Pixabay CC0 Public DomainJamesQube. Quaero Capital and Tiburon Partners Join Forces
M&A’s are off to a good start of the year. QUAERO CAPITAL and London based Asian fund management specialist Tiburon Partners have announced that, subject to FCA and FINMA approval, they will join forces.
The tie-up, under the QUAERO CAPITAL brand, will form a single business managing more than USD 2.3 billion.
In line with the shared boutique philosophy the combined business will remain 100% employee owned and continue to focus on highly concentrated, actively managed, value strategies.
QUAERO CAPITAL CEO Jean Keller said, “We are delighted to be joining forces with another excellent value specialist as our skills and expertise are wholly complementary. We are also excited to have a substantial presence in London – one of the key centres for investment talent in the world.”
Tiburon Partners’s senior partner Rupert Kimber said, “QUAERO CAPITAL’s managers think and work like us. They have a similar investment approach based on value orientated, concentrated portfolios. So, naturally, we are keen to partner with a firm which shares our philosophy, and can take our offering more widely around Europe.“
Foto cedidaGabriel Anguiano, Photo PROBITAS 1492 . Probitas 1492 is the First Lloyd’s Syndicate to Open in Mexico
Probitas 1492 has opened its office in Mexico City, becoming the first Lloyd’s syndicate to join the Representative Office of Lloyd’s in Mexico. The regional office will service the wider Latin America region.
Gabriel Anguiano, Head of Strategy & Business Development for Latin America, commented “We’re really excited to be opening the regional office, as part of our continued strategy to get closer to the source of business and further penetrate Latin America. We see this as a major step in establishing a local presence, with local people, local knowledge, local wordings in the local language. We see our presence in the region as a vital component in providing outstanding levels of service. The support we have had from cedents and brokers to date has been very encouraging. The new team is looking forward to continuing to develop and reinforce these relationships.”
The regional hub will initially provide facultative reinsurance for both casualty and property.
Gabriel Anguiano will lead the Mexico strategy spending time between London and Mexico City. He is joined by Property Underwriters, Roberto Gómez and Jocelyn Naranjo. Lorena Solís, Casualty Underwriter, completes the core team. Full technical underwriting support will be provided by Probitas’ London based Chief Underwriting Officers Jon Foley and Neila Buurman.
Ash Bathia, Probitas 1492 CEO, said “We are delighted to be the first Lloyd’s syndicate to build a local presence in Mexico to service the Latin American markets. This is a long term strategic play for Probitas and underpins the syndicate’s commitment to the region.”
Probitas 1492 have worked closely with Lloyd’s and Daniel Revilla, Lloyd’s Regional Head for Latin America and Lloyd’s Representative in Mexico, stated “Mexico is the largest source of premiums for Lloyd’s in Latin America, accounting for nearly a third of the region’s total premium. Having Probitas develop a local presence is fully aligned with Lloyd’s strategy in Latin America. Close proximity to local (re)insurance stakeholders will allow Probitas to conduct business that would not otherwise flow through the Lloyd’s market.”
Photo: hjjanisch. First Eagle Investment Management Completes Acquisition of NewStar Financial
First Eagle Investment Management has completed its acquisition of NewStar Financial, an established lender and investment manager specializing in direct lending to middle-market companies and management of broadly syndicated loans. NewStar’s credit platform and investment teams now form the alternative credit group of First Eagle.
“We are very pleased to add NewStar, a high-quality alternative credit manager that will broaden our investment lineup for both institutional and retail investors,” said Mehdi Mahmud, president and chief executive officer of First Eagle Investment Management. “NewStar has a track record of prudent lending that dates back to before the global financial crisis of 2007-2008. Given where we are in the credit cycle, we think thoughtful investors will find NewStar’s approach compelling. We look forward to delivering middle-market direct lending and broadly syndicated loan solutions to investors searching for sources of meaningful and sustainable income.”
“With the closing of the transaction, we can now embark on the next phase of our evolution,” said Tim Conway, chief executive officer of NewStar. “While continuing to provide the quality of service our clients have come to expect from us, we will also be able to deliver our credit solutions to a wider circle of institutions and individuals that already know and respect First Eagle. We are confident that we have joined the right firm and are excited about our future at First Eagle.”
First Eagle Investment Management is an independent, privately-owned investment management firm headquartered in New York with approximately $116 billion in assets under management.
A bill reforming the bylaws of Uruguay’s Free Trade Zone, where a good part of its financial industry is established, was approved almost unanimously by the Chamber of Deputies. Before the Bill’s final approval, its text must pass through the Senate, but parliamentary sources consider that it will pass that stage without major modifications.
Funds Society had access to the bill, which clarifies some of the most controversial issues of the proposed change, which, according to the Uruguayan government, was necessary in order to meet OECD criteria.
Greater Requirements and More Formalities
As set forth, companies must submit documentation within a year on the fulfillment of several objectives: the employment of Uruguayan labor, the development of investments and exports, and incentives to international economic integration. If these requirements are not met, contracts could be rescinded in June 2021.
“Free trade zone users, either direct or indirect, with contracts in progress that have no established term, or whose term exceeds the one referred to in the previous article, or which have been automatically granted extensions, must present documentation and updated information about the company and its current business plan, that allows evaluation of its economic and financial viability and its contribution to the fulfillment of the objectives established in Article 1 of this law, within a period of one year from the regulation of the law, for approval by the Free Trade Zones area of the General Directorate of Commerce,” says the bill.
The Requirement of 75% of Uruguayan Personnel is Maintained
This was another of the reform’s burning issues, since some companies had pointed out the difficulty encountered in certain sectors when trying to maintain the quota of Uruguayan personnel.
The bill stipulates that, “in carrying out their activities, free trade zone users must employ a minimum of 75% (seventy five percent) of personnel constituted by Uruguayan citizens, natural or legal, in order to be able to maintain their quality as such and the benefits and rights that this law accords them.”
However, in the case of activities within the services sector, the percentage may be reduced to 50% with prior authorization: “The request to the Executive Branch to reduce the percentages of nationals in the activity must be answered within sixty days from the date of submission of the request. Failure to reply within that period, shall deem the application as approved.”
Respect for Existing Contracts
The reform bill confirms that existing contracts will not be touched in order to adapt them to the new demands that will be mandatory for new companies wishing to establish themselves in those areas with a special tax regime.
“During the validity of the respective contracts, users of free trade zones will maintain all their benefits, tax exemptions and rights in the agreed terms, prior to this law’s date of effect, within the framework of the Free Trade Zones regime as established in Law. No 15.921, of December 17, 1987, and the provisions of this law shall not apply to them when said provisions imply limitations on such benefits, exemptions or rights, that were not applicable under said free trade zone regime prior to the effective date of the same”, says the text explicitly.
For more information we attach the text, in Spanish, of the law in PDF format.
Pixabay CC0 Public DomainPhoto: Petraboekhoff. Corporate Debt and Inflation-Linked Bonds Are Amongst this Year’s Best Options in Fixed Income
Asset management companies agree that 2018 will be characterized by a low rate environment and by a slow normalization of monetary policies calculated step by step to avoid damaging global growth. Once again, this leaves us with the same question as to what to expect from fixed income, to which so many investors and asset managers look with suspicion due to the low profitability it offers.
Where will the opportunities lie in this type of assets? For Hans Bevers and Bruno Colmant, Chief Economist and Head of Macro Analysis respectively, at Degroof Petercam, the context has to be taken into account. Neither one expects the normalization process of monetary policies to produce much higher yields than long-term bonds.
In an environment of very low interest rates, Degroof Petercam proposes the following alternatives to sovereign debt: investment grade corporate debt in Euros, which offers a limited return, but with durations that are often shorter than those of sovereign debt, and international bonds linked to inflation.
“Although inflation levels have recently disappointed, inflation-linked bonds remain attractive considering that overall growth forecasts and the improvement of the labor market situation should translate into a modest rise in inflation. We believe that valuations of inflation-linked bonds do not fully reflect this perspective,” says Jérôme van der Bruggen, Head of Private Banking Investment at Degroof Petercam.
In turn, SYZ AM points to credit as a key asset for 2018 within fixed income, despite its high valuations and the risks involved. “As far as the bond market is concerned, everyone knows that the sovereign returns of Western countries are low. However, it isn’t the government bond segment where the values of the fixed-income market are trivial. It’s in corporate credit. After years of ultra-accommodative monetary policy and a desperate search for profitability by investors, corporate credit in general, and high-yield markets in particular, have become the most expensive asset class in the world,” says Hartwig. Kos, Vice-CIO of Investments and Co-Head of Multi-assets at SYZ AM. He advises that, in an environment where inflationary pressures are rising and the stance on the ECB’s monetary policy is tightening, the high-yield market and its valuations are “clearly vulnerable.” According to Kos, “in investors’ minds at the present moment the asset class chosen is equity. And, in fact, although bonds are expensive, in comparison, equity is at a reasonable value. This is obviously a relative argument, but when you look at equity valuations in absolute terms the picture looks quite different.”
USA
AtEthenea, they take this into consideration and do not expect a rate hike, but they do not rule out that there will continue to be a significant demand on fixed income. “In this environment, and with continued demand from both domestic and foreign institutional investors, we believe that the pressure on long-term bonds should remain moderate. At the same time, continued strong economic conditions, favorable refinancing conditions, and low default rates should support spreads on corporate bonds,” explains Guido Bathels, Portfolio Manager at Ethnea Independent Investors.
According to Bathels, in the United States, we find a slightly different environment given the time of the economic cycle in which it is and the short-term increase in interest rates. “It’s possible that the rate increase of the first half of the year is corrected downward during the second half due to economic concerns. If this reverses, the profitability curve during the year would be a clear indicator of an impending economic slowdown. This prospect could put pressure on the risk premiums of corporate bonds. This type of scenario would definitely have an impact on interest rates and spreads in Europe towards the end of the year,” he explains.
In this context of global growth, but certain financial uncertainties, Bathels argues that active management and a flexible investment approach will be very important in order to not miss the opportunities that arise in the fixed income market.
Pixabay CC0 Public Domain. Funds Society Celebrated its 5th Anniversary with a Party in Miami
January 11th marked Funds Society’s fifth anniversary celebration. The party took place on the terrace of the East Hotel, in Brickell City Center. More than 100 professionals from the top asset and wealth management firms with in Miami and New York were able to enjoy a cocktail and strengthen ties with their colleagues and competitors.
The magazine’s team, with local presence in Madrid, Mexico, Miami, Montevideo and Rio de Janeiro, celebrated more than 5 years of offering news and exclusives about the investment fund industry and presented the number 13 of the US Offshore edition of the print magazine, to which you can subscribe through this link.
Along with it, the second edition of the Asset Managers Guide was distributed, which contains information on more than 60 international fund managers doing business in the market of non-residents in the United States (NRI). The first issue of the 2018 magazine will be at the readers’ tables over the next few days.
Pixabay CC0 Public DomainGonzalo Milans Del Bosch, courtesy photo. Gonzalo Milans Del Bosch Takes Over As Santander Asset Management's New CIO
Santander Asset Management, has a new CIO. Gonzalo Milans Del Bosch has been chosen to replace the current head of Investments, Dolores Ybarra, according to sources close to the bank that confirmed the news to Funds Society.
Ybarra, which was CIO since 2011, will now be the Global Head of Products and will support Milans Del Bosch in the transition to adopt its new functions.
Milans Del Bosch has until now been responsible for the Investment “Inversiones y Participaciones” division of Banco Santander.
CC-BY-SA-2.0, FlickrFrancois Millet, courtesy photo. Lyxor Sees in ETFs an Opportunity for Sustainable Investment to Continue Growing
Lyxor ETF has a new route for sustainable investment. The firm argues for the expansion of this type of investment and how ETFs have become a remarkable vehicle to invest under ESG criteria. A trend that the firm believes will continue to grow given that so far only 1% of European ETFs follow these investment criteria.
According to the management company’s assessment, these figures show great potential for growth. In addition, in terms of investment strategies, and taking Europe as a reference, it is observed that all strategies increased since 2013. As an indication, Lyxor ETF points out that just those strategies with exclusion criteria grew by 22% in 2015, as compared to 2013. This trend is compounded by the popularity and demand for passive strategies, which leaves the ideal framework for the development of sustainable investment through ETFs.
“ETFs can democratize access to these strategies because it is difficult for an investor to participate in certain assets, such as green bonds, for example. Instead, by using ETFs to diversify the portfolio, this type of asset can be accessed. In addition, it should be noted that they have lower costs, especially those that are contracted through digital platforms,” explains Francois Millet, Head of Product Line Management at Lyxor. Due to these qualities, Millet argues that it will be the millennial investors who will resort more readily to this type of solutions.
In his analysis of sustainable investment, Millet points out that, within the status that sustainable investment has in Europe, “we observe that the strategies that grow the most, investment through exclusion, impact investment, and sustainability issues, are precisely those invested in by passive management,” he says.
At Lyxor ETF, they have addressed this type of investment with two proposals: thematic investment and investment in indices. “In the case of the thematic investment, we have four ETFs that are within the theme of the UN Millennium Goals. They are related to energy, equality, water and green funds. Transforming these objectives into investment strategies is complicated, but it can be done by participating in the market of those megatrends which affect these issues,” says Millet.
Regarding their second proposal, the indices, he emphasizes that “investment is based on the sustainable rating of the companies. However, in order to consider these indices, data, exclusion strategies by sector or activity, and demonstrating that they prioritize certain objectives, are required”. In this regard, the firm uses the MSCI indexes.
Passive vs. active
At Lyxor ETF, they opt for an active use of passive management or, at least, a smart combination in order to address market needs. “In less efficient market areas, active managers are able to capture greater profitability; while in more efficient markets it is more complicated, and therefore, passive management makes more sense because the active manager has a harder time achieving good investment behavior”, explains Marlène Hassine Konqui, Head of ETF Research at Lyxor, who argues that the conflicting vision of active management versus passive management is wrong.
“For us, it makes more sense for active managers to include passive strategies in their portfolios which allow them to capture returns or help the portfolio to have a certain behavior,” she points out. According to her estimates, the perfect balance between these two management styles would be 70% of passive management and smart beta strategies, and 30% of active management.
Wikimedia Commons. Argentina, Seeking For New Tax Deferral Strategies
The new tax reform bill in Argentina will continue to be an issue throughout 2018, since, according to Marcelo Gutiérrez, Director at Invertax, it’s that country’s most significant change in regulations during the past 30 years. One of the income tax related modifications refers to the deferral of the tax payment due on offshore income.
Prior to the adoption of the new bill, many Argentineans held bank accounts in the name of an offshore company, and that allowed them to defer income tax until they decided to bring their money to Argentina. With which, the deferral could be eternal as long as the funds were not repatriated.
However, as pointed out by Invertax, the tax reform, under article 70, proposes that “the application of a new regime of international fiscal transparency, attributing the income to the holders of the intermediary structures (companies, trusts, etc.) from the moment of its generation, regardless of whether there is an effective distribution, provided that a series of requirements are met”.
According to Gutiérrez: “From now on, legislation takes a 180 degree turn, because due to the content of the reform, what will happen under international tax transparency standards is that that income will be directly attributed to the Argentinean, who will have to pay taxes. In this context, international tax planning does not offer a single solution which applies to everyone, so it usually has to be customized. What is clear is that now we have to look for a sophisticated strategy.”
The tax reform demonstrates the great knowledge on tax planning strategies of the law’s main author, Andrés Edelstein, Undersecretary of Public Revenues and former partner of International Taxation at Price Waterhouse Coopers. Amongst other issues the law analyzes in depth the definition of “control” in international structures and the ownership consequences for trusts constituted abroad, when they allow to defer taxes and when they do not.
“We are waiting for the regulation of the reform to come into effect because, among other things, those jurisdictions that are considered tax havens will be regulated. Offshore companies are not going to work anymore, and what they are asking for is companies from countries where taxes are levied, where companies have offices and have personnel that can carry out the activities they claim they carry out. And tax planning begins to be much more sophisticated and much more complex,” informs Marcelo Gutiérrez.
Pixabay CC0 Public DomainDevanath. What Were the Asset Management Industry’s Major Business Operations in 2017?
2017 was a good year for operations, acquisitions, mergers and expansion into new markets by leading international asset management companies; yet another example of the asset management industry trend towards higher concentration, while seeking higher efficiency and margin growth. Technology, regulatory changes, opening into new markets and strengthening their product supply capacity put these operations into context.
One of the major ones was the Aberdeen Asset Management and Standard Life merger, which together have become one of the largest investment companies in the world with 737 billion Euros in assets under management. The merger was closed in August, after the operation was announced in early March.
According to the firm, the merger leverages the complementary capabilities of both companies, leaders in the investment and savings market. The result is an investment group with strong brands, at the forefront of institutional and wholesale distribution franchises, market leading platforms and access to lasting strategic alliances globally.
Also, by combining the strong balance sheets of both companies, the resulting group has greater capacity for investing, as well as to grow and innovate. Together, Standard Life Aberdeen has offices in 50 cities around the world, serving clients in 80 countries. In addition, the firm maintains a market capitalization of more than 12.1 billion Euros (11 billion pounds).
The other two major operations in 2017 were the merger between Henderson and Janus Capital, and Amundi’s acquisition of Pioneer Investments. Regarding the first of those operations, it was carried out through a share exchange: each Janus share was exchanged for 4.719 new Henderson shares. With this exchange, Henderson shareholders took control of 57% of the capital and Janus shareholders of the remaining 43%. The resulting company, Janus Henderson Global Investors, has 320 billion dollars in assets under management and a market capitalization of around 6 billion.
The combination of both businesses has created an important global leader in asset management with a significant scale, as well as a great diversity of products and investment strategies, and great depth in global distribution of funds. In fact, Janus’ strength in the US market will combine with Henderson’s in the United Kingdom and Europe, creating a very global management company, with a very diverse and widespread geographic footprint.
The acquisition of Pioneer Investments, which was closed towards the end of 2016 for an amount of 3.545 billion Euros, is the third major operation that the sector saw last year. During the first six months, Amundi established the new group’s growth strategy, defined the priorities of its business lines, and established an integration plan; so that by July it was able to completely close the purchase.
Although with a little less dimension than the previous operations, another important transaction within the industry has been Schroder’s acquisition of Adveq, an asset manager specialized in private capital worldwide. As a result, of Adveq’s acquisition – which was renamed Schroder Adveq – Schroders’ private assets business rose to more than $ 7 billion in client commitments.
Other Operations
Other operations carried out by asset management companies with the aim of growing in markets where they already had a presence have perhaps been less striking. The clearest example was BlackRock’s purchase of Citi’s asset management business in Mexico in November 2017. With this operation, BlackRock in Mexico doubled its size.
In fact, BlackRock and Citibanamex, a member of Citigroup, signed an agreement for BlackRock to acquire Citibanamex’s asset management business. Impulsora de Fondos Banamex, has approximately 31 billion dollars in assets under management through fixed-income products, equities, and multiple asset products, mainly for consumer banking clients.
UBS also looked at growth possibilities in Latin America and bought CONSENSO, Brazil’s largest family office, in May. Both companies closed an agreement under which UBS acquired a majority stake in the Brazilian multi-family office that will result in the combination of its wealth management operations in Brazil. The resulting division is being directed by both, UBS executives and CONSENSUS’ founding partners.
With this operation, UBS consolidated its capabilities in Brazil, improving its offer for local clients and offering advice from a global player in the sector. The entity recognized after closing the agreement that this transaction allows them to accelerate their expansion in Brazil and to reaffirm their commitment to grow the wealth management business.
And for 2018?
These are just some of the most significant operations of 2017, which was a year when the industry showed some concentration and the search for synergies. The trend has continued during the first weeks of 2018, during which we have already witnessed First Eagle Investment Management’s acquisition of NewStar Financial, and the announcement of a merger agreement between Quaero Capital and Tiburon Partners. The big question now is what else will this year bring.
According to experts, it would not be unusual for this trend to continue as asset management firms face a change in their own industry marked by technological challenges, such as blockchain technology or bitcoin development, by new millennial consumers, by passive management’s strength, and by the pressure that all this is asserting on its margins.
