BroadSpan Capital has announced the expansion of its operations in Latin America through the establishment of a presence in Mexico City and the hiring of senior banker Luis Camarena as Managing Director and Head of Mexico.
In a press release, the firm has revealed that, through these efforts, it will expand its capacity to deliver its core Restructuring Advisory and M&A Advisory services to clients in Mexico as well as further facilitate cross border transactions for clients based in other markets.
Prior to joining BroadSpan, Camarena headed the Mexico operations of European investment banking firm Alantra for three years. Before that, he was a Director of Rothschild’s Mexico team for over eight years where he led numerous successful restructurings and M&A transactions. Camarena also worked at both Lehman Brothers and JP Morgan in the Investment Banking groups in Mexico City, Monterrey, and New York.
“We are delighted to bring Luis into the BroadSpan structure. It is rare to find a banker of his caliber that has not only the proven restructuring and M&A track record, but also successful experience working in both the bulge bracket and boutique environments. A fantastic fit for all parties,” said Mike Gerrard, BroadSpan’s CEO.
Meanwhile, Camarena claimed to be excited to join a team of bankers with “an unmatched level” of experience and track record that has successfully built a true US-Latin American IB platform. “BroadSpan’s top ranked restructuring practice and longstanding leadership in cross border M&A will bring significant value to our clients as we expand in what is the second largest economy in Latin America”, he added.
Founded in 2001, BroadSpan Capital is an independent investment banking firm that provides corporations, partnerships and government institutions with advice related to mergers & acquisitions and financial restructuring in Latin America and the Caribbean. It has offices in Miami, Rio de Janeiro, São Paulo, Mexico City and Bogota and through affiliate offices located in 30 countries around the world.
Pixabay CC0 Public Domain. Jupiter amplía su equipo de crédito estadounidense con la apertura de una oficina en Nueva York
Jupiter Asset Managementhas announced the launch of a new, New York-based US credit hub, increasing the research capacity of its 13 billion dollars’ global unconstrained fixed income strategy and deepening analytical coverage of the world’s largest, most liquid market.
In a press release, the firm has revealed that three Jupiter employees, including two newly appointed team members, will be based in the office, evolving the firm’s US credit coverage from its current focused and selective approach to a deeper and more extensive analytical cover. “With the office designed as an idea-generation hub for Jupiter’s UK-based fixed income strategy, the team will have no initial requirement for order raising or trading capability”, they add.
Dedicated US credit research team
The New York-based team will be led by experienced US Credit Analyst and US national Joel Ojdana, who joined the company in London in July 2018 and moved back to the United States with the opening of Jupiter’s Denver office in October 2020. With over thirteen years’ experience in fixed income investing, the asset manager believes that Ojdana has made “a meaningful contribution” to the firm’s US credit research – an important pillar of Jupiter’s unconstrained bond offering, led by Head of Strategy, Fixed Income, Ariel Bezalel.
With Ojdana in the credit hub will be David Rowe and Jordan Sonnenberg, who have joined the company as Credit Analysts this month. Rowe joins Jupiter from JP Morganwhere he has worked as an Analyst on theLeveraged Loans & High Yield Credit Trading Desk for the last two years, while Sonnenberg joins from Deutsche Bank, where he has spent five years on the company’s High Yield Credit Research team, most recently as a High Yield Credit Research Associate covering the industrials, paper & packaging and chemicals sectors.
In their new roles, both will work closely with Jupiter’s 10-strong London-based credit research team, including Credit Analyst Charlie Spelina, who joined Jupiter in 2017 to spearhead the company’s US credit research. Besides, they will report into Ojdana and to Luca Evangelisti, Jupiter’s UK-based Head of Credit Research.
Jupiter AM has pointed out that the team will focus onhigh-yield credit research, feeding into the idea generation process for its global unconstrained bond offering, including the flagship Jupiter Dynamic Bond (SICAV). In addition, their work will also feed into the research process across Jupiter’s broader fixed income strategy, including the Jupiter Global High Yield Fund, with a longer-term scope for evolving the company’s product range in this area.
Meanwhile, Stephen Pearson, CIO, addedthat as Jupiter’s Fixed Income strategy continues to go from strength to strength, it is “vitally important” to invest in their people and infrastructure. “David and Jordan’s experience in the US credit market make them the ideal candidates to further expand the team’s wealth of regional expertise, building on the meaningful contribution Joel’s work in the US has already made to the team’s investment process”, he concluded.
Pixabay CC0 Public DomainAutor: Alexas_Photos. Franklin Templeton compra el equipo de Crédito Investment Grade de Aviva Investors
Franklin Templeton has announced the talent acquisition of Aviva Investors’ US-based Investment Grade Credit team. This means that senior portfolio managers Josh Lohmeier and Michael Cho will join Franklin Templeton Fixed Income (FTFI). In addition, Tom Meyers, previously Aviva’s Head of Americas Client Solutions, will join FTFI in a newly created role as SVP, Senior Director of Investments and Strategy Development, Fixed Income.
In a press release, the asset manager has revealed that Meyers, Lohmeier and the full investment team are expected to join by the end of 2021. Lohmeier and Meyers will report to Sonal Desai, CIO at FTFI, and the investment team will continue to report to Lohmeier.
The Investment Grade Credit team currently manages over 7.5 billion dollars in institutional assets under management at Aviva, across its suite of investment grade credit strategies, including US Investment Grade Credit, US Long Duration Credit, US Long Duration Government/Credit, and US Intermediate Credit, with additional customized versions of each strategy for various institutional clients. The asset manager has clarified that Aviva clients in these strategies will have the opportunity to continue to have the team manage their assets at Franklin Templeton.
“Bringing this experienced team aboard will complement our existing credit capabilities by further deepening our expertise in investment grade credit, strengthening our research and analysis resources, and expanding our strategy offerings and capabilities further into the institutional marketplace, with a special focus on defined benefit and liability-driven investing,” said Desai.
“I look forward to working with Josh and the team to bolster and differentiate our investment grade credit offerings, and with Tom to bring this messaging to our clients and consultants, especially in the institutional arena”, she added.
Excess returns through all market cycles
Franklin Templeton has highlighted that this Investment Grade Credit team uses a differentiated portfolio construction process that breaks down and analyzes credit markets in distinctive ways in order to uncover additional opportunities for alpha and risk reduction for clients. Utilizing a custom risk framework and allocation system, the team aims to consistently deliver positive and uncorrelated excess returns through all market cycles, regardless of the direction of credit spreads, with a focus on downside protection.
Lohmeier claimed to be “thrilled” to continue to grow the substantial client interest they have seen in their investment grade credit strategy, now with Franklin Templeton. “Portfolio construction sets the strategy apart from its peers and is a key driver of its non-correlation. Our time-tested process is designed to add value by creating a more efficient portfolio and allocating to the best credit ideas”, he said.
Franklin Templeton believes that the team’s approach and expertise are complementary to its existing active quant investment process, which combines fundamental research-based active management with quantitative analysis and data science. In addition, the team’s investment philosophy and culture, built on the belief that a quantitative enhancement to fundamental research leads to more consistent and repeatable alpha generation, strongly aligns with FTFI’s existing culture.
“In the current environment, and especially within fixed income, we believe clients are looking for crisp differentiation and consistency,” said Meyers. “I look forward to working with Josh to continue to articulate the benefits of the investment grade credit strategies, and with the broader Franklin Templeton Fixed Income team in connecting clients with investment strategies that meet their diverse needs.”
Franklin Templeton Fixed Income has 156 billion dollars in assets under management, with approximately 13 billion of that in corporate credit strategies, as of August 31, 2021. The firm’s existing Corporate Credit Research Team comprises 31 investment professionals, organized by region.
Pixabay CC0 Public DomainAutor: Free-Photos. Reapertura de EE. UU.
U.S. equities marched higher in August as the S&P 500 logged its seventh consecutive monthly gain. Markets responded favorably to a strong earnings season, stable central bank monetary policy, and robust infrastructure spending. Despite the positive headlines, investors remain cautious over inflation dampening profit margins and companies’ passing those higher prices to consumers.
Although 53% of Americans are fully vaccinated, concerns remain over the impact of the Delta variant on the unvaccinated portion of the population. Efforts to administer a booster shot have received FDA approval, which aim to bolster the efficacy of those vaccinated earlier this year. Additional shutdowns remain unlikely and the market appears to have already discounted a cautionary re-opening scenario with travel and leisure stocks shedding some of their gains.
Continued focus remains on the Fed and their stance on monetary policy in response to higher inflation rates. Although recent discussions of potential implementation of tapering have been non-material, the market remains cognizant of potential action being taken by the Fed should these concerns persist.
Although our approach to picking stocks always evolves – we still often video conference with management teams even though we are back in the office – we remain true to the founding fundamental research process and PMV with a Catalyst™ methodology of our firm. As Value Investors, we will continue to use the current market volatility as an opportunity to buy attractive companies, which have positive free cash flows, healthy balance sheets and are trading at discounted prices.
Mergers and acquisitions activity remained vibrant in August with $480 billion in announced deals, an increase of 44% compared to 2020.
The global convertible market bounced back in August with positive returns and an uptick in issuance. Returns were mostly driven by positive underlying equity performance for the month. The return of issuance was also a positive development after a relatively slow July. Pricing improved and we anticipate the pace of issuance to accelerate through the fall. The fundamental reasons for increased convertible issuance are still quite intact with low interest rates, increasing equity prices, and favorable tax environments available to most potential issuers.
_________________________________________
To access our proprietary value investment methodology, and dedicated merger arbitrage portfolio we offer the following UCITS Funds in each discipline:
GAMCO MERGER ARBITRAGE
GAMCO Merger Arbitrage UCITS Fund, launched in October 2011, is an open-end fund incorporated in Luxembourg and compliant with UCITS regulation. The team, dedicated strategy, and record dates back to 1985. The objective of the GAMCO Merger Arbitrage Fund is to achieve long-term capital growth by investing primarily in announced equity merger and acquisition transactions while maintaining a diversified portfolio. The Fund utilizes a highly specialized investment approach designed principally to profit from the successful completion of proposed mergers, takeovers, tender offers, leveraged buyouts and other types of corporate reorganizations. Analyzes and continuously monitors each pending transaction for potential risk, including: regulatory, terms, financing, and shareholder approval.
Merger investments are a highly liquid, non-market correlated, proven and consistent alternative to traditional fixed income and equity securities. Merger returns are dependent on deal spreads. Deal spreads are a function of time, deal risk premium, and interest rates. Returns are thus correlated to interest rate changes over the medium term and not the broader equity market. The prospect of rising rates would imply higher returns on mergers as spreads widen to compensate arbitrageurs. As bond markets decline (interest rates rise), merger returns should improve as capital allocation decisions adjust to the changes in the costs of capital.
Broad Market volatility can lead to widening of spreads in merger positions, coupled with our well-researched merger portfolios, offer the potential for enhanced IRRs through dynamic position sizing. Daily price volatility fluctuations coupled with less proprietary capital (the Volcker rule) in the U.S. have contributed to improving merger spreads and thus, overall returns. Thus our fund is well positioned as a cash substitute or fixed income alternative.
Our objectives are to compound and preserve wealth over time, while remaining non-correlated to the broad global markets. We created our first dedicated merger fund 32 years ago. Since then, our merger performance has grown client assets at an annualized rate of approximately 10.7% gross and 7.6% net since 1985. Today, we manage assets on behalf of institutional and high net worth clients globally in a variety of fund structures and mandates.
Class I USD – LU0687944552 Class I EUR – LU0687944396 Class A USD – LU0687943745 Class A EUR – LU0687943661 Class R USD – LU1453360825 Class R EUR – LU1453361476
GAMCO ALL CAP VALUE
The GAMCO All Cap Value UCITS Fund launched in May, 2015 utilizes Gabelli’s its proprietary PMV with a Catalyst™ investment methodology, which has been in place since 1977. The Fund seeks absolute returns through event driven value investing. Our methodology centers around fundamental, research-driven, value based investing with a focus on asset values, cash flows and identifiable catalysts to maximize returns independent of market direction. The fund draws on the experience of its global portfolio team and 35+ value research analysts.
GAMCO is an active, bottom-up, value investor, and seeks to achieve real capital appreciation (relative to inflation) over the long term regardless of market cycles. Our value-oriented stock selection process is based on the fundamental investment principles first articulated in 1934 by Graham and Dodd, the founders of modern security analysis, and further augmented by Mario Gabelli in 1977 with his introduction of the concepts of Private Market Value (PMV) with a Catalyst™ into equity analysis. PMV with a Catalyst™ is our unique research methodology that focuses on individual stock selection by identifying firms selling below intrinsic value with a reasonable probability of realizing their PMV’s which we define as the price a strategic or financial acquirer would be willing to pay for the entire enterprise. The fundamental valuation factors utilized to evaluate securities prior to inclusion/exclusion into the portfolio, our research driven approach views fundamental analysis as a three pronged approach: free cash flow (earnings before, interest, taxes, depreciation and amortization, or EBITDA, minus the capital expenditures necessary to grow/maintain the business); earnings per share trends; and private market value (PMV), which encompasses on and off balance sheet assets and liabilities. Our team arrives at a PMV valuation by a rigorous assessment of fundamentals from publicly available information and judgement gained from meeting management, covering all size companies globally and our comprehensive, accumulated knowledge of a variety of sectors. We then identify businesses for the portfolio possessing the proper margin of safety and research variables from our deep research universe.
Class I USD – LU1216601648 Class I EUR – LU1216601564 Class A USD – LU1216600913 Class A EUR – LU1216600673 Class R USD – LU1453359900 Class R EUR – LU1453360155
GAMCO CONVERTIBLE SECURITIES
GAMCO Convertible Securities’ objective is to seek to provide current income as well as long term capital appreciation through a total return strategy by investing in a diversified portfolio of global convertible securities.
The Fund leverages the firm’s history of investing in dedicated convertible security portfolios since 1979.
The fund invests in convertible securities, as well as other instruments that have economic characteristics similar to such securities, across global markets (but the fund will not invest in contingent convertible notes). The fund may invest in securities of any market capitalization or credit quality, including up to 100% in below investment grade or unrated securities, and may from time to time invest a significant amount of its assets in securities of smaller companies. Convertible securities may include any suitable convertible instruments such as convertible bonds, convertible notes or convertible preference shares.
By actively managing the fund and investing in convertible securities, the investment manager seeks the opportunity to participate in the capital appreciation of underlying stocks, while at the same time relying on the fixed income aspect of the convertible securities to provide current income and reduced price volatility, which can limit the risk of loss in a down equity market.
Class I USD LU2264533006
Class I EUR LU2264532966
Class A USD LU2264532701
Class A EUR LU2264532610
Class R USD LU2264533345
Class R EUR LU2264533261
Class F USD LU2264533691
Class F EUR LU2264533428
Disclaimer: The information and any opinions have been obtained from or are based on sources believed to be reliable but accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss arising from the use of this information. The information is expressed at its date and is issued only to and directed only at those individuals who are permitted to receive such information in accordance with the applicable statutes. In some countries the distribution of this publication may be restricted. It is your responsibility to find out what those restrictions are and observe them.
Some of the statements in this presentation may contain or be based on forward looking statements, forecasts, estimates, projections, targets, or prognosis (“forward looking statements”), which reflect the manager’s current view of future events, economic developments and financial performance. Such forward looking statements are typically indicated by the use of words which express an estimate, expectation, belief, target or forecast. Such forward looking statements are based on an assessment of historical economic data, on the experience and current plans of the investment manager and/or certain advisors of the manager, and on the indicated sources. These forward looking statements contain no representation or warranty of whatever kind that such future events will occur or that they will occur as described herein, or that such results will be achieved by the fund or the investments of the fund, as the occurrence of these events and the results of the fund are subject to various risks and uncertainties. The actual portfolio, and thus results, of the fund may differ substantially from those assumed in the forward looking statements. The manager and its affiliates will not undertake to update or review the forward looking statements contained in this presentation, whether as result of new information or any future event or otherwise.
Pixabay CC0 Public DomainBajos rendimientos de la renta fija. Bajos rendimientos de la renta fija
As investors look across the world for opportunity and challenges within the fixed income asset class, it’s important to note that real yields are at historic lows in high quality fixed income markets.
In addition, spreads are at some of the lowest levels that we’ve seen in history. This is not a time to take undue risk within fixed income. At the same time, it’s important to see that the role of fixed income in asset allocators’ portfolios is changing. Because those real yields are so low, and yet because the opportunity in markets from a volatility perspective is rising, an investor must be significantly nimbler these days than to merely clip a coupon.
In the current market environment, we’re generally positioning our fixed income portfolios to take less risk given low real yields and low spreads. There are still areas of opportunity. As is often true in investing, investors continually fight the last war. Consumer balance sheets, particularly in the United States, are overlooked by some. To the contrary, we believe consumer balance sheets in the United States are quite strong. The real challenges are consumer balance sheets outside the United States and the corporate and sovereign bonds that are exposed to that weakness.
Outside of the U.S., we have seen an incredible penchant for spending, most notably on the sovereign front where government expenditures rose precipitously with Covid-related social spending programs. Of course, this is coming at a time when government revenues are at record lows due to lack of tax revenues with subdued economic activity. As with corporates, the recipe of a higher debt load with a lower P&L is not a comfortable dynamic, especially if prolonged.
Investors gave governments the benefit of the doubt through 2020 with the hope that 2021 would bring some austerity. That has not been the case. We are now left with a larger public sector deficit and a higher debt load. Therefore, we are not surprised that we have seen the largest number of sovereign rating downgrades in the 21st century by nearly 200% (captured below).
When Will the Fed Move?
One interesting development in markets over the course of the past quarter has been that rates have fallen, not just in the United States, but in many places across the globe. This is at odds with high inflation and high growth prints, as well as an improving labor market. A remarkable instance of the market trying to outguess the Federal Reserve.
Despite questions around the Fed’s commitment to keeping rates lower for longer, investors have seen that they have been very clear and resolute. The Fed’s plan to raise rates and taper bond purchases is on schedule for later this year.
Although the Fed is still active in markets, the economic bump in the road due to the Delta variant makes it apparent that rates cannot rise monotonically towards 2 or 3+ percent. However, as we look at the intermediate term, and we see incredible amounts of fiscal and monetary stimulus still in the system, growth should continue to be good and curves should continue to steepen. While the Fed and other central banks are anchoring rates at the front end, the long end can rise especially as that taper gets closer and closer.
No Global Lock-Step Market Movements Likely
As we look across the globe, there are a variety of different situations and potential opportunities. Emerging markets is a varied landscape: from China which has a significant virus lockdown and has seen an early cycle growth stage, earlier than other countries; to places like Brazil, where vaccination rates are much more challenging and resulting growth has been pushed into the future. At some point, we’re going to see vaccines continue to take hold, and that should be a boost for growth. But is there an opportunity today before we see restored domestic demand, particularly in a healthier local consumer?
Outside the U.S., we cannot apply a blanket policy to risk. Corporate bonds offer a glimmer of hope. There are many corporates in EM who benefit from the global cycle vs domestic demand. In other words, they are exposed to the aforementioned healthy consumer/corporates we have in the United States. Because of this, we have seen leverage, interest coverage, and cashflow generation improve with global reflation.
The key in EM is making sure there are built-in hedges to the business (input costs, currency, interest rate) that can help weather global economic swings or offer defensive narratives. With these, we can capture EM spread levels which have lagged both U.S. and the Euro area (see below) while limiting our exposure to typical EM dynamics like cyclicality, currency depreciation and earnings volatility.
With that in mind, we have continued to move our portfolios to a risk-off stance but with a focus on the strength of consumer and corporate balance sheets and the underwriting of fixed income in those sectors.
One last note is we need to look at the market every day, and do, because we never know what day volatility will rear its head. These are times when a nimble and wholistic approach to fixed income management really comes into its own.
Jason Brady, CFA, is President and CEO at Thornburg Investment Management.
Ayman Ahmed is a Senior Fixed Income Analyst at Thornburg Investment Management.
Important Information
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
This is not a solicitation or offer for any product or service. Nor is it a complete analysis of every material fact concerning any market, industry, or investment. Data has been obtained from sources considered reliable, but Thornburg makes no representations as to the completeness or accuracy of such information and has no obligation to provide updates or changes. Thornburg does not accept any responsibility and cannot be held liable for any person’s use of or reliance on the information and opinions contained herein.
Investments carry risks, including possible loss of principal.
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Please see our glossary for a definition of terms.
Foto cedidaNicolas Chaput, consejero delegado (CEO) de ODDO BHF AM.. ODDO BHF AM compra Metropole Gestión, firma especializada en gestión value
ODDO BHF Asset Management and Metropole Gestion have announced their merger. In a press release, they have revealed that ODDO BHF AM has acquired 100% of the equity capital of this independent French asset manager specializing in value investing, which was founded in 2002 by François-Marie Wojcik and Isabel Levy. The transaction is still subject to approval by the French Autorité des Marchés Financiers (AMF).
In their view, this link-up will avail clients of both companys of “a unique investment style” that has been implemented for over 20 years by a “stable and dedicated team” led by Isabel Levy and Ingrid Trawinski.
Specifically, the expertise of Metropole Gestion will enrich ODDO BHF AM’s existing product offering. Both investment firms have already placed environmental, social and governance (ESG) criteria at the heart of their investment processes for several years now.
Meanwhile, Metropole Gestion’s fund range will benefit from ODDO BHF AM’s European distribution capacities, particularly in France, Germany, and Switzerland, with institutional clients, distributors and independent financial advisors. Meanwhile, the merger will give ODDO BHF AM’s strategies access to distribution in the US and UK, where Metropole Gestion is already present.
“In almost 20 years, Metropole Gestion has built up renowned know-how in value-oriented investment style, thanks to the trust that investors have placed in it, and backed by a highly skilled and devoted team. This know-how will be the cornerstone of the greater reach it will have within the framework of this merger”, said Francois-Marie Wojcik, Chairman and CEO of Metropole Gestion.
Isabel Levy, Deputy CEO and Chief Investment Officer of the independent firm comment that this merger addresses their wish to join up with “an ambitious business strategy” by combining teams with “renowned and complementary skills and similar cultures.”
Lastly, Nicolas Chaput, CEO of ODDO BHF AM claimed to be “very pleased” to welcome the Metropole Gestion team, whom they know well and for whom they have “the utmost respect”. “The value-oriented investment style implemented by Isabel’s and Ingrid’s teams will enrich the Group’s product offering and meet the expectations of many of our clients”, he concluded.
Pixabay CC0 Public DomainAutor: nattanan23.. El aumento del ahorro será el legado de la pandemia mientras la confianza del inversor se dispara
A greater focus on saving and financial wellbeing are set to be among the lasting legacies of the pandemic even as investor confidence soars, the last Schroders Global Investor Study has found.
The flagship study, which surveyed over 23,000 people from 32 locations globally, found that almost half of investors (46%) will now save more once restrictions have been lifted. Although this sentiment is strongest among investors aged 18-37, this more measured approach also flows through to investors’ retirement outlooks, with 58% of retirees globally now more conservativein terms of spending their savings, while 67% of those yet to retire now want to save more towards their retirement.
Despite the challenges brought by the pandemic, Schroders points out that investor confidence has soared to its highest level since the study began in 2016, with average annual return expectations over the next five years expected to be 11.3%, an increase on 10.9% predicted a year ago.
A focus on financial wellbeing
The study also shows that almost three-quarters (74%) of investors globally have spent more time thinking about their financial wellbeing since the pandemic, with self-purported ‘expert/advanced’ investors the most engaged. Geographically, this change was most pronounced in Asia with investors in Thailand, India and Indonesia sharing this view strongly.
This means that investors globally are now more likely to check their investments at least once a month (82%), compared with 77% of investors in 2019. Besides, over the course of 2020, 32% of investors globally saved more than they had planned to. Unsurprisingly, this was driven by decreased spending on non-essentials, such as eating out, travel and leisure.
In this sense, over a third (38%) of investors in Europe had saved more than planned, followed by those in Asia (28%) and the Americas (27%). Of those who were unable to save as much as planned, 45% globally cited reduced salaries/work income as the key reason, “which reflects the great challenges caused by the pandemic”, says Schroders.
Cause for optimism
The analysis reveals that investors in the USA, Netherlands and the UK are set to be the most likely to increase spending once their respective lockdowns have lifted. At the other end of the scale, the most cautious investors were based in Japan, Sweden and Hong Kong.
Furthermore, investment confidence is being driven by investors who class themselves to be ‘expert/advanced’ with return expectations of 12.8%, compared with 8.9% for self-purported ‘beginner/rudimentary’ investors. In this sense, those in the Americas were the most bullish, expecting annual total returns of 12.5% over the next five years, followed by those in Asia (12.3%) and slightly more cautious investors in Europe (9.7%).
“The pandemic has heightened our sense of uncertainty and challenged our ability to process risk, making many of us feel more anxious and out of control. These sentiments can clearly be seen in the results of our survey, with investors increasingly focused on saving, monitoring retirement contributions and checking their investments more frequently”, commented Stuart Podmore, a behavioural investment insights specialist at Schroders.
In his view, despite the “huge challenges” we have encountered, it is encouraging to see that the pandemic has acted as a catalyst for promoting a stronger focus globally on generic financial planning and wellbeing. “Although this is a global study, we all share common wants and needs, and financial security is a key focus for all of us. At the same time, we need to exert caution over the investment returns we expect over the coming five years, as the outlook shared by many investors – and in particular those who believe themselves to be experts – is exceptionally optimistic”, he added.
Podmore believes that the past 18 months have taught us that “the future remains difficult to predict” and a “measured, consistent and patient” approach to investing, focused on long term objectives and probable outcomes, is likely to stand investors “in better stead”.
The surge in stock markets that accompanied the summer heatwave is, we believe, over. From here on in, conditions are likely to be much less friendly. As a result, we maintain our underweight stance on equities and our neutral position on bonds, balanced by an overweight in cash.
The summer rally came as falling oil prices boosted hopes the US Federal Reserve could engineer a soft landing for the US economy. Further lifting investor sentiment were data testifying to the US’s economic resilience.
Yet there are reasons to believe the stock market recovery has run its course. Oil prices are rising again. And even if inflation has peaked, it is looking sticky. Business and consumer surveys, meanwhile, are turning gloomy even though central banks are likely to ignore these until they feed through to hard economic data. At the same time, valuation and sentiment indicators no longer offer compelling cases to hold riskier assets (see Fig. 2).
To turn more positive on riskier assets, we’d need to see several developments unfold at more or less the same time.
First, a steeper yield curve. That would suggest strong economic growth down the line; it is also a prerequisite for bull markets. Second, a bottoming of downward revisions to corporate earnings forecasts and to leading economic indicators. Third, technical indicators giving unequivocal ‘oversold’ signals for equities, and cyclical stocks in particular. And finally – for bonds – that the currency monetary tightening cycle is sufficient to get inflation back to central banks’ targets.
Our business cycle indicators point to more inflation surprises and a sustained loss of momentum in economic growth indicators. We have again cut our global GDP forecast for the current year, to 2.5 per cent from 2.9 per cent, largely as a consequence of weakening US data.
We now expect the US economy to grow by just 1.6 per cent this year, from 3 per cent previously. Although leading indicators have been weakening across most regions and sectors, we anticipate both the euro zone and the US will narrowly avoid recession over the coming quarters. Indeed, US survey evidence and hard data increasingly look at odds with one another, with retail sales remaining resilient, unemployment at 50-year lows and residential investment as a percentage of GDP hitting new post-global financial crisis highs.
The euro zone economy outperformed during the first half of the year thanks to pent-up demand following the removal of Covid restrictions, but the latest numbers are less encouraging. The recent surge in European gas and electricity prices is a particular worry. The UK, meanwhile, is clearly sliding into a recession while inflation continues to rip higher, posing an intractable dilemma for the Bank of England. On the other hand, Japan remains a bright spot as do emerging economies, particularly in Latin America.
Our liquidity scores remain negative, with conditions particularly tight in both the US and the UK. Developed market central banks are making policy more restrictive by both raising interest rates and through quantitative tightening (QT) measures that contract their balance sheets – our central bank liquidity gauges show their worst readings since at least 2007. We expect global QT of some USD1.5 trillion this year, equivalent to a 1 percentage point increase in interest rates, which would unwind half of Covid-era monetary stimulus. At the same time, the pace of private credit creation is starting to slow.
Our valuation scores show that following their rally, equities are again looking expensive, while bonds are cheap to fairly valued. For global stocks, year-ahead price-to-earnings ratios have risen by a lofty 15 per cent since mid-June, reducing their appeal. Another negative comes in the shape of corporate earnings, whose growth we believe is running out of steam; we forecast a below-consensus 2 per cent growth in profits for 2022, with risks on the downside if economic growth weakens further. Our valuation models favour emerging markets, materials, communications services, UK bonds, the Japanese yen and the euro and finds as particularly expensive commodities, US equities, utilities, euro zone index-lined bonds, Chinese bonds and the dollar.
Our technical indicators show that trend and sentiment signals for riskier assets have largely normalised, having been negative during the fist half of the year. Despite the summer rally, sentiment indicators are neutral with the exception of utilities and euro zone high yield bonds, which look overbought. Speculative positioning in S&P 500 stocks is close to a record short. But while surveys show continued bearishness, that’s declining, and flows into equity funds have turned positive again.
Asset allocation
We maintain our underweight in equities amid concerns about global growth and our neutral position on bonds as inflation looks to be stickier than expected.
We reduce risk in our equities portfolio by downgrading Chinese stocks to neutral and the consumer discretionary sector to underweight.
We keep a defensive stance by maintaining our overweight in Treasuries and safe-haven currencies. We are underweight European sovereign and corporate bonds and the Chinese renminbi.
Opinion written by Luca Paolini, Pictet Asset Management’s Chief Strategist
Pixabay CC0 Public Domain. A medida que los mercados vuelven a la normalidad, las opciones de la Fed podrían ser claves
Last year, during the most acute phase of the Covid-19 crisis, the world’s major central banks intervened on an unprecedented scale – cutting interest rates, buying government bonds and providing massive liquidity. Sovereign bond yields reacted by sinking to historic lows: -0.9% on the 10-year German Bund and 0.5% on 10-year US Treasuries.
With a brisk – albeit uneven – economic recovery underway across much of the world, and yields well above their recent low point, some commentators believe global rates have turned a corner. The argument goes that the four-decade bond bull market, which has pushed yields steadily lower, is now over. A resurgence of growth and inflation means that materially higher rates are inevitable.
Though it is tempting to think that the recent climb in bond yields heralds a change of regime, we think this view is mistaken. While rates may rise somewhat from here, there is ample evidence that they will remain extremely low against all historical measures. Indeed, multiple factors suggest interest rates will stay “lower for even longer,” based on both long-term economic trends and more recent developments. Rethinking portfolios to account for this outlook should be an urgent priority for investors.
Slower growth is suppressing interest rates
To take the longer-term factors first, the forces that have propelled a 40-year bull market in government bonds – and the accompanying decline in developed-world interest rates (see Chart) – seem far from exhausted. Until they are, it is premature to call a decisive turn.
Two key factorshave helped drive rates lower: a decades-long deceleration in economic growth and inflation, as well as falling long-term inflation expectations. Nominal bond yields track nominal GDP closely. As growth slows, interest rates and bond yields tend to moderate. In this context, a given rate of interest represents an equilibrium that balances demand for capital to invest and the supply of savings available to meet that demand. Slower growth tends to suppress investment demand for investment capital and therefore puts downward pressure on interest rates.
Demographics mean the world is “drowning” in savings
Increased longevity across the developed world has tipped the demographic balance, reducing the size of working populations relative to older generations, helping create a worldwide glut of savings that is seeking a home in safe assets, notably bond markets.
There are also fewer places to put these savings to work. This is because of a long-term transition in developed economies from capital-intensive industry and manufacturing towards capital-light, services-oriented businesses, which have lower investment needs.
Slowing productivity growth has reinforced this trend by reducing long-term rates of economic expansion, again suppressing demand for investment capital. The result is an abundance of capital and a relative shortage of opportunities to invest it, leading to downward pressure on interest rates. All these factors are long-term in nature and firmly entrenched – none of them is likely to reverse imminently.
Debt is at record levels
The world has accumulated a vast amount of debt – public and private – in the years since the global financial crisis, and especially since the Covid-19 crisis. Massive debt burdens, albeit easily financeable at very low interest rates, tend to suppress future growth by diverting cash from productive investment to servicing debt. They also make borrowers more vulnerable to unexpected increase in interest rates.
With debt levels in major developed economies at record levels, central banks face a daunting challenge. Any significant rise in interest rates could render huge swathes of existing debt unsustainable and destabilize governments and financial markets. As a result, financial repression – where inflation is consistently higher than interest rates – becomes a necessary tool of monetary policy to ensure borrowers’ debt burdens remain sustainable. But it creates challenges for investors who are hunting for yield to protect their savings.
In effect, the center of gravity in central banking has shifted. Policies such as quantitative easing (QE), experimental a decade ago, are now routine. Far from seeking an exit from current policies as soon as possible, central banks are now more likely to stress the dangers of providing too little support to the economy, rather than providing too much.
So, it is not surprising that even though a powerful rebound in economic activity is likely, this year and next, all indications are that monetary policy will remain loose. The US Federal Reserve is expected to taper its bond purchase program very gradually, with no rate increase likely before 2023. In the euro area, monetary policy will remain extremely loose. All this strongly suggests that the most likely outlook in developed economies is for many more years of historically low interest rates that will keep returns from safe assets close to zero.
Portfolio implications
How should investors react? It has rarely been harder to generate reliable income. Equally, preserving the purchasing power of money in an age of financial repression is a constant headache. And if investors venture beyond traditional assets in search of extra yield, how should they diversify and manage risk?
Think of allocations as a barbell
Investors should view their choices as a “barbell” that spans two groups of assets: those suited to preserving capital (including sovereign bonds, credit and cash alternatives) and those designed to generate capital growth and income (including emerging-markets bonds, equities and private-markets assets such as infrastructure equity and debt and private credit.) They can then choose from a range of multi-asset solutions that combine elements from each group to target a range of outcomes.
Staying agile is key
The past few years have illustrated a key feature of today’s investment markets: how rapidly conditions can shift. Accordingly, the optimum mix of assets will naturally need to shift in response. This calls for a highly dynamic approach to positioning that rapidly switches asset allocations within the portfolio as the economic conditions evolve to preserve the benefits of diversification and ensure agile risk management.
Consider permanent portfolio changes
Some changes in portfolios could be more permanent. This points to a future in which the balance of traditional equity/fixed income portfolios will shift decisively towards equities: a conventional balanced portfolio of 70% bonds and 30% equities may move towards a 50:50 position, for example. A more aggressive 60:40 portfolio might shift to 80% equity and 20% fixed income, or even 100% equities with an equity-risk hedge overlaid. It also suggests that allocations to private-market assets intended to generate capital growth and additional yield will increase substantially. They may reach 20% in a typical institutional multi-asset portfolio.
The forces that have driven interest rates steadily towards zero over the past four decades are still at work and will remain dominant for the foreseeable future. Against this background, the way investors approach asset allocation must change, and their approach to risk management and diversification must become far more agile to navigate an era when market conditions can be changeable.
A column by Franck Dixmier, Global Chief Investment Officer for Fixed Income at Allianz Global Investors; and Ingo Mainert, Chief Investment Officer of Multi Asset for Europe
Many relevant players of Miami´s financial industry raised $ 75,000 to help those affected by the collapse of the Surfside condominium in Champlain Towers South through the GEM foundation.
During the event, which took place on September 9th at the Rusty Pelican, Michael Capponi, GEM’s President, explained to the presents about the foundation’s work.
Zulia Taub, a survivor of the collapse, also spoke.
The initial goal was $ 50,000, but with the effort of 20 firms, which supported with Diamond, Gold and Silver sponsorship, it was possible to reach 75,000.
Diamond: Funds Society, MFS, Ninety One Gold: AXA Investment Managers, BNY Mellon Investment Management, Bolton Global Capital, Brown Advisory, Insigneo, Janus Henderson Investors, Jupiter Asset Management, Schroders, Thornburg Investment Management Silver: RWC, Natixis Investment Management, Manulife Investment Management y Franklin Templeton.
In addition, the event wouldn’t have been possible without the collaboration of José Corena, Richard Garland, Jimmy Ly and Blanca Durán from Día Libre Viajes.
Moreover, the organization has created an account in gofundme platform as a new donation channel.
