Foto cedidaDavid Norris, courtesy photo. Twentyfour AM Will Talk Global Fixed Income at the Investments & Golf Summit 2019
For Twentyfour Asset Management, a multi-sector bond strategy provides an attractive level of income and an opportunity for capital growth by investing in a broad range of bonds from the diverse fixed-income universe.
On May 7th, the company will expose during Funds Society’s Investments & Golf Summit. They will talk about the benefits of a highly flexible approach, and how it provides them exposure to debt instruments from the whole range of fixed-income assets, including investment-grade bonds, high-yield bonds, government bonds and asset backed securities.
Both David Norris, Head of US Credit, and John Magrath, Head of Distribution will be at the event.
Based in London, TwentyFour AM is part of Swiss Vontobel Group.
For more information and/or to register for the Investments & Golf Summit 2019, follow this link.
Wikimedia CommonsKevin Daly. Courtesy photo. Aberdeen Standard Investments: "Frontier Markets will Generate Good Returns: The Headwinds they Faced in 2018 Have Disappeared"
Aberdeen Standard Investments currently manages 13 billion dollars in debt from emerging countries. Of these, 195 million come from its border market strategy, which has been underway since September 2013. “There are attractive profitability opportunities in this product by structuring a diversified portfolio of corporate and sovereign bonds in hard currency and debt in local currency,” states Kevin Daly, the asset management company’s Senior Investment Manager in emerging market debt.
In an interview with Funds Society, he assures that this approach allows them to minimize the risks of losses, as they were able to do in 2018, and, at the same time, capture the upside risks, as they forecast for 2019. In that regard, since the beginning of the year, Daly is convinced that the frontier markets will generate good returns during the coming months, since “the headwinds they faced in 2018 have disappeared,” such as the strong growth of the United States, the Fed’s harshness, and concerns about the commercial war.
Daly supports this with the performance of the Aberdeen Standard SICAV I – Frontier Markets Bond Fund, a sicav fund registered in Luxembourg. “So far, everything is going well: it has delivered returns of about 6% so far this year.” The fund obtained a gross negative return of -3.50% in 2018, outperforming the emerging general debt “and most other types of assets.” That figure rises to 8.12% if the average returns since the fund’s creation are taken into account.
The management company points out the short duration of this type of asset and of the fund, with an average of 3.4 years. The fund’s main attraction for investors lies in its ability to generate high revenues: its yield at maturity is 10.1%.
“We manage it with a total-return approach, without comparing ourselves with any reference index and we are committed to a diversified portfolio, which has generated attractive risk- adjusted returns since its creation,” the asset manager points out. According to his account, by not resorting to any reference index, they are not overweight or underweight in countries or regions “per se” but have an allocation limit of 10% per country and another 3% for corporate issuers.
Therefore, the positions of “greater conviction” are those that are around 5% and that, at present, would be countries like Egypt, Nigeria and Ecuador. Daly reveals that the first two provide double-digit returns with stable currencies. Ecuador, meanwhile, “is our strongest debt position in hard currency, as we believe that the country will benefit from the International Monetary Fund’s new support program.” In his opinion, this should help reduce its dependence on market financing.
As for the companies, he points out that there is “great value” in Nigeria and Ukraine. All in all, the portfolio is composed of 68% for debt in hard currency, 14% for corporate debt and 32% in debt in local currency, such as Egypt’s or Nigeria’s. Daly is convinced that the three assets offer attractive value.
The fund is also a good diversification option for Latin American investors who have local individual bonds. For Aberdeen Standard Investments, it can help reduce the volatility of their portfolios and, at the same time, continue to offer high performance.
When asked about the risks faced by these markets, he points out that the largest of them is “idiosyncratic risk”, since frontier bonds and their currencies have historically had a low correlation with US Treasury securities. “Addressing country risk is key to the performance” of this product, says Daly, who says there is an “information gap” when investing in frontier markets.
“Our experience investing in them, which requires continuous diligence and frequent trips to these countries, allows us to take advantage of that gap when it comes to structuring the portfolios,” he says.
Foto cedidaPhoto BIVA. Vanguard is Preparing to Launch its First Mexican Domiciled ETF
Vanguard is seeking approval from local regulators to launch its first Mexican‐domiciled ETF that will seek to track the FTSE BIVA Index, providing investors access to a broad Mexican equity exposure.
This ETF will be the first local investment vehicle launched by Vanguard in Mexico and will complement their current ETF suite of international ETFs cross‐listed in the Mexican International Quotation System.
“The launch of this ETF reinforces Vanguard’s long‐term commitment to the Mexican market. Mexican equities are an important asset class in local portfolios and we strongly believe an ETF structure will enable our clients to efficiently access the local equity market. This product is unique as it seeks to track an inclusive and diversified index while maintaining a strong liquidity profile. Given its inclusiveness, this ETF will best serve investors – from large pension plans to individual investors ‐‐ who are looking to take a long‐term strategic allocation in Mexico.” said Juan Hernandez, Country Manager Vanguard México.
“This is a very exciting time for BIVA, as we are fulfilling our objective of contributing to the promotion, growth and modernization of the Mexican stock market. Receiving Vanguard along with their first local ETF, represents a great honor and reinforces our commitment towards providing investors with innovative products, as well as giving them exposure to companies of all sizes, not just the large ones, but medium and small as well.” Said María Ariza CEO BIVA.
The FTSE BIVA Index is designed to reflect the performance of liquid Mexican companies. The benchmark currently provides an unbiased representation of the Mexican equity universe, including FIBRAS (local REITs). All Mexican equity securities listed in the country are considered, allowing for new issues to be included as the local equity universe expands over time. This enables smaller companies to be part of the index contributing to a broader market liquidity.
BIVA, which is part of CENCOR, is considered among the most advanced stock exchanges due to its technology provided by NASDAQ who powers more than 70 markets worldwide, providing state‐of‐the‐ art standards. Its flagship index FSTE BIVA offers a modern, inclusive and representative benchmark of the Mexican market, comprised by companies of all sizes.
Vanguard has been conducting business in Mexico for more than 10 years. In 2017, the firm opened its first office in Mexico City to better support the Mexican Investors.Vanguard currently offers more than 70 US‐domiciled and UCITS ETFs cross‐listed in Mexico, and is the second largest ETF manager in the country.
CC-BY-SA-2.0, FlickrDanan Kirby, courtesy photo. Thornburg Investment Management Will Talk About MultiSector Fixed Income at the 2019 Investments & Golf Summit
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 Danan Kirby, CFA, Portfolio Specialist at Thornburg Investment Management. He will talk about how multisector bond portfolios seek income by diversifying their assets among several fixed-income sectors, usually U.S. government obligations, U.S. corporate bonds, foreign bonds, and high-yield U.S. debt securities, and asset-backed securities.
Danan Kirby works with Thornburg’s investment team and serves as a liaison for the team and key investment decision makers, communicating process and results of the firm’s investment strategies. He joined Thornburg in 2016.
Prior to Thornburg, Danan served as portfolio manager for the Strategic Growth Bancorp family of banks, managing various strategies for institutions and individual investors. Before that, he was a financial institution specialist with the FDIC. He is also a veteran of the U.S. Army. Danan graduated summa cum laude from the University of New Mexico’s Anderson School of Management with a BBA, concentrating in finance. He is a CFA charterholder.
For more information and/or to register for the Investments & Golf Summit 2019, follow this link.
Courtesy photo. If Things Take A Turn For The Worse, Are There Expansionary Measures To Follow Those Adopted By The Central Banks? Modern Monetary Theory
At the start of 2019, we saw a rally in risk assets thanks to the fact that investors have been focused on the more dovish signals coming from the central banks rather than on the weakening growth trend. Recently, the OECD warned that economic outlooks were now weaker in almost all G20 countries, particularly in the euro zone, with the heaviest negative impact being seen in Germany and Italy. The organisation also lowered global growth by -0.2% to 3.3%.
In the last meeting of the ECB, Draghi indicated a weak environment full of uncertainty: the rise in protectionism that has brought about a slowdown in trade and global production; political risk, with an emphasis on Brexit; and the vulnerability of the emerging markets, in particular China. In this regard, Draghi announced new measures. These included maintaining rates unchanged until at least the end of 2019 (in a previous address there had been talk of this going on until the summer. As it is, Draghi will be the first ECB president not to change rates as his mandate ends in October), and a further series of targeted longer-term refinancing operations (TLTRO-III), which would begin in September 2019 and run until March 2021 with a maturity of two years and with a view to facilitating the continued flow of credit in the economy.
The extraordinary measures implemented by the main central banks to overcome the financial crisis are set to take hold. The Fed, which had begun monetary normalization, stopped the expected rate hikes in their tracks and it intends to bring an end to its balance sheet reduction sooner than planned; the Bank of Japan is continuing with quantitative easing and has kept rates around 0% for the last 10 years; and the ECB is implementing new measures in the hope of making the euro zone economy more resistant.
Although the central banks remain cautious in sticking to monetary normalisation, it seems that the available margin is smaller than when they began. Note the evolution of Draghi’s words, which have gone from his famous saying in 2012: “The ECB will do whatever it takes to preserve the euro, and believe me, it will be enough”, to his words in the last ECB meeting in March 2019 with reference to the economic context: “In a dark room you move with tiny steps. You don’t run, but you do move”. Can you see the difference? It was possible to run at the start, but now we can only take tiny steps.
Better coordination between fiscal and monetary policy would be helpful to the economy during a slowdown. In the US, Trump has already implemented an expansionist fiscal policy following years and economic growth and, in Europe, depending on the results of the European elections in May, there may be more pressure to adopt these fiscal benefits despite the mechanisms agreed to by European countries to contain the deficit and control the debt.
But nowadays the debate in the US focuses on the so-called Modern Monetary Theory, the greatest defenders of which come from within the Democratic party (Bernie sanders, who is leading the polls for the US presidency, and Alexandria Ocasio-Cortez, well-known activist and bright new star in Congress). They essentially propose printing money (or nowadays simply pressing a button) and, instead of buying bonds like during QE, using it to finance social, environmental and infrastructure projects and the like. Proponents of this theory argue that provided they borrow in their own currency and they can print money to cover their obligations, they cannot fail and the limit would depend on rising inflation.
In this scenario, in which fiscal spending would be injected directly into the real economy instead of using a more indirect QE route, inflation should rise. However, everything we know about macroeconomics is being called into question because, until now, the deficits have not caused out-of-control inflation or a flight from the bond markets. Even with this in mind, it seems reasonable that implementing these measures would mean higher debt, which would affect the solvency of countries. Also, with more debt, rates would move upwards and affect bonds and the assets that would predictably do better would be real estate and investments in infrastructure or commodities like gold.
Photo: lucianalopezrec. “You Can Check Out Any Time You Like, But You Can Never Leave” (Hotel California, Eagles)
In our article of October 2018, we described the country’s history, the fighting spirit and the nation’s pragmatism to support the argument that a Brexit deal, or no deal, would not be an issue over the medium/longer term for the British people. As one observes the population go about its daily business, this comment is still pertinent today.
We also considered some kind of agreement past the Brexit deadline. With the possibility of an extension, this scenario is not totally off the table.
However, what we could not have imagined, was the extent of the political mess Brexit is causing in the House of Commons. As the UK parliament refuses the current proposal put forward by Prime Minister May, it confirms not wishing to leave the European Union (EU) without a deal of some sort at the same time. The actions of British Politicians are making them ‘all just prisoners here … of their own device’ (Hotel California, Eagles). In effect, they have manœuvred themselves into a corner with nowhere to go. They can no longer close the divorce process with the EU weeks before the deadline, nor can they accept a new deal, as there is none on offer (yet).
On the economic front, the Finance industry has already organized itself to maintain access to the European financial market, with passporting ‘put throughs’ via Luxembourg and Ireland. The ‘City’ is well prepared for any outcome. For trade however, the organizational logistics are becoming a nightmare. This is likely to disrupt exchanges with the EU, a large exporter to the UK. In addition, the sorry sight of a disorderly British Parliament and local media bashing of an imminent end of the world for its people post Brexit, are likely to weigh on the consumer sentiment moving forward. Not good for business either side of the channel.
‘Muddling through’, ‘Fudging’ a deal or ‘Kicking the can down the road’ have been traditional ways politicians sort out problems. However, the times today are so grave and the decisions of such consequence that these approaches are no longer appropriate. To top it all, the population is now divided and feed up with the whole Brexit issue. A new referendum or general election might not even provide a clear answer as to what way to go. As deadlock looms pending a new deal (if ever there is one), the UK could end up just being ‘unable to leave’ after having triggered Article 50 to ‘check out’ of the EU.
Wikimedia CommonsPhoto: koka_sexton. The Fed Will Stop Reducing its Balance in September
The Federal Reserve on Wednesday left rates unchanged and lowered its economic forecasts. Moving from a 2.3% GDP growth estimate to a 2.1%, as well as upping unemployment numbers from 3.5% to the still low 3.7%. It also signaled it was done hiking rates for the year.
“Growth is slowing somewhat more than expected,” Fed Chair Jerome H. Powell said at a news conference. “While the U.S. economy showed little evidence of a slowdown through the end of 2018, the limited data we have so far this year have been somewhat more mixed.”
Most importantly, the Fed also announced it would stop reducing its balance by September.
According to Rick Rieder, BlackRock’s Chief Investment Officer of Global Fixed Income: “The Committee also re-iterated its intention to run a larger balance sheet going forward than previously assumed, which we would agree with. That approach is more sensitive to the banking and broader financial system, which arguably has become a much larger part of the economy than ever before, but this is not necessarily a dangerous dynamic at all. It just requires regulation and moderate policy adjustment over long periods of time. Reducing mortgage holdings as part of the balance sheet adjustment and running a shorter weighted-average maturity of its Treasury holdings allows the Fed to run a larger balance sheet, but with less duration and a less “credit-heavy” character over time.”
Wikimedia CommonsPhoto: Steven Depolo. LatAm Institutional Investors Embrace ETFs As Instrument Of Choice For Volatile Times
Latin American institutions continue to adopt ETFs at record levels according to the third annual Latin American Exchange-Traded Funds Study from Greenwich Associates, with ETF allocation now 18% of total assets in 2018. This is up from 13% in 2017 and just 8% in 2016.
The Greenwich Associates study, entitled “ETFs: Instruments of Choice for Latin American Portfolios” surveyed 50 institutional investors throughout Latin America on how they are utilizing and implementing ETFs within their portfolios. Latin American institutions are applying the funds to a growing list of applications across asset classes, resulting in ETFs becoming more mainstream components of investor’s portfolios.
Several trends are contributing to that growth:
Risk management: Latin American institutions view risk management as their top priority for the year ahead, with approximately 70% of study respondents name “managing risk-return that is in line with objectives/outcome” as their primary 2019 objective. Latin American institutions are increasingly using ETFs to strategically and tactically position their portfolios against the looming risk of trade wars, economic recession and renewed market volatility.
Rise of indexing: Like their counterparts in the United States, Europe and Asia, Latin American institutions continue to move assets from active management to index strategies. In fact, 88% of study participants named ETFs as their preferred wrapper for index exposures and 45% have used ETFs to replace other vehicles, primarily active mutual funds and individual stocks. This transition of portfolio assets remains one of the biggest and most consistent sources of ETF demand.
Strategic Exposures: Latin American institutions continue to adopt ETFs for strategic purposes such as exposure to fixed-income, international diversification, and tax efficiency—with the last achieved through the use of European UCITS due to preferential withholding or estate tax rates for non-U.S. investors. 68% of respondent institutions label ETFs as strategic, with 40% of respondents reporting average ETF holding periods of longer than one year.
Appetite for Smart Beta: ETFs have also emerged as institutions’ vehicle of choice for smart beta strategies. Sustained appetite for factor-based approaches could actually accelerate demand for ETFs in 2019. More than 60% of current investors in smart beta ETFs plan to increase allocations to the funds in the coming year. This increase is partly being driven by more sophisticated use of factor-based strategies. 57% of institutions report having developed investment views on specific factors that they want to implement in their portfolios, and can do so using ETFs.
“As these and other developments make ETFs more mainstream components of institutional portfolios, Latin American institutions are applying the funds to a growing list of applications across asset classes,” says Greenwich Associates Managing Director Andrew McCollum and author of Repositioning Portfolios, Latin American Institutions Up Their Use of ETFs. “This proliferation of uses is fueling fast expansion—especially in equity portfolios, where half of current ETF investors are planning to expand allocations in 2019, with many of these institutions anticipating increases in excess of 10%.”
“The ETF discussion is no longer about active versus passive, it is about making active investment decisions utilizing ETFs. What we are seeing today around the world and in Latin America are active investors using ETFs as efficient building blocks for their active portfolios. We are also seeing increased interest and understanding from investors about the importance of diversifying their portfolios and gaining a larger exposure to international markets.” says Nicolas Gomez, Head of iShares for Latin America.
Wikimedia CommonsIgnacio Pakciarz, Aswath Damodaran, & Jerry Cohen. BigSur Partners' Event with Aswath Damodaran: A Total Success
BigSur Partners – a global investment and wealth management company headquartered in South Florida with more than $1B in assets under management and a provider of investment advising services throughout Latin America, the United States and globally – alongside NYU Stern School of Business, welcomed more than 100 business executives, community leaders, clients and NYU alumni to the private conference with “Wall Street’s Dean of Valuation” NYU Stern Professor Aswath Damodaran, at the East Miami Hotel in Brickell Avenue, Miami Florida.
During his presentation, Damodaran spoke on equity valuation and strategies that lead to increased investment sentiment for successes in business. Discussing topics from his recent book, Narrative and Numbers: The Value of Stories in Business, as well as giving meaningful insight to investor sentiment.
Ignacio Pakciarz, Founding Partner and CEO at Bigsur Partners, as well as Stern Board of Overseers member told Funds Society: “We were delighted to see so many guests from BigSur and from NYU Stern. We are also very honored to have Professor Damodaran as our main speaker; his views on valuation are truly compelling: an asset’s value is based not only on metrics, but also on its story! We hope we can host many successful events like this one in the future, where we can share ideas from leaders, experts, and academics across different sectors and industries with our community.”
The BigSur Event Series was created with the goal of finding the best ideas in academia, industry experts, leading family offices and other counterparts interested in financial markets to present to the firm’s valued clients for ongoing industry insights.
CC-BY-SA-2.0, FlickrPhoto: Streamsong Resort and Golf. Funds Society Organizes its Sixth Investments & Golf Summit
Funds Society is proud to announce that it will host its Investments & Golf Summit 2019 on May 7th and 8th at the Streamsong Resort and Golf.
The event includes a cocktail and reception dinner on the 6th, an Investments day on the 7th and the VI edition of our traditional Golf Tournament on the 8th.
Sponsors include AXA Investment Managers, Allianz GI, Amundi, Janus Henderson Investors, M&G, Participant Capital, RWC Partners, Thornburg Investment Management and Vontobel Asset Management.
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.
Funds Society’s VI Golf Tournament will take place at the Streamsong Resort and Golf, a five star property near Fort Meade, Florida (around 240 miles from Miami) on the Streamsong Black, brought to life by renowned designer Gil Hanse, that celebrates the legacy of traditional Scottish links.
Spots are limited for the Tournament so please register at your earliest convenience. Non-player guests can take part in other activities such as Sporting Clays and Archery, or simply enjoy the academic day and dinner.
