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Going Digital

Global lockdowns have proved a major catalyst for speeding up the digital revolution, opening up new opportunities in life and in investment.

Focus on digital services: Our digital themed strategy invests in data-driven, web-based companies which provide interactive services through intelligent algorithms. These companies are the most disruptive and innovative digital businesses that are helping to develop faster and cheaper solutions for businesses and consumers globally, offering a better basis for decision making
Bottom-up, high conviction approach: Our investment approach centres on pure stock picking, with no benchmark constraints.
Expert insight: Together, our investment team have more than 60 years of experience. An Advisory Board of external experts provides guidance on industry developments and long-term prospects.

A morning yoga lesson, eight hours at the desk (with a break for lunchtime shopping), then a catch-up with friends over cocktails in the evening. Until quite recently, this normal working day would have unfolded over several different locations across a town or city. Now, in the age of the coronavirus, such activities are taking place online. And it’s likely that these new digital habits will outlast the pandemic.

Indeed, whatever the vantage point, it’s clear we are living through an unprecedented expansion of our digital world. The experience has generated a thirst for even more and better tech – offering attractive opportunities for businesses who can deliver it.

During the lockdown, business growth has been phenomenal among providers of TV services, online video games, e-shopping, social networks, e-health, online education and more.

Netflix secured 16 million new accounts in the first quarter of 2020 – nearly double the number of the previous three months. China’s Tencent, meanwhile, saw a 31 per cent year-on-year jump in online game revenues as customers sought escapism in “Honor of Kings” and “Peacekeeper Elite”. Italians increased the time they spent on Facebook’s apps by 70 per cent.

As lockdowns are eased across the world, it would be natural to expect that growth fade over time. But the fundamentals paint a different picture. After all, so far only 59 per cent of the world’s population has access to the Internet. And as the so-called “Generation Hashtag” – the digital native group born between 1991 and 2005 – grows up and increases its economic power, demand for digital will grow. This demographic represents about 34 per cent of the total population today.

The rollout of 5G networks will provide an added boost. Already making inroads in the US, China, Korean and other developed markets, 5G has the power to transmit data much faster than current phone networks, handle much higher volumes of information, and require much less battery power. Because the digital demands of the lockdown have put heavy pressure on existing capacity, it seems likely that the rollout of 5G will now proceed more rapidly. This, in turn, will fuel the expansion of the Internet of Things, opening up an almost endless set of digital possibilities.

Around the home, for example, this could mean tomato plants that can ask for water, roofs that warn of weaknesses after extreme weather, jackets that keep parents updated on a child’s location, trash cans that ask to be emptied, and milk cartons that point out expiration dates. Moving around town, that could mean having a heads-up on open parking spaces, second-to-second data on surrounding traffic for driverless cars, local air-quality warnings, and much more.

Better connectivity will boost tech growth on a number of fronts. Three in particular stand out. All three had already been on the rise, but as a result of the pandemic, have now massively broadened their customer and client base. Now that more people have experienced what is possible, we expect strong momentum to continue.

To begin with, there’s e-commerce. The lockdown prompted millions of people to embrace online shopping for groceries and other goods, and we expect that many of them will have been won over by the convenience and competitive pricing, at least for some of their purchases. PayPal signed up an average of 250,000 new accounts per day in April, according to a recent trading update.

Software as a service (SaaS) is another area destined for strong growth. SaaS encompasses the technology that powers working from home platforms, online education, cloud storage and teleconferencing. Even when the lockdowns are fully lifted, we expect that both businesses and employees will embrace more flexible working practices than pre-pandemic. Education will change too – Cambridge University has already said that lectures will remain online until at least summer 2021.

Digital life is another key area. After work comes play, and the lockdown has shown how much of our leisure activities and socialising can be done with the help of digital. Here, meal-kit/food deliveries, streaming video services, and online games could be among the biggest beneficiaries. E-health is also booming – in the US alone, some 900 million patient visits will have been conducted by video this year – up 64 per cent on 2019, according to health research group Frost and Sullivan.

While the lockdowns have been temporary, they have shown just how much digital progress can be achieved and how quickly. And the further we move down the road of digitisation, the more data we have to improve the experience and the process. Artificial intelligence will become more and more part of our everyday life with digital services based on its ultra-sophisticated algorithms.

Opinion by Sylvie Séjournet, Senior Investment Manager at Pictet Asset Management.

Please click here for more information on our thematic equity strategies.

This article was first published in FT Adviser.

Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to risks and uncertainties that could cause actual results to differ materially from those presented herein.

Important notes

This material is for distribution to professional investors only. However it is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation. Information used in the preparation of this document is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning. Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.

This document has been issued in Switzerland by Pictet Asset Management SA and in the rest of the world by Pictet Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority, and may not be reproduced or distributed, either in part or in full, without their prior authorisation.

For US investors, Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act.

Pictet Asset Management Inc. (Pictet AM Inc) is responsible for effecting solicitation in North America to promote the portfolio management services of Pictet Asset Management Limited (Pictet AM Ltd) and Pictet Asset Management SA (Pictet AM SA).

In the USA, Pictet AM Inc. is registered as an SEC Investment Adviser and its activities are conducted in full compliance with the SEC rules applicable to the marketing of affiliate entities as prescribed in the Adviser Act of 1940 ref. 17CFR275.206(4)-3.

Active ownership: proxy voting and ESG engagement activities

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Vaun0815 jungle Unsplash — Pixabay CC0 Public DomainVaun0815. Vaun0815

As an active manager, we strongly believe that taking account of environmental, social and governance (ESG) considerations can help us make better long-term investment decisions for our clients. Furthermore, we believe in leveraging the power of investors to trigger positive change. This involves exercising our voting rights systematically in the best interests of our clients and engaging directly with the companies we invest in when we have ESG concerns.

In our latest active ownership report, we present key figures and commentary on our proxy voting and ESG engagement activities. We look forward to continuing our active ownership activities in 2020, both bilaterally and through collaboration with industry partners.

Engagement with corporate issuers

Through our engagement programme, we seek to focus on corporate issuers with material ESG failings in order to encourage them to align their policies, practices and disclosure with established industry best practice.

Corporate engagement examples: ESG in action

German power company on environmental and social issues

We started engaging with this company in early 2019 primarily to press the company to sell off its coal and lignite assets. During the year, the company rotated its assets towards renewables and the company committed to achieve carbon neutrality by 2040.

After multiple bilateral and collaborative meetings (through CA100+), the company made considerable progress on a number of engagement objectives as it:

started to work with the Science Based Target Initiative (SBTI) in order to assess the disparity between the company’s own carbon reduction targets and the goals of the Paris Agreement
committed to improve the alignment of their reporting with Taskforce on Climate-related Financial Disclosures (TCFD) recommendations
begun considering linking executive pay to climate targets
initiated a global review on climate-related lobbying practices to ensure they are consistent with the company’s own climate strategy

Canadian material company on corporate governance issues

In 2019, we engaged with this company to prevent a majority shareholder from acquiring it at what was, in our view, an unfairly inexpensive price. We discussed the issue with other long-term shareholders to better understand their views and exchange concerns. We directly engaged with the company’s board together with the external deal consultant and the case featured in a Canadian newspaper.

In June 2019, we visited the company’s latest acquisition on-site to see for ourselves whether this warranted the corresponding share price decline. We met the company CEO and VP Finance & Strategy to discuss the rationale and activities there. This only strengthened our conviction that the share price fall was unwarranted.

As a result, upon the announcement of a takeover, we emphasised to the board that we were not in favour of the move, especially at the existing offer price. When minority shareholders were asked to vote on the potential takeover bid, our investment team voted against the deal. The bid did not go through due to shareholder opposition and, as such, we achieved our goal and the engagement was closed.

Dialogue with sovereign issuers

For our Emerging Markets sovereign debt strategies, ESG factors are integrated within country risk models. A targeted dialogue with sovereign issuers is part of our active ownership strategy.

In 2019, we partnered with EMpower, a well-respected and innovative global philanthropic organisation focused on youth in emerging economies, in order to enhance their analysis and understanding of long-term sustainability issues.

Brazil: ESG in action

In 2019 our macroeconomic strategist designed a due diligence trip to Brazil to better understand the unique political and economic challenges, as well as gain insight into specific social development issues. Our research showed issues in the quality of spending in education and its diversity and inclusion system. Conversations with the Ministry of Economy show the current administration’s desire to improve Brazil’s business environment and to secure long-term growth for the country. This is an example of the positive feedback loop between improving ESG issues and the overall creditworthiness of a sovereign issuer.

Our ongoing analysis and dialogue surrounding these issues continues away from country due-diligence trips and at times we have an opportunity to act in a collaborative manner with other investors who share our concerns. For example, in 2019 Pictet Asset Management signed an Investor Statement on Deforestation and Forest Fires in the Amazon.

Opinion by Arabella Turner, ESG specialist at Pictet Asset Management.

Proxy voting: Pictet AM’s 2020 voting summary can be assessed here and the past records here.

Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to risks and uncertainties that could cause actual results to differ materially from those presented herein.

Important notes

This material is for distribution to professional investors only. However it is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation. Information used in the preparation of this document is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning. Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.

This document has been issued in Switzerland by Pictet Asset Management SA and in the rest of the world by Pictet Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority, and may not be reproduced or distributed, either in part or in full, without their prior authorisation.

For US investors, Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act.

Pictet Asset Management Inc. (Pictet AM Inc) is responsible for effecting solicitation in North America to promote the portfolio management services of Pictet Asset Management Limited (Pictet AM Ltd) and Pictet Asset Management SA (Pictet AM SA).

In the USA, Pictet AM Inc. is registered as an SEC Investment Adviser and its activities are conducted in full compliance with the SEC rules applicable to the marketing of affiliate entities as prescribed in the Adviser Act of 1940 ref. 17CFR275.206(4)-3.

Pictet Asset Management: Liquidity vs the Virus

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Vast amounts of stimulus have underpinned the markets after the initial shock of the COVID-19 crisis. The question for investors now is whether such support can continue to offset a sharp fall in corporate profits. Below, Pictet Asset Management (Pictet AM) shares their views on fixed income and currencies:

A focus on United States of America:

Global bond markets remain supported by unprecedented monetary stimulus. Pictet AM expects the world’s five top central banks to inject a whopping USD 8.4 trillion of liquidity into the financial system this year, which is equivalent to 14.3 per cent of their countries’ total GDP (1).

All bonds might look attractive against this backdrop. But central bank support must be balanced against the fact that valuations are now exceptionally high – some fixed income asset classes are the most expensive they’ve been in 20 years. Additionally, the global economy appears to be on a path to recovery, which could cause bond yields to reverse course.

Those contrasting signals keep us neutral on fixed income overall. Drilling deeper, among sovereign debt Pictet AM sees the best return potential in US Treasuries. The Fed has been particularly aggressive with stimulus, and Pictet AM expects it to deliver more in the coming months. This will most likely come in the form of yield curve control, which should keep liquidity abundant and Treasuries’ valuations unusually high for a long time.

The stimulus should also be good news for US corporations, which are already beginning to benefit from a pick-up in the economy. The US economic surprise index hit an all-time high in June, for example. Economically, US looks to be in better shape, which supports their overweight stance on US investment grade bonds – particularly as they have the backstop of Fed support should things dip again.

However, Pictet Asset Management is mindful that the economic recovery is still in the early stages, and there are many risks ahead, including the US election and the possibility of a second wave of the pandemic. Pictet AM therefore remains underweight US high yield. Although it is the only fixed income asset class that is not expensive relative to its 20 year history, according to their model, they believe such valuations do not factor in the potential for future defaults. The market is pricing in a default rate of just 7-8 per cent, while Moody’s expects it to reach nearly double that, at 13 per cent.

In the currency market, Pictet AM thinks the euro should benefit from an improving economic backdrop, helped by increased stimulus. The ECB’s TLTRO 3 bank funding programme and the EU’s economic recovery plan are big positives. The former has seen a very good take-up and will boost banks’ earnings as well, while the latter can potentially prove a game-changer for fiscal unity within the bloc. All in all, Pictet AM thinks the euro’s 14 per cent undervaluation against the dollar (see chart) is no longer justified, and upgrade the currency to overweight. Technical trends, such as seasonality, are favourable, too.

Pictet AM also sees potential for a rebound in emerging market (EM) currencies, which are extremely cheap and have lagged the broader ‘risk-on’ rally so far. That, in turn, should benefit EM local currency debt.

To guard against any renewed market volatility, Pictet AM keeps defensive positions in the Swiss franc (whose haven status is complemented by a strong uptick in the domestic economy) and in gold. Although gold has enjoyed a very strong run (up 15.5 per cent since the start of the year), it is still not in overbought territory according to their technical indicators, which makes it a good hedge. Indeed, Pictet AM believes fundamentals – including the possibility of an inflation spike over the medium term, persistently negative real rates and the prospect of a further weakening in the dollar – more than justify the precious metal’s apparently stretched valuations.

Notes:

(1) Data for US, China, euro zone, Japan and UK. Policy liquidity flow is calculated as net central bank liquidity injection over preceding 6 months as percentage of nominal GDP, using current USD GDP weights.

Please click here for more information on Pictet AM’s Investment Outlook.

Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to risks and uncertainties that could cause actual results to differ materially from those presented herein.

Important notes

This material is for distribution to professional investors only. However it is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation. Information used in the preparation of this document is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning. Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.

This document has been issued in Switzerland by Pictet Asset Management SA and in the rest of the world by Pictet Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority, and may not be reproduced or distributed, either in part or in full, without their prior authorisation.

For US investors, Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act.

Pictet Asset Management Inc. (Pictet AM Inc) is responsible for effecting solicitation in North America to promote the portfolio management services of Pictet Asset Management Limited (Pictet AM Ltd) and Pictet Asset Management SA (Pictet AM SA).

In Canada Pictet AM Inc is registered as Portfolio Managerr authorized to conduct marketing activities on behalf of Pictet AM Ltd and Pictet AM SA. In the USA, Pictet AM Inc. is registered as an SEC Investment Adviser and its activities are conducted in full compliance with the SEC rules applicable to the marketing of affiliate entities as prescribed in the Adviser Act of 1940 ref. 17CFR275.206(4)-3.

Hanneke Smits Will Take Over as CEO of BNY Mellon Investment Management after Mitchell Harris Retires

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The Bank of New York Mellon Corporation announced that Mitchell Harris, CEO of BNY Mellon Investment Management, which includes the Wealth and Investment Management businesses, has announced his intention to retire effective on October 1st. Consequently, the company has appointed Hanneke Smits as new CEO of BNY Mellon Investment Management, and Catherine Keating will continue in her role as CEO of BNY Mellon Wealth Management.

The corporation stated in a press release that both Smits and Keating will report to Todd Gibbons, CEO of BNY Mellon. Furthermore, Smits will join BNY Mellon’s Executive Committee.

“Mitchell has been instrumental in driving our Investment Management business over the last four years as CEO and we wish him all the best in retirement. During a period of tremendous change in the investment landscape, he helped reposition our multi-boutique model and launch new investment capabilities, leaving us well positioned to meet the evolving investment needs of our clients,” said Gibbons.

He also claimed that they are “delighted” to elevate Hanneke into the CEO role for Investment Management. “She has spearheaded Newton’s business momentum and client-centric culture, and we look forward to her leadership within Investment Management. Mitchell has cultivated a strong bench of leaders, including Hanneke and Catherine, who will continue to drive the execution of our strategic priorities to deliver leading investment solutions to our clients underpinned by exceptional investment performance.”

Meanwhile Smits stated that she is “deeply honored” to serve as CEO of BNY Mellon Investment Management. “We have made great progress in building a diversified investment portfolio to help our clients achieve their investment goals. We will build on this strong foundation to continue to drive performance and innovation across our investment products, while also serving as a trusted partner for our clients in today’s rapidly changing investment environment”, said Smits.

Smits will continue as CEO of Newton until October 1st and the company revealed a search is currently underway to replace her. Over the next several months, Harris will work closely with her and Keating to ensure a smooth transition of leadership.

Smits has been CEO of Newton Investment Management, a subsidiary of The Bank of New York Mellon Corporation, since August 2016. Her career spans close to three decades in financial services, including serving as a member of the Executive Committee at private equity firm Adams Street Partners from 2001 to 2014, and Chief Investment Officer from 2008 to 2014. Hanneke is a non-Executive Director to the Court of the Bank of England and serves on the board of the Investment Association.

In addition, she is Chair of Impetus, a venture philanthropy organization that supports charities that aim to transform the lives of disadvantaged young people, and as part of this appointment, she is Trustee of the Education Endowment Foundation, founded in 2011 by The Sutton Trust in partnership with Impetus. She is co-founder and former Chair of Level 20, a not-for-profit organization set up in 2015 to inspire women to join and succeed in the private equity industry. Originally from the Netherlands, Hanneke has a BBA from Nijenrode University and a MBA from the London Business School.

With IRR Greater Than 10%, Real Estate Ckds Dominate And Cerpis Fund Funds

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Screen Shot 2020-07-08 at 3 — Photo: IGS. Foto:

Of the 114 CKDs that exist, 19 achieve an IRR greater than 10% net in pesos, while of the 32 CERPIs there are only 11 have an IRR greater than 10 percent. Together, it means that 21% of CKDs have IRRs greater than 10%, where 17% correspond to CKDs and 34% to CERPIs. These results are those we have, considering capital calls and distributions at the end of May 2020.

These numbers are explained by the corresponding valuations where many of them, being valued in dollars, reflect the movement in the peso dollar exchange rate. As CKDs and CERPIs are private equity vehicles listed on the Mexican stock exchanges (BMV and BIVA), these gains are only book gains at the date of the analysis.

Of the $29,653 million dollars of committed capital, 74% are CKDs and 26% are CERPIs. The market value is $11,353 million dollars. For CKDs, the figures show that 70% of resources have been called while for CERPIs they barely reach 24%, so capital calls will change IRRs, just as distributions do.

When reviewing the CKDs (private equity funds listed on the stock market that invest in Mexico) in amount and number, the real estate, infrastructure, energy, private equity and debt sectors stand out.

With an IRR greater than 10% in pesos, the real estate, private equity and infrastructure sectors stand out with the highest number of CKDs. In the real estate CKDs (7), those of IGS (3), FINSA (1), FINSA / Walton (1), Artha (1) and Alignmex (1) stand out. Private equity (4) includes IGNIA (1), Dalus (1), Northgate (1) and ACON (1). In the Infrastructure CKDs (3) those of RCO (1), GBM Infrastructure (1), as well as Infrastructure Mexico (1) stand out.

With the lowest number of CKDs with IRR greater than 10% in the energy sector (2) is one of BlackRock (1) and Artha Energía (1). Altum (2) is in the credit sector and PMIC Latam (1) is in the fund fund sector.

Among the 32 CERPIs with an IRR higher than 10% are those of the fund of funds sector and those of private equity. Of the 21 CERPIs in the fund of funds sector, 10 of them have an IRR of more than 10% where those of BlackRock (8), Lexington Partners (1) and Blackstone (1) stand out. Among the 6 private equity funds, Glisco Discovery stands out. It is important to mention that the vast majority of these have barely called capital by 20% and the ones that have been the most are Lexington and Glisco Discovery (33 and 30% respectively).

The two CKDs that have amortized so far (AMB Capital and Promecap) neither achieved an IRR higher than 10% net for the investor in pesos. Both CKDs were born in 2010. A total of six additional CKDs to these two will expire in the coming months where only in three cases their IRR is between 8 and 9%. These IRRs will continue to change with the independent quarterly valuations made by CKDs and CERPIs.

Column by Arturo Hanono

GAM Hires Jeremy Roberts as New Head of Global Distribution

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Anotación 2020-07-08 094647 — Foto cedidaJeremy Roberts, nuevo responsable global de distribución de GAM.. GAM ficha a Jeremy Roberts y le nombra responsable global de distribución

GAM Investments announced the appointment of Jeremy Roberts as Global Head of Distribution. Roberts will join the asset manager in September from BlackRock, where he was Co-Head of EMEA Retail Sales and Head of the UK Retail Business. He will report directly to Peter Sanderson, Group Chief Executive Officer, and will be a member of the Senior Leadership Team.

GAM has announced in a statement that this is a role recently created as Tim Rainsford, current Head of Sales and Distribution, is leaving the company “to take up a new opportunity”. That’s why a new role of Global Head of Institutional Solutions will also be appointed to assume the responsibilities of Rainsford together with Roberts.

“I’m thrilled to be joining GAM as Global Head of Distribution in September. GAM has an extremely strong management team, a great suite of active products and an innovative, client-centric culture and therefore I’m really looking forward to joining such a talented group of people”, said Roberts, who has 20 years of experience in the industry.

Meanwhile, Sanderson claimed to be delighted with Roberts joining the company. “His leadership experience, enthusiasm and his passion to deliver outcomes for clients make him a great fit for GAM. I am excited to welcome Jeremy to the firm to help us further build on our strong distribution capabilities. I would also like to thank Tim for his contribution to the firm and to wish him all the best for the future”.

Allianz Global Investors Teams with Virtus Investment Partners in the U.S. Retail Market

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Captura de pantalla 2020-07-07 a las 14 — . Pexels

Allianz Global Investors announced a strategic partnership with Virtus Investment Partners that will focus on enhancing both firms’ growth opportunities in the U.S. retail market to existing and potentially new clients.

AllianzGI stated in a press release that Virtus will become the investment adviser, distributor and/or administrator of their approximately $23 billion in open-end, closed-end and retail separate account assets. Meanwhile, AllianzGI’s teams will continue to manage the strategies in a subadvisory capacity, providing continuity for their U.S. retail clients.

Also, their Dallas-based Value Equity team, which manages approximately $7 billion of the assets, will join Virtus as an affiliated manager. The partnership also provides for future joint product development of investment solutions for retail clients in the U.S.

The asset manager pointed out that partnership will enhance Virtus’ offerings, giving it access to AllianzGI’s “deep, global investment expertise while expanding AllianzGI’s access and presence in the U.S retail markets”.

“This new partnership is strategically meaningful for us in terms of scale, fit and growth potential,” said George R. Aylward, President and Chief Executive Officer of Virtus.

Tobias C. Pross, Chief Executive Officer of AllianzGI stated that the partnership is “truly complementary” and will allow them to focus their U.S. distribution efforts on the Institutional, Insurance, Sub-Advisory and Non-Resident markets, “which are more closely aligned with our strengths in other markets”, he said.

Based on current asset levels, the partnership will increase Virtus’ mutual fund assets under management by approximately 40% to $54 billion and its total to $128 billion.

Sustainable Success Stories

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Sometimes, setting goals is the easy bit. The hard task is actually implementing them. Over the last two years, we have been examining how to integrate Sustainable Development Goals (SDGs) into our investment-decision-making approach for listed markets. This work has taken place against the backdrop of broader efforts to set aspirations and targets for economic development, social inclusion and environmental sustainability around the world.

Building on its previous Millennium Development Goals, the United Nations (UN) has set 17 SDGs, including Affordable and Clean Energy (SDG7), Climate Action (SDG13) and Good Health and Well-being (SDG3), the areas where the most prominent SDG investment opportunities are typically concentrated. Achieving them require governments, businesses, investors and civil society to join together in taking action.

Unlike the predecessor framework of the UN’s Millennium Development Goals, the current SDG agenda explicitly calls on the private sector to deliver solutions. Many companies around the world have already started to incorporate sustainability into their business activities. The SDGs take this commitment further, calling on companies to incorporate the SDGs into their business models, innovations and investments.

In its 2017 “Better Business, Better World Report,” the 35 chief executives and civil-society members of the Business and Sustainable Development Commission identified 60 major market opportunities across the food and agriculture, urban-development, energy and materials, and health and well-being sectors.¹ Examples of business opportunities are reducing food waste, new farm technologies, affordable housing, energy-efficient buildings and public transport.

Which is all well and good, but how can such thinking be integrated into a coherent investment approach? Having done so for quite a while, we can tell you that it is by no means straightforward. Our work included research originally published in April 2018 outlining our proprietary methodology as to how best to invest through an SDG lens.² During the current year, we have enhanced that methodology to deliver more granularity and asses not just issuers’ positive contributions but also their negative ones. With it, we believe that we can now deliver a more complete picture of an individual issuer’s overall net contribution to the SDGs.

Our investment universe for this analysis is the MSCI AC World Index. Within this index, we assess where companies’ product and services are contributing the most to specific SDGs. We find that company activities are typically clustered around five SDGs, namely Climate Action (SDG 13), Quality Education (4), Good Health and Well-being (3) as well as Responsible Production & Consumption (12). However, within the sectors, the exposure to the different SDGs varies substantially.

We start identifying companies with revenues positively linked to SDGs and they then face additional scrutiny through a risk-control layer designed to identify true leaders. Our analysis shows that most of the industries focus their efforts on contributing to SDG 13 (Climate Action). However, this reveals significant variations both within and across sectors.

When examining the results from our in-depth analysis, we find that the sub-sectors that have the highest contribution to the SDGs are within healthcare, technology and real estate. By contrast, the sectors with the lowest share of “True SDG leaders” and “SDG leaders” are energy and communication services.

In spite of norm violations in product safety which penalizes the SDG rating across the healthcare sector, both the sub-sectors of pharmaceuticals, biotechnology & life sciences and health care equipment & services have high proportions of “true SDG leaders” and “SDG leaders” (81% and 82% of the market cap in their sub-sectors respectively).

In the IT sector, all three sub-sectors have a high proportion of SDG leaders. We find that IT products are typically deployed for energy-efficiency purposes and are associated with SDG13; the same also applies to certain devices in the semiconductor sub-sector.

In the food and beverages sub-sector, we often observe a lower exposure to the SDGs than one might have expected. These companies are contributing to the SDGs, but nevertheless have disappointing ratings due to their net negative SDG contribution particularly to SDG 2 (Zero Hunger – Nutrition). This includes companies producing soft drinks, confectionary, desserts, red-meat-based products and highly processed foods products.

Last but not least, most of the companies in the communication-services sector have little to no positive SDG revenue. As a result, and even though many companies may score highly in terms of ESG quality they will be marked down on an SDG basis, achieving an SDG rating of “D” at best. By contrast, SDG leaders are rated “A” or “B.”

So, what does it all mean? Our analysis illustrates the usefulness of having a formal framework to assess issuers across consistent criteria sets in deriving our global outlook for our sector-allocation and security-selection processes. By including ESG information in general and SDG information in particular, we aim to reduce our investment risks, capture investment opportunities and facilitate efforts to improve environmental and social challenges faced by society.

Column by Petra Pflaum, EMEA Co-Head of Equities & CIO for Responsible Investments in DWS

1. Business and sustainable Development Commission (January 2017). Better Business, Better World

2. https://www.dws.com/insights/global-research-institute/Integrating-UN-sustainable-development-goals-into-investment-portfolios/

This information is subject to change at any time, based upon economic, market and other considerations and should not be construed as a recommendation. Past performance is not indicative of future returns. Forecasts are based on assumptions, estimates, opinions and hypothetical models that may prove to be incorrect.

DWS Investment GmbH as of 6/17/20

CRC 076675 (06/2020)

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Additional disclaimer for Chile: This private offer commences on current date and it avails itself of the General Regulation No. 336 of the Superintendence of Securities and Insurances, currently the Financial Markets Commission. This offer relates to securities not registered with the Securities Registry or the Registry of Foreign Securities of the Commission for the Financial Markets Commission, and therefore such shares are not subject to oversight by the latter. Being unregistered securities, there is no obligation on the issuer to provide public information in Chile regarding such securities; and these securities may not be subject to a public offer until they are registered in the corresponding Securities Registry.

La presente oferta privada toma vigencia el date y está sujeta al Reglamento General No. 336 de la Superintendencia de Valores y Seguros (SVS), conocida como la Comisión de Mercados Financieros (CMF). Esta oferta cubre aquellos instrumentos que no están registrados en el Registro de Valores o Registro de Valores Extranjeros de la Comisión de Mercados Financieros (CMF), por lo tanto, dichas acciones no están sujetas bajo la supervisión de la CMF. Debido a que no están registrados, el emisor no tiene la obligación de proporcionar información sobre dichos instrumentos en Chile, los mismos no pueden ser ofrecidos bajo una oferta pública hasta que estén registrados en el Registro de Valores que corresponde.

Additional disclaimer for Peru: The Products have not been registered before the Superintendencia del Mercado de Valores (SMV) and are being placed by means of a private offer. SMV has not reviewed the information provided to the investor. This Prospectus is only for the exclusive use of institutional investors in Peru and is not for public distribution

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For investors in Mexico: The funds have not been and will not be registered with the National Registry of Securities, maintained by the Mexican National Banking Commission and, as a result, may not be offered or sold publicly in Mexico. The fund and any underwriter or purchaser may offer and sell the funds in Mexico, to institutional and Accredited Investors, on a private placement basis, pursuant to Article 8 of the Mexican Securities Market Law.

Without limitation, this document does not constitute an offer, an invitation to offer or a recommendation to enter into any transaction neither does it constitute the offer of securities or funds. The offer of any services and/or securities or funds will be subject to appropriate local legislation and regulation.

For investors in Brazil: The shares in the Fund may not be offered or sold to the public in Brazil. Accordingly, the shares in the Fund have not been nor will be registered with the Brazilian Securities Commission – CVM nor have they been submitted to the foregoing agency for approval. Documents relating to the [shares in the Fund], as well as the information contained therein, may not be supplied to the public in Brazil, as the offering of shares in the Fund is not a public offering of securities in Brazil, nor used in connection with any offer or subscription or sale of securities to the public in Brazil.

For investors in Panama: These securities have not been listed with the Superintendence of the Securities Market and neither has any offering, sale or transaction with them. The listing exemption has been made based on Article 83 (3) of Decree Law No. 1 of July 8, 1999 (Institutional Investors). Consequently the tax treatment established under Articles 269 to 271 of Law Decree 1, dated 8 July 1999, does not apply. These securities do not fall under the supervision of the Superintendence of the Securities Market.

For investors in Uruguay: The sale of the [Products] qualifies as a private placement pursuant to section 2 of Uruguayan law 18,627. The Products must not be offered or sold to the public in Uruguay, except in circumstances which do not constitute a public offering or distribution under Uruguayan laws and regulations. The [Products] are not and will not be registered with the Financial Services Superintendency of the Central Bank of Uruguay.

For investors in Brazil: The shares in the Fund may not be offered or sold to the public in Brazil. Accordingly, the shares in the Fund have not been nor will be registered with the Brazilian Securities Commission – CVM nor have they been submitted to the foregoing agency for approval. Documents relating to the shares in the Fund, as well as the information contained therein, may not be supplied to the public in Brazil, as the offering of shares in the Fund is not a public offering of securities in Brazil, nor used in connection with any offer or subscription or sale of securities to the public in Brazil.

Baruc Sáez has Been Named CEO of Itaú Corpbanca Colombia

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Foto cedidaBaruc Sáez . Baruc Saéz ha sido nombrado nuevo CEO de Itaú Corpbanca Colombia

Itaú Corpbanca announced the resignation of Álvaro Pimentel as Chief Executive Officer of our banking subsidiary in Colombia effective November 1, 2020. Baruc Sáez has been appointed as his replacement.

Sáez is currently director of investment banking for Itaú BBA for Latin America, based in New York. With 10 years of experience in the Itaú group, he has been responsible for consolidating and leading the regional investment banking team.

He also directed the international fixed income platform for debt capital markets, loan syndication and credit structuring. Before joining Itaú, he worked at Marathon Asset Management, Deutsche Bank, ABN AMRO and ING Barings, always in positions linked to the wholesale and investment world. He has a Master in International Economics and Finance from Brandeis University and a Bachelor from Bard College.

Pimentel will return to Itaú Unibanco in Brazil as Executive Director of Itaú Latam based in São Paulo, leading the operations in Argentina, Paraguay and Uruguay, after developing a successful process in Itaú Corpbanca Colombia for four years. This included the introduction of the Itaú brand in the Colombian market, concluding the process of technological and operational integration, and implementing the Itaú culture in the bank’s operation in the country.

Over the next few weeks and until November 1, Pimentel and Sáez will develop a splicing process, in order to carry out a successful transition. Until that date, Pimentel will continue as CEO of Itaú Corpbanca Colombia until this process is completed.

Brown Advisory: “We Have Recalibrated the Models to Include a Global Pandemic Within Our Core Portfolios”

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Entrevista Brown Advisory — Foto cedidaBertie Thomson and Mick Dillon, portfolio managers of the Global Leader fund of Brown Advisory. Brown Advisory: "We Have Recalibrated the Models to Include a Global Pandemic Within Our Core Portfolios"

According to Mick Dillon and Bertie Thomson, portfolio managers of the Global Leader fund of Brown Advisory -the asset manager that MCH Investment Strategies represents in Spain, Italy and Portugal-, this is a unique market event. As long-term investors with a bottom-up style, they argue that the crisis generated by the coronavirus will have a huge impact on economies worldwide. In this interview with Funds Society, both managers explain their view on the equity market.

Q. What conditions need to be in place for us to start seeing a recovery in the global stock markets?

A. As I write this in mid-June 2020, the NASDAQ and the MSCI All World index are close to pre-COVID levels so it seems that stock markets have recovered already. However, there have been delays in when companies might get cashflow, so shortcut valuation multiples have actually gone up.

Q. After the records that the US stock market registered over the last year, was this adjustment in valuations necessary?

A. The shock to demand means cashflows have been delayed and this recalibration of the IRRs means valuations needed to adjust. Whilst we recognize the cost of capital for the companies we invest in may have come down as interest rates have fallen, our investors still need a good return above long-term market averages. We use a 10% WACC for all investments in developed markets as we believe this is the return which our investors need per annum.

Q. What kind of stocks are best resisting this shock?

A. We believe some businesses with non-deferrable demand might be better positioned to weather this shock, or you need straight out pricing power. We have certainly seen some of our companies adapt and rise to the challenges that the pandemic has created, for example our biggest investment, Microsoft, has seen its cloud and office apps benefit from enormous take-up due to work from home sanctions as has Google’s cloud business. Roche, one of our top 10 investments, is seeing a benefit from COVID-19 testing within its diagnostics business. In financials, we have seen Deutsche Boerse benefit from a large uptick in trading volumes and volatility spiking across asset classes where it provides the leading trading, centralised clearing and settlement platforms in Europe.

Q. Is this a good time to buy?

A. It is incredibly difficult to time the market, and that is not our aim. If you have a portfolio of companies with a 25% RoIC that you own for 4 years you will get 100% return on capital. So long as the supply-side isn’t disrupted by competition and your customer keeps coming back, then over time that should deliver. We believe that long-term outperformance is possible with a concentrated portfolio of good quality companies allowing them to compound their excess economic return over a full market cycle.

Q. What is your approach in that sense? Have you made any changes in your portfolios?

A. We maintain a rigorous focus on valuation so that if you buy them cheaply enough, this should deliver attractive long-term (5 years) returns. We also view ESG research as an essential part of our investment strategy and we are now witnessing the increasing focus on these considerations by investors around the world. Recently, we have significantly added to our exposure to emerging market financials, such as Bank Rakyat and HDFC Bank, as their share price valuations started implying enormous value. As an example, Indonesia’s Bank Rakyat has played a critical role in promoting the government’s social agenda by advancing subsidized credit for rural enterprises.

Q. When taking advantage of these opportunities, special attention will have to be paid to risk management. How are you managing portfolios in this coronavirus crisis?

A. We have recalibrated all our models to include a global pandemic within our base case for all our holdings. For some companies, this can even be a benefit, for others it is a terrible disruption to their business. Using a probability weighting system helps to calibrate our IRRs to a better expected return with both base and bear cases. Nonetheless, we see a number of our investments with double digit IRRs over 5 years.

Q. We have also seen an oil crisis in the first quarter of the year. In your opinion, are there more risks on the horizon?

A. There are always more risks on the horizon, but the magnitude varies significantly. We have held no investments categorised in the energy sector since the launch of this Fund. However, we have recently added Aspen Technology to the portfolio, which gives us some exposure to the energy sector. We do believe volatility can create opportunities for long-term investors and we have found in the middle of the crisis the chance to invest in a couple of new companies –like Autodesk and Intuit– that had been on our ‘ready-to-buy list’ for years but we really didn’t think we would get the right price. Suddenly in the midst of the crisis they reached prices giving us tremendous protection and we are now the proud part-owners of two terrific businesses.

Q. What is your outlook for global equities this year?

A. We are absolutely long-term investors and for us that means 5 years. We consider multi-year IRRs and have a 10 year DCF to take us away from short-term swings and to a more steady state environment. Whilst we don’t know about the rest of this year, we have tremendous confidence in our portfolio of high RoIC companies over a 5-year horizon.