Wikimedia CommonsPhoto: 1971markus. Three US Cities, Amongst the Best Ones to Live In
If you’re looking to live in a place with affordable housing, ample work opportunities and a reasonably pleasant environment, it’s time to pack your bags and move to London.
According to a global survey conducted by Resonance, a consulting group, London is the best city to reside in 2019. That’s thanks to having all the things mentioned above and more.
But if you want to stay in the United States, you’ll be happy to know that three cities in this country were included in the top 10.
While Miami ranked 26th worldwide, New York City came in third. Chicago and San Francisco ranked seventh and tenth respectively.
To reach its conclusion, Resonance described the profile of 100 of the cities with the best performance in the world based on 23 different factors, including the affordability of housing and employment opportunities, the quality of the environment (both natural and artificial), the quality of institutions, diversity, economic prosperity and the quality of culture, gastronomy and nightlife.
The top 10 is made up of:
London, United Kingdom
Paris, France
New York, USA
Tokyo, Japan
Barcelona, Spain
Moscow, Russia
Chicago, USA
Singapore, Singapore
Dubai, UAE
San Francisco, USA
If you’re thinking about making a change, or just want some inspiration to travel, check out the full list here.
Foto cedidaClaudio Izquierdo, courtesy photo. PARTICIPANT Capital will Share its View on Real Estate Assets During the Investment & Golf Summit
According to a major study called “The Return on Everything” that spanned more than 140 years, real estate has outperformed equities historically. During the sixth edition of the Investment & Golf Summit organized by Funds Society PARTICIPANT capital will present this asset class and explain its advantages and diversification properties within investment portfolios.
Real estate investments provide stability in volatile markets and increase portfolios’ risk-adjusted returns. In the past, only institutional investors had access to direct investing in real estate projects. The investment landscape, however, is changing, unlocking the opportunities of private real estate equity investing for individual investors.
According to modern portfolio theory, adding uncorrelated assets to a portfolio increases risk-adjusted returns. Private real estate funds are an ideal addition to the portfolios of long-term investors because they have a low correlation with stocks and bonds.
Individuals allocate an average of only 5 percent of their portfolios to alternative assets, including real estate. The optimal amount is 10 to 20 percent. As a result, institutional investors that have a diversified asset-class mix outperform their peers.
Claudio Izquierdo,Managing Director of Global distribution, will be presenting this asset class on behalf of PARTICIPANT during the event. Izquierdo brings all of his international business acumen and expertise to bear, allowing for strategic growth in the global development and investment space. Izquierdo’s strong history of success with Latin American investors and high net worth individuals provides insight and authenticity for the PARTICIPANT Capital Advisors team. Izquierdo is a graduate of Florida International University and earned a degree in finance.
As an affiliate of RPC Holdings, PARTICIPANT Capital offers investors opportunities to join in lucrative, private real estate development at an at-cost basis beginning with land acquisition to which RPC adds ongoing value through development, management, and monetization.
The sixth edition of the Investments & Golf Summit organized by Funds Society will take place between May 6 and 8 at the Streamsong Resort and Golf with the portfolio managers of the leading companies within the industry. For more information and to ensure your place, follow this link.
Foto cedidaRichard Brown. Janus Henderson Will Talk About Global Equities at the Investments & Golf Summit
Richard Brown will present Janus Henderson’s Global Equity Market Neutral Strategy during Funds Society’s2019 Investments & Golf Summit.
The Janus Henderson Global Equity Market Neutral Fund aims to generate a positive absolute return over rolling 12 month periods, in all market conditions. The Fund employs a market neutral approach through high conviction pair trades identified through fundamental analysis. The Fund is able to draw upon the stock picking ability of experienced senior investment professionals within Janus Henderson Investor’s equity division, thereby blending a range of investment styles and processes.
The Fund targets a low level of volatility and low drawdowns. The fund utilizes a systematic risk parity portfolio construction process to ensure the Fund is balanced and each pair trade contributes equally to target volatility. Portfolio construction is overseen by a dedicated portfolio manager, as well as independent risk teams. In addition our fund provides a diversified exposure across geography, sector and market cap.
Richard Brown is a Client Portfolio Manager of European equities at Janus Henderson Investors, a position he has held since 2015. Richard joined Henderson in 2007 as a product specialist and began working on the Pan-European equities team as an investment specialist in 2009. Richard graduated with a BSc degree (Hons) in mathematics with management studies from Sussex University. He holds the Chartered Financial Analyst designation and the Investment Management Certificate (IMC). Richard has 12 years of financial industry experience.
Janus Henderson has over 328 billion dollars in assets under management by its over 2,000 employees in 28 cities around the world.
The sixth edition of the Investments & Golf Summit organized by Funds Society will take place between May 6 and 8 at the Streamsong Resort and Golf with the portfolio managers of the leading companies within the industry. For more information and to ensure your place, follow this link.
Pixabay CC0 Public DomainFoto: SteenJepsen. Risk Control and Diverse Coupon Structures: ASG Capital’s approach to Investing in the Subordinated Debt Market
Controlling risk and opting for different coupon structures to manage monetary policy changes in the US and Europe are elements ASG Capital’s focuses on in order to successfully invest in subordinated debt. “We are experiencing unusual times: there has been a lot of intervention by the central banks, so we have to bank on a flexible strategy,” says Steven Groslin, Executive Member of the Board of Directors of this asset management company, where he also co-manages various funds.
In a webinar organized by SharingAlpha, Steven Groslin, together with Ygal Cohen, President, Executive Director and Founder of ASG Capital, delve into this instrument’s key points, and more specifically the strategy of its flagship fund: LFP ASG Dynamic Income Fund. They insist on the importance of managing risk, both general fixed income market risk, for example taking into account the recent monetary changes over the last few years in the US and Europe, and specific risks linked to this kind of instrument, the subordinated bond.
Groslin outlined how their focus is on “blue chip” corporations and on “systemic” entities. As a consequence, they invest mainly on investment grade issuers. At the same time, they are committed to maintaining a diversified portfolio with no more than 3% allocated one any one instrument. Currently, 90 positions are held in the fund.
According to him, the fund’s uniqueness comes from the different types of coupons held within their portfolio: fixed rate coupon (10,4%), floating rate coupon (22,4%) and, above all, fixed rate that become floating rate after a future call date (67,2%). The main advantage of being overweight in this last category is that it allows them to “optimize their positioning, based on the interest rates.”
Risk Control
Groslin points out that there is no additional risk over and above that which is inherent to the fixed income subordinated debt market: “there are no derivatives, there is no leverage and there are no repos.” If a currency risk appears, this is hedged so as to convert the master portfolio into a “pure USD” investment vehicle.
“Risk management is essential in order to be able to benefit from the attractiveness of this type of asset”, adds Cohen. He points to alternative investment solutions providing a similar level of returns, such as the emerging debt markets or high-yield debt market. He considers the level of risk of these two investment markets is “substantially higher” than the one proposed in their subordinated investment strategy.
He underscores the current average carried yield return of the fund at over 6%. In addition to this carried yield, there is a “capital gain component” for an additional potential return thus making the fund an attractive investment proposition.
Their investment approach is bottom-up. Issuers are selected for their strong economic fundamentals: “90% come from the investment grade space”, he states. Once a corporation has been selected as an investment target, ASG chooses the debt instrument with the best risk-reward ratio of this same issuer.
Cohen confirmed how they mainly invest in OECD market, preferring to stay away from the emerging space so as to avoid dealing “with potential geopolitical risks.” Their main geographical exposure is as follows: 37,1% of their issuers are based in Eurozone, 29,7% of them in European non-Eurozone countries, and 23,3% in North America.
According to Cohen, geographical diversification allows them to have access to a greater diversification in terms of different economic sectors. The financial sector represents (60,5%) of the fund, (banks are the main issuers of subordinated debt instruments), followed by an allocation to the asset management and insurance sector (20,2%), and the industrial sector further behind (5,8%).
As the fund is managed in USD, this allows them to have more investment opportunities than with any other competing currency. Another factor making their strategy “unique”. Few funds are specialized in this way in Europe and the US. Their investment solution meets the increasing need for yield of many investors such as: retail, family offices, private and institutional banks….
The strategic investment strengths outlined above are brought together to generate investment value over time. Their management of the Fixed Income assets follows their unique “prudent, flexible, and transatlantic” approach, concluded Ygal Cohen.
Foto cedida. MMT – Modern Monetary Theory. Should We Bear it in Mind? Implications for the Financial Markets
This recent heterodox economic theory has many financial market participants spooked. I will try to explain what it entails (it takes some effort to understand) and the potential impact it could have on the various markets should it be put into practice, chiefly because it shifts our understanding of how the economy works (inflation, interest rates, debt, currencies, etc). Also, regardless of the fact that its strict implementation may turn out to be extremely complicated in real life, it is a good idea to try to understand what it is all about in the event that an attempt is made to partially adopt it. Fundamentally, it is an approach to economic management with no ideological basis. However, it is true that increasing numbers of economists with ties to the left are arguing in favour of putting it into practice.
MMT is based on two premises: 1) a country that issues its own currency can print money limitlessly without the risk of default; and 2) public spending is independent of financing and it has the ultimate goal of guaranteeing full employment.
The primary message being sent is that monetary policy makes little sense because it involves wasting real resources by associating it with high rates of unemployment throughout the cycle. Fiscal policy, therefore, is the centre of economic management for a country. Public spending should focus on maintaining full employment, while taxes should be used to slow the economy when necessary and to combat inflation. Furthermore, public debt would be used to manage money supply, interest rates and the level of capital investments. And this would all be with a floating exchange rate regime.
Inflation is seen as a consequence of having reached the country’s maximum productive capacity and, therefore, it marks the theoretical limit of public spending. In this case, a reduction to public spending or a tax increase would be implemented.
Why is this theory growing in support? My feeling is that, on the one hand, the world has gotten used to a model of continuous stimuli and, on seeing that QE has reached breaking point (we need only look at the mess in which the markets found themselves in the last quarter of last year due to fears about QT), at such a late stage in the economic cycle, the debate about turning the screw from a fiscal policy perspective is necessary for the political class. And on the other hand, MMT directly targets one of the greatest negative impacts of QE, the growing inequality at certain levels of society – another handy argument for the political class.
To try to discern the impact that MMT could have on the financial markets (and this is by no means an exhaustive analysis), we could start by looking at the large increase in public spending to meet the mandate of achieving full employment. This is public spending financed by printing money, which lowers interest rates. In this scenario, capital and financial investments would surge. The beginnings of inflationary pressures would start to be felt and the government would begin increasing bond issues to raise the interest rates. At some point, interest expenditure would exceed nominal growth. In all likelihood, inflation would not fall, so few investors would want this debt. A good many investors would go abroad, which would speed up a sharp devaluation of the currency and bring about the need to print yet more money. Here is where we would begin to see massive hyperinflation. As Minsky said, anyone can create money, the problem lies in getting it accepted.
The effects on debt and the currency are clear, but what about equities? It is obvious that because equities are real assets, they would behave better than nominal assets. But it may be better to invest outside the country, also in real assets, bearing in mind that the government’s need to raise taxes could even come to be considered confiscatory.
As I mentioned, it is good to consider that the application of MMT would, to begin with, mean the creation of a tax authority (similar to a central bank) that is independent of the government, something that seems very difficult. But, in any case, we can see partial efforts being made to put the theory into practice, chiefly through fiscal stimulus policies that are partially or fully monetised. Here it will also be important to invest in real assets (due to inflation expectations), such as the stock market, but by carefully selecting the securities with pricing power capacity.
Foto cedidaLuiz Ribeiro, CFA - Managing Director DWS
Head of Latin America Equities and Lead Portfolio Manager of LatAm and Brazil Equity Fund. Luiz Ribeiro, DWS:“Once the reforms are approved, we could see a ’rerate’ in the Brazilian equity markets similar to the one experienced in India”
The social security reform proposed by Bolsonaro’s government and its chances of success have the whole region in suspense. Luiz Ribeiro, CFA Managing Director Head of Latin American Equities of DWS, is an expert in the field who shared in an exclusive interview with Funds Society his vision on this and many other topics.
Ribeiro informs us that DWS has recently changed its recommendation for emerging markets to overweight, due to, on one hand, the change in the FED’s tone that is willing to maintain low rates for longer and, on the other, the growth expectations for emerging markets compared to developed markets that are currently at the end of the cycle.
“Market consensus for earnings growth in EM in general is 5% for 2019 and 12% for 2020. If you look at Latam is 22% this year and 10% next year. You don’t see that in developed markets any more, it is difficult to find”, emphasizes Ribeiro.
For Ribeiro, the situation in Brazil explains the fall in expected earnings in the Latin American region from 2019 to 2020, although he believes that it is very likely that the market consensus will change if the reforms are approved.
The Bolsonaro’s government change
Ribeiro stresses the important change that Bolsonaro’s new government has meant for the country since it is the first center-right government since the end of the dictatorship. “We have an ultraliberal economist leading the economy now, we never had that before. The economic team led by Paul Guedes is very strong and as such he has even been able to attract people from the previous government who are excellent technicians. The team is great with a liberal mindset and that makes a difference” explains Ribeiro.
Among other things, he highlights the importance that the new economic team gives to the fiscal deficit and to reducing the size of the state in general, which to Ribeiro, are the main challenges the Brazilian economy is facing. However, approving these reforms is not going to be an easy process, since, for example, the social security reform is a constitutional change that requires the approval of the 3/5 of the lower house.
In spite of everything, Ribeiro is optimistic and trusts the capacity of the Brazilians to react when they are against the wall. “Both this government and the previous one have done a very good job explaining the reasons why we need to do it. Among the population there is a growing consensus that this need to be done. “
Reforms and savings proposal
Spending on social security accounts for more than half of government expenditure and is growing at a good pace. “We believe that in a few years it can reach 100% if we do not stop that growth,” says Ribeiro. Thus, the reform presented by Bolsonaro is a very aggressive reform in terms of objectives, with expected savings (less expenses), even higher than what the market expected and above the 500.000 million reals of the reform presented by the previous government.
“The proposal considers a saving of about 1.1 billion reais for the next 10 years. It is a very comprehensive reform that, if approved, assumes that there will be no more worry in the next 10 years. Maybe it’s a negotiation tactic and this number will be diluted somehow. Anything above 600,000-700,000 million reals is great in our opinion. “
Among the challenges that the reform faces, Ribeiro points out the unfairness of the system that benefits a few, and that minority is very well represented in Congress and therefore can exert much pressure in the lower house. To this we must add that the government is using a new strategy that implies not giving anything in return in the negotiations and implies that the different parties give in for the common good. “We do not know how this will work, it is generating a lot of noise in the congress and the parties are mentioning they are not happy “
The reform needs 316 votes to be approved in Congress, and the market currently discounts that it is approved in June to which Ribeiro adds that “if it is delayed, the market in the short term will suffer”.
Privatizations and tax reform
But this is not the only important reform that the Brazilian government must carry out. Privatizations and tax reform are also very necessary, according to Ribeiro. Thus, he expects that a value of privatizations “between 90,000-100,000 million dollars in the next three years is feasible” despite the fact that Guedes has estimated the value of state companies at 1 billion reais.
Some of these privatizations have already been carried out such as the subsidiaries of Petrobras and the recent auction of 3 groups of airports, thank to which, the state obtained 2,000 million reais at a price 10 times higher than the minimum price and with a significant participation of foreign investors, what has been considered a success. But there’s still a lot to do.
Regarding the tax reform, the government’s objective is to simplify the system to reduce tax evasion, in addition to granting more collection power to municipalities and regional governments. Thanks to this, Ribeiro affirms that the government “is going to receive a lot of support from mayors and regional governments to do it. This also helps social security reforms because they will put pressure on their congressmen to vote in favor of the reforms. “
Equity markets
Specifically, and turning into the equity markets, Ribeiro estates that local investors are more optimistic than foreigners, as for example shows the increasing percentage of mutual funds portfolios that are allocated to equities. However, he points out the importance of investment as an element of growth and estimates that it will not pick up until the uncertainty regarding the reforms is mitigated, so he expects that “Brazilian economic activity will remain slow during the first half of the year and only pick up during the second half of the year. “
With respect to market valuations, the PE ratio of the Brazilian market is more or less in line with the historical average of the last 4 years, which for Ribeiro means “it is not a bargain, but it is not expensive”.
Ribeiro compares the current situation in Brazil to what happened in India after the elections and believes that there is a possibility of “rerate” in the Brazilian market. “Once the reforms are approved, the risk perception goes down and we have probably a higher growth that will lead the markets to trade at a higher PE than before. 13-15 times benefits is feasible if the reforms are approved.”” We will have a market that will trade at higher multiples together with higher earnings. That combination will lead to good returns for investors and the equity markets, we think “, concludes Ribeiro.
Regarding their preference for sectors, Ribeiro explains that because they are positive regarding the Brazilian economy, they like domestic companies. The consumer sector, “utilities”, and smaller players in the Fintech segment are among their favorites.
Finally, Ribeiro acknowledges that volatility will remain high in the region for the next 3-6 months, but in his opinion “exploring volatility is positive, bargains may appear from time to time. If you know how to navigate that volatility is not necessarily negative, “concludes Ribeiro
Pixabay CC0 Public Domain. Interest Rate Differentials Increasingly Tight
March 2019 saw 10-year bunds dipping into negative yield territory. The difference between German sovereign short-term rates (2 years) and the long-term ones (10 years) now stands at 0.50%, half the level of a year ago. A similar move can also be seen in US government debt over the same period.
Several factors lie behind these recent rate changes. Central bank monetary accommodation continues in certain parts of the world, notably in Europe and in Asia. In addition, there is a growing anticipation of slowing world economic activity which would indicate that future global interest rates are likely to remain low. With longer dated European government debt now at around 0%, these bonds join the already significant stock of Japanese sovereign instruments currently showing similar levels of yield.
European and Japanese bond returns are dwindling. As a consequence, more of the world’s savings pool could migrate towards US Dollar (USD) denominated debt assets in search of the positive yield these instruments still provide. If these capital flows were to rise significantly in the coming months, the effect would be to drive down US interest rates from their present levels.
In sum, both short- and long-term yields in Europe and Japan are converging towards 0%, while at the same time the differential in interest returns between large economic blocs is being reduced. In this kind of environment, US Dollar bond investors will have to seek out yield where they can find it.
This generalized ‘world hunt’ for yield could lead to a tightening of spreads between private sector debt and US government bonds. Subordinated dollar instruments (especially those of large systemic issuers) stand to benefit very favorably from this up and coming trend.
Foto cedidaGreg Tournant, courtesy photo. Allianz GI Will Talk About Active Management for Structured Products at the Investments & Golf Summit 2019
With one of the largest stand-alone equity-index options managers team in the field, at Allianz GI they use simple, liquid instruments to pursue returns regardless of the performance of the S&P 500 Index. Their nine-member investment team is tenured and experienced, managing options-based strategies for institutional investors since 2005.
On May 7th, during the Investments Day at Funds Society’s Investments & Golf Summit Greg Tournant, Managing Director, Portfolio Manager and CIO US Structured Products, will talk about the benefits of this asset class.
He joined Allianz GI in 2002. He is also head of the Structured Products team. Tournant has 23 years of investment industry experience. From 2007 to 2008 he served as co-CIO at Innovative Options Management, where he worked with the team in a sub-advisory capacity. Before that, Tournant worked at Eagle Asset Management, McKinsey & Co. and Raymond James. He has a B.S. from Trinity University and an M.B.A. from Northwestern University.
Allianz Global Investors has over 730 investment professionals in 25 offices worldwide and manages $577 billion in assets for individuals, families and institutions.
For more information and/or to register for the Investments & Golf Summit 2019, follow this link.
Foto cedidaMatthew Lovatt, Global Head of Framlington Equities, AXA IM. AXA IM Will Talk About Opportunities Created by Digital Disruption at the Investments & Golf Summit
AXA IM will talk about investment opportunities in the evolving economy as a result of the digital disruption at Funds Society’s sixth Investments & Golf Summit.
Changing demographics and technological disruption have accelerated the trend towards thematic investment in recent years as the historical boundaries of sectors have become increasingly less relevant. According to the firm, global equity unconstrained investors looking through this thematic lens can clearly identify the disruptors from the disrupted; or as they term it the ‘old economy,’ where companies maintain more traditional approaches, and the ‘evolving economy,’ which consists of firms who have embraced these fast changes.
AXA’s Digital Economy strategy is focused on the e-commerce value chain and digital transformation of traditional businesses.
Matthew Lovatt, Global Head of Framlington Equities, AXA IM, will be at the summit to explain everything regarding the strategy. Appointed in June 2018 as Global Head of Framlington Equities, the active stock picking expertise of AXA IM, Matthew is also a member of the Management Board of AXA IM. Matthew has 30 years of investment experience and joined AXA IM in 2004. He started his career in Equity Research at Henderson, before developing an equity hedge fund business. He holds a BSc in Economics with Statistics from Bristol University.
AXA Investment Managers (AXA IM) is an active, long-term, global multi-asset manager. We work with clients today to provide the solutions they need to help build a better tomorrow for their investments, while creating a positive change for the world in which we live. With approximately $860 billion in assets under management as of the end of September 2018, AXA IM employs nearly 2,400 employees around the world and operates out of 30 offices across 21 countries. AXA IM is part of the AXA Group, a world leader in financial protection and wealth management.
The sixth edition of Funds Society’s Investments & Golf Summit will take place on May 6th-8th at the Streamsong Resort and Golf. For registration follow this link.
Foto cedidaChristophe Machu, courtesy photo. M&G to Talk About Multi-Asset Allocation at the Investments & Golf Summit
The sixth edition of Funds Society’s Investments & Golf Summit will take place on May 6th-8th at the Streamsong Resort and Golf.
On May 7th, at the Investment day, participants will be able to take the opportunity to discuss about Global Markets as well as the latest portfolio management strategies and investment ideas from top-performing Asset Managers.
Amogst them is M&G’s Christophe Machu. He will talk about the benefits of multi-asset allocation, and how one can achieve a flexible asset allocation process that looks to manage risk and volatility by constructing a diversified portfolio that can invest in a variety of asset classes.
Machu joined the Multi Asset and Convertibles teams as an associate investment specialist providing support for M&G’s multi-asset fund range and the M&G Global Convertibles Fund in September 2014. He initially joined M&G in 2012 as a sales support in Paris before moving into the International Marketing team in London. Christophe has an MSc in risk and finance from EDHEC Business School.
With over 85 years experience, M&G is one of Europe’s leading asset managers.
For more information and/or to register for the Investments & Golf Summit 2019, follow this link.
