off balance sheet assets and liabilities. Our team arrives at a PMV valuation by a rigorous assessment of fundamentals from publicly available information and judgement gained from meeting management, covering all size companies globally and our comprehensive, accumulated knowledge of a variety of sectors. We then identify businesses for the portfolio possessing the proper margin of safety and research variables from our deep research universe.
Class I USD – LU1216601648
Class I EUR – LU1216601564
Class A USD – LU1216600913
Class A EUR – LU1216600673
Class R USD – LU1453359900
Class R EUR – LU1453360155
Disclaimer:
The information and any opinions have been obtained from or are based on sources believed to be reliable but accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss arising from the use of this information. The information is expressed at its date and is issued only to and directed only at those individuals who are permitted to receive such information in accordance with the applicable statutes. In some countries the distribution of this publication may be restricted. It is your responsibility to find out what those restrictions are and observe them.
Some of the statements in this presentation may contain or be based on forward looking statements, forecasts, estimates, projections, targets, or prognosis (“forward looking statements”), which reflect the manager’s current view of future events, economic developments and financial performance. Such forward looking statements are typically indicated by the use of words which express an estimate, expectation, belief, target or forecast. Such forward looking statements are based on an assessment of historical economic data, on the experience and current plans of the investment manager and/or certain advisors of the manager, and on the indicated sources. These forward looking statements contain no representation or warranty of whatever kind that such future events will occur or that they will occur as described herein, or that such results will be achieved by the fund or the investments of the fund, as the occurrence of these events and the results of the fund are subject to various risks and uncertainties. The actual portfolio, and thus results, of the fund may differ substantially from those assumed in the forward looking statements. The manager and its affiliates will not undertake to update or review the forward looking statements contained in this presentation, whether as result of new information or any future event or otherwise.
Foto cedidaMina Lazic, new Relationship Manager at AIS Financial Group. Mina Lazic, new Relationship Manager at AIS Financial Group
AIS Financial Group has hired Mina Lazic as new Relationship Manager. The firm announced in a press release that she will report directly to Samir Lakkis, founding partner.
Lazic has 12 years of work experience as Global Markets Sales, working in investment banks in London. In her last role, she was Executive Director in Nomura, responsible for Cross-Asset Sales for Russia and CIS. Previous to that, she spent 8 years with Société Générale, selling FX, Rates, Credit, Flow and Structured products to FI clients in CEE, Russia, CIS, Greece, Cyprus and Austria, among others.
Lazic started her career in Merrill Lynch as Equity Derivative Sales and she holds a Masters in Finance and a Bachelors in International Economics and Management Degree from Bocconi University in Milan, Italy.
AIS currently distributes over 1 billion dollars a year in structured products and is now broadening its business line, distributing third-party funds. With offices in Madrid, Geneva, Bahamas and Panama, the company will look to partner with those managers who want to outsource their sales force and “benefit from the knowledge and experience” that they have in the region.
