CC-BY-SA-2.0, FlickrPhoto: Antonin. Mexico's Mutual Fund Industry Grew 9% in Dollars the Last Five Years
In the last 5 years, the Mexican mutual fund industry’s Assets Under Management grew 9% in dollar terms, while the Afores (Public Pension Funds) grew 31% in the same period. It is noteworthy that in the period the peso lost 40% versus the dollar, which was one of the main reasons there was only a single digit growth.
According to the regulator (CNBV) as well as industry information (AMIB), the mutual funds companies manage US$ 112 billion through 567 mutual funds. There are little more than 2 million contracts divided between 29 intermediaries. The three largest participants account for 56% of the market and the 10 largest participants have a combined 90% market share. The three largest are bank related entities, with more than 10% market share each. These three are: Banamex with 25% of all AUM, BBVA Bancomer with 19% and Santander with 12% as of the end of 2015. In the last 5 years Banamex increased its market share 0.5%; while BBVA’s decreased by 4% and Santander also saw outflows equivalent to 1% of its AUM.
While there is still a strong interest, from both locals and foreigners, to enter and increase their presence in the mutual fund industry in Mexico, reviewing the figures for the last five years, the most important changes come from GBM which added an extra 2% market share to their AUM, to settle with 4% market share and in ninth place; and the case, already mentioned, of BBVA Bancomer whose market share fell from 23 to 19%. The rest have small variations of plus or minus one percent.
In addition to the above, the entities that stand out are Banorte IXE (on 4th place with a 7% market share) with an increase in market share of 1.2%; Actinver (5th place with 6% market share), Finaccess with 0.8% (15th place with 1% of the market); and Principal (13th place and 1% of the market) with an increase of 0.6% over five years.
Although the number of debt and equity funds offered is very similar (280 debt funds vs 287 equity funds for a total of 567 funds at December); the distribution by assets class is not the same: 73% of assets are in debt funds while only 27% are in equity funds.
Reviewing the composition of the assets between debt and equity funds of each intermediary we observe some specialization. Managers with more than 90% of its assets invested in debt funds are: Nafinsa (98%); CI Fondos (98%); Intercam (96%); Monex (95%); HSBC (93%); Mifel (92%); Vector (91%); Invex (90%); and Multiva (90%). Those with more than 60% of its assets in equity funds are: Valmex (70%); GBM (65%); Inbursa (59%) and Finaccess (59%).
It is estimated that management fees average 1.12% in Mexico with debt funds fees are around 1%, while funds fees ranges between 1.5 and 2%, on average.
Reviewing the five years figures, one concludes that the fund business in Mexico is a long term one and where participation slowly grows.
CC-BY-SA-2.0, FlickrPhoto: Jason Kotik, senior investment manager, North American Equities at Aberdeen Asset Management . Jason Kotik will talk US Small Caps at the Fund Selector Summit in Miami
Jason Kotik, senior investment manager, North American Equities at Aberdeen Asset Management is set to discuss smaller companies investing when he takes part in the upcoming Fund Selector Summit Miami 2016 on the 28th and 29th of April.
As a manager, Aberdeen has been harnessing big ideas in the North American smaller company space for years. The companies may be small, but they believe they have the potential to pack a punch for long-term investors, especially those willing to dig deep.
The conference, aimed at leading funds selectors and investors from the US-Offshore business, will be held at the Ritz-Carlton Key Biscayne. The event-a joint venture between Open Door Media, owner of InvestmentEurope, and Fund Society- will provide an opportunity to hear the view of several managers on the current state of the industry.
Kotik, Aberdeen senior investment manager and member of Aberdeen’s North American Equity Team, will speak about how to find such opportunities, including reasons why the current period offers opportunity to invest in small-cap equities.
Kotik’s responisbilities include co-management of client portfolios at Aberdeen, which he joined in 2007 following the acquisition of Nationwide Financial Services. Previously, he worked at Allied Investment Advisors and T. Rowe Price. He graduated from the University of Delaware and earned an MBA from Johns Hopkins University. He is a CFA charterholder.
You can find all the information about the Fund Selector Miami Summit 2016, aimed at leading fund selectors and investors from the US-Offshore business, through this link.
CC-BY-SA-2.0, FlickrPhoto: Mark Strozier. Be on the Right Side of Change
Companies are having a much harder time producing earnings growth. Those that are positioned on the right side of change should be better placed to increase profits—and deliver investment returns—in a growth-constrained world.
Corporate profit margins today are much higher than their average since the early 1950s (Display). These profitability levels are very high, even when taking into account that the mix of US economic activity has shifted toward more capital-light business models (e.g., services and technology), which inherently generate higher margins.
But not every company or industry is facing the same squeeze on earnings growth. In particular, changes triggered by technology, regulation or structural shifts in specific markets are excellent sources of growth potential—even in an earnings-constrained world. Finding companies that are on the right side of changes like these is one of several ways that active investors can capture excess returns over long time horizons.
Using Technology Right
Technological change isn’t only about the Internet or social networks. Consider the retail sector, where new technology and information systems allow companies to take advantage of massive amounts of available data on customer behavior. Companies that recognize this potential and invest accordingly are using these tools to deepen relationships with customers—and are capable of doing better than rivals who haven’t.
Manufacturing is another case in point. Companies that are at the vanguard of manufacturing innovation have greater flexibility in managing their businesses, which provides a powerful way to boost profitability.
For example, when we researched Nike in 2015, we discovered innovations that looked likely to significantly improve the company’s earnings growth potential. Nike may be adding sophisticated chips to some of its sneakers; this will allow it to deepen its relationship with customers by offering personalized deals that bypass retail outlets, bringing more profit to the shoemaker. It’s also using a new automated manufacturing technology called Flyknit that lets customers customize their orders with minimal labor, allowing Nike to shift its production closer to consumers—in the US and around the world—and save costs on shipping, duties and tariffs. Our research suggests that innovations like these are transforming Nike’s business model and could potentially trigger a leap in its profitability.
Why the wide gap between our view and the street’s? It’s because most analysts aren’t evaluating how new technologies and processes will filter down to the bottom line over several years; the potential payoff is a couple of years beyond their horizon. In a short-term world, building thoughtful, independent models like these can make the difference in choosing stocks that stand out from the crowd.
The Innovation Factor
It’s not only giants like Nike that turn innovation into investment opportunities. It’s becoming easier every year for people to change the world because traditional barriers to innovation—such as capital and time—are falling dramatically.
Today, new ideas can be transformed into businesses for only a fraction of the prior cost thanks to continued exponential declines in the cost of computing. For example, the required costs of a typical tech start-up have fallen by roughly 95% since the dot-com era of the 1990s (Display, left). And the disruptive potential is enormous, as seen in the shift in advertising from print newspapers toward the digital world, which has had a profound impact on profits for both traditional media companies like the New York Times and new media leaders like Google (Display, right). For investors, the challenge is to get an early grasp on how unfolding changes will transform the profitability outlook for a wide range of companies.
This often requires an understanding of broad themes that transcend traditional industries and sectors. For example, increasing environmental awareness is spurring global efforts to address challenges that include carbon emissions, clean water, food availability and sanitation. Policy support and technological progress are making the shift to decarbonized energy inevitable, in our view. And the costs of renewable energy such as solar or lithium-ion batteries for electric cars are falling dramatically (Display). We believe that many investors have underestimated the disruptive potential of exponential cost improvements to drive faster and broader adoption.
Changes like these are opening up big investing opportunities. Over the next 15 years, we estimate that $4 trillion will be invested in new solar and wind capacity. Industries like these are highly fragmented, and offer strong growth opportunities for winners.
But identifying investment targets requires a substantial research effort in order to understand the technological and business dynamics of many public companies operating in nascent industries. By searching for businesses that are on the right side of changes like these, we believe investors can find companies that should be well positioned to grow their earnings—even when broader business conditions are stagnant.
Frank Caruso is CIO US Growth Equities at AB and Daniel C. Roarty is CIO Global Growth.
Photo: DanNguyen, Flickr, Creative Commons. Nordea Asset Management Expands its Active U.S. Fixed Income Offering with U.S Core Plus Bond Fund
Nordea Asset Management (NAM) announces that it has launched on April 4, 2016 the Nordea 1 – US Core Plus Bond Fund, provides investors active, diversified investment across the different sectors of the U.S. bond market. The investment objective of the Fund is to maximise total return over a full market cycle through income generation and price appreciation.
DoubleLine Capital LP (DoubleLine) is the sub-manager of the Fund. With this new offering, NAM broadens its partnership with DoubleLine, which as the sub-manager has provided investment services to the Nordea 1 – US Total Return Fund since its launch in 2012.
While the core of the portfolio consists of Investment-Grade U.S. debt instruments (covered by the Barclays Capital U.S. Aggregate Index), the “Plus” in the Fund name indicates that the investment universe expands beyond the traditional benchmark sectors to areas such as High Yield, USD-denominated Emerging Market Debt and non-Agency mortgage-backed securities.
“The design and flexibility of the Fund allows it to take advantage of areas of the market which DoubleLine believes offer attractive risk-adjusted return opportunities,” says Christophe Girondel, Global Head of Institutional and Wholesale Distribution. “We believe that the Fund forms an important addition to our current range of U.S. Fixed Income solutions, one of the major asset classes in any well diversified portfolio,” he adds.
The launch fully leverages Nordea’s multi-boutique approach and capabilities. This new fund complements the existing U.S. Fixed Income range of the Luxembourg-domiciled Nordea 1 SICAV, currently comprising a Low Duration US High Yield Bond fund, a US Corporate Bond fund, a US High Yield Bond fund, a North American High Yield Bond fund and a US Total Return Bond fund.
DoubleLine is an independent, employee-owned money management firm based in Los Angeles, California, U.S.A. Led by Chief Executive Officer and Chief Investment Officer Jeffrey Gundlach, the firm is widely recognised for its expertise and strong track record in active fixed income management. DoubleLine has been managing a similar strategy to the Nordea 1-US Core Plus Bond Fund since 2010.
DoubleLine’s investment philosophy is to build portfolios designed to outperform under a range of market scenarios by shunning away from unidirectional bets. The Fund achieves this through top-down active management of exposure to specific market segments combined with bottom-up security selection.
CC-BY-SA-2.0, FlickrPhoto: (stephan)
. A Glimpse into North Korea
During a recent visit to Asia, I took the opportunity to join a tour to the notorious demilitarized zone that separates North and South Korea. The “DMZ” as it is more commonly referred to, is 4 kilometers wide and has served as a buffer zone between the two states since the Korean War Armistice Agreement of 1953.
Lacking a peace treaty to bring the Korean War to an official conclusion, the countries remain technically at war, which makes the plight of the Kaesong Industrial Complex—a jointly run industrial park—all the more intriguing for visitors.
The complex, located just north of the DMZ, has manufactured goods for export into the South since 2004. According to global news agencies, there are 124 South Korean companies operating within this area and our tour guide informed us that some 50,000+ workers from the North can expect to earn approximately US$100 per month for their services.
If these figures are accurate, these employees earn only 6% of the average household disposable income in the South. However, upon closer inspection, this facility is less about profit margins than it is a step toward re-unification; a concept that was repeatedly referred to throughout our tour.
Despite this positivity, my visit unfortunately coincided with an indefinite closure of the Kaesong Industrial Complex—a response by the South to the launching of a North Korean long-range rocket. While this is not the first time the complex has had to close, it should be noted that past shut-downs had been initiated by the North. Whether we will see future reconciliation on this front remains open to debate.
While we don’t know if the lights are out for good or not at Kaesong, my experience was that commerce is not completely absent from the region. As just one of 42 paying visitors on my tour, I saw several other bus-loads of sightseers at multiple stops. Furthermore, whether it was in the Joint Security Area, the Third Infiltration Tunnel or the Dora Observatory, we found gift shops were never all that far away. This offered me the opportunity to buy key rings, figurines and even soju—a distilled rice liquor—that reputedly came from the North.
From my various vantage points (and despite technically setting foot inside the secretive state), it is impossible to tell what life is truly like in North Korea, north of the DMZ. Whether North Korea will ever see projects such as Kaesong as a pathway to economic development remains to be seen. But I would like to think that one day I’ll be able to return to this fascinating region in an investment capacity.
Colin Dishington, CA, CFA, is Research Analyst at Matthews Asia.
CC-BY-SA-2.0, FlickrPhoto: Matthias Born, senior portfolio manager, European Equities at Allianz Global Investors. Allianz GI’s Matthias Born is attending the Fund Selector Summit
Matthias Born, senior portfolio manager, European Equities at Allianz Global Investors will be discussing structural growth investing at the upcoming Fund Selector Summit Miami 2016, taking place 28-29 April.
Born, who is lead portfolio manager on the Allianz Europe Equity Growth Select fund, will outline how a high conviction strategy can focus on the most attractive structural growth ideas. His fund has been designed to benefit from bottom-up stock selection, through which weights on individual stocks are based on conviction levels across growth, quality and valuation criteria.
The conference, aimed at leading funds selectors and investors from the US-Offshore business, will be held at the Ritz-Carlton Key Biscayne. The event-a joint venture between Open Door Media, owner of InvestmentEurope, and Fund Society- will provide an opportunity to hear the view of several managers on the current state of the industry.
Born was appointed co-leader of the Investment Style Team Growth in 2009. Since then he has been lead portfolio manager of the funds and mandates of the strategy Euroland Equity Growth and Continental Europe Growth.
Before joining Allianz GI he worked for the Middle Market Group (Global Corporate Finance) at Dresdner Bank. In 2001, he graduated in Business Administration from the University of Würzburg with a master’s degree.
You can find all the information about the Fund Selector Miami Summit 2016, aimed at leading fund selectors and investors from the US-Offshore business, through this link.
Photo: Mike Gibb, co-head Global Wealth Management Distribution at Legg Mason Global Asset Management. Mike Gibb, co-head Global Wealth Management Distribution at Legg Mason Global Asset Management, will join the Fund Selector Summit Miami
Mike Gibb, equity specialist, co-head Global Wealth Management Distribution at Legg Mason Global Asset Management will join the upcoming Funds Society Fund Selector Summit Miami 2016, which takes place on the 28th and 29th of April.
The conference, aimed at leading funds selectors and investors from the US-Offshore business, will be held at the Ritz-Carlton Key Biscayne. The event-a joint venture between Open Door Media, owner of InvestmentEurope, and Fund Society- will provide an opportunity to hear the view of several managers on the current state of the industry.
Focusing on European long/short equity opportunities, Gibb, who is also an equity product specialist of Martin Currie, a Legg Mason affiliate, will look to outline how combining bottom up stockpicking with a macro overlay can generate alpha and deliver absolute returns in variable market conditions.
Before his previous role managing relationship and wealth mangement opportunities, Gibb was a client services director covering an institutional client base across regions. He has also been a hedge fund salesman with responsibility for investors in Europe and Asia. Before joining Martin Currie in 2005, Gibb was at Credit Suisse First Boston as a director and equity saleman for five years.
He was also an equity research salesman at Salomon Smith Barney for four years and before that a Far East equities fund manager for Gartmore and Scottish Amicable in 1990-1995. He is an associate of the UK Society of Investment Professionals (Asip) and a member of the CFA Society of the UK and has attained the Fundamentals of Alternative Investments certificate from CAIA . He graduated with an MA (Hons) in economic science from The University of Aberdeen.
CC-BY-SA-2.0, FlickrPhoto: The Tax Haven. The Earnings Season in the US Adds Pressure To Financial Markets
As we approach the start of the Q1 earnings season in the US, financial markets experienced renewed pressures. During the last week, the MSCI world was down 1%, with EMU and Japanese equities underperforming US equities. Commodities were also down but interestingly this had limited implications on US high yield and EM.
This was detrimental for hedge funds with the Lyxor index down 0.7% during the last week. CTAs again outperformed, driven by the performance of the fixed income, energy and FX clusters. Long positions on the JPY vs USD were also rewarding (see chart) as a result of the continued depreciation of the USD.
“The minutes of the 15-16 March FOMC meeting reminded investors that the dovish stance of the Fed is not so consensual within the voting members of the Committee but this had little impact on the currency. It is actually a well known fact that Yellen had to deal with hawkish regional Fed presidents in 2016. The good news is that she has managed to control the hawks so far”, explain the Lyxor AM team head by Jeanne Asseraf-Bitton, Global Head of Cross Asset Research.
Overall, Lyxor AM are upgrading CTAs, from neutral to slight overweight. “After the market rally in March and ahead of the US earnings season, their defensive portfolio appears to be a good hedge against any disappointment. Meanwhile, their long stance on US fixed income is less aggressive and with 10-Treasury yields near the bottom of the range of the past three years, it seems adequate. They have also reduced their shorts on energy, which is a positive development as the USD depreciation implies upside risks on the asset class”, says the research.
With regards to Event-Driven, Merger Arbitrage funds suffered due to the Pfizer/ Allergan deal break. It followed the announcement of new Treasury rules to discourage tax inversion deals. The Lyxor Merger Arbitrage index is down 1.9% this week. A number of funds were involved in the deal: Merger Arbitrage managers had set up the spread (long Allergan/ short Pfizer), while Special Situation managers held either long positions in Allergan, Pfizer or both, explaining why they outperformed. “We maintain the slight overweight stance on Merger Arbitrage. The exposure of the strategy on inversion deals is marginal today, hence limiting contagion risks to the rest of the portfolios”, concludes.
CC-BY-SA-2.0, FlickrPhoto: US Lipper Awards 2016. Five Columbia Funds Earn Lipper Fund Awards
Five Columbia funds have received 2016 Lipper Fund Awards as top-performing mutual funds in their respective Lipper classifications for the period ending December 31, 2015:
Columbia Select Large-Cap Value Fund (R5 shares): Large-Cap Value Funds classification (290 funds) – 10 years
Columbia Greater China Fund (Z shares): China Region Funds classification (26 funds) – 10 years
Columbia Global Equity Value Fund (I shares): Global Large-Cap Value Funds classification (39 funds) – 3 years
Columbia Contrarian Core Fund (Z shares): Large-Cap Core Funds classification (499 funds) – 10 years
Columbia AMT-Free California Intermediate Muni Bond Fund (Z shares): California Intermediate Municipal Debt Funds classification (30 funds) – 10 years
The U.S. Lipper Fund Awards recognize funds for their consistently strong risk-adjusted three-, five-, and 10- year performance, relative to their peers, based on Lipper’s proprietary performance-based methodology.
“We are pleased to have five funds recognized by Lipper for their consistent, risk adjusted performance,” said Colin Moore, Global Chief Investment Officer. “Our priority is to deliver consistent investment returns for our clients through superior research and capital allocation within and across our strategies and with a deep understanding of their investment needs.”
This is the fifth consecutive year that Columbia Select Large-Cap Value Fund has earned a Lipper Award in the Large-Cap Value category. The fund received the award for 10-year performance in 2015 (90 funds), 10- year performance in 2014 (84 funds), for 5-year and 10-year performance in 2013 (102 funds and 84 funds), and for 5-year performance in 2012 (402 funds).
CC-BY-SA-2.0, FlickrPhoto: Moyan Brenn. PineBridge Investments Completes Fundraising for Structured Capital Partners III, L.P.
PineBridge Investments, the global multi-asset class investment manager, has announced the final close for PineBridge Structured Capital Partners III, L.P. (together with parallel partnerships, the “Fund”).
PineBridge completed the fundraising in March with US $600 million of aggregate capital commitments, surpassing its planned target amount of US $500 million. The Fund will invest in junior capital securities including mezzanine debt and structured equity issued by privately-owned middle- market companies across all sectors in North America.
F.T. Chong, Managing Director and Head of PineBridge Structured Capital, stated, “We are committed to being reliable and flexible providers of junior capital to middle market companies. We are pleased with the positive reception for our Fund. Most of the Limited Partners from our prior fund have signed up for this Fund and new investors include major institutions in the US as well as Europe, the Middle-East and Asia.”
