Pixabay CC0 Public Domain. Regnan lanza el fondo Global Equity Impact para inversores pertenecientes a la Unión Europea
Regnan, the responsible investment management business affiliated with JO Hambro Capital Management (JOHCM), has announced the launch of the Regnan Global Equity Impact Solutions Fund (RGEIS) for EU-based investors. The firm has also appointed Freeman Le Page as Portfolio Specialist.
In a press release, the asset manager revealed that the strategy will be available via Regnan’s Dublin-domiciled OEIC fund range. This comes after the launch of vehicles for UK and Australian-based investors in October and December 2020 respectively.
The fund aims to generate long-term outperformance by investing in mission-driven companies that create value for investors by providing solutions for the growing unmet sustainability needs of society and the environment, using the 17 United Nations Sustainable Development Goals (SDGs) and their 169 underlying targets as an investment lens. Regnan also pointed out that it is a high conviction, diversified, global multi-cap fund with a strong emphasis on driving additional impact through engagement.
An annual management charge of 0.75% will apply for the Dublin-domiciled fund’s ‘A’ share class, with euro, unhedged and hedged, sterling and US dollar share classes available, subject to a minimum £1,000 investment, or currency equivalent. Furthermore, founder investors can take advantage of a seed share class featuring reduced fees and an expense ratio cap.
A new portfolio specialist
The asset manager also announced the appointment of Freeman Le Page as Portfolio Specialist. He joins from Newton Investment Management where he was SRI Client Director, managing accounts for investors with responsible investment mandates. Based in London, Le Page will be supporting Regnan’s investment strategies and the growth of the business in this newly created role.
Led by Tim Crockford, the Regnan Equity Impact Solutions team are pioneers in impact investing in public equity markets. The team previously managed the Hermes Impact Opportunities Equity Fund, which Crockford launched in December 2017.
“We are excited to bring the fund to European investors after the launch of our UK and Australian funds last year. We are seeing increasing interest in public market impact investing across Europe. Investors are being drawn to an approach that promotes long-term investment in companies providing solutions to the environmental and social problems facing the world while at the same targeting an index-beating return”, Crockford said.
Pixabay CC0 Public Domain. SKY Harbor transforma todas sus estrategias en sostenibles
SKY Harbor announced in a press release the transformation of all of its investment vehicles into ESG funds. Additionally, two of these US high yield strategies are widening their potential investment universe by incorporating non-dollar issuers and are thus becoming global.
The asset manager highlighted that it has long been supporting high yield investors in their quest to integrate sustainability into their risk-taking. As a further evolution of this commitment, all three sub-funds of the SKY Harbor Global Funds Sicav –totaling over 2.8 billion dollars of assets under management– are now effectively embedding sustainable investment principles.
“The below investment grade issuer universe is not well-positioned for the transition to a more sustainable economy given that in many cases they have secularly or cyclically challenged business models and lack the scale that would be supportive of a pivot to more sustainable products, processes and behaviors. We do, however, believe that supporting the companies where the commitment is sincere is our duty as responsible asset managers. Furthermore, we are convinced that investments in companies that position themselves for a more sustainable economy will deliver higher returns with lower risk over time”, said Hannah Strasser, founder and CEO of SKY Harbor.
The asset manager pointed out that, consequently, now the entire SKY Harbor Global Funds Sicav is complying with the latest and most stringent regulatory developments within the European Union, notably meeting the “significantly engaging” criteria from the French AMF doctrine. This means that eligible bond issuers will be measured by their transparency and disclosure of key climate-related risks, commitment to the communities in which they operate, focus on governance, health and safety, and policies and commitments around diversity and inclusion. All in all, “exposure to sectors and industries that are deemed to have unsustainable characteristics is minimized“, they said.
Further proof of its commitment is that all the commingled funds that SKY Harbor is either managing or sub-advising in Europe, in the US and in South America, which account for the majority of their assets under management, are about to implement such a Sustainable investment approach.
Pixabay CC0 Public Domain. ¿Se volverá su cartera artificialmente inteligente?
Ever since the first computers were designed, people have envisioned machines working to serve humanity. Many fundamental obstacles to that vision today have been overcome through innovation, creating a society where artificial intelligence (AI) is increasingly integral to our lives. For investors, the question now is how to position their portfolios to benefit from what many are calling the Fourth Industrial Revolution.
AI is using machines to understand, learn, and act on inputs from data being generated by an ever-growing number of digital devices, from smart watches to sensors monitoring livestock. AI finds patterns that humans can turn into insights, creating a feedback loop so machines can learn. What does this mean to investors? In our view, it means that businesses will be more productive and profitable.
This creates, in our view, a significant opportunity for investors. Advances in digital technology, including AI, have been so great lately that economist Tyler Cowen, author of The Great Stagnation, has said that total factor productivity (TFP) could reach record highs in 2021 after a decade of stagnating. Cowen is not alone seeing a bright future. A World Economic Forum report published in October wrote, “As the economy and job markets evolve, 97 million new roles will emerge… (largely) in fourth industrial revolution technology industries like artificial intelligence.” The report said that the most successful firms will be those that “reskill and upskill” workers to leverage AI and other digital advances.
Investors seeking to find potential winners can start by grouping AI companies into three categories; firms advancing AI technologies that can be sold as platforms and/or services; firms deploying AI to give them a competitive advantage; and, companies that are using AI to disrupt entire industries.
AI is fundamentally about making sense of large volumes of data, a challenge that naturally favors some data-intensive industries. For example, the Information Technology and Communications sectors have embraced AI to develop personalized services. Manufacturers use AI to advance factory automation and financial services firms use algorithms to develop new products. Some financial firms use AI to assess corporate Environmental, Social and Governance actions, using the technology to improve risk management and, potentially, the performance of portfolios.
Investors can also find AI innovators within various investment themes. Smart City projects use AI to create solutions for such challenges as reducing congestion and crime. Within the Internet of Things theme, innovative firms are adding more and more computing form factors to gather the data, adding devices in everything from refrigerators to farming irrigation systems and manufacturing supply chains.
In 2020, AI became more important as companies embraced digital transformation, using AI-enabled cloud solutions to better engage their customers, especially remotely. Part of this digital evolution has involved advances in cybersecurity. AI could be called the “arms merchant” of cybersecurity; helping create solutions to protect firms against cyberattacks and being used by hackers to find vulnerabilities. As more economic value comes online, firms advancing AI-enabled cybersecurity solutions should benefit.
AI is also increasingly important in the medical and pharmaceuticals sectors. That was evident in 2020 as AI technology rapidly sequenced the COVID-19 virus, facilitating an efficacious vaccine in a matter of months rather that the decade such an effort could otherwise have taken.
As AI becomes ubiquitous, the lines between sectors are blurring. Whether a certain firm is considered an automaker or a tech company may be a question of perspective. These blurring lines expand the opportunity set for investors that are willing to identify the firms that are making smart investments in AI to differentiate their products in ways that could facilitate a growing profits and market share.
The leadership of individual firms is also crucial. Investors should seek to identify the leaders with the courage to make the financial and cultural investment needed to leverage AI to gain market share, shift profits higher and to increase their share of overall industry profits.
Investors should monitor some key risks. There is a growing consensus that regulations may be needed to slow fake news and hate speech that can undermine democratic institutions. However, such regulations could benefit social networks if those new rules held people propagating hate speech, or fake news, legally responsible for the damages caused by their actions. Such rules, coupled with algorithms promoting reputable content, could ultimately improve social media for the common good.
Similarly, as data proliferates, privacy is another concern that may become even more acute as new technologies such as facial recognition become commonplace, suggesting a need for more rules.
Developing the appropriate legal framework should help the industry grow by removing a key risk to the outlook. Meanwhile, many questions remain: Who should be responsible when an intelligent medical X-ray machine produces an erroneous diagnosis—the radiologist, the hospital or the maker of the X-ray machine’s software? Similar legal issues must be resolved with self-driving cars, an area where progress has been much faster pace than I expected.
Beyond its investment potential, AI can help take the robot out of ourselves by eliminating all manner of mundane tasks, in the end, leaving investors with more time to enjoy the fruits of their labor.
Column by Sebastian Thomas, Lead Portfolio Manager for Global Artificial Intelligence at Allianz Global Investors
Foto cedidaPaul Schofield, nuevo director del equipo de renta variable sostenible y de impacto de NN IP. . Paul Schofield, Jeremy Kent y Pieter van Diepen se unen al equipo de renta variable sostenible y de impacto de NN IP
NN Investment Partners (NN IP) announced in a press release the strengthening of its sustainable and impact equity team with senior appointments. Specifically, Paul Schofield, Jeremy Kent and Pieter van Diepen will be the ones to join the company as of 1 April and will be based in London and The Hague.
The asset manager revealed that Schofield has been appointed Head of Sustainable & Impact Equity, leading a team of 19 experienced investment professionals. He brings over 20 years of experience in equity investing and joins from Allianz GI, where he was Lead Portfolio Manager of the Sustainable Equity range alongside several other global equity strategies. At NN IP, he will report to Jeroen Bos, Head of Specialised Equity and Responsible Investing.
Meanwhile, Kent has been appointed senior portfolio manager of NN IP’s Sustainable Equity funds. With 13 years of experience, he also joins from Allianz GI, where he held the role of senior portfolio manager for the global sustainable equity strategies. Kent will report to Schofield. They both had a seat on Allianz GI ESG committee and its Proxy Voting committee.
Lastly, Van Diepen has been appointed NN IP’s Head of the Sustainable and Equity analyst team, consisting of seven buy-side analysts and two data scientists. He will also take on the role of senior analyst on the FinTech and Financial Inclusion value chain and will report to Schofield. With over 12 years of experience in financial markets, Van Diepen joins the firm from Aberdeen Standard Investments where he held the role of Investment Director within the global equities team.
Furthermore, the team is adding 3 new members: Giovanna Petti, analyst of Environmental Solutions & Materials; Dirk-Jan Dirksen, analyst of Digital Transformation; and Jeff Meys, dedicated to Consumer Trends.
“We are very pleased to welcome 6 new members to our team. Paul, Jeremy and Pieter bring a wealth of experience and knowledge in equity investing and sustainability to NN IP and are fully aligned with our responsible investment philosophy”, said Jeroen Bos, Head of Specialised Equity & Responsible Investing at NN IP.
In his view, they are well-positioned to directly add value to their sustainable and impact equity investment processes, benefitting their clients. “These appointments clearly underline our ambition to maintain our leadership position in responsible investing, an area where we have a strong and longstanding heritage and where we will continue to invest”, he concluded.
Pixabay CC0 Public Domain. Bloomberg y Rockefeller AM lanzan índice de mejora de ESG
Bloomberg and Rockefeller Asset Management announced the launch of the Bloomberg Rockefeller U.S. All Cap Multi-Factor ESG Improvers Index, available through the Bloomberg Terminal. The index combines Bloomberg’s renowned risk model, data, and index capabilities with 40 years of ESG expertise from Rockefeller AM.
Both firms pointed out in a press release that, unlike other ESG indices that emphasize screening around ESG leaders or laggards, this one ranks a company’s improvement in performance on material ESG issues relative to industry peers. It also combines the Rockefeller ESG Improvers ScoreTM, an uncorrelated and proprietary alpha enhancing factor, with quality and low volatility factors to pursue outperformance over traditional market-cap weighted indices with low tracking error and minimal sector or other factor deviations. They also stated that another distinctive aspect of the index is that it incorporates shareholder engagement techniques that help create shareholder value and catalyze positive change.
“We believe that investors will increasingly differentiate between ESG leaders and improvers – firms showing the greatest improvement in their ESG footprint. And that the latter offers a greater potential for generating uncorrelated alpha over the long-term,” said Casey Clark, Managing Director and Global Head of ESG Investments at Rockefeller Asset Management.
Meanwhile, Alan Campbell, Head of Index Product Management at Bloomberg, claimed that institutional investors are focusing now on underlying ESG factors and trends, so they are expanding their index offering to include ESG improvers. “Together with Rockefeller we are providing investors with a product that captures high quality and low volatility companies that exhibit positive ESG momentum.”
Lastly, Chip Montgomery, Managing Director and Head of Business Strategy & Corporate Development at Rockefeller AM highlighted that given Bloomberg’s history as a multi-asset index provider, and their experience in the ESG space, they “felt this was a natural partnership to bring ESG Improvers benchmarks to the market”.
Ignacio de la Maza, Janus Henderson Investors. Ignacio de la Maza, Janus Henderson Investors
Janus Henderson Investors is delighted to invite you to the first in a three-part series of virtual events for 2021, with the Invested in Connecting Fixed Income Forum taking place on Thursday 4 February.
2020 was a turbulent, uncertain and volatile year. As we enter 2021, the Fixed Income Forum aims to capture and review a range of perspectives through a thoughtful and dynamic analysis of market events.
The day will feature our Fixed Income specialists as they analyze dominant themes we see across global markets, the importance of ESG in the investment process, as well as how they expect to position their portfolios for the new year ahead.
With 100 minutes of live sessions as well as on-demand videos from our Portfolio Managers, we aim to offer you engaging and insightful updates from the team through HEDx talks, market outlooks and live debates. All content will also be available to watch on the platform for up to one month after the event.
Janus Henderson Investors is also pleased to offer simultaneous translation in French, German and Spanish during the live sessions.
If you would like to attend, you can register for this event at this link.
13:30 GMT | 14:30 CET |10:30 CLST | 08:30 EST – Virtual platform opens
14:00 GMT | 15:00 CET | 11:00 CLST | 09:00 EST- Welcome – Ignacio De La Maza, Head of EMEA Intermediary and LatAm
14:05 GMT | 15:05 CET |11:05 CLST | 09:05 EST – Market Outlook – Jim Cielinski, Global Head of Fixed Income
14:25 GMT | 15:25 CET |11:25 CLST | 09:25 EST – The Importance of ESG –Paul LaCoursiere, Global Head of ESG Investments
14:40 GMT | 15:40 CET |11:40 CLST | 09:40 EST – The ‘reflation trade’ — is 2021 the beginning or the end of the move – Jenna Barnard, Co-Head of Strategic Fixed Income –The consensus for the reflation trade has gained strong momentum in recent weeks, as bullish investors have rotated towards inflation protection since late last year, further boosted in January by the Democratic win in the US Senate, which is likely to lead to much larger fiscal stimulus over the next few months. Is the trend likely to persist? Jenna Barnard, Co-Head of Strategic Fixed Income will share her views on the subject.
14:55 GMT | 15:55 CET |11:55 CLST | 09:55 EST – Break
15:05 GMT | 16:05 CET | 12:05 CLST | 10:05 EST Trust – the most important commodity in finance – Nick Maroutsos, Head of Global Bonds – Bond markets revolve around trust. We lend money in the expectation that borrowers will repay us, with interest. In this HEDx talk, Nick Maroutsos, Head of Global Bonds, explores why trust is pivotal to the successful functioning of fixed income markets from the smallest borrower through to the broader macroeconomic system and why it is particularly pertinent in 2021.
15:20 GMT | 16:20 CET | 12:20 CLST | 10:20 EST – The Hunt for Yield – Fixed Income Panel Debate– Jennifer James, Emerging Market Debt, Tom Ross, Global / European High Yield, and John Pattullo, Co-Head of Strategic Fixed Income. Moderated by Lucy Hockings, BBC News Presenter.
15:50 GMT | 16:50 CET | 12:50 CLST | 10:50 EST – Conclusion and event close – Ignacio De La Maza, Head of EMEA Intermediary and LatAm
Foto cedida. S&P Dow Jones Indices y la Bolsa de Santiago lanzan el Índice S&P IPSA ESG Tilted
S&P Dow Jones Indices, the world’s leading index provider, and the Santiago Exchange, announced last January 20th the debut of the S&P IPSA ESG Tilted Index, the latest in S&P DJI’s growing family of global ESG indices based on some of the world’s most highly tracked regional and country-specific benchmarks.
The index uses rules-based selection criteria based on relevant ESG principles to select and weight its constituents from the S&P IPSA, Chile’s headline stock index, measuring the performance of the largest and most liquid stocks listed on the Santiago Exchange.
The objective is to give investors core exposure to the Chilean equities market while providing a significant boost in ESG score performance.
“Last year, ESG undeniably asserted itself as an essential strategy for the mainstream investor as the COVID-19 pandemic and social justice issues put the importance and relevance of corporate sustainability data and principles firmly in the spotlight,” said Reid Steadman, Managing Director and Global Head of ESG Indices at S&P DJI.
“We are thrilled to work with the Santiago Exchange to continue expanding our ESG strategy in Latin America with launch of the S&P IPSA ESG Tilted Index.
This new index will be a useful tool for investors looking to bring ESG principles into the core of their investment portfolios with the goal of attaining performance largely in line with the Chilean equity market.”
“Sustainability is a strategic cornerstone for the Santiago Exchange and the basis for our mission to publicize, disseminate and promote ESG best practices. As capital market articulators, by launching this new index we seek to encourage companies to manage ESG factors with the highest standards, while providing tools for better investment decision-making in order to boost the sustainable development of the market, and to allow Chilean issuers to position themselves globally”, said José Antonio Martínez, CEO of the Santiago Exchange.
Index Methodology
The S&P IPSA ESG Tilted Index starts with all constituents in the S&P IPSA. Companies involved in controversial weapons, tobacco, thermal coal, and companies with disqualifying United Nations Global Compact scores are excluded.
Remaining eligible companies are then weighted within their respective GICS Sectors by their S&P DJI ESG Score resulting from the Corporate Sustainability Assessment (CSA). Companies with relatively high or low S&P DJI ESG scores are overweighted or underweighted within their GICS Sector all while maintaining the same sector balance as the parent index, the S&P IPSA.
By maintaining sector neutrality with the eligibility universe, the index provides significant additional
exposure to ESG factors while maintaining relatively low tracking error with the broader market.
At launch, the S&P IPSA ESG Tilted Index will have the following 26 constituents:
Foto cedidaMichaela Collet Jackson, directora de distribución para Europa, Oriente Medio y África de Columbia Threadneedle.. Columbia Threadneedle nombra a Michaela Collet Jackson directora de distribución para Europa, Oriente Medio y África
Columbia Threadneedle Investments has announced in a press release the appointment of Michaela Collet Jackson as Head of Distribution EMEA (Europe, the Middle East and Africa). Previously in BlackRock, she will take over her new role next March 22.
Collet will lead Columbia Threadneedle’s regional Sales and Client Service functions across Wholesale, Institutional and Insurance channels. Reporting to Nick Ring, CEO EMEA, she will join the firm’s regional leadership team and primary governance bodies.
“We look forward to Michaela joining Columbia Threadneedle to lead our UK, European and Middle East Sales teams and drive our distribution capability across client channels. Michaela is a results-focused leader who brings excellent experience in distribution strategy and execution, sales management and client relationship roles. She has an outstanding record of achieving growth through a highly effective combination of strategic direction, team leadership and client-focused organisational structure”, Ring said.
He also highlighted that Collet joins the asset manager at an “exciting time”, as they have consistently strong investment performance, a broad array of strategies across all major asset classes and experience creating bespoke solutions for their clients. “Under Michaela’s leadership we are well positioned to build deeper relationships, serve more clients and grow our EMEA franchise“, he added.
Michaela has over 18 years’ experience in the asset management industry in Europe. She joined Barclays Global Investors (BGI) in 2005 and later BlackRock in 2009 (when it acquired BGI), where she progressed through a number of distribution roles including iShares Business Development lead for international and private banks in the UK and Switzerland, Sales Director for the Nordic Institutional business, Head of Nordic Retail and Head of Solutions & Partnerships for EMEA Retail. In April 2020, she became Managing Director and Deputy COO for the EMEA Distribution business.
Foto cedida. Abbie Llewellyn-Waters, Rhys Petheram y Jon Wallace, nuevos cargos en Jupiter AM
Jupiter AM announced a number of senior appointments and changes within its sustainability suite, which also affect the Jupiter Global Ecology management team. In a press release, the asset manager pointed out that these decisions will allow them to continue to offer clients attractive returns through long-term sustainable investing.
In particular, the firm has named Abbie Llewellyn-Waters Head of Sustainable Investing, the fund manager Rhys Petheram has been promoted to Head of Environmental Solutions, and Jon Wallace has taken over the management of the Jupiter Global Ecology Growth Fund. Wallace will be replacing Charlie Thomas, Head of Strategy, Environment and Sustainability, who leaves after 20 years at the company.
“Drawing on Jupiter’s 30-year heritage of sustainable investing, this restructure and the series of appointments reinforce our commitment to this strategically important client proposition which we see as a cornerstone of our future business growth plans. We are pleased to be able to offer our clients a distinct choice of products, enabling them to achieve their sustainable investing goals in partnership with our dedicated and experienced team”, Andrew Formica, CEO, said.
She also claimed to be “delighted” to have Llewellyn-Waters and Petheram in these new roles where they will be “instrumental” in shaping, supporting and influencing the firmwide initiatives that they have been developing over the last year.
Meanwhile, Stephen Pearson, CIO, congratulated them on their new roles, created to drive forward Jupiter’s sustainability proposition, and paid tribute to departing manager Charlie Thomas: “Having taken on the management of Jupiter’s flagship Ecology unit trust fund nearly 20 years ago, he has become an important part of that fund’s long history and has made a strong mark at Jupiter and on the sector during his tenure. He has been a pleasure to work with and he leaves with our thanks for the valuable contribution he has made and our best wishes for the future”.
Three in-house professionals
With over 15 years of sustainable investment experience, Llewellyn-Waters will lead the firm’s sustainable investing capability, while also feeding into the work of Edward Bonham Carter, who has taken on a new role focusing on the company’s stewardship and corporate responsibility activities. As part of this, she will continue to play an important role in shaping best practice across the business in line with Jupiter’s commitment to ESG.
Meanwhile, Petheram is a recognised thought-leader in environmental fixed income investments with 20 years’ experience across fixed income and multi-asset portfolios. He has co-managed the Jupiter Global Ecology Diversified Fund since inception in 2016, delivering 27.5% relative to a sector average of 16.85% over this time.
In his new role, Petheram will work closely with Llewellyn-Waters, leading and evolving Jupiter’s expertise in investing in companies intentionally focused on providing solutions to sustainability challenges across key environmental themes. He will also oversee Jupiter’s environmental solutions range across asset classes, while continuing to co-manage the Jupiter Global Ecology Diversified fund.
Lastly, Jupiter AM highlighted that Wallace, who has worked closely with Thomas for over 10 years, has an in-depth knowledge of the portfolios and a strong expertise in seeking out the key innovators in the green technology space, making him “the natural successor” for this range. He will collaborate closely with Thomas to ensure a smooth transition of fund management responsibilities.
Pixabay CC0 Public DomainRana y mariposa. Rana y mariposa
GAMCO Investors, Inc. is pleased to announce the launch this month of the GAMCO Convertible Securities fund, a new sub-fund of GAMCO International SICAV (Luxembourg), managed by Gabelli Funds. The GAMCO Convertible Securities fund offers investors access to one of Gabelli’s core strategies within a UCITS compliant structure, providing daily liquidity via accumulating share classes and a distributing class. We are excited to bring an actively managed fund to the European and Global marketplace that will be dedicated to global convertible securities while factoring in ESG guidelines.
The Fund leverages the firm’s history of investing in dedicated convertible security portfolios since 1979. Multiple share classes will be available at launch and are tailored for Global institutional investors as well as select non-US retail investors. At the onset, the Fund will launch with an institutional founder’s class at a reduced fee.
By actively managing the fund and investing in convertible securities, we seek 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.
The portfollio investments will be 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. The strategy remains robust as the convertible markets continue to provide a strong flow of new issuances as well as attractive investment opportunities.
What is going on in the convertible market?
Global converts, as represented by the ICE BofA G300 Global Convertibles Index, increased another 5.4% in December. Global CBs added 32.6% in 2020, the best year for global CBs since 2009 on an absolute total return basis, ahead of each global stocks, High Yield and IG bonds.
In December 2020 CB issuance maintained its record pace as $12.6bn was priced globally, well-above the historical average for the month of December. While all regions were active last month, the US primary market saw the most volume as $8.1bn was priced, topped by the $2.0bn offering from Dish Network and $1.15bn offering from Uber. As of year-end, $158.6bn of new CB paper was launched globally, the most in a year since 2007 when nearly $163bn came to market. Of this, the US saw $105.8bn, just shy of 2001’s $106.4bn record, while Europe, Asia, and Japan saw $31.1bn (the most since 2009), just under $20.0bn (the most since 2007), and $1.7bn, respectively.
With the surge in net-new issuance discussed above and the impact of very strong CB performance last year, the global market ended 2020 with a $509bn market value, the most it’s been since May 2008. Regionally, the US has reached $351bn, also its largest size since 2008, with Europe at $89bn, Asia $54bn, and Japan $15bn. Europe’s size is now its largest since 2014, while Asia’s is its best since 2008. In contrast, given its lackluster returns and negative net-new supply, Japan was the only region to contract in 2020.
Top-performing pockets of the global CB market in 2020 were generally high growth, high delta, large-cap, tech, and consumer discretionary, mostly in the US and Asia. Overall, Asian equity alternatives (deltas above 0.8) were the top-performing regional bucket with a 199% gain, followed by US consumer discretionary (+195%), Asia discretionary (+120%), US HY (+115%), and Asia tech (+104%). As noted earlier, these segments of the market benefitted from the pandemic-driven rally in work-from-home names.
On the other side, the leading underperformers for 2020 included mostly lower-delta energy, transportation, and small-caps, mainly from Japan and Europe, though notably US energy was the biggest underperformer overall driven by the likes of Chesapeake and Nabors. Behind US energy (-30%) was European energy (-18%), Japan transportation names (-5%), European industrials (-4%), and Japan materials (-4%).
In our analysis it is clear that a handful of issuers dominated 2020’s large returns, mostly in the US and Asia. In the US, Tesla’s three tranches of CBs contribute about 41% of the US benchmark’s top-line performance, while Microchip, Zillow, Square, and Wayfair made up about 3%, 3%, 3%, and 2%, respectively. In fact the top ten issuers comprised about 61% of the index’s total return. In Asia, the single-issuer trend was even more pronounced as the top three names (the Sea, NIO, and Pinduoduo ADRs) made up 78% of the Asia benchmark’s performance. At the global level, the top CB names in 2020 were Tesla, Sea, NIO, Microchip, and Pinduoduo, which comprised 33%, 6%, 3%, 3%, and 3% of year-to-date returns, respectively.
The portfolio team is concerned that growth names may be a headwind in 2021 if the cyclical shift plays out the way we see hints of in the marketplace. We think that the CB market’s high concentration of growth and tech names, which proved to be a tailwind to performance in 2020 especially in the US and Asia, may become a headwind in 2021 if a cyclical rotation from growth to value persists. We think there is a likelihood of this happening if the economy reopens faster-than-expected and the vaccine optimism endures. Overall we believe the Global Convertible market performance will still achieve the asymmetrical returns we have seen in the past few years.
What should we expect from 2021?
U.S. equities closed 2020 with a December and fourth quarter rally as many stock indices continued to set multiple record highs. All of 2020’s net S&P 500 gain occurred during the second half as the upbeat economic outlook, Covid-19 vaccines, hope for more fiscal stimulus, and the Fed’s big monetary policy easy outweighed the resurgent pandemic. U.S. Senate control and Biden’s agenda prospects await the final outcomes of the two January 5 Georgia runoff elections.
Shares of small cap cyclically sensitive companies should benefit in 2021 as well as companies that will benefit from a long overdue focus on U.S. infrastructure.
The Gabelli stock selection process for researching and investing globally in various ‘Green Energy Wave’ companies and industries is centered on the ‘Environmental’ (E) aspect of the Environmental, Social, and Governance (ESG) framework that is being increasingly applied to companies worldwide. Our Green Team’s belief is that ‘our planet and people’ are essential to the future of Planet Earth. Our ‘Love Our Planet & People’ (LOPP) equity research methodology uses social screens and a holistic “E” overlay that have the potential to deliver enhanced returns by awarding relatively high ratings to selected companies that prioritize environmental sustainability. Low financing costs and improving economics should produce multiple clean energy winners, including select utility stocks, renewable developers, and clean energy equipment suppliers. We expect to see advancements in battery storage technology, grid modernization, green hydrogen, electric-vehicles and charging ports, rooftop solar, and energy efficiency. Substantial amounts of investment capital are needed to transition the global power industry toward a 100% renewable and net zero carbon goal. This is likely to provide long-term revenue and earnings growth for clean energy companies.
GAMCO’s risk arbitrage team expects 2021 merger and acquisition activity to continue the rising trend that started in the second half of 2020. Deals will likely include friendly and hostile, local, cross border, mega and bolt on transactions. Catalysts for industry consolidations and SPAC related deals should set the pace.
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.
