Foto cedidaNicolás Gazitua. Ardian Opens an Office in Chile
Ardian, a private investment house with over 71 billion dollars in assets managed or advised, announced the opening of an office in Santiago, Chile. The new office, serving Ardian’s growing base of investors and investments in Latin America (LatAm), demonstrates Ardian’s long-term commitment to both Chile and the LatAm region. This will be Ardian’s 14th office in its global network.
Ardian will work closely with its LPs – pension funds, insurance companies and family offices — to share knowledge and strengthen relationships. Currently, Ardian’s LatAm investor base, mainly within Chile, Colombia and Peru, has leveraged a diversified range of strategies on Ardian’s platform including Private Equity Secondaries, European Direct Buyouts, Infrastructure Secondaries, European Real Estate and Global Co-Investments. Ardian sees continued investor demand in the region, as well as particular interest from LPs within Brazil and Mexico, which are looking to diversify their holdings outside of LatAm.
In addition, Ardian has become increasingly active since it first entered the region in 2010 after it began acquiring LatAm businesses as build-ups for European portfolio companies. Over the last eight years, Ardian has supported portfolio companies acquiring nine LatAm build-ups with specific exposure to Brazil, Mexico, Chile and Ecuador.
In 2016, Ardian Infrastructure made its first LatAm direct investment when it acquired an 81 percent stake in Solarpack, which manages solar PV plants in Chile and Peru. It will continue to target mid-market essential infrastructure assets in the energy and transport sectors to provide Ardian’s global investor base with increased opportunities to invest in high-quality LatAm infrastructure assets.
Nicolas Gazitua will lead the new Chilean office supported by a dedicated team based in Santiago in coordination with the NYC office co-headed by Mark Benedetti and Vladimir Colas. Ardian will continue to build out the Chilean team and provide additional resources over the coming years.
Benoît Verbrugghe, Member of the Executive Committee, Head of Ardian US said: “The Latin American region is very important to Ardian and this office will allow us to focus on building closer relationships with our LPs and other institutional investors in the region. Our growing international footprint highlights our commitment to a truly global, multi-local approach. We prioritize the deep knowledge and relationships that can only come from an on-the-ground perspective, allowing us to understand the needs of our investors and portfolio companies on a granular level.”
“Furthermore, the Chilean office is an important step forward in our continued efforts to provide our global investor base with opportunities in high quality LatAm investments and superior returns. We will also use the office to source secondary deals from potential LatAm sellers” concluded Verbrugghe.
Wikimedia CommonsJenny Johnson, presidenta y COO de Franklin Templeton Investments . Franklin Templeton Prepares to Position its ETF Platform in all Distribution Channels in Mexico
During her last visit to Mexico, Jennifer M. Johnson, President and COO of Franklin Templeton Investments, pointed out that country’s importance for her company, stating that, regardless of the outcome of the elections, “We are very optimistic about the possibilities of the local market.”
Its most recent bet, the entry into the ETFs’ market, presents an unparalleled opportunity in Mexico: “Mexico is very interesting since ETFs are bigger than mutual funds, I think it is the only market where that happens”, commented Johnson, who, through Franklin Templeton has a line of ETFs that includes passive and Smart Beta strategies. “Mexico is a great opportunity for the Franklin ETFs platform. They are great for all markets, pension funds, institutional funds, retail clients, and we are going to look to position them in all distribution channels,” she added. Meanwhile, Hugo Petricioli, the company’s Regional Director for Mexico and Central America, mentioned that he has seen a strong appetite for ETFs from all of his clients.
Regarding the recent change in regulation, which will allow Afores to invest in international mutual funds, Johnson commented: “We believe that open architecture is the best thing for the client” adding that it is a natural progression to first invest in the local market and then turn around to see what’s on offer abroad, “also, when there is greater uncertainty within a country [such as the one generated before the presidential elections and the NAFTA renegotiations], investors like to hedge themselves by venturing into other geographies.” She also mentioned that at Franklin Templeton they have “great portfolio managers both locally and abroad, and so we see this opening as an interesting opportunity”.
About the renegotiation of the North American Free Trade Agreement, Johnson commented that it may take a little longer to reach its culmination but that in general, President Trump likes to use social networks to provoke, but he is practical when it comes to executing, “so we believe that in the end it will be something sensible which will not be very disruptive.”
Despite the above, and according to Luis Gonzali CFA, Portfolio Manager, the team at Franklin Templeton is cautious in its positioning, seeking to hedge against a global rise in inflation. In addition, and according to Ramsé Gutiérrez CFA,Vice-president of the Fixed Income team in Mexico, the company is also looking, as long as the mandate allows, to reduce the duration of debt portfolios, “since the premium’s time value is currently almost nil.”
Aitor Jauregui, courtesy photo. Aitor Jauregui (BlackRock): "Growing Demand in Europe and Sustainable Investment will Make the ETF Market Grow Over the Next Few Years"
The ETF business continues to increase after three years of record growth figures. For Aitor Jauregui, Head of Business Development for BlackRock in Iberia, the outlook is much better in the long term: “With an average annual growth of 19% over the past few years, at BlackRock, we expect that in 2023 the ETF industry will reach 12 trillion dollars and 25 trillion dollars by 2030.”
These positive forecasts are also positive for the ETFs market in Europe which, according to Jauregui, will be “one of the main drivers of the investment fund business during the coming years”. According to this executive, and as shown by the Greenwich Associates European ETF Study commissioned by BlackRock, European institutional investors will have a prominent role in this growth, as the average of their allocation to exchange-traded funds increased by 10.3% of its total assets in 2017, from 7.7% in 2016.
“European institutional investors are adjusting their portfolios to a more volatile environment, given the return of volatility to the market and the end of stimuli from central banks. In this context, European institutional investors have found in the ETFs an investment vehicle that adapts to their needs,” says Jauregui before delving into this survey’s data, which was compiled from the responses of 125 investors, mainly pension funds, asset management companies, and insurance companies.
The survey shows the trends that make the ETF business set a positive trend in Europe. First of all, there has been an increase in the use of smart beta ETFs, which, at present 50% of respondents admit to using. Secondly, there is a greater demand for ETFs by multi-asset funds: In fact, 79% of asset managers admit to using them, as well as their intention to increase their use during the next year.
Finally, the survey shows two further trends: The use of fixed-income ETFs is a source of growth in the ETFs universe, and socially responsible investment (SRI) has a leverage effect on this business. Regarding the latter, it is worth noting that 50% of the respondents admit having invested part of their assets following sustainable investment criteria.
The attractiveness of ETFs
For Jauregui, these four trends are, “sources of forward ETFs market growth.” And they will be a driver because European institutional investors appreciate the value that this vehicle brings to their portfolio. For example, according to the aforementioned survey, ETFs are used to substitute direct investments, such as bonds, shares or derivatives. The survey shows that 50% of respondents say they use ETFs to substitute derivatives, compared to the 30% who acknowledged doing so last year.
In this regard, Jauregui points out that, regardless of the economic environment, investors value the characteristics they offer positively. “In Europe, in particular, I believe that the implementation of MiFID II makes institutional investors appreciate transparency, cost, and operational simplicity more. This is also going to be an argument that will sustain its growth in the coming years,” he says.
Speaking in terms of strategies, the ETFs that arouse most interest among European institutional investors are those of minimum volatility, dividends, factors and, finally, multifactor strategies.
Finally, should we carry out this same analytic exercise by asset allocation, the survey would show that fixed income is the type of asset where ETFs are most likely to grow. “In the case of equity ETFs, 86% of respondents admit to using them and 43% expect to increase their use throughout 2018. In fixed income, 65% expect to invest in this type of ETF as compared to the 48%registered last survey. Once again, the main criteria of European institutional investors when deciding on their use are: their liquidity, their cost, their performance and, finally, the choice and composition of the index they follow.
Debates within the Sector
In the midst of the strong development that this market is experiencing, the sector faces two debates: Possible overheating in the ETFs market and the argument between active management and passive management. In both cases, Jauregui has a solid position that he defends coherently. “It‘s clear that the weight of the ETFs in the market as a whole, and the assets that are there, is too small a part for their behavior to affect the progress of the underlying markets,” he said in relation to the first debate.
Regarding the second debate, Jauregui argues that the approach of two different types of confronting management does not make any sense. “I think that every investment decision is an active decision, even when a manager chooses to use an indexed vehicle in his portfolio. At BlackRock we believe that we have to think about indexed management as one more element when managing our clients’ capital and offering investment solutions,” he points out.
And while the sector continues debating this, BlackRock has advanced over all its competitors and has become the leading provider of the European market in terms of ETFs. According to the survey, 91% indicates iShares as its main provider.
In this regard, the asset manager believes they are on the right track. “We will continue working on new launches, while always being very selective about the solutions we provide in the market and betting on the indexes without leverage and without using derivatives. Likewise, we will focus on smart beta and factors ETFs. There is a general interest on the investors‘part, but we believe that managers of multi-active strategies are very interesting potential investors. In the long term, we will also focus on the trends we see, such as fixed-income ETFs and socially responsible investment,” concludes Jauregui
Pixabay CC0 Public DomainSean Taylor, courtesy photo. Latin America Has Higher Earnings Expectations than Other EM, but Significant More Political Risk
Funds Society had the occasion to, from Santiago de Chile, interview Sean Taylor, Chief Investment Officer for Asia Pacific at DWS, and discuss with him his market view on the Asia Pacific region for 2018. Taylor, who joined DWS in 2013 with 21 years’ experience in the Industry, manages two flagship DWS products: DWS Investor Emerging market fund and DWS Top Asian fund. He is also responsible for the EM equity platform.
Positive view on global economy but need to be selective in sector and stocks
DWS outlook is positive on the global economy but recently they have observed an increase in uncertainty due to the US trade policy, Italy’s new government’s anti-EU rhetoric and select Emerging Market currency weaknesses. Taylor states that: “All three aspects require close monitoring. While an outcome is difficult to predict, our base case assumes no escalation of these issues and an eventual positive resolution triggering a sentiment relieve.”
Taylor also thinks that assets prices have already rallied and DWS is recommending their clients to be more selective in sectors and stocks: “Even under these positive scenarios, investors have to be more selective on duration and seek diversification.”
Same happens in the EM context, where Taylor recommends that: “it is not just buying EM, is being more selective particularly on the credit side and the sovereign side” and adds: “Current account deficit EM countries and those with high US debt levels are being impacted through their domestic currencies and/or foreign reserves, although rising US rates have been well flagged.” According to Taylor, if easing financial conditions tighten more sharply than expected, EM debt could become under pressure. DWS expects 2 further 25bps hikes by the Fed by the end of the year with the US 10yr yields of 3.25% by March 2019.
Regarding credit, they are expecting positive returns although not as high as in the recent years. They recommend a multicredit strategy to blend in some of that risk in.
On equities they are positive, US equities are expensive but still have upside: “it is really going to be based in earnings and earnings this year will be quite positive.” The rest of the international markets are looking cheaper, as they are not reflecting this economic growth.
Emerging markets: Expecting rewards after years of growth negative policies
When questioned about their preferences in terms of markets from a macro perspective, Taylor stated that beginning 2017 DWS was overweight in EM and continue to do so structurally: “There have been changes happening in those markets that we consider very positive. From a Macro perspective we see high potential in GDP growth versus previous years because we will start to see the positive impact of the new policies of new leaders in Asia. The new leaders in Asia came all about at the same time with a new mandate: to widen the economy. To achieve this they had to change the model: China had to stop corruption, India had to reduce burocracy and so did the Philippines and Indonesia. These changes implied being growth negative for the first 5 years but now they are able to collect the positive effect.
Also from a monetary point of view, Asia had a tight monetary policy and was dampening growth when the rest of the world had QE. Now as QE comes out we think Asia continues to be driven by its owns dynamic in economic terms. “
Taylor also thinks that EM and Asia are in a better position to adjust to changes in US and Chinese policy and adds, “Investing in EM has therefore been selective, avoiding those most vulnerable economies with deteriorating current account deficits and uncertain politics (Indonesia, Argentina, Philippines, Turkey, Malaysia) and under pressure to raise rates (Indonesia, Philippines) as well as those under potential trade/sanctions (Mexico, Russia) – however we have taken advantage of the rise in commodities, energy and oil prices where we have been sectorally overweight.”
Latam higher earnings growth than EM area but significant political risk
Turning into the Latin American region, although it has been underweight in DWS portfolios for several years, they have started to increase their exposure recently. Even if political risk is on top of the table, DWS has a forecast of 25% estimated growth earnings versus 18% for the EM market area as a whole.
Going into more detail on the political risk, Taylor mentioned that the difficulty about the Brazilian election is the wide variety of candidates and possible scenarios. Therefore, there is a lot of event risk going forward. But to his view, Brazil is already factoring the worst case scenario:” From a fundamental point of view, Brazil went through 4 years of deep recession and although last year President Temer was beginning to put some reforms in there were also down because of the political situation. The Brazilian team is not factoring any positive news until the election. Brazil has the highest tax to GDP ratio of any large EM but has the lowest investment rate/GDP of 14% and the growth model relays on current account deficit. They need a strong president to implement the necessary reforms and leads Brazil to a cycle of economic growth. On the bottom up side they are expecting good earnings coming through.”
Commodities and Growing demand in China
DWS is expecting to see steady commodity prices going forward supported by growing demand in China. China’s growth for the following 5 years will be driven by : “the “One Belt one Road project” and growth in Chinese domestic economy. China is going to change from investment led growth to domestic lead growth so it will evolve into better consumption. In addition, the increase of the quality of life of the average Chinese will lead to the next phase of urbanization that will imply taking the next 100 million people from Central China to Western China into more urban areas. All these factors will enhance the demand for commodities”
Hong Kong versus Chinese domestic stocks
Taylor is an expert in Chinese and Hong Kong markets and as such he highlights the need to differentiate between forces driving Hong Kong markets and Chinese stocks. Taylor explains that; “the HK index, the Hang Seng, has relatively little to do with China as it is really based in domestic HK. Its sectors are: HK property, HK or international banks with HSBC and utilities and all those are quite interest rate sensitive so that puts as off. Utilities, we are underweight because the prices are capped by the government and if the funding costs increase their margins are going to be reduced and it is relatively expensive. The only area where we see some upside is consumer as consumption is picking up.”
He further states that on the other side, the China indexes traded in HK, the H Share index, which is effectively Chinese SOE (state owned enterprisers) listed in HK many years ago to improve Chinese corporate governance is 30% cheaper than the A share (Shanghai) index: “We have now a 25/28% arbitrage between H share and A share. The H share 3 years ago was 60% cheaper than the A share in China is now 30% cheaper”. This fact together with “Asian are buying Asian” and are demanding better balance sheet management, support his view that “ the earnings profile of what I call, MSCI China H Share, which does not include Hang Seng- domestics HK stocks- is much greater that the earnings of HK companies.”
In addition, as per recent announcements that could also boost Chinese equities, Taylor mentioned the Chinese Depository receipts. Although details are yet to come, the Chinese depository receipts will allow companies like the tech and the internet companies in the US to trade onshore in the Chinese market.
Chinese Bond Connect
Following on with his positive view on China, Taylor also comments on the Chinese Bond Connect project. It will allow foreign investors to be able to access the second largest bond market in the world:“ given our view in sovereign, where we are not seeing much yield globally, Chinese sovereign and corporate offer some good yields. That will mean that China will go into some of the big bond indexes and that will naturally put a one-of flow of bonds in there, but what it really means is that international investors can´t ignore China”
View on the generally accepted Chinese risks
The two biggest risk of China according to the majority of investors is that China´s got too much debt and too much leverage. To Taylor the two are different. The government debt to GDP, which is increasing every day, will be eased by foreign investors being able to access the Chinese bond market (Chinese Bond connect) as the government will be able to issue more, diversify and lower the risk premium of the Chinese economy . “Our view is that the debt problem is a balance sheet problem not a solvency problem and China owns effectively both sides of the balance sheet, so the only problem that can really put China into trouble is China itself.”
In his opinion, the biggest short term risk China is exposed to is the leverage in the financial system and particularly wealth management products. A lot of the smaller banks don’t have enough deposits, so they go to the overnight market and that causes spikes. Nonetheless, to Taylor the decision taken by the Chinese central bank has been very sensible: “what has happened in the last year is that PBOC has been very clever, it has kept policy rates very low, only raising 5 bps when the fed rose, but its kept 7 days rate quite tight, so it’s been squeezing liquidity out of the market, it´s been making the system safer. And that is also why we can assign a higher PE to China.”
EM Currencies outlook
For Taylor recent months have been complicated for emerging market currencies due to a stronger US dolar. That being said, most of the currencies are behaving as expected with current account surplus economies and better politics outperforming those with more difficult current accounts and uncertain politics. They consider Turkey and Argentina isolated incidents.
“In Asia, India has not done too well given the rise of commodities and oil prices, whilst Malaysia’s new government has caused some political uncertainty which is seen in the ringgit – however higher oil for Malaysia will help bolster their current account. For China the renminbi has strengthened since the beginning of the year while the Korean won has mostly been stable during the latest geopolitical tensions. Russia however has seen a depreciation in its currency post sanctions,” explains Taylor.
Strategies applied to the DWS Emerging and Asian funds
DWS Investor Emerging market and DWS Top Asian fund are both managed similarly combing country selection with stock selection. Their philosophy is one of a global perspective with local knowledge. They have localized teams all across the regions that provide a very good perspective of what is going on the ground: “3 years ago their strategy was defensive, which meant buying growth companies, buying quality. Now the strategy is more balanced. Last year they were really overweight in the technology areas, in South Korea and Taiwan while this year they are underweight because prices have already reflected the upside value. For 2018 they are focused more into consumer, financial, and cyclicals sectors. We have a very good risk adjusted return and very fundamentally driven, very disciplined process.”
2019 Outlook
As a final conclusion, Taylor states that their 2018 outlook for Asia and the emerging markets is positive: “We don’t see it being the same return as last year but we are confident for another 10% upside from here.” When asked about their expectations for 2019, he stated that next year earnings will be lower than 2018 but still positive at 14%. ”In 2019 we would expect to get full return as we would have gone through the rate cycle, would be a bit clearer on trade, hopefully more clear on sanctions and people would truly realize that our top down story of that growth continuing, plus the bottom up story of earning picking up structurally as well as cyclically, plus Asia buying Asia will give good support for the market.”
Pixabay CC0 Public Domain. 2017 Brought More Clients and AUM to the Biggest 25 Global Wealth Management Operators
Assets Under Management (AUM) at the top 25 global wealth management operators grew 17.0% on average this year, finds Scorpio Partnership’s 2018 Global Private Banking Benchmark. This means the top 25 operators now collectively manage 16.2 trillion dollars.
Just as a rising tide raises all boats, wealth managers were able to capitalize on favourable market conditions in 2017 as a core driver of growth. The FTSE All-World Index advanced nearly 22% during the year and global economic growth was estimated to have reached 3%, an uptick from 2.4% in 2016.
However, there were also positive indicators that firms achieved greater success in drawing additional assets from new and existing clients in 2017. On average, the contribution of Net New Money to AUM, which was flat in 2016, rose to 4.3% in 2017 for those firms who declared this data.
China Merchants Bank gained two positions, taking over Northern Trust and Pictec. BNP Paribas, Safra Sarasin Group, Banco Santander and Credit Agricole are the few non-American firms.
Asian firms grew the most, with a median increase in AUM of 15.2%, versus the 7.5% European ones got and the 13.8% from the Americans.
“Conditions have been exceptionally positive for global wealth management in the last 12 months, but wealth firms must also be given credit for starting to find new revenue” says Caroline Burkart, Director at Scorpio Partnership. “Our client engagement assessments throughout 2017 have indicated that client sentiment is on the up which is inevitable when markets are good.
Wealth firms should put processes in place now to measure and respond to customer feedback, so that when the next market downturn occurs, they have the insight they need to continue delivering a compelling client experience. A handful of wealth firms are starting to publish their client satisfaction data, highlighting that this is creeping up the agenda as a complementary measure to financial performance.”
Asia’s wealth managers achieved the most significant gains this year, with average AUM growth of 15.2% (in base reporting currency), compared to 7.5% among European operators and 13.8% among firms based in the Americas. Many wealth managers present in Asia continued to increase their focus in this region in 2017. In several emerging markets, strategic acquisitions contributed to inorganic growth in AUM.
Most notably, Bank of China – a new entrant to the top 25 table last year – stood out by reporting double-digit growth for a second consecutive year. The firm attributed its success to effective marketing, customer developed client profiles and proposition enhancements.
Yazann Romahi, Photo J.P. Morgan AM. J.P. Morgan Asset Management Takes Nine U.S. ETFs to Mexico
J.P. Morgan announced the expansion of its business in Mexico and the launch of nine US equity ETFs. Leveraging J.P. Morgan’s existing capabilities and expertise, the funds will be managed by an investment team led by Yazann Romahi, CIO of Quantitative Beta Strategies and Portfolio Manager at J.P. Morgan Asset Management.
“The listing process of US ETFs in Mexico underscores our commitment to providing choice for Mexican investors, what believe are, some of the best and most innovative products to market,” said Juan Medina-Mora, representative in Mexico for J.P. Morgan Asset Management. “The ETFs allow investors to customize their portfolios in an effort to meet distinct outcomes, also considering currency-hedged alternatives.”
The funds, which are designed to provide exposure to traditional indexes for better risk-adjusted returns, are:
J.P. Morgan Diversified Return Global Equity (JPGE): The fund is designed to provide global equity exposure with potential for better risk-adjusted returns than a market cap-weighted index. It tracks the FTSE Developed Diversified Factor Index.
J.P. Morgan Diversified Return International Equity (JPIN): The fund tracks the FTSE Developed ex-North America Diversified Factor Index, which utilizes a rules-based approach combining risk-weighted portfolio construction with multi-factor security screening based on value, low volatility, momentum and size factors.
J.P. Morgan Diversified Return International Currency Hedged (JPIH): The fund is designed to provide core developed international equity exposure with potential for better risk-adjusted returns than a market cap-weighted index. It tracks the FTSE Developed ex North America Diversified Factor 100% Hedged to USD Index.
J.P. Morgan Diversified Return Emerging Markets Equity (JPEM): The fund is designed to provide emerging markets equity exposure with potential for better risk-adjusted returns than a market cap-weighted index. It tracks the FTSE Emerging Diversified Factor Index.
J.P. Morgan Diversified Return U.S. Equity (JPUS): The fund tracks an index whose methodology is designed in an effort to capture market upside while providing less volatility in down markets compared to a market cap-weighted index, the Russell 1000 Diversified Factor Index.
J.P. Morgan Diversified Return U.S. Mid Cap Equity (JPME): The fund is designed to provide U.S. mid-cap equity exposure with potential for better risk-adjusted returns than a market cap- weighted index. It tracks the Russell Midcap Diversified Factor Index.
J.P. Morgan Diversified Return U.S. Small Cap Equity (JPSE): The fund is designed to provide U.S. small-cap equity exposure with potential for better risk-adjusted returns than a market cap-weighted index. It tracks the Russell 2000 Diversified Factor Index.
J.P. Morgan Diversified Return Europe Equity (JPEU): The fund is designed to provide developed Europe equity exposure with potential for better risk-adjusted returns than a market cap- weighted index. It tracks the FTSE Developed Europe Diversified Factor Index.
J.P. Morgan Diversified Return Europe Currency Hedged (JPEH): The fund is designed to provide developed Europe equity exposure with potential for better risk-adjusted returns than a market cap-weighted index. It tracks the FTSE Developed Europe Diversified Factor 100% Hedged to USD Index.
J.P. Morgan Asset Management’s ETF suite in the U.S. features 22 product offerings with over 4 billion dollars in assets under management. J.P. Morgan achieved a top ten position in flows in the U.S. across smart beta ETFs in 20161. J.P. Morgan was also named one of the “Most Trusted” ETF providers according to Cogent Reports’ 2016 Advisor Brandscape report
Pixabay CC0 Public DomainSecond Presidential Debate. While Mexican Presidential Candidates Propose Nothing To Amend The Pension System, Fundamental Improvements Are Required
In countries with less sensitive problems because of low pensions, presidential aspirants usually propose improvement measures, general reforms to mitigate disadvantages for former workers, and modifications aimed to avoid poverty for those who are still active. In Mexico, candidates to executive power have not expressed their proposal, if they have it, to rectify the expected retirement conditions of affiliates to the local pension system, SAR.
Insufficient pensions for current workers are expected, even with higher contribution
What do we have to ask to candidates? In some opportunities it has been repeated that with current mandatory contribution (CR) and applying composed profitability, the pretended replacement rate (RR) of workers could be as higher as 26%, clearly exiguous to lead a decent life. If the CR were to be increased now to 14% –a net rate of 13.0% after fees– and the annual weighted average profitability were 4%*, those who began their working life along with the SAR and accumulate uninterrupted contributions and returns in 21 years could consider their pension will be equivalent to around 45.5% of their last salary (or 53% if we assume annual returns of 5% instead of 4%). The 45.5% of RR is the consequence that half of the active life of these affiliates has already gone (so, 0.5% of active life over 26% of expected RR = 13%), and of taking into account that the new quota plus the next profitability would only influence the remaining years of work, provided that they do not go through periods of unemployment (so, 0.5% over RR of 65.0%= 32.5%).
If we start from the basis that the reform to the Chilean system was proposed by the fact that the RR of retirees did not reach the 80% projection of their last salary, this supposed increase in the CR of the SAR would be clearly insufficient for the Mexican workers’ pension to meet the necessary expenses in their retirement. Under these parameters, those who have few time of affiliation could aspire to higher pension tan 45.5%. In its case, the expectation of RR of 65% (through annual returns of 4%) or 80% (through returns of 5%) could only be reached by the new affiliates, those who began to work together with the application of the new CR.
With this simple thought –and the mirror of the Chilean model–, it can be realized that the increase of 115% of the contribution, from 6.5% today, without other complementary measures, would not solve the trouble of those who already have a working path. Assuming that the pension equivalent to 65% of salary, trough returns of 4% it would be taken as adequate by the future affiliates then it is clear that two kind of measures have to be determined; if that were not the case, there would be more problems and more solutions would have to be demanded.
Inquire to candidates in the remainder of the campaign
In the way that it is worrisome the candidates have not spoken, it baffles that those affected, nor the media, have demanded proposals or ideas for amendment. In other countries, a large proportion of voters decide according to pensions.
It would be believed that the man who was minister of Finance (in two six-year terms) would be able to make proposals or outlines of corrective projects; not just because his technical career but also because the influence he had over Comisión Nacional de Ahorro para el Retiro: the head of Finance is member of the Governing Board of the Commission, which in turn is attached to the ministry as a decentralized body. Even with that he has not made a single allusion to SAR.
That does not exempt the other aspirants, that considering they do not have experience in the sector are supported by teams that know the issues and worrying aspects of the country, and could be sensitive to the problem and commit to amend it.
The insufficiency of the RR is one of the concerns, but not the only one, about the pension system. There are other pending. Is exposed because it is the core, which will constitute the pension itself, the amount on which the sustenance will depends since retirement. In the remainder of the campaign, it is desirable that workers, media and academics inquire about it to the candidates.
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* Please see “Aumento en la Contribución del Sistema de Retiro en Chile: Beneficios e Implicaciones”, Fitch Ratings. October 16, 2017.
Column by Arturo Rueda. English version by the author
Pixabay CC0 Public DomainRobeco, courtesy photo . Robeco Appoints Bart Oldenkamp as Head of Investment Solutions
Robeco has hired Bart Oldenkamp as Head of Investment Solutions, effective July 1st, 2018. In this role, he will be responsible for further expanding Robeco’s Investment Solutions business, which includes services such as fiduciary management and multi-asset solution products.
He will succeed Martin Mlyná, who currently holds this role, while also serving as Managing Director at Corestone, Robeco’s manager selection platform. As from 1 July 2018 he will focus fully on his position at Corestone to further increase its added value for clients and to further grow Corestone’s multi-manager business.
Gilbert Van Hassel, CEO of Robeco, said: “I welcome Bart to Robeco; in him we have found a highly experienced professional to fulfil this crucial role for our clients with a strong network and reputation in the area of fiduciary management and investment solutions. This appointment underlines our commitment and ambition to grow our fiduciary business, which is a key element of our strategy for 2017-2021.”
Oldenkamp said: “I am excited to join Robeco and I am looking forward to working together with clients to achieve their financial objectives. I am confident that based on Robeco’s strong academic and research driven approach we will be able to further strengthen our solutions for clients and achieve sustainable growth of our business.”
He previously worked at NN Investment Partners, where he was Managing Director Integrated Client Solutions. Before that, he headed the Dutch office of Cardano, a consultancy firm specialized in fiduciary management, risk management and investment advisory services, after having held various positions at ABN Asset Management, including Global Head of LDI & Structuring and Product Specialist Structured Asset Management in the US. He is the academic director of the Pension Executive program at the Erasmus School of Accounting & Assurance, and a non-executive board member at the pension fund for the Dutch railway transport sector. He holds a PhD in Econometrics from Erasmus University Rotterdam.
Photo . Itaú Unibanco Celebrates 21 Years of Listing on the New York Stock Exchange
Itaú Unibanco is celebrating 21 years of listing on the New York Stock Exchange (NYSE), the largest exchange by trading volume. To celebrate the date, Itaú received the honors at the traditional “closing bell” ceremony, which marks the conclusion of the trading day on the NYSE. At the event Candido Bracher, Chief Executive Officer of Itaú Unibanco; Eduardo Vassimon, General Director – Wholesale; Caio David, Executive Vice President, Chief Financial Officer (CFO) and Chief Risk Officer (CRO); Alexsandro Broedel, Executive Officer for Finance and Investor Relations; and Christian Egan, Executive Officer for Global Markets and Treasury as well as Roberto Setubal, Co-Chairman of the Board of Directors were present.
“The fact that we have shares traded on the New York Stock Exchange has contributed to the bank’s growth and made us better known around the world, helping us to expand the number of foreign investors among our shareholders. We are very satisfied with the results of these 21years of listing”, says Candido Bracher.
During this period, the shares of Itaú Unibanco (identified by the ITUB ticker symbol) have been turning in a consistent annual performance, appreciating on average by 16% (considering the reinvestment of dividends) and with a recurring return on equity of 24.4%. Over the period, US$ 32.7 billion has been distributed in dividends and Interest on Capital, net of income tax.
In the first quarter of 2018, Itaú’s shares recorded average daily trading amounts of, R$ 535.3 million (US$ 161.1 million) on the NYSE and R$ 724.7 million (US$ 218.0 million) on the Brazilian stock exchange, B3, and totaling R$ 1.3 billion (US$ 379.1 million). The total trade volume was 41.5% greater than the same period in 2017. On B3, growth was 68.7% and on the NYSE, 16.2%.
Pioneering spirit and appreciation
Unibanco was the first Brazilian bank to trade its shares on the New York Stock Exchange in 1997. Itaú launched its American Depositary Receipt (ADRs) program on the NYSE in 2002. Following the merger of Unibanco with Itaú in 2008, the shares of the two banks were unified.
Currently, 67% of the 3.2 billion preferred shares of Itaú Unibanco pertain to foreign investors, 38% trading on B3 and 29% on the NYSE. The remaining 33% belong to Brazilian nationals and were traded on B3. The numbers reflect shares in the free float, that is those free for negotiation in the market and excluding those shares in the hands of the controlling shareholders or held as treasury stock.
This performance is the outcome of a transparent agenda in the relationship of Itaú Unibanco with the capital markets started in 1996, with presentations in the United States and Europe for disclosing the bank’s corporate governance practices and for emphasizing its respect and consideration for its shareholders.
“The sustainability of any organization depends on how it interacts with its employees, clients, shareholders and society in general. For this reason, we run a far-reaching agenda of events and meetings for understanding investor requirements and to disclose the strategies and results of our businesses, based on clarity, transparency and on a long-term vision”, says Caio David.
Itaú Unibanco has 121 thousand direct shareholders and a further approximately 1 million indirect shareholders through participation in Brazilian investment and pension funds which hold the institution’s shares.
In the past three years, Itau contributed Value Add to the economy of R$ 189.4 billion (US$56.9 billion), distributed as remuneration to the employees (30%); taxes, charges and contributions (30%); profits and dividends to all shareholders (19%); reinvestments in the operations of the bank (19%) and rents (2%).
New Cycle
In September 2017, the bank changed the maximum limit for payment of Dividends and Interest on Capital, and previously set at 45% excluding share buybacks, introducing a payout (percentage of net profit distributed to the shareholder) of 83% (including buyback of its own shares). In the light of the new remuneration practices, Itaú’s shares have now also become attractive to investment and pension funds where the strategy is to prioritize assets with higher levels of payout and efficient capital management.
In 2017, the bank distributed US$ 5.3 billion in dividends and interest on capital, the result of a recurring net income of US$ 7.5 billion.
Pixabay CC0 Public DomainFederico Tomasevich, CEO at Puente. Puente Will Exclusively Distribute a Partners Group Vehicle in Argentina, Uruguay and Paraguay
After the new Argentine legislation allows Argentine investors to operate financial instruments abroad, provided that they have a local agent as a link to the operation abroad. Puente announced an agreement with Partners Group, one of the leading investment groups in the world, to exclusively distribute one of its innovative investment instruments in Argentina, Uruguay and Paraguay.
“We are very excited about Partners Group’s decision to choose us as its exclusive partner in Argentina, Uruguay and Paraguay, which further strengthens our investment platform, particularly in terms of alternative investments. It presents an opportunity to those that seek to diversify their portfolio, maximizing their capital through investments in private equity, real estate, private debt, and infrastructures. This strategy allows the investor to access dollar returns that aim to be above most of the options available today in the market, with investments with lower volatility and that have a low correlation with traditional markets,” said Federico Tomasevich, President of Puente.
With its head office in Switzerland and 19 offices around the world such as New York or Houston, Partners Group manages more than 74 billion dollars in assets invested in private equity, real estate, private debt and infrastructure projects.
“Partners Group, through Puente, makes available to the Argentine, Uruguayan and Paraguayan investment market, a modern and efficient investment alternative that gives access to Puente’s clients to investments in private markets, which are typically only accessible to large institutional investors. We are very enthusiastic about this agreement with Puente, a renowned institution in the markets in which it operates,” said Gonzalo Fernández Castro, Head of Private Equity for Latin America at Partners Group.
Puente has over 3,400 million dollars in assets under management.
