CC-BY-SA-2.0, FlickrPhoto: Allie_Caulfield
. Singapore Tops The Charts As Best Overall Destination For Expats
For the second year in a row, Singapore takes the top spot in HSBC’s Expat Explorer country league table. Expatriates in Singapore enjoy some of the world’s best financial rewards and career opportunities, while benefiting from an excellent quality of life and a safe, family-friendly environment.
More than three in five (62%) expats in Singapore say it is a good place to progress their career, with the same proportion seeing their earnings rise after moving to the country (compared with 43% and 42% respectively of expats globally). The average annual income for expats in Singapore is USD139,000 (compared with USD97,000 across the world), while nearly a quarter (23%) earn more than USD200,000 (more than twice the global expat average of 11%).
Overall, 66% of expats agree that Singapore offers a better quality of life than their home country (compared to 52% of expats globally), while three quarters (75%) say the quality of education in Singapore is better than at home, the highest proportion in the world (global average 43%).
Now in its ninth year, Expat Explorer is the largest and one of the longest running surveys of expats, with 26,871 respondents sharing their views on life abroad including careers, financial wellbeing, quality of life and ease of settling for children.
The 2016 Expat Explorer report also reveals:
Millennials are drawn to expat life to find more purpose in their careers Nearly a quarter (22%) of expats aged 18-34 moved abroad to find more purpose in their career. This compares to 14% of those aged 34-54 and only 7% of those aged 55 and over. Millennials are also the most likely to embrace expat life in search of a new challenge: more than two in five (43%) say this, compared with 38% of those aged 34-54 and only 30% of those aged 55 and over. Millennials are finding the purpose they seek, with almost half (49%) reporting that they are more fulfilled at work than they were in their home country.
Expat life accelerates progress towards financial goals Far from slowing progress towards their longer term financial goals, expats find many are fast tracked by life abroad. Around two in five expats say that moving abroad has accelerated their progress towards saving for retirement (40%) or towards buying a property (41%), compared to around one in five (20% and 19% respectively) whose move abroad has slowed their progress towards these financial goals. Almost a third (29%) of expats say living abroad has helped them to save towards their children’s education more quickly, compared to only 15% who say it has slowed them down.
The top expat destinations for economics, experience and family are:
Dean Blackburn, Head of HSBC Expat, comments: “Expats consistently tell us that moving abroad has helped them achieve their ambitions and long-term financial goals, from getting access to better education for their children to buying property or saving more for retirement. Most expats also find that their quality of life has improved since making the move – and that they are integrating well with the local people and culture.”
CC-BY-SA-2.0, FlickrPhoto: Aston Martin. Aston Martin and the Real Estate Branch of the Coto Family Join Forces for a Luxury Real Estate Project
Aston Martin is collaborating with global property developer G and G Business Developments on a unique waterfront real estate project at the mouth of the Miami River. Aston Martin Residences at 300 Biscayne Boulevard Way will be a striking 66-floor luxury residential tower featuring approximately 390 condominiums offering incredible panoramic views of Biscayne Bay and the Miami area.
G and G Business Developments, the luxury real estate branch of the Coto family, has a reputation for pursuing innovative projects with a clear vision which ensures the delivery of exceptional results. To this Aston Martin brings its ability to define luxury and exclusivity through craftsmanship, design and attention to detail, understanding the important balance between beauty and performance.
Aston Martin’s design team, led by EVP and Chief Creative Officer, Marek Reichman, will design the interior spaces including the two private lobbies, the two-level fitness centre with ocean views and the full-service spa amongst other shared spaces in the development. When the development opens in 2021, seven penthouses and a duplex penthouse – all of which will enjoy private pools and spacious terraces – will be complemented by a range of luxury one to four bedroom condominiums.
These beautiful spaces will be encased in a bold sail-shaped building, an engineering master-piece designed by Revuelta Architecture and Bodas Mian Anger, renowned for creating landmark properties that are aesthetically pleasing and yet grounded in performance and purpose.
Katia Bassi, VP Aston Martin and Managing Director AM Brands said: “For over a century Aston Martin has delighted in working with talented people who not only understand our ethos but embody it. G and G Business Developments are just such people and we are excited to be collaborating with them to create truly exemplary residences. This remarkable new ven-ture realises our long-term vision of entering the world of luxury real estate, and is a natural extension of the Aston Martin brand. We create beautiful cars for those who appreciate automotive fine art, and we are excited to extend our expertise in design and craftsmanship into a project of this calibre. Such ventures enable us to further enhance and grow the brand into new aspects of the luxury world that appeal to both our existing and future customers.”
German Coto, CEO of G and G Business Developments said: “I am particularly proud of this project and our partnership with such an iconic British brand. We are working closely with the Aston Martin design team to create a stunning tower that will enhance and define the new Miami skyline. The collaboration is a beautiful mix of technology, style and elegance. I be-lieve that together we can build a highly desirable place to live, setting new standards in both design and quality of life.”
The Aston Martin Residences at 300 Biscayne Boulevard Way is part of a carefully curated collection of luxury projects and experiences within the Art of Living by Aston Martin portfolio’ taking customers beyond sports cars and expressing the company’s design and cultural ethos into other products and experiences.
The brand’s signature understated elegance, authenticity of materials and clean lines will be evident throughout and residents will experience the Art of Living by Aston Martin at every touch point. Highlight features will include doors with bespoke artisan Aston Martin handles, number plinths and kestral tan leather door tabs. Aston Martin designed reception desks fea-turing craftsmanship from the company’s halo products will adorn each lobby, along with key design features in all shared areas, including a beautiful infinity pool located on the 55th floor. Residents of the new development will also be able to enjoy easy access to the turquoise wa-ters of Miami via an exclusive yacht marina.
Reichman concluded: “As our first real estate project, we wanted to express the timeless style of Aston Martin through design elements and materials appropriate for an ultra-modern residential building. Our design team is providing the inspiration for a look and feel that will be truly Aston Martin.” The sales centre for the Aston Martin Residences at 300 Biscayne Boulevard Way will open in March 2017 and the project will break ground during Summer 2017.
Photo: Pictures of Money. Diagnosing the Health Care Selloff
Health care stocks have suffered as political rhetoric heats up around health care reform. Heidi suggests the sector may have been over-penalized.
No sector has been a victim of election antics and volatility like health care, the third-largest sector weight in the S&P 500 Index. The S&P 500 Health Care Index is down a little more than 2% this year and the S&P Biotechnology Select Industry Index has plummeted over 15%, while the S&P 500 has notched a decent 6% gain, according to Bloomberg data.
This should come as no surprise: A key factor in the recent selloff has been investor concerns that new regulations could impact the prices of drugs. These concerns are exacerbated by political rhetoric connected to the presidential election, and we think the likelihood of significant reform remains low. Although both U.S. presidential candidates have very different approaches to health care, each has proposed significant changes to the current system. And as politicians suggest plans to rectify an imperfect system, many health care companies feel the heat, particularly biotechnology companies, which then see weakened stock prices.
However, despite the potential for near-term political headwinds, there are positive fundamental and structural factors that suggest some health care companies are being over-penalized.
In recent years, U.S. equities overall have generally seen their stock prices gain from multiple expansion, rather than significant earnings growth. In other words, investors have been willing to pay more for the same dollar of earnings. But the health care sector is an exception; its earnings have been overlooked. The cheaper the stock prices get, the less the stocks are loved. See the chart below.
So why have health care and biotech stocks been left out in the cold? The market selloff in biotech began last year when Hilary Clinton commented on drug price gouging and the need for increased regulation. In a single day, the Nasdaq Biotech Index dropped almost 5% (source: Bloomberg).
I think this is a classic example of investor behavior driving stock prices rather than investment fundamentals. For now, this reform talk is all rhetoric. Actual reform measures affecting drug pricing would likely take years to legislate and implement. I won’t speculate on whether Congress would remain under Republican control, or which candidate would become president, but I believe that there is a strong likelihood of continued political divisions and gridlock. This suggests that the power to push through major reforms will be limited.
Markets in autumn have historically seen an uptick in volatility, according to Bloomberg data. Given that we are in the final weeks before the election, we expect volatility to continue in the health care sector. In fact, the issue is top of mind for voters. In a 2016 national survey of registered voters, health care ranked number four on the list of importance behind the economy, terrorism, and foreign policy. With so much focus on the sector, health care companies could continue to pay the price for political rhetoric in the near term.
The need for health care
But it’s important to remember that in addition to valuations and earnings, lifestyle and demographic factors support health care over the long term. First, while we can postpone discretionary purchases like a car or new appliances in dire times, health care is one thing we cannot live without. Meanwhile, an aging baby boomer population means demand for health care services will likely continue to grow. And as advancements in technology ensue, so will the average age in life expectancy, thus furthering the need for health care.
Some options to think about
Stocks in the biotech industry have a history of volatility, and given the election, nothing is certain. Yet, the industry is experiencing a wave of innovation. Within this context, it may make sense for some long-term investors to consider how biotech stocks may fit into their portfolio. Investors with a higher risk tolerance and/or a longer-term investment horizon may want to think about taking advantage of market volatility to find select opportunities in health care and biotech. To gain exposure to health care or biotech companies, investors may want to take a look at the iShares Nasdaq Biotechnology ETF (IBB) or the iShares U.S. Healthcare ETF (IYH).
Build on Insight, by BlackRock written by Heidi Richardson
CC-BY-SA-2.0, FlickrPhoto: Tony Webster. Deutsche Bank is Looking to Sell its Banking and Securities Subsidiaries in Mexico to InvestaBank
Deutsche Bank has entered into an agreement to sell its Banking and Securities subsidiaries in Mexico to InvestaBank, Institución de Banca. Deutsche Bank will centralize its Mexican Global Markets and Corporate & Investment Banking coverage function in its global hubs.
“Only two months after announcing the sale of our Argentina subsidiary, we are pleased to mark another major milestone in simplifying our bank by selling our subsidiaries in Mexico as part of Strategy 2020,” said Karl von Rohr, Chief Administrative Officer at Deutsche Bank. “We will work in partnership with our clients, regulators, employees and other stakeholders to ensure a smooth transition to the new arrangements.”
The bank is committed to serving its governmental, corporate and institutional clients in Mexico from global hubs and will continue to offer these clients the full range of investment banking products. As of 2015, Deutsche Bank had 131 employees in Mexico.
The transaction, which is part of the bank’s Strategy 2020 plan to rationalize its global footprint, is expected to close in 2017, subject to regulatory approvals and other customary conditions. Terms of the transaction were not disclosed.
CC-BY-SA-2.0, FlickrPhoto: Ministerio de Cultura de la Nación Argentina. Investing in the Age of Populism: a European Equities View
Populism is on the march. The unexpected UK vote to leave the EU, rising support for right-wing politicians in several other European countries, and the surprisingly strong showing by politicians such as Donald Trump are starting to cause jitters amongst investors. Not least because several of these politicians and political movements support ideas that range from mildly damaging to economically illiterate, such as greater government intervention in business, criticism of central bankers and restrictions on immigration and protectionism.
Despite increasing popular support for these unattractive ideas, equity markets have so far held up reasonably well, with the US market still trading near record levels. European markets have also snapped back from their post-Brexit vote blues, but is this stance complacent? And what are the potential investment implications of this populist movement?
Discontent with the status quo
First we should consider what is behind these votes and polls. Popular dissatisfaction with general economic development since the global financial crisis is palpable, caused by stagnation or falls in real disposable income for middle or lower earners. And discontent has been further sharpened by the realisation that almost all of the economic rewards go to a tiny elite. Mostly, these are the failings of globalism, which has delivered cheaper goods but also a deflationary impact on the bargaining power of semi-skilled and unskilled labour in developed countries, as products and services are moved offshore.
But the key point is that this discontent is being directed at national governments, because of the belief that politicians can ‘do something’. More unscrupulous politicians have realised that they can exploit these discontents to further their careers, even if they have no clue how to solve the underlying problems. Remember how prominent Brexiteers in the UK promised that the UK could control immigration and retain full access to the single market – a false claim that was exposed fairly quickly after the vote.
Thankfully, no politician has the power to roll back the effects of globalism – otherwise someone might propose that we all buy locally made clothes or rear our own chickens. Perhaps that sounds like a lovely idea. But on a more serious note, there is still a risk that politicians could come up with increasingly outrageous ideas to try to appeal to voters and to make a difference in a low-growth world. The Brexit debate is a case in point. Is the UK really likely to be a more prosperous place if it becomes significantly less attractive to foreign investors?
The politics of pragmatism
So the key task is to identify politicians who might do real damage and to assess if they really will be in a position to do that damage. The resilience of markets in the face of Brexit and other factors is explained by the expectation (or hope) that relatively sensible people are likely to end up taking decisions, or that the most foolish ideas will not actually be enacted.
In the case of the UK, the finance ministry is being run by the first man to have some actual business experience in at least a generation. And although much of the public rhetoric in the UK seems to be anti-business, a good part of this is probably pre-Brexit negotiation tactics aimed at securing a good deal. There is a difference between what politicians feel they need to say to justify their positions to discontented voters and what they are likely to enact in practice. It is also overlooked that the UK could well remain inside the European customs union – even if it leaves the single market.
If you work on the basis that the most extreme politicians will not get their hands on the controls and that mildly daft ones will be reined in by bureaucrats, then the current market view looks more realistic. There are risks that relatively sensible politicians could try and spend their way out of low growth, especially because we seem to be close to the limits of what central banks can do via quantitative easing (QE) and negative interest rates.
But it is more likely that a few high-profile infrastructure projects or housing schemes will be announced (maximum publicity for the least money) and that much riskier ideas such as ‘helicopter money’ – an alternative to QE that could be anything from payments to citizens to monetising debt – will be avoided. Fears that the EU will fall apart because of Brexit also seem misplaced: history means that other European countries have a completely different view of the institution.
Why pay for nothing?
Back to investment. If you want to get a return on your capital, no-one likes the idea of paying to lend money to a company (thanks for the offer, Henkel and Sanofi, which have both offered debt at negative rates). This only makes sense if you think someone else will buy the debt for an even more negative return.
So it seems that equities are one of the few places that can offer the potential of a real return. And within equities, there are some sensible steps to follow that can help to identify the types of company that should be able to ride out the next few years in a resilient way:
Look for basic products and services (tyres, lubricant, shampoo, food)
Look for recurring revenues or long-term contracts
Don’t overpay for growth – it might disappoint!
Find niche products with pricing power
Avoid regulatory/tax risk
Avoid dependence on a few products or countries
Identify beneficiaries of low interest rates (infrastructure)
Look for contractors with specialist infrastructure skills (tunnels, bridges)
Locate ‘self-help’ stories
Although valuations in Europe are significantly higher than they were two years ago, it is still possible to find solid businesses capable of delivering a cash yield of 6–7% and with opportunities to grow. Unless the political situation really deteriorates, those prospects are some of the best available in a world where low growth and negative rates are likely to continue for some time to come.
Simon Rowe is a fund manager in the Henderson European Equities team.
CC-BY-SA-2.0, FlickrPhoto: Concepción Muñoz. The Hedge Fund Allocation Is Dead. Long Live Total Return!
Outflows from hedge funds are accelerating. Hedge funds are now finding themselves on the defensive from poor performance, high fees, unfriendly legal structures, and an onslaught of negative publicity. Investors were already becoming more conscious of fees amid low nominal returns. Now a new dynamic is setting in: fear.
Those who are still invested in hedge funds are right to worry about whether today’s flood of outflows will induce tomorrow’s lowering of the portcullis, with hedge funds invoking gates to prevent investors from running en masse. Runs on banks can happen very suddenly, hence the time-tested maxim: “If you are going to panic, panic first.”
But here’s a more benign view of hedge funds’ future.
Five years from now, there will be no hedge fund allocation. In its place will be the total return allocation. This will consist of a whittled down group – in numbers and fees – of surviving, talented hedge funds that tear down their gates and earn their keep net of fees, blended with managers of liquid alternatives. Just as multi-strategy hedge funds eclipsed their single-strategy counterparts, so too will multi-asset strategies incorporate and push aside single-strategy liquid alts. This new and improved allocation will have lower overall fees, boost transparency, and deliver better and more differentiated riskadjusted returns (Sharpe ratios).
Within most portfolios, we’ll see differing blends of total return. At one end of the spectrum will be total return blends that focus more on seeking a capital appreciation outcome. Here, more growth-oriented multi-asset liquid alts will be teamed with long-biased multi-strategy hedge funds. Together, they will cannibalize equity and private markets to deliver returns based on capital appreciation while taming volatility – without the need to tie up capital for up to a decade at very high fees. On the other end of the spectrum will be blends that deliver capital conservation, with multiasset liquid alts focused on absolute return teamed with multi-strategy hedge funds focused on relative value. As interest rates start to rise, investors will increasingly see these blends as a more stable and steady source of capital preservation. Most portfolios will blend strategies focused on capital appreciation and capital conservation depending on the client’s objective.
The total return allocation will grow to help constituencies achieve outcomes that are important to them. With lower nominal returns and rising volatility, blending and increasing the size of the total return allocation – an outcome-based strategy – will be the order of the day for most portfolios. Outcomes include compounding money in real terms over inflation by certain hurdles over defined time frames. For example, an outcome could be exceeding inflation by 3% per year over rolling three years, or by 5% per year over rolling five years. This allocation will be more of a talent pool than an asset class, focused on achieving higher Sharpe ratios than those of traditional asset classes.
Today’s 10% allocations to hedge funds will give way to 20% allocations to total return. Within US institutional portfolios, hedge funds will shrink from a 10% allocation to 5%, while liquid alt forms of multi-asset will grow to 15% to lower fees while enhancing liquidity and transparency. Of course, this will differ by region. The UK has already evolved toward 10%-15% multi-asset (which they call diversified growth). This will keep growing to 30%. Australia is furthest along in eliminating hedge funds, owing to unseemly fees.
Comparable talent found in liquid alts will have the edge. This is because of their lower fees, higher liquidity, and greater transparency. Liquid alts also tend to be attached to more formidable and buttoned-down marketing and compliance organizations than hedge funds are – an important consideration in the post-Bernie-Madoff world.
Relative return has worked well for asset managers, yet only in secular booming markets. Gone is the 30-year disinflationary tailwind that enabled booming markets with shrinking volatility. The total return allocation will manage to objectives, not benchmarks, gradually weaning away the overall portfolio from relative return investing. As regimes evolve, so too must portfolios.
Michael J. Kelly, is Managing Director, Global Head of Multi-Asset at PineBridge.
This information is for educational purposes only and is not intended to serve as investment advice. This is not an offer to sell or solicitation of an offer to purchase any investment product or security. Any opinions provided should not be relied upon for investment decisions. Any opinions, projections, forecasts and forward-looking statements are speculative in nature; valid only as of the date hereof and are subject to change. PineBridge Investments is not soliciting or recommending any action based on this information.
CC-BY-SA-2.0, FlickrJoe DaGrosa - Courtesy photo. Miami Private Equity Is Taking the Marathon, Triathlon and Spartan Race to Cuba
In the last year, Miami-basedprivate equity investor Joe DaGrosa has quietly – and kind of accidentally – become the leader in the participatory sports space in Cuba. Joe DaGrosa and his MultiRace event company, in partnership with Spanish company Eventos Latinamerica, now effectively holds exclusive rights to the Havana Marathon (November 20), Havana Triathlon (February 25-26) and Spartan Race Cuba (March 18).
As the Company expands its presence in Cuba, it aims to help build an athletic bridge by bringing runners and triathletes from the World over to the country while introducing and developing a new generation of competitors in Cuba. “We believe that sports are a wonderful means to bridge cultural gaps and bring people together.” The Company has been holding workshops in Cuba on running sports training, nutrition and rehabilitation, with an emphasis on “training-the Trainers” in order to promote the sports.
Although there has been significant investor interest in doing business in Cuba since the re-establishment of relations with the US nearly two years ago, the reality is that there remains much to do in creating business, diplomatic and legal frameworks for international businesses and investors to operate. These challenges highlight Mr. DaGrosa’s achievement in establishing a business presence which positions him well to expand into other areas of opportunities in the country. Mr. DaGrosa added that “Cuba is a country whose people share a great affinity for many aspects of US culture and sports. Our focus today is to position these events as World leaders and make Cuba a global destination for elite runners and triathletes while seeking opportunities to help Cuba develop and expand its hospitality infrastructure which will be critical in this effort.”
CC-BY-SA-2.0, FlickrPhoto: Kirilos. Why Voter Anger is Positive for Emerging Market Debt
Political risk almost always features prominently on the list of concerns for investors in emerging market debt, as the countries in which they invest are prone to occasional bouts of instability, unrest and even revolution.
Recently, though, upheaval in the politics of a number of key emerging economies has been something to welcome, rather than fret about, as it is the result of voters demanding better economic stewardship.
The trend complements a shift in other factors that were previously bearish for emerging market bonds, and have now become bullish, helping the asset class to generate some of the best returns of 2016. These factors are economic growth, where the prospects have improved in emerging versus developed economies; commodity prices, which have rebounded strongly; China’s economy and financial markets, which have stabilised; and the outlook for US monetary policy, where rates are now expected to remain lower for even longer.
In this note, we discuss four high-profile emerging markets that suffered both from matters beyond their control, before the areas listed above turned from headwinds to tailwinds, and from matters within their control – and which they are now in the process of confronting.
Brazil
The presidency of Luiz Inácio Lula da Silva, a founding member of the left-wing Workers’ Party, or PT, from 2003 to 2011 coincided with a period of rising commodity prices, stoked in large part by demand from China. Unfortunately for his successor, Dilma Rousseff, this important prop for the economy was gradually removed during her tenure.
Rousseff also took a different approach to economic policy from Lula, who had managed the economy well over his two terms. She adopted a number of misguided policies that weakened the country’s fiscal credibility and undermined the independence of its central bank. Recession struck; investors dumped Brazilian assets; and the country lost its cherished investment-grade credit rating.
Over this period, a corruption scandal known as the ‘Car Wash’ affair erupted, over a kickback scheme at the state oil company, Petrobras. While Rousseff was not directly implicated, many of her party members were – including Lula. Ultimately, the economic crisis and public rage against alleged widespread graft undercut Rousseff’s popularity and derailed her government. She was ousted from office this year and replaced by her former vice president, Michel Temer, who appointed figures regarded highly by investors to lead the finance ministry and central bank.
It is unclear whether Temer will manage to enact all of his plans to steer Brazil out of its current quagmire, but investors are optimistic.
Argentina
The Kirchners – first husband Néstor, then wife Cristina Fernández – governed Argentina from 2003 to 2015, over which period they pursued largely populist and investor-unfriendly policies, such as giving sizable energy subsidies to consumers and forcing the central bank to fund the government. These policies stoked inflation – which the government tried to hide by manipulating the official data.
The difficult global backdrop only worsened the country’s economic malaise. But in December, Fernández was replaced by Mauricio Macri, the centre-right mayor of Buenos Aires, who beat the government-backed candidate in a general election.
Macri won on a pro-business platform that included pledges to reduce subsidies and export taxes, and normalise economic reporting. He also helped Argentina end a standoff with ‘holdout’ creditors, who had prevented the country from paying other investors to whom it had sold debt. These measures enabled Argentina to return to the bond market earlier this year with a US$16.5bn debt sale, a sign of renewed investor confidence.
Venezuela
Home to the largest proven oil reserves in the world, Venezuela is another South American country that experienced a sudden reversal of fortunes when commodity prices slumped.
During the good years, Hugo Chávez, its socialist president who held office from 1999-2013, borrowed heavily and used profits from oil exports to spend lavishly on his constituents. At the end of his presidency, these policies proved unsustainable: poverty, inflation and crime spiked; investors fled Venezuelan assets.
The social and economic crisis worsened after Chávez’s death in 2013, as his successor, Nicolás Maduro, continued the former president’s policies but without his charisma, while oil prices fell precipitously. This year, large numbers of Venezuelans have pressed the authorities to allow a recall referendum to remove Maduro – a process that has so far been stymied by the government-influenced electoral council.
While the outlook remains highly uncertain, it is clear that the military will be key to how the situation plays out, given its grip on many areas of the economy.
South Africa
After the end of apartheid, South Africa was well run for many years: its institutions remained strong; its financial markets, first-class. The government was fiscally prudent, keeping the country’s debt-to-GDP ratio low.
But as power passed from Nelson Mandela, to Thabo Mbeki, to Kgalema Motlanthe and most recently to Jacob Zuma, economic policy-making deteriorated, while issues such as high unemployment persisted. This became more problematic following the slowdown in Chinese growth and collapse in commodity prices, especially as the government did little to change course.
Zuma has presided over a host of corruption scandals, and an ill-fated attempt to replace South Africa’s highly respected finance minister, Nhlanhla Nene, with a little-known politician. The latter move sapped investor confidence in the country, triggering a bout of market stress that only dissipated when Pravin Gordhan, a former finance minister, was reappointed to the position.
In South Africa, too, the electorate has recently voiced its displeasure with the government’s economic stewardship: in local elections in August, the ruling African National Congress party in August suffered its worst election result since coming to power in 1994.
Favourable outlook
Clearly some of these countries are closer than others to achieving the better economic stewardship that their electorates are demanding. There will doubtless be further moments of drama as voters press their case against governments and vested interests. But the important thing is that while the process is noisy and messy, it is democracy at work. And it shows that these countries are moving in the right direction, however fitfully.
Looking ahead, we expect the clamour for reform across emerging markets to support the asset class, alongside the improvement in growth prospects, bounce in commodity prices, stability in China’s outlook and a still-accommodative US Federal Reserve.
In this context, we expect the appeal of emerging market debt to grow as more investors seek out the attractive sources of return offered by the asset class, especially in light of the low-to-negative yields on offer by developed market government bonds.
John Peta is Head of Emerging Market Debt at OMGI.
CC-BY-SA-2.0, FlickrPhoto: Joe Cheng. Eaton Vance to Acquire Calvert Investment Management
Eaton Vance recently announced the execution of a definitive agreement to acquire the business assets of Calvert Investment Management, an indirect subsidiary of Ameritas Holding Company. In conjunction with the proposed acquisition, the Boards of Trustees of the Calvert mutual funds have voted to recommend to Fund shareholders the approval of investment advisory contracts with a newly formed Eaton Vance affiliate, to operate as Calvert Research and Management, if the transaction is consummated.
Calvert is a recognized leader in responsible investing, with approximately $12.3 billion of fund and separate account assets under management as of September 30, 2016. The Calvert Funds are one of the largest and most diversified families of responsibly invested mutual funds, encompassing actively and passively managed U.S. and international equity strategies, fixed income strategies and asset allocation funds managed in accordance with the Calvert Principles for Responsible Investment. As a responsible investor, Calvert seeks to invest in companies that provide positive leadership in their business operations and overall activities that are material to improving societal outcomes.
Founded in 1976, Calvert has a long history in responsible investing. In 1982, the Calvert Social Investment Fund (now Calvert Balanced Portfolio) was launched as the first mutual fund to oppose investing in South Africa’s apartheid system. Other Calvert innovations include the first responsibly managed fixed income and international equity funds, and pioneering programs in shareholder advocacy, corporate engagement and impact investing.
“I am extremely pleased that Eaton Vance has chosen to make Calvert the centerpiece of its expansion in responsible investing,” said John Streur, President and Chief Executive Officer of Calvert. “By combining Calvert’s expertise in sustainability research with Eaton Vance’s investment capabilities and distribution strengths, we believe we can deliver best-in-class integrated management of responsible investment portfolios to investors across the U.S. and internationally. Eaton Vance is the ideal partner to help Calvert fulfill its mission to deliver superior long-term performance to clients and achieve positive impact.”
“As part of Eaton Vance, we see tremendous potential for Calvert to extend its leadership position among responsible investment managers,” said Thomas E. Faust Jr., Chairman and Chief Executive Officer of Eaton Vance. “By applying our management and distribution resources and oversight, we believe Eaton Vance can help Calvert become a meaningfully larger, better and more impactful company.”
Completion of the transaction is subject to Calvert Fund shareholder approvals of new investment advisory agreements and other closing conditions, and is expected on or about December 31, 2016. Because the transaction is structured as an asset purchase, liabilities in connection with Calvert’s previously disclosed compliance matters and other pre-closing obligations will remain with the seller. Terms of the transaction are not being disclosed.
CC-BY-SA-2.0, FlickrPhoto: Joey Gannon
. China Oceanwide To Acquire Genworth Financial
China Oceanwide Holdings and Genworth Financial, have announced that they have entered into a definitive agreement under which China Oceanwide has agreed to acquire all of the outstanding shares of Genworth for a total transaction value of approximately $2.7 billion, or $5.43 per share in cash. The acquisition will be completed through Asia Pacific Global Capital, one of China Oceanwide’s investment platforms. The transaction is subject to approval by Genworth’s stockholders as well as other closing conditions, including the receipt of required regulatory approvals.
As part of the transaction, China Oceanwide has additionally committed to contribute to Genworth $600 million of cash to address the debt maturing in 2018, on or before its maturity, as well as $525 million of cash to the U.S. life insurance businesses. This contribution is in addition to $175 million of cash previously committed by Genworth Holdings. to the U.S. life insurance businesses. Separately, Genworth also announced preliminary charges unrelated to this transaction of $535 to $625 million after-tax associated with long term care insurance (LTC) claim reserves and taxes. Those items are detailed in a separate press release. The China Oceanwide transaction is expected to mitigate the negative impact of these charges on Genworth’s financial flexibility and facilitate its ability to complete its previously announced U.S. life insurance restructuring plan. Genworth believes this transaction is the best strategic alternative to maximize stockholder value.
James Riepe, non-executive chairman of the Genworth Board of Directors said, “The China Oceanwide transaction is the result of an active and extensive review process conducted over the past two years under the supervision of the Board and with guidance from external financial and legal advisors. The Board is confident that the sale of the company to China Oceanwide is the best path forward for Genworth’s stockholders.”
Upon the completion of the transaction, Genworth will be a standalone subsidiary of China Oceanwide and Genworth’s senior management team will continue to lead the business from its current headquarters in Richmond, Virginia. Genworth intends to maintain its existing portfolio of businesses, including its MI businesses in Australia and Canada. Genworth’s day-to-day operations are not expected to change as a result of this transaction.
China Oceanwide is a privately held, family owned international financial holding group founded by Lu Zhiqiang. Headquartered in Beijing, China, China Oceanwide’s well-established and diversified businesses include operations in financial services, energy, culture and media, and real estate assets globally, including in the United States. Businesses controlled by China Oceanwide have more than 10,000 employees globally.
“Genworth is an established leader in both mortgage insurance and long term care insurance, which are markets that present significant long-term growth opportunities,” added Lu, Chairman of China Oceanwide. “We are impressed by Genworth’s purpose and its focus on helping people manage the financial challenges of aging as well as achieving the dream of homeownership. In acquiring Genworth and contributing $1.1 billion of additional capital, we are providing crucial financial support to Genworth’s efforts to restructure its U.S. life insurance businesses by unstacking Genworth Life and Annuity Insurance Company (GLAIC) from under Genworth Life Insurance Company (GLIC) and address its 2018 debt maturity. In order to close the transaction and achieve these objectives, we have structured the transaction with the intention of increasing the likelihood of obtaining regulatory approval.”
Tom McInerney, President & Chief Executive Officer of Genworth concluded, “We believe that this transaction creates greater and more certain stockholder value than our current business plan or other strategic alternatives, and is in the best interests of Genworth’s stockholders. China Oceanwide is an ideal owner for Genworth going forward. They recognize the strength of our mortgage insurance platform and the importance of long term care insurance in addressing an aging population. The capital commitment from China Oceanwide will strengthen our business and increase the likelihood of obtaining regulatory approval.”
