Next Thursday, November 18, at 11:00 am EDT, at a new Virtual Investment Summit organized by Funds Society and entitled “Investment opportunities in Asia: China and beyond“, Jorge Corro, Head of US Offshore, along with his colleagues Kiran Nandra, Head of Emerging Equity Management and Senior Client Portfolio Manager, and Qian Zhang, Senior Client Portfolio Manager in the Emerging and Greater China Corporate Debt team, will talk about the opportunities and challenges for investors interested in Asia
For the first time since the 1980s, the return on a 50/50 global portfolio is below the expected inflation rate. Consequently, global investors will have to diversify into new asset classes, markets and topics like they have never done before. Higher returns, lower inflation, higher growth and cheap currencies are, in Pictet Asset Management’s opinion, a convincing argument for emerging Asian assets.
The panelists at this Virtual Investment Summit will also discuss how recent events in China are affecting the region and the growing influence of the area on the world stage, bringing the world’s economic center of gravity constantly to the East.
Kiran Nandra, Head of Emerging Equities Management, Emerging Equities
Kiran Nandra joined Pictet Asset Management in 2016. She is the Head of EM Equities Management and Senior Client Portfolio Manager for the Emerging Equities team.
Previously, Kiran worked at Wellington Management where she was most recently a Portfolio Specialist.
She joined Wellington in 2003 in a Relationship Management role before becoming a Research Analyst covering European and Latin American banks.
Kiran graduated from University College London with an LLB (Honours) degree in Law and is currently enrolled at The University of Chicago Booth School of Business.
Qian Zhang, Senior Client Portfolio Manager, Emerging Corporate and Greater China Debt
Qian Zhang joined Pictet Asset Management in 2019. She is a Senior Client Portfolio Manager for the Fixed Income Emerging Market Corporate and Greater China Debt team.
Before joining Pictet, she was a client portfolio manager in J.P.Morgan Asset Management Global Fixed Income team and Emerging Markets Debt team, based in both London and Hong Kong. Prior to JPMorgan, Qian worked for Merrill Lynch in Tokyo where she focused on Interest Rate Derivatives.
Qian obtained a B.A. in Economics and Statistics from Peking University, Beijing, China and an M.Sc. in Mathematical Risk Management from Georgia State University, U.S. Qian is a Chartered Financial Analyst (CFA) charterholder
The recent U.S. listings of futures-based bitcoin exchange-traded funds (ETFs) expand the range of channels for investors looking to obtain cryptocurrency exposure. However, according to Fitch Ratings, synthetic or direct fund exposures present trade-offs around risk transparency, pricing, operational complexity and the evolving path and scope of regulation.
In Fitch’s opinion, the lack of opposition from the U.S. Securities and Exchange Commission (SEC) for the first ETF based on bitcoin futures reflects the relative comfort of regulators around the trading of instruments within regulated venues rather than an endorsement of the underlying cryptocurrency and is likely to advance the development of similar products.
The current market capitalization of bitcoin ETFs and mutual funds is dwarfed by the Grayscale Bitcoin Trust, a Canadian trust invested in cryptocurrencies. This trust had approximately CAD26 billion in AUM at end-July 2021. However, the firm points out that the U.S. is poised to become the global leader in crypto ETFs with significant market interest and a focus on regulation. Conversely, China recently banned crypto investing.
According to Fitch Ratings, investors in futures-based ETF funds will be exposed to additional price volatility risk and tracking discrepancies between bitcoin and futures prices. Futures-based funds may also underperform funds with physical crypto exposure due to the associated costs of entering into new future contracts and from lack of upside from any software updates – so-called “hard forks” – that yield new coins. In addition, contango (or backwardation) markets may result if the futures price is above (or below) the expected future spot price, further increasing risks for less experienced retail investors.
“The rapid growth in funds may also push the limits on the number of contracts that a fund can own, increasing the challenges of fund/ETF management. Custodial considerations stemming from the physical investing in crypto assets may leave ETFs and funds vulnerable to additional financial and operating risks. Financial institutions with exposure to or that facilitate bitcoin ETFs face increased financial, operational, regulatory and reputational complexities and risks. However, benefits could include higher, more diversified revenue and AUM growth from increased market share and franchise position in cryptocurrencies”, says the firm.
In its view, trading interruption, redemption risks and price volatility are key risks for funds and ETFs investing in cryptocurrencies. Liquidity, while likely still available to ETF investors in periods of elevated price volatility (i.e. crypto price declines), would likely be at substantial discounts. However, until regulatory further clarity is established, including addressing critical definitional questions, crypto investments not only run the risk of becoming substantially devalued due to inherent volatility of the underlying asset, but also from regulatory change or other development that could ban some investments, which could negatively affect investors accessing the sector through trading or fund accounts.
The existing vehicles in Canada demonstrate some of the risks associated with volatility in the underlying assets. Specifically, a number of Canadian Bitcoin ETFs issued market disruption notices in May 2021 indicating that continued stress could force the ETFs to temporarily suspend trading. However, Canadian ETFs were able to continue operating normally through a period of significant volatility, suggesting that ETFs functioned as intended. This may add weight to applications to regulators for cryptocurrency-backed ETFs and mutual funds in other markets.
According to Fitch Ratings, “physical” crypto ETFs are not exposed to futures market dynamics but instead face custody and bankruptcy-remoteness risks, alongside cybersecurity risks associated with electronic wallets holding crypto assets. These represent just some of the risks that the SEC is focused on, ahead of a November deadline for approving (or not opposing) the launch of physical bitcoin ETFs.
After more than a year of uncertainty in the markets due to the pandemic, the future of the global economy is back into focus. In many ways, COVID-19 has advanced that future by accelerating some pre-pandemic market trends and driving entirely new ones. In the current context of high volatility and the specter of long-term inflation clouding the global economic landscape, Global Markets Outlook is set to become the destination for in-depth market analyses.
Unquestionably, the post-Covid-19 world will be the starring theme of StoneX’s Global Markets Outlook. Specifically, the three-day conference will provide an overview of new technologies and macroeconomic perspectives through four highly specific tracks: Correspondent Clearing, Wealth Management, Global Agriculture, and Dairy. As usual, event will feature some of the world’s leading market experts and thought leaders who will provide a comprehensive view on what to expect for the financial and commodity markets in 2022 and beyond.
Roger Shaffer, StoneX Financial Inc.’s Managing Director, Correspondent Clearing Division, noted that with this event, “our clients will have the opportunity to hear from the company’s CEO and other senior officers as well as key members of the Correspondent Clearing Division.” Mr. Shaffer also said that technology and new initiatives will be front and center. “Basically, we are going to share how we want to help our clients grow their business. That’s the key. One of our most important roles is to help our clients grow their business.”
On the importance of attending Global Markets Outlook, Steven zum Tobel, StoneX Financial Inc.’s Managing Director, Correspondent Clearing Division, said that “the culture that permeates throughout our organization is to provide a high level of service for our clients. Everything we do is for their benefit. We believe strongly in having face-to-face conversations with our clients. There is no substitute for that.”
“It is so important for them to have contact with our people. I believe this one of the biggest benefits of attending this conference. We deepen the relationships with our clients, we spend quality time with them, it’s real face-to-face, without the day-to-day distractions,” he concluded.
Besides participating in the sessions, attendees will also have the chance to interact with StoneX executives and visit the global trade show and participate in special events planned just for the Correspondent Clearing attendees. To learn more about Global Markets Outlook and register for the event, please visit https://stonex.cventevents.com/GlobalMarketsOutlook2022
Foto cedidaMariano Belinky, Ex-CEO de Santander AM.
. Mariano Belinky ficha por Motive Partners como industry partner
The private equity firm Motive Partners, focused on financial technology, has announced the appointment of Mariano Belinky as an Industry Partner. The company has revealed in a press release that he will focus on areas that bring “strategic value” to its investment mandate.
Based primarily in the London offices, Belinky will focus on originating and diligencing transactions across financial technology, seeking to spot trends ahead of time, and sourcing deals and capabilities that can support the growth of Motive’s portfolio companies.
Motive Partners believes the adoption of new digital channels, innovative processes and game-changing technologies “will yield value-creating opportunities for forward-thinking alternative investment firms“. This appointment demonstrates its intent to continue building capabilities to support its platform’s mission of outsized returns, focusing on operator and innovator led value creation.
“We believe technology has the ability to unlock huge value for investment firms. All aspects will evolve, from how we invest to how we interact with our portfolio companies and clients”, commented Rob Heyvaert, Founder & Managing Partner at Motive Partners. In this sense, through Motive Create and Belinky’s appointment, they are seeking to extend their edge, as they “weaponize financial technology ideas” to empower their operations and portfolio companies by embedding these new financial capabilities to transform operations and gain scale.
Meanwhile, Belinky claimed to be “extremely excited” to join the firm and contribute to further accelerate its growth and those of its portfolio companies. “Fintech has reached a maturity point as an industry, and I believe Motive as a platform is uniquely positioned to capture the immense opportunities the space has created. I’m looking forward to joining forces with a terrific team of Investors, Operations and Innovators to make it happen”, he added.
Prior to joining Motive Partners, Belinky was the Global CEO of Santander Asset Management where he led the turnaround of the company since its re-acquisition from Warburg Pincus and General Atlantic. Prior to this, he co-founded and ran InnoVentures, Santander Group’s $400m fintech-focused global venture capital fund. Belinky has also been a junior partner with McKinsey and Company, where he advised global banks and asset managers across Europe and the Americas, and he was previously part of the research technology team at Bridgewater Associates.
Pixabay CC0 Public Domain. Descarbonización: el coste de pasar de la inacción a la inversión y al crecimiento económico
The first week of COP26 has yielded some positive announcements about decarbonization, reducing methane emissions and access to clean energy by 2030. However, the success of this summit will be determined by the levels of commitment, policies and financing that are mobilized.
In the opinion of Eva Cairns, Head of Climate Change of abrdn, hardly any clear action plans to achieve the objectives have been detailed and there are no legally binding implementation mechanisms. “We need action plans to halve emissions by 2030 and not just offer vague long-term ambitions. This also applies to the 130 billion dollars promised by the financial community on Financing Day to reach the zero emissions target by 2050. Discussions on the climate financing promise of $100 billion for the developing world are underway and are expected to be fulfilled by 2022 based on Japan’s increased commitment. Much more is needed to reflect the obligation of the developed world to help mitigation and adaptation in the developing world,” warns Cairns.
Moving from general objectives to concrete actions because, according to Bank of America, inaction also has a high cost. In one of its latest research, the form argues that climate change is not an abstract problem but affects the world economy mainly through storms, floods, droughts and sea level rise. “There are also indications that climate change and its reduction play a role in the recent rise in energy prices. Given the prospects for regulation, investment in dirty energy capacity is likely to be low and dependent on high prices. Meanwhile, green energy is not increasing fast enough to fill the void. Changes in wind and rain patterns seem to have affected the supply of wind and hydraulic energy, while China has imposed restrictions on emissions from power plants, causing shortages of electricity. All this underscores the importance of making the transition well. In fact, some economists consider carbon taxes to be one of the most effective ways to promote a more natural transition,” the firm says.
In fact, it is estimated that the potential impact of not acting could mean a loss of more than 3% of GDP each year until 2030, which would increase to $69 trillion in 2100; and a loss of 5% of the value of the global stock market ($2.3 trillion) permanently eliminated by the revaluation of climate policy, with a potentially extreme impact on the profits of companies in certain sectors.
If inaction has a cost, the energy transition that leads economies to achieve zero net emissions and decarbonize their production systems also has a cost. The International Energy Agency (IEA) estimates that achieving zero emissions will cost $150 trillion over the next 30 years, or 5 trillion annually. But BloombergNEF (BNEF) raises the figure to 174 trillion dollars or 5.8 trillion a year, that is, about three times the current investment received by the energy system.
“Most of this item will go to the electrification of various human activities and the electricity system (between 3 and 5 trillion a year until 2030), while hydrogen will gain ground until 2040/50 (0.5 trillion annually). The decarbonization of non-energy emissions, such as agriculture and land use, will need even more capital. This will require job mobility between sectors, which can be a challenge given the requirements to retrain employees and the challenges of labor supply in the short term, which can lengthen the transition,” Bank of America clarifies.
All this investment could be an opportunity to boost employment and GDP. But, according to Bank of America, climate change studies focus on the wrong side of the economy: the impact on aggregate demand and not on productive capacity. “For example, the latest IEA report argues that moving towards zero net emissions would reduce employment in the traditional energy sector by 5 million people by 2030, but would add 14 million jobs in the clean energy sector,” the firm explains. These reports argue that “the increase in jobs and investment stimulates economic production, which translates into a net increase in world GDP until 2030.” World GDP growth is, on average, 0.4% higher in the period from 2020 to 2030.
The drawback would be that inflation could be between 1% and 3% higher, according to the IEA. Bank of America experts disagree, as they believe that by the time climate change mitigation efforts are underway, the world economy will probably be close to full employment, as is likely to be the case in the United States. Therefore, “to staff the industry means removing workers from the rest of the economy. At the same time, the construction of green energy infrastructure will require more than double the investment in the sector, from approximately 2% of current GDP to an average of 4.5% in the period 2020-2030. In addition, in the long term, although this transformation offers opportunities, accelerating the transition to a low-carbon economy too fast could harm growth, closing sectors at the expense of others and competing for resources when the economy is close to full employment,” they explain.
In the short term, central banks could accommodate the increase in demand, allowing their economies to overheat. Hence the estimate of the IEA in the increase in inflation. However, Bank of America experts also do not agree with that estimate: “If the Federal Reserve allows the economic potential to be permanently overcome, inflation will not only increase, but could take an upward trend. As in the 1970s, there will be a feedback loop between price inflation, wage inflation and price expectations,” they explain.
Driving decarbonization
All experts and analysts agree that the holding of COP26 is a unique opportunity to delve into these reflections and draw up coordinated plans to achieve decarbonization. This is the topic of the latest report by Goldman Sachs Investment Research, which identifies five questions of interest to be addressed at this conference.
Carbon pricing: It is a key instrument for decarbonization, but it also has to be a fair instrument, which prevents carbon leakage and provides greater confidence and transparency for voluntary compensation. According to the entity, the reduction of carbon emissions alone is unlikely to achieve Net Zero’s ambition for carbon by 2050. “We believe that carbon offsets are a crucial driver for carbon elimination through nature-based solutions and direct carbon capture, contributing about 15% to the decarbonization of emissions from the most difficult sectors to debate by 2050. We believe that discussions around higher standards, greater supervision and better liquidity of voluntary carbon credits worldwide could contribute to creating an efficient path to zero net carbon,” they explain.
Consumer choice: Governments could impose the disclosure of the carbon footprint in products/services and set standards in a coordinated manner at the global level, which would allow consumers to choose low-carbon products and manage their carbon budgets. In his opinion, “it is a missed opportunity to take advantage of consumer pressure on global companies to decarbonize their value chain, finance carbon offsets and aspire to a zero net carbon label.”
Capital market pressure: According to his report, the ESG boom is pushing capital towards decarbonization, but regulatory uncertainty and lack of global coordination are generating structural underinvestment in the key sectors of materials, oil and gas and heavy transport, which increases price inflation and concern for affordability.
Net Zero: Net Zero’s national commitments and further carbon reductions by 2030 will be at the center of intergovernmental discussions. “We have modeled two paths to Zero Net Carbon by sector and technology, and we see the importance of clean technology ecosystems, including renewable energy, batteries, hydrogen, carbon capture and the circular economy,” he argues.
Technological innovation: In their 1.5° C scenario, they estimate that $56 trillion in investments in green infrastructure is needed to reach the Zero Net Carbon target by 2050, which represents approximately 2.3% of world GDP at its peak.
Foto cedidaJohn Fraser, responsable de Crédito Estructurado Global de Tikehau Capital.. Tikehau Capital nombra a John Fraser socio y presidente de sus estrategias globales de crédito estructurado
Tikehau Capital has announced the appointment of John Fraser as Chairman of its Global Structured Credit strategies, based in New York. In a press release, the firm has highlighted that the designation reinforces its commitment to its CLO business and supports its expansion into the US market.
In this newly created role, Fraser will advise senior Tikehau Capital team members in growing the firm’s existing structured credit businesses including its U.S. and European CLO platforms. He will also help develop and launch new business lines within the structured credit space. His entrepreneurial and institutional experience will support Tikehau Capital Structured Credit and overall company brand building and product marketing including interaction with investors.
Since the creation of its CLO business in 2014, Tikehau Capital has a proven track-record in the structured credit space, in particular through the completion of over 2 billion euros (2.31 billion dollars) in new issuance across five CLOs in Europe and the launch of its first CLO in North America in September 2021.
“We are delighted to welcome John in Tikehau Capital’s teams as we continue to build on the success of our European CLO and Structured Credit strategies in order to expand our offering into the US market. John brings a unique and rare combined entrepreneurial and institutional journey and deep CLO expertise, and we look forward to leveraging his experience as we grow to meet investors’ evolving needs”, said Mathieu Chabran, co-founder of Tikehau Capital.
Fraser brings 30 years of experience in the CLO business. He joins from Investcorp where he was an independent member of its Board of Directors since 2019. Most recently, he was managing director and head of Investcorp’s U.S. credit business, where he was responsible for managing all aspects of U.S. loan-focused credit investments including portfolio management, fund raising, and operations.
From 2012 to 2017, he was managing partner and CIO of 3i Debt Management US LLC. In 2005, he founded Fraser Sullivan Investment Management, LLC, which was subsequently sold to 3i Group. Fraser also previously held management positions with Angelo Gordon, Continental Bank, Merrill Lynch Asset Management and Chase Manhattan Bank North America.
Fraser claimed to be excited to join Tikehau Capital’s team. “The firm’s prospects for growth in the U.S. and global credit markets are impressive, supported by a respected global brand, talented and committed people, an expanding international investor base and its willingness to use balance sheet resources to back new initiatives. I look forward to being part of and adding to the future success of Tikehau Capital”, he added.
Foto cedidaNick Ring, consejero delegado para EMEA de Columbia Threadneedle.. Columbia Threadneedle Investments confirma el cierre de la adquisición del negocio de gestión de activos en EMEA de BMO
Last April, Columbia Threadneedle Investments announced the acquisition of Bank of Montreal’s EMEA asset management business (BMO GAM EMEA). Seven months later, the transaction has now been completed and adds 131 billion dollars to Columbia Threadneedle to bring total assets under management to 714 billion dollars.
In a press release, the asset manager has revealed that the acquisition enables them to build further strength and capability in areas of increasing prominence in the European and global asset management landscape, such as responsible investment. Both firms “combine complementary strengths to create a world class RI capability based on creating value through research intensity, driving real-world change through active ownership, and partnering with clients to deliver innovative solutions”, they say. Together, they manage total assets of 49 billion dollars in RI funds and strategies across asset classes.
Another area that has been reinforced with this transaction is alternatives, since they have established a global business of more than 47 billion dollars, including real estate in the UK, Europe and the US, infrastructure, private equity and hedge fund offerings. Columbia Threadneedle believes that they are now “well set to respond to increasing demand from clients for less liquid, diversifying assets both as standalone strategies and within bespoke solutions”.
Lastly, they have strengthened their capacity of offering investment solutions. Columbia Threadneedle has longstanding relationships with large and complex clients delivering regulatory sensitive portfolios (such as Solvency II and Basel III) for insurance companies and banks as well as customised solutions for sub-advisory partners, while BMO GAM (EMEA) has a top four LDI business in Europe as well as an established fiduciary management business. “Together our Solutions business represents the point of entry of more than 200 billion dollars of client assets, or almost 30% of our expanded AUM”, the asset manager points out.
The acquisition also adds the BMO GAM (EMEA) managed investment trusts and its established multimanager range to Columbia Threadneedle’s offering. Separately, the transaction will result in certain BMO US asset management clients moving to Columbia Threadneedle, at a later date subject to client consent.
“This strategically important acquisition accelerates our growth in the EMEA region and secures our position as a significant global asset manager. Our established strengths in core asset classes and our strong, long-term performance track record are complemented by key strategic capabilities that improve our ability to meet the evolving needs of our clients”, commented Nick Ring, CEO, EMEA, at Columbia Threadneedle.
He also highlighted that their combined team of more than 2,500 people share a client-centric culture, a collaborative and research-based investment approach, and a long-held commitment to responsible investment principles. “Together, we look forward to embracing our role as active investors to drive change, deliver client outcomes and continue to make our own contribution to a sustainable future”, he concluded.
Pixabay CC0 Public Domain. Las 500 mayores gestoras del mundo alcanzan los 119,5 billones de dólares en activos gestionados
Assets under management (AuM) at the world’s 500 largest asset managers have reached a new record of 119.5 trillion dollars, according to a new research from the Thinking Ahead Institute. This represents an increase of 14.5% on the previous year when total AuM was 104.4 trillion dollars.
The chart shows that Blackrock has retained its position as the largest asset manager in the ranking, followed by Vanguard holding its second place position for the seventh consecutive year. Of the top 20, 14 are U.S. managers, accounting for 78.6% of the top 20 AUM.
On the whole, passive investments represent 26%, an increase of 16.2% compared to a 15.4% growth in actively managed AUM. According to the research, passively-managed assets under management among the largest firms grew to a total of 8.3 trillion dollars in 2020, up from 4.8 trillion in 2016.
It also shows that asset managers have been addressing the growing demand from more sophisticated asset owners, for more complex and tailored investment solutions. Outsourced CIO, Total Portfolio Approach (TPA) and ETFs have all been popular sources of growth for the world’s top managers, to meet clients’ increasing requirements for returns.
“We have witnessed unprecedented change within the investment industry – accelerated dramatically by the pandemic. In particular, sustainability is no longer just a luxury for some firms. Instead, during the pandemic, asset managers from all corners of the world have became even more aware of the interconnectedness of the financial system with society and the environment”, commented Roger Urwin, co-founder of the Thinking Ahead Institute.
In his opinion, asset managers have always had the ambition to develop and innovate: “We have seen this particularly with ESG mandates, which increased by 40% in 2020. The biggest contributor to this was the growth in ESG ETFs”.
Main trends
Among other trends, the research also found that half of managers increased the proportion of minorities and women in top positions, over the course of the last year and that client interest in sustainable investing increased across 91% of the firms surveyed. Besides, 78% of managers increased resources deployed to technology and big data and 66% increased resources deployed to cyber security.
The number of product offerings increased for 70% of surveyed firms, and aggregate investment management fee levels decreased for 25% but fee levels increased for 21%. Lastly, a majority of managers (59%) experienced an increase in the level of regulatory oversight.
Pixabay CC0 Public DomainCriterios ESG. Sostenibilidad
Environmental, social and governance fund proliferation is usually fueled by the marketing mantra that investors can “do well by doing good.” While that’s no doubt true, ESG criteria are all too often a check-the-box exercise at both the fund and the company levels. Many ESG funds default to outsized tech holdings or include companies that talk the ESG talk but fail to walk the walk, otherwise known as “greenwashing.”1 Conversely, ESG data vendors often tag some firms with low sustainability ratings, even as those companies make genuine and concerted efforts to improve their sustainability.
Such “ESG momentum” plays can become great investments both in terms of their sustainability and return potential. But properly assessing their relative progress across sectors and culturally diverse geographies, particularly in emerging markets, is no easy task. We believe sound judgment is just as crucial in ESG research as in traditional financial research. In the following Q&A, Thornburg Portfolio Manager Charlie Wilson, who co-leads the firm’s emerging market strategies, explains how the team defines and conducts ESG research, which is part and parcel of its traditional financial research and ongoing company monitoring.
Q: Many ESG-focused funds seem to start with negative screens that simply filter out companies in potentially problematic industries. How should ESG filters be implemented?
CW: Our research broadly aims to capture the costs of both positive and negative externalities. That’s why we don’t just conduct negative screens. Positive externalities can be reflected in lower cost of capital thanks to decreased liability risks, while negative externalities can manifest in higher capital costs due to, say, high energy intensity, water usage or greenhouse gas emissions.
Enhancing traditional financial analysis with extensive ESG-derived metrics gives a fuller financial picture, which can inform a more realistic discount rate and allow for more accurate earnings and cash flow projections, in our experience. Generally, we just think companies whose strategy or business model is based on amplifying positive externalities while reducing or eliminating negative externalities will benefit from higher confidence in the sustainability of free cash flow generation, a lower cost of capital, and the potential to increase reinvestment opportunities over time.
Q: Does market volatility within emerging markets create a particularly favorable environment for truly active managers?
CW: These regions have less mature capital markets and a smaller institutional investor base; they have higher economic cyclicality and currency volatility; more regulatory and political risks, not to mention uneven ESG standards. The high frequency of factor rotations between growth and value in EM in a way also speaks to the volatility in the space.In many situations, these elements also work together to amplify investor optimism or pessimism, driving stock prices farther away from fair value than might be observed in developed markets. In EM these inefficiencies and dislocations exist across sectors, geographies, market capitalizations, levels of business quality, and investment styles such as value, growth and quality. We aim to exploit these inefficiencies by marrying each investment team member’s broad expertise, deep fundamental analysis, and insights on non-financial business characteristics with the ability to assess the impact of externalities and better gauge risk and reward across a huge opportunity set—the index alone comprises more than two dozen countries.
* Based on the Eurozone domiciled segment of the MSCI World Index
Source: FactSet and Sustainalytics
Q: How does that work at the stock level?
CW: In our stock selection process, we focus on vibrant companies with attributes that we believe mitigate business-related risks: durable firms with a leading or growing market position; strong, quality leadership and governance; and the ability to fund their own growth, so they are usually free cash flow positive. They must also trade at attractive prices for us to establish or add to a position, so we also have some margin of safety.
We also build in a macro overlay due to currency risk sensitivities, which depend largely on domestic current account or fiscal deficits, or both, local benchmark interest rates and inflation. In these instances, the price targets of our positions must meet, if not exceed, our return hurdle rates based on potential local currency depreciation, as our investors are mostly U.S.-dollar based. But there are always at least a few great companies to be found in countries that are passing through a rough patch economically; those firms that demonstrate resilience in the tough times tend to thrive over full market cycles and can be excellent investments.
Lastly, every position must offer a “path to success,” catalysts or milestones that should propel it to close the discount we see in our assessment of its intrinsic value. Having clear milestones makes it easier to track the progress of our investment thesis on each stock in the portfolios.
Q: You run rather concentrated strategies of just four to five dozen positions. Doesn’t that generate greater volatility at the portfolio level? How does your portfolio construction process address that?
CW: Well, again, it starts at the stock level. You would be surprised how a strong company in a promising market can not only survive but thrive in challenging economic times, taking share from other, less thoughtful competitors that don’t address the needs or interests of all stakeholders. By the way, those include not just clients, shareholders and majority owners, but obviously employees, suppliers and local communities. Now at the portfolio level, we think we can better achieve our performance goals by making larger, more meaningful investments in a highly select, and well diversified, set of our best ideas. By focusing capital in our highest-conviction stocks, our portfolios naturally have fewer holdings, larger average weights, and more capital in the top ten positions, which usually make up just more than 40% of the portfolios.
So, on portfolio construction, while we’re always aware of absolute and benchmark- relative volatility, for us it’s rather secondary to the longer-term return potential of the portfolios. We do think our portfolio construction helps to mitigate the impact of volatility by diversifying our investments across market segments with different underlying business drivers. Given our stock selection, the portfolios tend toward quality and growth, but their diversification goes beyond standard country parameters.
Founded in 1982, Thornburg Investment Management is a privately-owned global investment firm that offers a range of multi-strategy solutions for institutions and financial advisors around the world. A recognized leader in fixed income, equity, and alternatives investing, the firm oversees US$45 billion ($43.3 billion in assets under management and $1.8 billion in assets under advisement) as of 31 December 2020 across mutual funds, institutional accounts, separate accounts for high-net-worth investors, and UCITS funds for non-U.S. investors. Thornburg is headquartered in Santa Fe, New Mexico, USA, with additional offices in London, Hong Kong and Shanghai.
PUENTE, a wealth management and capital markets firm – with its headquarters in the United Kingdom and presence in the United States and Latin America – announced that Fernando Recalde will be the new CEO of the Group.
To date, Recalde served as Country Manager of Larraín Vial in Argentina and, for the last 20 years, held different roles in structuring, trading and distribution in New York. In his extensive career, his time as Director and President of Merrill Lynch Argentina also stands out.
“I am very excited to join a firm with the recognition and trajectory of PUENTE. The growth project we are considering for the next five years is very challenging, but we have professionals with the experience, knowledge and commitment necessary to achieve it,” said Fernando Recalde.
For his part, Federico Tomasevich, main shareholder, said: “I am very satisfied with the evolution that Puente had in the last 10 years thanks to the team of leaders and professionals of excellence that we have. To date, we manage more than 2.5 billion dollars in assets under administration in Wealth Management, we trade more than 15 billion dollars in Institutional Trading and in the last five years and we have structured financing in the Capital Markets for more than 5 billion dollars in more than 400 transactions.”
Tomasevich had been serving until now as CEO and Chairman of the Board of Directors of Puente Holding UK, he will now focus on the strategic management of the group.
“We have great expansion plans in Latin America and the United States for the next five years. With Fernando’s appointment as CEO of the Group, I will dedicate myself – from the presidency of the Group and together with the rest of the board – to the strategic management of PUENTE,” Tomasevich said.
