CC-BY-SA-2.0, FlickrPhoto: OnePoint Services
. Raymond James Will Work With AxiomSL
AxiomSL, a risk data management and regulatory reporting technology for financial services firm, will provide an array of broker dealer (BD) and bank holding company (BHC) data aggregation and reporting solutions to Raymond James, the St. Petersburg, Fl.-based diversified financial services firm.
The partnership with AxiomSL grew out of a goal from Raymond James’ larger enterprise data strategy to automate the existing, largely manual processes and tactical functions which were straining under increasing regulatory reporting requirements.
The wide-ranging coverage will include Daily Net Capital (15c3-1) and Customer Reserve (15c3-3) calculations, along with TIC (Treasury International Capital) and FOCUS reports for the BD. In addition, the BHC will be integrating several reports for the Federal Reserve’s FR Y-9C, Call reports, and Basel Risk-Weighted Asset (RWA) calculations.
“As part of our larger goal of data management transformation, Raymond James was looking for a strategic technology partner that could help with a significant portion of our critical reporting,” says David Lesser, senior vice president of technology at Raymond James. “AxiomSL’s expertise working with complex, diversified institutions and ability to implement these solutions over a number of years was exactly what we were looking for.”
Alex Tsigutkin, CEO at AxiomSL adds: “Today, broker dealer firms like Raymond James are looking to reengineer their reporting function in their efforts to keep up with new prudential regulation demands and as part of broader institutional automation. We are very pleased to work with such a well-respected firm as Raymond James and look forward to providing these solutions for them in the years to come to meet new and evolving regulatory mandates.”
The AxiomSL change management platform enables firms to address quickly and seamlessly internal and external changes while achieving data lineage, risk aggregation, workflow automation, computation, validation and audit as well as disclosures in any format. Further, the AxiomSL’s visual business rules can be easily understood by users who do not have specialist-coding knowledge. These features give clients confidence in the automation of complex reporting business logic, data quality, governance and control in meeting stringent timeframes.
De izquierda a derecha, Jean-Luc Hivert y Laurent Jacquier Laforge. Fotos cedidas.. La Française Reorganises its Securities Fund Management Division
Over the last five years, La Française has experienced strong growth through its expansion and through the internationalisation of its expertise, thanks to its strategic partnerships that have allowed the group to strengthen its skills.
So as to create synergies between the various group affiliates and divisions, La Française has reorganized its Securities Fund Management Division.
Accordingly, under the leadership of Pascale Auclair, Global Head of Investments, Jean-Luc Hivert and Laurent Jacquier Laforge are heading the two divisions of expertise: “Fixed Income and Cross Asset” and “Equity”, respectively.
Jean-Luc Hivert, with nineteen years of asset management experience, becomes CIO Fixed Income & Cross Asset. He is responsible for €30 billion in assets under management and heads a team of twenty-six experts. Accordingly, he is entrusted with the Group’s Cross Asset management, discretionary portfolio management and targeted management, for which Odile Camblain-Le Mollé holds operational responsibility. Jean-Luc joined La Française des Placements in 2001. As Co-Head of Bond Management, Jean-Luc innovated and contributed to the launch of the fixed maturity fund concept, one of the key differentiation factors of La Française. He holds a specialised post-graduate diploma (DESS) in Finance from Université Paris VI (1996), a MIAGE (Computer science applied to business management) degree (1995) and a MASS (Applied mathematics and social sciences) degree from Université Paris XII (1993).
Laurent Jacquier Laforge, with more than thirty years of experience, becomes CIO Equities Global. He is responsible for the entire SRI Equity range offered by La Française, small caps management and the monitoring of partnerships, such IPCM, an extra-financial research firm, Alger and JK Capital Management. For several years, La Française has been building strategic partnerships with specialised foreign management companies. As group CIO Equities Global and in the interests of investors, Laurent Jacquier Laforge will identify potential collaborations on products and research synergies. Laurent joined La Française in 2014. Since then, he has transformed the range of funds offered by La Française Inflection Point by incorporating the philosophy of Strategically Aware Investing (SAI) which includes an additional responsible dimension and was developed by IPCM, the London research firm with which the group has established a strategic partnership. Laurent Jacquier Laforge holds a DESS-DEA postgraduate degree in Economics from Université Paris X in Nanterre. Laurent is a member of the SFAF (French Financial Analysts association).
CC-BY-SA-2.0, FlickrPhoto: Pedro Ribeiro Simões
. Investor’s Attention Shifts to Passive in European Equities
Very disappointing results of active European equity fund managers in 2016 may have caused an acceleration of the shift into passive solutions, says www.fundinfo.com.
Active European equity managers got wrong-footed on sector allocation in 2016, adds the website. As ifund revealed this week, only 8% of European equity managers outperformed the MSCI Europe NR net of retail fees and just 24% did so gross of fees.
This may have caused an acceleration of the shift into passive solutions: while one year ago active European equity funds accounted for about 75% of all document views this number has most recently collapsed to 54%. This shift was most pronounced within public channels for German investors but was also remarkable for Swiss, Italian and UK investorss.
Andrew Balls, courtesy photo. PIMCO Launches Global ESG Investment Platform
PIMCO, a leading global investment management firm, has launched a dedicated Environmental, Social and Governance (ESG) investment platform globally, offering a range of fixed income solutions to investors seeking attractive returns while making a positive social impact. As part of this effort, the PIMCO GIS Global Bond ESG Fund has been launched in EMEA.
PIMCO applies a robust framework across its ESG solutions, delivering maximum impact for investors. This framework includes three key elements: exclusion, evaluation and engagement. Companies with business practices that are misaligned with sustainability principles are excluded from PIMCO’s ESG portfolios. Companies are also evaluated on their ESG credentials and those with best-in-class ESG practices are favored in these solutions. Critically, the team engages collaboratively with companies, encouraging them to improve their ESG practices and influence long term change.
The newly launched PIMCO GIS Global Bond ESG Fund invests in a range of sovereign and investment grade corporate bonds from around the world. The fund aims to maximize total return whilst favoring issuers with best-in-class ESG practices and those that are working to improve them. The fund is managed by a team led by Andrew Balls, Managing Director and CIO of Global Fixed Income and Alex Struc, Portfolio Manager co-heading the ESG initiative at PIMCO.
In addition, PIMCO has enhanced two of its socially responsible funds in the U.S. to incorporate a wider range of ESG considerations into the investment process. These funds are managed by a team led by Scott Mather, Managing Director and CIO for US Core Strategies and Alex Struc.
Andrew Balls said: “For many investors, screening out undesirable investment categories isn’t enough anymore; they want to use their investments to promote change in the world. Our ESG platform provides the tools to do that without compromising on returns.”
Alex Struc said: “Historically, this type of strategy has been pursued by equity investors but we firmly believe that engagement as a debtholder is equally important. Across the vast fixed income universe, small change can have an enormous positive impact.”
New research from global research and consulting firm Cerulli Associates finds that women offer a solution to the industry’s impending succession crisis and talent shortage as advisor retirement accelerates. “Women represent only 15.7% of the 310,504 financial advisors in the industry,” states Marina Shtyrkov, analyst at Cerulli. “Women remain outnumbered in financial advisor communities despite efforts to recruit more female advisors; only 16 in every 100 advisors are women.”
“Close to 40% of advisors plan to retire within the next 10 years, leaving the industry scrambling to groom replacements,” Shtyrkov explains. “Women present an untapped talent pool that offers a solution to the industry’s recruiting problems. By expanding their focus and altering their recruiting strategies to appeal directly to female candidates, broker/dealers (B/Ds) and RIA custodians can help fill the gaps left by retiring advisors.”
The reasons driving women to become advisors can differ from those that inspire men to enter the industry. “Nearly all female rookie advisors consider the desire to help people reach their goals to be a major factor for becoming an advisor,” Shtyrkov says. “B/Ds and custodians will have better success recruiting prospective women advisors and safeguarding against a future headcount shortage if they accentuate the social impact that an advisor has when working with people to achieve their financial goals.”
“A B/D’s most powerful tool in recruiting female rookies is its existing group of established women advisors,” Shtyrkov adds. Cerulli believes that established women advisors can dispel negative perceptions about the industry that deter some women from considering advising a career option. By sharing their experiences, these women can address misconceptions about what it means to be an advisor as well as offer transparency into the profession.
These findings and more are from the first quarter 2017 issue of The Cerulli Edge – Advisor Edition, which discusses the role women advisors play in an evolving wealth management landscape, including how to attract more women to the industry, how to support established women advisors, and the concrete business advantages of gender diversity.
CC-BY-SA-2.0, FlickrSasha Evers, courtesy photo. Sasha Evers Will Lead the Latin America and Spanish Business of BNY Mellon
BNY Mellon Investment Management (BNY Mellon IM), the world’s largest multi-boutique asset manager with 1.7 trillion dollars in assets under management, announced that Sasha Evers, Managing Director for Iberia, expands his role to lead the Latin America business.
Antonio Salvador Nasur will continue in his regional role based in Santiago, Chile, reporting directly to Sasha Evers, based in Madrid, Spain.
Under Evers’ leadership BNY Mellon IM opened its Madrid office in 2000 to successfully grow BNY Mellon IM’s presence across Iberia (Spain, Portugal and Andorra), where current assets under management are USD 3,537 bn (EUR: 3.730 m).
Sasha Evers, Managing Director of BNY Mellon IM for Iberia, said: “The Latin American region offers a strong long-term growth story for our business. I am looking forward to working closely with Antonio to further build upon our business in the region.”
Matt Oomen, Head of International Distribution at BNY Mellon Investment Management, commented: “While setting in stone our longer term distribution strategy to grow assets in Latin America, we saw many synergies between Iberia and Latin America. Sasha’s experience and leadership puts him in the best position to further grow our presence in the region, following his success leading BNY Mellon IM Iberia.”
CC-BY-SA-2.0, FlickrPhoto: Clint Budd
. Where’s The Growth?
Looking into 2017, our primary investment thesis is based on the belief that investors are underestimating the prospect of stronger growth and inflation in the US economy relative to the rest of the world over the next year.
Where’s the growth?
Global growth has been weaker than many policymakers and market participants expected following the 2008 global financial crisis. The deleveraging cycle in the developed world and the Chinese economy’s transition to a lower-growth path have both acted as major headwinds to the global economy. In response, central banks have undertaken extraordinary policy measures to provide support, which, in turn, have strongly in uenced the direction of asset prices.
Pessimism is in the price
We believe the global economy’s structural issues will remain with us for some years to come, resulting in a continuation of the low-growth environment. However, this has largely been accepted by investors. Looking into 2017, our primary investment thesis is based on the belief that investors are underestimating the prospect of stronger growth and in ation in the US economy relative to the rest of the world over the next year.
Following an easing of financial conditions over the past year, with government bond yields and mortgage rates having declined significantly, we see positive trends emerging in US credit growth and the housing market in particular. In our view, this implies higher longer-dated US bond yields and a stronger US dollar looking forward. As a result, we believe that many of the areas that have struggled through 2016 appear to offer some of the most attractive opportunities.
Sectors are diverging
The large decline in longer-dated government bond yields this year resulted in a meaningful division within equity markets. This has been particularly prevalent in the US market where, although the S&P 500 has made little overall progress, there has been a high level of dispersion in performance between those sectors that gained from lower bond yields and those that lost.
US banking bounce?
An example would be the performance of US banks relative to utility companies, with the former underperforming significantly. While a stronger US dollar and higher bond yields may act as a headwind to US equities more broadly, we believe there is scope for a rotation within the equity market and consequently we have been sellers of US utility companies and buyers of US banks.
Greenback revival?
We have also been sellers of government bonds and have been reinitiating long US dollar positions against the currencies of countries where we expect monetary policy to remain loose or even be eased further, such as the Korean won, Taiwanese dollar, New Zealand dollar and Japanese yen. With the exception of the latter, these currency positions are designed to act as defensive positions at a time when government bonds may struggle to perform.
Positioning for 2017: Flexibility is the key
Although we believe there are a number of compelling opportunities in 2017, we acknowledge that valuations across the majority of asset classes are not as attractive as they have been in recent years, as we remain in an environment of structurally low growth with economies more susceptible to shocks. As a result, the overall risk level of our strategies will likely remain lower than would otherwise be true, were risk premia to be higher, and we will continue to use our flexibility to identify opportunities as they appear and to seek to protect capital as risks emerge.
Iain Cunningham is a Portfolio Manager in the multi-asset team atInvestec Asset Management.
Pixabay CC0 Public DomainFoto: 495756. Annika Falkengren and Denis Pittet, New Managing Partners at Lombard Odier
The Lombard Odier Group announces the appointment of Annika Falkengren and Denis Pittet as new Managing Partners.
“These two nominations provide a solid base for the further build-up of the Lombard Odier Group” said Patrick Odier, Senior Managing Partner of the Lombard Odier Group. “We are particularly pleased to welcome two highly complementary personalities with Annika Falkengren, who brings a recognised expertise in the running of a respected and successful European financial institution, and Denis Pittet, who has contributed significantly to the strategic development of the bank over the past 20 years. These two appointments represent a strong endorsement of our strategy, differentiated business model and long term vision.”
Annika Falkengren, currently President and CEO of Skandinaviska Enskilda Banken (SEB), will join the Lombard Odier Group in July 2017 as a Managing Partner based in Geneva. Annika Falkengren joined SEB in 1987 and made a long and distinguished career which culminated in her nomination as President and CEO of SEB in 2005. Recognised as one of Europe’s most respected bankers, she is also Chairman of the Swedish Bankers Association.
“I am very honoured to join a Group with strong family values and with a truly international mindset and outlook”, said Annika Falkengren. “I firmly believe in the partnership model which has been underpinning Lombard Odier’s evolution over the 221 years of its history.”
Denis Pittet will become a Managing Partner in January 2017. Denis Pittet joined the Group in 1993 as a trained lawyer. He was Group Legal Counsel, before joining the Private Clients Unit in 2015 where he took over the responsibility for the independent asset managers’ department and led the expansion of wealth planning services in the areas of family governance and philanthropy. He became a Group Limited Partner in 2007. He is also Chairman of the Fondation Philanthropia, an umbrella foundation supporting clients’ long-term philanthropic projects.
“My objective will be to maintain a first class client experience at Lombard Odier”, added Denis Pittet. “We are solely dedicated to clients in a model which puts independence at the heart of everything we do.”
After 20 years of commitment to the Group, Managing Partner Anne-Marie de Weck retired on 31 December 2016. She joined Lombard Odier in 1997 to take over responsibility for the Firm’s legal department, and subsequently its Private Clients activity. A Managing Partner since 2002, Anne-Marie de Weck has made decisive contributions to the strategic development of the firm’s private client business.
“We would like to express our sincere thanks to Anne-Marie de Weck for her relentless commitment to serving our clients. We are also very grateful that she will maintain a close relationship with the Group as a member of the Board of Directors of our Swiss-based bank. In this role, she will continue to be involved in defining the strategic orientation and overseeing the operational activities of the business”, said Patrick Odier.
In July 2017, the Management Partnership of the Lombard Odier Group will be composed of Patrick Odier (Senior Partner), Christophe Hentsch, Hubert Keller, Frédéric Rochat, Hugo Bänziger, Denis Pittet and Annika Falkengren.
CC-BY-SA-2.0, FlickrPhoto: Chris D Lugos Z. Private Funds: Venturing Off the Beaten Path
This year, we expect a continuation of many of the same themes we’ve seen in private markets this year. The global macroeconomic environment remains weak, and central banks continue to pursue accommodative monetary policy. Top line growth is still hard to come by – both for companies and for the US economy.
Investors are looking for private market yield more than ever. So alternative investments continue to be popular among institutional investors as their comfort level in traditional assets of listed equity and fixed income is tested. Fixed income looks fully valued to many as interest rates can only go up from here and investors wait for the negative consequence of central bank intervention and negative rates to materialize. Long range forecasts for public market equities among major institutional investors are as low as 4%-5%, which is far below their actuarial assumptions for the growth of their liabilities. So where else can investors turn?
We think the biggest change just may be among investors themselves. When the world is becoming compartmentalized, investors feel crowded. Everyone is following the same themes and feeling the same pressures. Investors are looking for new opportunities and ways to optimize their exposure through a “best ideas,” unconstrained portfolio of private assets, whether it be in emerging markets or developed markets.
Finding opportunities
We’re seeing large buyouts in private markets, purchased at over 10 times (x) a company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) using 6x leverage for larger deals. In the general secondaries market, pricing is also becoming fully valued because more people are looking for truncated J curves and a visible portfolio that has growth potential. (The J curve shows a private equity fund’s tendency during its life to deliver negative returns and cash flows early on and investment gains and positive cash flows later on as companies mature and are sold off.)
We think investors should go where most of them aren’t – that is, areas of the market with less capital formation. It may be harder to do the work to generate returns, but it may actually be a lower-risk strategy than following the path of least resistance that many other investors follow. In particular, we are focused on opportunities in the small and midmarket segments of the private market, along with private credit. We believe that investors should focus on smaller companies and/or funds to pursue alpha, while keeping in mind that these segments require greater expertise and selectivity.
A small midmarket business will generally trade at a lower multiple than a large market business. Among the same types of companies, just different sizes, investors can pay 7x EBITDA for the smaller company but 9x for the larger one. Why? Because the leverage is easier to come by for the larger company. The bigger the fund, the more pressure to put money to work. Of course, small midmarket transactions are hardly cheap, but it’s a relative value proposition as opposed to an absolute value one.
There’s another advantage to small and midmarket deals. Not only can investors get the benefit of higher growth, but once the company gets to a certain size, investors may get the benefit of an expanded multiple such that the next investor uses more leverage to buy the company. Investors should never use the expanded multiple as the main justification, in our view – they should look for growth, operational efficiency, and good bottom lines – but an expanded multiple can be a bonus.
Be mindful of risks
Of course, investors need to be aware of the risks and special skills involved in the private equity markets. Investors should do the proper due diligence to make sure the managers they pick are able to execute on the type of mandate they’ve been given. This execution risk is even broader in cases where an investor is looking for a manager to provide a “best ideas” portfolio. In the past, investors needed only to ensure that the manager was capable within a constrained or compartmentalized context. Now, managers need to demonstrate the breadth and depth of their capabilities in several areas or markets.
Another risk in the private markets is that portfolios cannot react as quickly to market developments or uncertainty as compared with more traditional asset classes like listed equities and fixed income. The ship turns much more slowly in private markets, and a level of uncertainty can slow things down. If an adverse event were to cause corporates to step back from markets, liquidity will become constrained for private equity. Exit trends have been favorable over the past three years as low interest rates have caused corporations to become more acquisitive. However, we expect the number of exits to moderate into 2017 and 2018. Exit trends have the potential to revert to the mean over the next 12-18 months because of the continued uncertainty over the global macroeconomic picture and investors’ nervousness about what central banks will do. On top of that is growing political risk, particularly in Europe and other developed markets.
Currency movements have had a huge impact on returns for international investments. EM currency performance relative to developed market currencies and even within Europe (for example, the euro versus the pound) has been dramatic. Most investment professionals believe volatility will still be the name of the game going forward, so general partners (GPs) of funds should be cognizant of currency effects. Many investors in the UK and continental Europe did not expect the pound and euro to move so dramatically. GPs should think about hedging within their funds versus telling their clients to manage it themselves, in our view.
Finally, it’s worth repeating that something that looks low risk can come at a high price. Investors can end up paying too much because debt is readily available. Paying up for an asset and then putting leverage on it makes something once solid and straightforward become more risky because of high purchase price multiples and high debt use.
One size will not fit all
The search for yield is becoming a catalyst for change in the private markets as investors now focus on determining the right strategy. Many are turning to alternative investments because of their ability to generate yield when there is little to be found in the traditional markets. Growth opportunities may also be more readily available in the private markets.
However, investors must remember that it’s not easy. As interest in these opportunities grows, assets become more expensive. And as competition for yield grows, returns are moderated. While there are many obstacles, we believe there is still more opportunity for skilled investors to generate yield and growth.
Steven Costabile is the Global Head of PineBridge’s Private Funds Group (PFG).
This information is for educational purposes only and is not intended to serve as investment advice. This is not an offer to sell or solicitation of an offer to purchase any investment product or security. Any opinions provided should not be relied upon for investment decisions. Any opinions, projections, forecasts and forward-looking statements are speculative in nature; valid only as of the date hereof and are subject to change. PineBridge Investments is not soliciting or recommending any action based on this information.
CC-BY-SA-2.0, FlickrPhoto: Toby Oxborrow. What The Markets May Be Miscalculating?
The last few days of 2016 have receded amidst continued pain for Asia’s markets. The year had begun with a rally in Asia’s equity and fixed income markets, but it ended in a slump. I wish performance had been better, but the sectors that rallied—materials, energy and other cyclicals—did so less due to fundamental reasons than due to expectations of inflationary conditions rising once again. Sectors with more robust secular growth profiles, such as health care, have recently suffered. This environment has been a difficult one for investors, including our team at Matthews Asia, which is focused on making long-term strategic decisions to buy secular growth at reasonable prices. But it is also an environment of which we have warned investors, one that I believe is transient, and so we intend to stick to our investment philosophy and our commitment to long-term growth, not short-term trading. But sentiment is against us right now.
Indeed, as markets have marched on since the victory of President-elect Donald Trump, each footstep seems to bring new confidence into the U.S. market, just as it sends tremors through the East. Expectations of higher inflation, easier regulations, and an America-first trade policy are being priced in as being a boon to the U.S. and a burden to Asia. But have the markets been marching blindly? Is the focus too much on NOW and too little on the far future? Has the market been relying too much on conventional wisdom, what it feels is true, rather than spending the time to think through the issues in a cooler, more logical fashion? If it has done so, it would not be surprising—given the shock and emotional reaction by many over Trump’s surprise win. And yes, I do believe that the market has gotten some things wrong.
First, the markets may be overestimating the inflationary stimulus from President-elect Trump’s economic policy. Tax cuts will raise the budget deficit, yes. But that will be offset by a faster pace of interest rates hikes by the Federal Reserve. Tax cuts that save money for the wealthiest and broaden the tax base at the bottom are more likely to be saved than spent. That is not stimulative. Plus, many on the new administration’s economics team are advocates of hard money and tighter control over, even auditing, the Fed. This is not an environment in which it will be comfortable for the Fed’s doves (those happy to see higher inflation) to operate.
Second, the markets may be overestimating the effects of looser regulation. Yes, there are costs associated with it, but it is not as if profits are at a low level. Indeed, they are close to peak levels of GDP. Where is the evidence that regulation has imposed high costs? The effect of tax cuts in the corporate tax rate are real—but for how long are they likely to persist? Perhaps the market is overestimating the boost to valuations from these potential events.
And the effect of trade tariffs? They are likely to impose costs—a one-off jump in import costs, on the U.S. consumer and businessman alike. The reaction in the markets has been stark—as if the U.S. was isolated to this effect and Asia is incredibly exposed. This is the old canard about Asia being an export-led economy. It is not. Asia grows because it saves, it invests and it reforms. The excess that it produces beyond its immediate needs, it exports. But that is not vital to its citizens’ standard of living. Indeed, Asia would simply consume even more of what it produces (and it already consumes the vast majority) if tariffs became punitive. The short-term impact is likely to make the U.S. dollar stronger—but less trade means less cross-border investment and that could weaken the dollar further down the line.
Would supply chains be affected? Shortened? Probably, but again, don’t take too much of a U.S.-centric view of the world. China and other large Asian manufacturers are building out their supply chains in more developing parts of Asia only in part to satisfy Western demand. The long-term goal is still to produce for their own citizens. China will keep investing in the rest of Asia. Yes, some businesses will suffer, but others will benefit. Our portfolios largely consist of those companies focused on the domestic consumer and the domestic business in Asia, where long-term trends are overwhelmingly positive.
Simultaneously, markets are, I believe, mispricing Asia’s long-term prospects. The better performance we saw in the early part of 2016 was, I believe, partly a recognition that Europe had its own problems, but also that in Asia, equity valuations were reasonable and real interest rates were actually very high in global terms (hence the rally in bonds)—and that despite several years of poor earnings results, Asia’s economic growth would sooner or later translate into profit growth. That confidence has gone for now. But the fundamentals remain in place and even as valuations in the U.S. become increasingly stretched as markets price in an idealistic interpretation of the next administration’s policies, valuations in Asia are getting cheaper for long-term secular growth businesses.
Indeed, as I meet clients these days, I am often asked: “Where is the good news?” As I talk about the likely issues to come—trade issues, more worries about China’s currency, a strong dollar, and all the other issues that the markets are focused on, it’s a fair question. The answer is twofold. First, Asia appears well set to weather the storm! This may seem mealy-mouthed, but it’s important to recognize the current issues and also to see that high savings, high current accounts, low inflation, and low budget deficits give Asia a lot of policy room to maneuver—room that Latin America, for example, largely does not have. Second, Asia’s economies are still growing faster than the West and that should ultimately mean stronger profits. This is no small advantage. It may seem like a thin thread to hang your hopes on, but it only appears thin because it is not tangible—corporate profits are not growing quickly NOW.
Still, Asia right now has much going for it—economic growth, stable politics, strong fiscal and monetary positions, and reasonable valuations. The only things it lacks are momentum in corporate profits and the change in sentiment which that would bring. As I look into 2017, I do not know if this is the year when profits will turn (though margins are close to 15-year lows). But with dividend yields in the market near 3%, I know we will be paid to be patient. And now in Asia, more than ever, there would appear to be prospective returns to patience. That patience may be tried at times by “junk rallies” and sensationalist headlines, but we will continue to look beyond the headlines and help you see the opportunities in the region. And we intend to keep investing in the companies that are set to grow sustainably for the long term, not try to time rallies in those companies enjoying their last days in the sun. When the market is thinking “now, now, NOW”… we are trying to be patient, patient, patient.
Robert Horrocks is Chief Investment Officer at Matthews Asia.
