CC-BY-SA-2.0, FlickrNico Gómez, Courtesy photo. BlackRock: Latin American Investors are Increasingly Buying More UCITS iShares
“At 20% growth globally, ETFs represent the fastest growing part of asset management and Latin America is no exception. In fact, last year they grew by 23%,” says Nicolás (Nico) Gómez, who heads BlackRock’s iShares efforts in the LatAm and Iberia Region.
According to the manager and to the Greenwich Associates Latin America Survey – commissioned by BlackRock, Latin American institutional investors will continue to play a leading role in the growth of the industry, which according to BlackRock, will reach 12 trillion dollars in 2023 and 25 trillion dollars in 2030.
“Our fiduciary duty as asset managers is to educate the markets on international exposure and on the importance of investing more and more abroad,” says Nico, mentioning that “ETFs are the preferred instrument for Latin American investors for the construction of international portfolios.”
In his opinion, ETFs in the region are growing, maturing, and becoming more liquid mainly because, through internationalization processes, investors are looking for “country risk reduction, since most of their assets are in its same country”, where “local assets sometimes provide few options.”
“Another great feature driving the growth of ETFs is their ease of operation, which allows asset managers to take low-cost tactical positions.” For example, Nico mentioned that “This year saw some disinvestment in Europe and a little more investment in Asia, as well as a return to the US. Latin American investors also chose to increase their exposure to US short-term fixed income, as a dollarization process.”
Something important worth pointing out is that “the Latin American investor buys three types of iShares: those domiciled in the US, those in their country, and increasingly, iShares domiciled in Europe, UCITS iShares, and they are buying them there because they are becoming more and more liquid, but the main reason is their tax efficiency.”
Looking into Brazil
Mexico is the country with the most iShares in the region, with around 30 billion dollars in assets under management. It’s followed by Colombia with 12 billion, Chile with 11, Peru with 9, and Brazil with 5 billion. However, the survey sample concentrated 30% of respondents in Mexico, and 27% in Brazil. “In Brazil, we are seeing a market that previously invested almost 100% nationally and which is now going abroad due to the drop in rates,” concluded Nico.
. William Lopez Joined Jupiter as Head of Latin America and US Offshore
William Lopez joined Jupiter on 18 June as Head of Latin America and US Offshore. He will lead the distribution efforts in Latin America and US Offshore markets, working closely with Matteo Perruccio, Head of Global Key Clients and Strategic Partners, with a view to developing strong coverage across the region and driving growth in sales.
He will also lead and manage third party relationships for the region.
Jupiter mentioned that William is the first appointment dedicated to the region, as stated above he will be supported by the Global Key Client and Strategic Partners team which Matteo leads.
“I am very pleased to have joined Jupiter to lead the distribution effort for Latin America and US Offshore. I feel that Jupiter is a hidden gem in Latin America and there is a lot of scope to build on following a solid start in this very diverse market. The range of high alpha strategies which are targeted at both wholesale and institutional clients differentiate Jupiter’s offering to the investment community across Latin America.” William told Funds Society.
Lopez joins Jupiter following four years at Columbia Threadneedle where he was responsible for US Offshore and Mexico.
CC-BY-SA-2.0, FlickrPhoto: Jörg Schubert. Bolton to Open a New York Office
Bolton Global will open, next September, an office on Fifth Avenue to facilitate the transition of wealth management teams in the New York City area to the independent business model.
The independent broker dealer established presence in New York City through the signing of two teams with more than 500 million dollars in client assets: that of Ruben Lerner and Manuel Uranga, who came from Morgan Stanley in New York , and that of Michel Dejana and Adelfa Rosario, who arrived from Safra Bank also in the Big Apple.
Bolton will provide ready-to-work offices for the teams of the main banks and wirehouses to migrate from the traditional employee model to one in which they acquire the ownership and control of their business book, operating under their own brand.
The firm will place the firms’ premium office space, technology infrastructure, brand development and legal support for the NYC-based teams that are transitioning to the independent model.
Bolton successfully implemented this strategy in Miami, where it opened its own offices before recruiting more than 20 teams with client assets worth 3.5 billion dollars from Merrill Lynch, Morgan Stanley, Wells Fargo, JP Morgan and Citi.
Growth of assets
Bolton has capitalized on the growing migration of equipment from the main wirehouses to the independent business model in recent years. Recruitment by the firm has been concentrated in leading teams that serve international clients and has been successful with the transition of several high profile teams. Bolton’s comprehensive transition strategy has produced growth in AUM of more than 22% per year during the last 5 years.
Clients’ assets are held by BNY Mellon Pershing as custodian and clearing house, and Bolton offers a full range of wealth management products and services along with the security of financial institutions, with considerably improved compensation.
The firm’s new offices in Manhattan are located at 489 Fifth Avenue, where they will occupy the entire 21st floor.
Photo: Finizio. Schroders Launches Argentine Bond Fund for the International Market
Schroders has launched the Schroder Alternative Solutions (Schroder AS) Argentine Bond Fund – a strategy focused on investing across Argentina’s full credit spectrum. The Fund will provide access to bond issuers in a large, growing economy with the aim of delivering investors a high yield, total return strategy.
The strategy will take a research driven, bottom-up approach in order to build a diversified portfolio of issuances across Argentina’s over USD 300 billion investment universe, whilst also managing downside risk. The team will search for opportunities in sovereign debt, provincial debt, corporate debt and local currency. The Fund launched on 29 June 2018.
The strategy will be managed by Fernando Grisales and James Barrineau and the 10 strong emerging market debt team in New York, and advised by the Argentina investment desk, led by Pablo Albina. Pablo is Country Head, Argentina and has 26 years of investment experience, including 20 years as a fixed income fund manager. The investment team is backed by Schroders’ global expertise, with a strong emphasis on local knowledge. The team has an on-the-ground presence in Argentina and local specialists to cover regional issuers in Argentina’s 23 provinces and the City of Buenos Aires.
Nicolas Giedzinski, Head of LatAm Intermediary & Discretionary US Offshore, said: “We have seen strong interest from international clients to have an Argentine bond product that can provide a compelling yield story in a country that moved from a frontier market into an emerging market category. The fund offers our clients a professionally managed, one-stop solution and the opportunity to invest in a specialised, high yield strategy. We have already been implementing this strategy in a local vehicle for a number of years, and now we are bringing our expertise packaged in an international vehicle.”
Fernando Grisales, the Fund Manager, said: “With an International Monetary Fund (IMF) agreement in hand and a stable policymaking framework in place, we believe that a single country fund for Argentina could be a great choice for investors seeking to capitalize on these structural improvements.”
Schroders has had a presence in Argentina since 1932 and is the number one independent asset manager in the country. It has the largest position in the Argentine debt market, currently managing more than USD 1.2 billion in Argentina long-only debt.
Victor Arakaki . Victor Arakaki has Joined Morgan Stanley Investment Management
Victor Arakaki has joined Morgan Stanley Investment Management as Vice President, Latin America and Offshore Client Engagement.
Based in Brazil, he will be responsible for relationship management across Brazil, Argentina, Uruguay and Chile (intermediary clients). Victor will be based out of the Sao Paulo office reporting directly into Carlos Andrade, Head of MSIM’s Latin America and Offshore Client
Engagement.
Prior to joining the firm, Victor was at Deutsche Asset Management/DWS and was previously at HSBC Global Asset Management as Senior Product Specialist for Latin American Equities & Business Development in Latin America for both the institutional and intermediary channels. He has fourteen years of industry experience.
Photo: WCM Investment Management . Natixis Investment Managers to Acquire Stake in WCM Investment Management
Natixis Investment Managers (Natixis) signed an agreement to acquire a minority stake in WCM Investment Management (WCM) and become their exclusive third-party distributor, subject to limited exclusions. The agreement establishes a long-term partnership that will allow Natixis to distribute WCM’s investment strategies globally, which in turn enhances WCM’s ability to grow and create opportunity for its clients and employees while upholding its focus on its culture and investment process.
Under the terms of the agreement, Natixis Investment Managers will acquire a 24.9% stake in WCM and enter into a long-term exclusive distribution agreement, subject to limited exclusions. WCM will retain its independence and autonomy over the management of its business, its investment philosophy and process, and its culture, while benefitting from a strong global partner. Paul Black and Kurt Winrich will remain as co-CEOs, and there will be no changes to management or investment teams. The impact of the transaction on Natixis’ CET1 ratio is estimated to be approximately -15 basis points (bps).
“We are pleased to become the global third-party distributor for WCM, whose strong track record and proven investment process make them an excellent partner and strong addition to our global offering,” said Jean Raby, CEO of Natixis Investment Managers. “Our investment in WCM exemplifies our commitment to adding high-conviction, highly active investment managers to our multi-affiliate platform in order to provide our clients with a wide range of unique investment opportunities.”
“We’re really excited to enter into this partnership with Natixis,” said Paul Black, Co-CEO of WCM Investment Management. “After a lot of thought and collective input, we concluded the smartest way to enhance our stability, and to guard our investment temperament, was to partner with a world-class global distribution platform. For some time now we’ve known that diversifying the product mix within the firm – by raising the profile of our global strategy, our emerging markets strategy, and various other investment strategies – is the key to making this happen.”
“Our culture starts with kindling an entrepreneurial spirit, driven by empowerment and transparency,” said Kurt Winrich, Co-CEO of WCM Investment Management. “We try hard to pay attention, seize opportunity, be smart, stay humble, and stay hungry. While working hard and caring for your people is essential, we strongly believe it doesn’t explain everything, and that success also involves being given some opportunities. Today, we have another opportunity placed before us. This partnership will allow us to stay focused on what we do best; namely nurturing and growing a vibrant, robust culture, and generating superior performance for our clients.”
With $29 billion of assets under management (as of May 31, 2018), employee-owned WCM is best known for managing low-turnover, alpha-generating equity portfolios with a focused, global growth approach.
Heather Brilliant, CFA. CFA Institute Reaches Milestone As Women Elected to Board Leadership Positions
Heather Brilliant, CFA, has been elected the new chair and Diane C. Nordin, CFA, the vice chair of the Board of Governors of CFA Institute, the global association of investment management professionals. The election marks a significant milestone in the organization’s history with women elected to the top two leadership positions on the Board, the highest governing authority of CFA Institute. In total, five of the 15 Board positions (30%) for fiscal year 2019 will be filled by women – a goal CFA Institute set in 2016 and realized ahead of schedule in 2017. Brilliant will assume the chair on Sept. 1, 2018, succeeding Robert Jenkins, FSIP, who will continue on the Board, which is staffed by volunteers.
“Heather’s depth of experience in the investment management industry and her passion for the mission of CFA Institute are a powerful combination,” said Paul Smith, CFA, president and CEO of CFA Institute. “Building a better world for investors involves challenging industry norms and closing the gender gap, as well as raising standards in our profession. That sounds like a tall order but with Heather at the helm of our board, supported by Diane Nordin as vice chair and the rest of the Board, I am confident that we will continue to make meaningful progress.”
“I am honored to serve as chair of the Board and am proud of the organization’s dedication to building our industry on a foundation of ethics and integrity,” Brilliant said. “Investment management faces many headwinds: business models are changing; client demographics are shifting and products are increasingly commoditized. As chair, my goal is to ensure CFA Institute and our members are ready for the challenges they face and are equipped to take advantage of the opportunities they bring.”
Brilliant is managing director, Americas, of First State Investments where she is responsible for expanding First State’s market presence across the Americas. She was previously CEO of Morningstar Australasia, and was global director of equity and corporate credit research for seven years prior. Before joining Morningstar, Brilliant spent several years as an equity research analyst for boutique investment firms. Brilliant is co-author of “Why Moats Matter: The Morningstar Approach to Stock Investing” (John Wiley & Sons, 2014), a book on sustainable competitive advantage analysis. She has served on the CFA Institute Board of Governors for five years, and is a member of the CEO Search Committee, Compensation Committee, and Executive Committee. Brilliant holds a bachelor’s degree from Northwestern University and a master’s degree from the University of Chicago Booth School of Business.
Diane Nordin brings more than 35 years of experience in the investment industry to her position as vice chair. She is a director of Fannie Mae, where she serves as chair of the Compensation Committee and member of the Audit Committee. Recently, she was named to the Principal Financial Group Board, and is also on the Board of Antares, a spinout of GE Capital. Nordin is a former partner of Wellington Management Company LLP, where she held numerous global leadership positions, including director of fixed income, director of global relationship management, and director of fixed income product management. She has served on the CFA Institute Board for two years and is chair of the Audit and Risk Committee and CEO Search Committee. She holds a bachelor’s degree from Wheaton College.
Board of Governors Roster
The 2019 CFA Institute Board of Governors will comprise a diverse group of 15 members who reside in seven countries, namely: Australia, China, India, Malaysia, United Arab Emirates, United Kingdom, and the United States. The CFA Institute membership elects officers for a one-year term and governors for a three-year term that runs from Sept. 1 to Aug. 31. The full list of Board members for the new term is:
Heather Brilliant, CFA, (United States), First State Investments
Diane Nordin, CFA, (United States), Wellington Management Company (retired)
Pixabay CC0 Public DomainPhoto: Monsterkoi. Convertible Bonds Gain Popularity Given Volatility’s Return
During the first quarter of the year, convertible bonds were one of the most attractive assets, especially after seeing the first signs of the return of volatility to the market. In this second quarter of the year, this type of asset has continued to please investors.
As explained by Arnaud Brillois, Head of Convertibles at Lazard Asset Managementand and manager of its long-term convertibles, the main advantage of this asset is that it allows investing in attractive and volatile stocks, limiting risks.
“The greater the volatility of the underlying stock, the greater the value of the convertible bond. In addition, due to its main virtue, convexity, convertible bonds increase their exposure to equity with a rise in the underlying, and market exposure decreases with the fall of the underlying,” says Brillois.
Undoubtedly, the return of volatility and the investor’s certainty that it has come to stay, drives the popularity of this fixed income asset. According to RWC Partners, “the market has been assessing a level of volatility that is too low for the current level of stock valuations and the point in the economic cycle.”
Finally, Brillois points out as another positive characteristic of this asset that they have a short average life of 2.5 years and, consequently, “the impact of interest rate hikes is limited”.
More Issuances
Convertibles are among the very few asset classes that offer positive exposure at increasing levels of volatility. According to RWC Partners, this has also led to increased issuances within the convertible bond market.
“This increase in issuance is a trend now and is expected to continue as rates increase further. January 2018 saw spectacular increase of 120%, compared to the same period last year,” he says.
Léa Dunand-Chatellet, Courtesy photo. Léa Dunand-Chatellet, New Head of Responsible Investment at DNCA Finance
DNCA Finance – an affiliate of Natixis Investment Managers -recently created a Responsible Investment department, led by Léa Dunand-Chatellet. According to the company, and after the signing of the UN Principles for Responsible Investment (UNPRI) in 2017, this move clearly reflects DNCA Finance’s aim to take its responsible investment approach a step further.
She is tasked with setting up a Responsible and Sustainable Investment team as part of the broader portfolio management team, with the aim of providing in-house research for all fund managers, particularly for the SRI fund range, which will be available from September 2018.
“I am delighted to join this vibrant team and gain greater insight into the portfolio managers’ renowned expertise, as we work together to develop an exacting and pragmatic approach. We will aim to deliver high value-added extra-financial research, making it impactful for our portfolios and driving their performances” said Léa Dunand-Chatellet.
Eric Franc stated “We are very proud and pleased to welcome Léa to our team – responsible investment is one of DNCA Finance’s key strategic goals going forward”.
Léa Dunand-Chatellet, 35 years old, is a graduate of the École Normale Supérieure (ENS), with an agregation in economy and management (university highest-level competitive examination for teachers’ recruitment), and is also a member of various committees on the Paris financial market. She teaches courses on responsible investment in some of France’s major business schools and coauthored a key publication in 2014 “SRI and Responsible Investment” (published by Ellipse).
Léa started her career in 2005 at Oddo Securities’ extra-financial research department, and then became portfolio manager and Head of ESG research at Sycomore Asset Management in 2010. She spent five years at the company, setting up and managing a range of SRI funds with AUM of €700m, achieving a top AAA ranking from Citywire. Working within the investment management industry, she developed a pioneering extra-financial model that includes sustainable development issues in the fund management approach. In 2015, she joined Mirova as Equity CIO, managing a team of ten equity portfolio managers, with AUM of €3.5bn.
As we approach the middle of the year, with sluggish stockmarket returns so far in 2018, Investec believes that it makes sense to assess where we are with regard to the investment case for European equities. In their opinion, a volatile year so far for European equities hasn’t put a stop to the region’s fundamental equity drivers and each of the 4Factors on which they analyze stocks are showing encouraging signs for the region: earnings growth, fundamentally sound profitability, attractive valuation and technical momentum.
“Despite this recent moderation, we believe the current environment still offers plenty of scope to continue the strategy that has served our investors so well in recent years: finding areas of the market where earnings recovery is evidenced but not yet priced in.” Says Ken Hsia, Portfolio Manager, Investec European Equity Fund.
Looking at their 4Factors, Investec continues to see plenty of attractive opportunities in Europe. “Our experience on the ground shows that Europe’s earnings recovery is still very much under way. Analyst consensus still expects 8% EPS growth for 2018 and 2019 in Europe. Return on equity continues to improve with several drivers playing their part –revenue growth, margin expansion, financial deleveraging/share buybacks and some tax cuts. As some parts of the world are already seeing margins peak, this would indicate that Europe’s current business cycle still has room to run.”
Besides, they believe that Europe’s monetary policy will deliver a similar situation to the US, where the pace of recovery has been more gradual over a longer period of time than previous cycles. “As we are less than two years into the most recent uptrend– compared with over four years for the US – we believe there is room for European corporate revenues to recover further.”
In their opinion, the key risks are around global geopolitics. The Brexit negotiations continue to drive uncertainty for UK businesses and individuals – but that hasn’t stopped UK companies from investing for growth.
The ongoing talk of a global trade war also loomed large over the market, especially in the commodities sector. “However, as bottom-up stock-pickers, we will approach this on a company-by-company basis. This holds true for both the direct impact of the trade tensions, as well as indirect effects, such as decreases in commodity or metal prices if tariffs tilt supplies towards Europe”.
Their process is also showing positive improvements on the strategy front, where they focus in on companies that can generate shareholder wealth above and beyond the cost of invested capital. “As it currently stands, European companies have been delivering improving returns on equity, due in part to the improving revenue trends and the resulting operational leverage. All the while, improved capital discipline and cost cutting exercises undertaken during the previous earnings downturn are also starting to bear fruit.”
Looking at sectors, they believe the materials one is benefiting from higher commodities prices, as well as a newfound capital discipline. Meanwhile in financials – more specifically banks – they currently see good opportunities to invest “in a sector that is starting to recover from a decade of structural regulatory and economic headwinds. With the uncertainty around Basel IV regulation now resolved, banks have the possibility to use the excess capital sitting on their balance sheets to lend, creating additional revenues that can further fuel returns.” They also like the recent Strategy improvement in the UK food retail and are currently seeing some weakness in telecoms,healthcare and retail, which Investec believes are all at the low end of their historical profitability ranges.
As ever with equities, positive earnings momentum and solid profitability don’t necessarily guarantee returns as this often increases the risk of overpaying. However, Investec believes that although we have seen European equities trade more richly over the last 18 months, European equities do not look overvalued and technicals are showing no cause for concern.
“In summary, we continue to be constructive on European equities due to our investment thesis: that earnings and returns are benefiting from the economic recovery and the recent round of self-help measures undertaken by companies. Meanwhile, valuations do not reflect the full extent of the earnings recovery. Downside risks are common to equities, but we remain focused on the upside potential, especially if European banks are able to show lending growth.” Hsia concludes.
