. Liquidity Management Top Priority for Fund Managers and Institutional Investors in New Market Environment
State Street Corporation in partnership with the Alternative Investment Management Association (AIMA), the global representative of alternative investment managers, released a new research report that found that nearly half (48 percent) of survey respondents say that decreased market liquidity is a secular shift that is here to stay. Regulations stemming from the 2008 financial crisis, coupled with historically low interest rates and slow rates of growth in the global economy, have constrained the ability of many banks to perform their traditional roles as market makers, which in turn has impacted broader market liquidity conditions.
More than three-fifths of the survey respondents say current market liquidity conditions have impacted their investment management strategy, with nearly a third rating this impact as significant, and are reassessing how they manage risk in their investment portfolios. More broadly, they are adjusting to an environment of less liquidity in which trading roles have been transformed, new market entrants are emerging, and electronic platforms and peer-to-peer lending are changing the way firms transact their business.
“Increased regulation and the pressure to manage costs have significantly changed market liquidity conditions,” says Lou Maiuri, executive vice president and head of State Street’s Global Exchange and Global Markets businesses. “The new liquidity paradigm is causing many players in the investment industry to think again about the fundamentals: what roles they play, where they invest, and how they transact their business.”
While there is no one-size-fits all strategy for balancing risk and return in the current market environment, investors and managers are adapting to the new environment by focusing their efforts in three areas:
Rationalizing the risk
Optimizing the portfolio
New rules, new tools
49% say the role of non-bank institutions as liquidity providers will grow and 42% say that this growth will come from hedge funds Nearly half (47%) say hedge funds may play an important role in providing liquidity in more volatile markets. “With liquidity likely to remain top of mind for years to come, now is the time to find the strategies, tools, and solutions that will make a sustainable difference in the new investment climate,” continued Maiuri.
“Hedge funds and other asset managers are responding to more challenging market liquidity conditions by increasingly seeking out new opportunities, including taking on a more prominent role as market-makers, providing new sources of finance to the real economy, and lending their support and expertise to improving liquidity risk management,” added AIMA CEO Jack Inglis.
Gustavo Lozano, courtesy photo. Pioneer Investments Wins a Mandate for Mexican Afore XXI-Banorte
Global Asset Manager, Pioneer Investments, announced on Monday the appointment of an Asian Equity Mandate with Mexican pension fund manager, Afore XXI Banorte. The mandate, totaling close to USD 150 million, will be actively managed by the specialist Asian Equities investment team at Pioneer Investments’ London hub. Pioneer Investments, which currently has USD 246 billion of Assets Under Management globally, has been managing Asian Equity assets since April 2008 based on a consistently applied philosophy and process. This approach has provided a strong track record over the medium to long term through all market cycles.
Afore XXI Banorte, the pension fund manager in Mexico, awarded Pioneer Investments the mandate as it diversifies its investment strategy and seeks to provide its customers with access to investment opportunities across the international markets. To date, Afore XXI Banorte has funded one previous mandate on European Equity Markets with Schroders and BlackRock and this is the second project that they are awarding. The funding period is expected to be quicker than previous industry experiences on the back of regulation flexibility and experience acquired.
The Asian Equity mandate, a segregated account close to USD 150 million, follows an original pan Asiatic approach that includes Japan. This allows the investor to benefit from emerging Asia potential while investing in developed market companies based in Japan and Australia.
Gustavo Lozano, Country Head of Pioneer Investments Mexico, commented: ‘’We are delighted to be able to partner with Afore XXI Banorte. We have been working with them and other pension funds to develop of long-term institutional relationships in an integral relationship where knowledge transfer and investment capabilities are key. We believe that our fundamental, proprietary research-driven approach to investment in Asian Equities stood out through the selection process, and we look forward to building a rewarding relationship with the Afore going forward.’’
Jose Castellano, Head of Iberia, North America Offshore & Latin American Markets at Pioneer Investments, noted: ‘’ Pioneer Investments opened a Mexico Office in 2012 and being able to work with Afore XXI Banorte is the culmination of efforts from a variety of areas of our business. Afore XXI-Banorte is the largest pension fund in Mexico and key for our consolidation as a top international active manager in the country and the region. We believe that our best-in-class service proposition together with our investment expertise is key to developing long-term relationships. We are honored to be awarded this mandate by Afore XXI Banorte, and we will continue to work closely with them to secure both a high quality of service and strong long-term performance.’’
Sergio Mendez, CIO for Afore XXI Banorte noted: “We selected Pioneer Investments for the strength of their process, their performance record, original investment proposition and the stability of the investment team. We are excited to be moving forward with Pioneer Investments, giving the Mexican pension fund market access to international expertise. Afore XXI-Banorte continues its diversification in international markets building strong and beneficial partnerships with the global Asset management community that will benefit Mexican pensioners in the long run.”
CC-BY-SA-2.0, Flickr. Standard Life Investments Extends Ryder Cup Deal
Following the 41st Ryder Cup at Hazeltine National Golf Club in Minnesota last Fall, where the US regained the trophy, the global asset manager, Standard Life Investments, confirmed that it has extended its ground-breaking sponsorship of The Ryder Cup to include the 2018 contest, which will be played at Le Golf National, Paris, France, from September 28-30 2018.
Commenting on the extension, Nuala Walsh, Global Head of Marketing & Client Relations at Standard Life Investments, said: “The Ryder Cup continues to reflect and complement our commitment to fostering team spirit in order to deliver performance excellence. Following the 2016 contest at Hazeltine National in Minnesota, and our close partnership with the European Tour, we are thrilled to announce an extended commercial agreement for The 2018 Ryder Cup.”
Keith Pelley, Chief Executive of The European Tour, the Managing Partner of Ryder Cup Europe, welcomed the extended partnership: “The Ryder Cup is one of the most prestigious events in sport and Standard Life Investments both share and exemplify our values of integrity and the pursuit of potential. We are delighted that they have chosen to extend their partnership with The Ryder Cup and we look forward to working together to deliver another world-class contest in Paris in 2018.”
Standard Life Investments became the first Worldwide Partner of The Ryder Cup in February 2013, sponsorship which included both Europe’s victory at Gleneagles in 2014 and the recent US triumph at Hazeltine National in 2016.
Foto: AedoPulltrone, Flickr, Creative Commons. Aviva to Lift UK Property Fund Suspension On December 15th
Aviva Investors has announced it will resume trading of its £1.5bn Property Trust on 15 December, having suspended the fund on 4 July to implement a “sustainable sales programme” in order to raise liquidity.
In a note sent to investors seen by InvestmentEurope, the asset manager said the trust has sold 11 properties totalling £212m between the EU referendum vote and 17 November 2016. The temporary suspension has allowed the company to be selective with its orderly sales programme, and ensure the retained portfolio remains “robust and well diversified.”
“There have been no forced sales, and we have focused on taking the right time to obtain the best value on sales, whilst retaining core assets and maintaining a balanced UK commercial property portfolio. Prices achieved have been broadly in line with market valuation changes since the EU referendum vote,” the note reads.
“The sales have been selected in line with our wider real estate strategy to focus on fewer centres, and values achieved have been broadly in line with market valuation changes since the EU referendum vote. We are confident that the trust holds a robust and diverse portfolio of properties; providing significant potential for growth, a strong income stream and the opportunity for further income growth,” Ed Casal, CEO of Aviva Investors Real Estate, said.
“Despite the recent uncertainty in the market, yields on property remain relatively attractive in a low interest rate environment. We believe there is a convincing place for the asset class within a balanced portfolio for long-term investors,” he added.
Fund co-manager retires
Aviva has also announced that Mike Luscombe, co-manager of the fund, will retire at the end of January. Following his departure, Andrew Hook, co-manager of the fund since March 2015, will assume the role of lead manager.
Hook joined Aviva in 2007 and has over 15 years’ industry experience.
“He has played a key role in the repositioning of the trust’s portfolio over the past year, and will be supported by a dedicated and experienced asset management team along with the newly-established UK transaction team, who between them help source, develop and manage the properties in the portfolio,” the note reads.
Photo: Keitikee, Flickr, Creative Commons.. Growth in Global Wealth Remains Limited in 2016
According to the Credit Suisse Research Institute’s (CSRI) seventh annual Global Wealth Report, the overall growth in global wealth remained limited in 2016, continuing the trend that emerged in 2013 and contrasting sharply with the double-digit growth rates witnessed before the global financial crisis of 2008.
In the mid-term, only moderate acceleration is expected. Switzerland once again ranked as the global leader in terms of average wealth per adult in 2016.
As the latest edition of the CSRI Global Wealth Report shows, total global wealth in 2016 edged upwards by USD 3.5 trillion to a total of USD 256 trillion (or 1.4%), a rise very much in line with the increase in the world’s adult population. Accordingly, average wealth per adult of USD 52,800 remains in line with last year’s figures.
Brexit vote hits wealth
The UK suffered a significant drop in wealth in 2016, with USD 1.5 trillion being wiped off household wealth in response to the Brexit vote, which triggered a sharp decline in exchange rates and the stock market.
Michael O’Sullivan, Chief Investment Officer of International Wealth Management at Credit Suisse, stated: “The impact of the Brexit vote is widely thought of in terms of GDP but the impact on household wealth bears watching. Since the Brexit vote, UK household wealth has fallen by USD 1.5 trillion. Wealth per adult has already dropped by USD 33,000 to USD 289,000 since the end of June. In fact, in US dollar terms, 406,000 people in the UK are no longer millionaires.”
Japan rises, distribution of Chinese wealth growth more unequal
The Global Wealth Report also highlights the impact of adverse currency movements, which caused wealth to fall in every region except Asia-Pacific. The highest rise in wealth amongst individual countries was achieved by Japan with a total increase of USD 3.9 trillion, followed by a USD 1.7 trillion rise in the US. Switzerland once again topped the rankings in terms of average wealth per adult. Despite a decline in average adult wealth, its leading position remains unchallenged.
Loris Centola, Global Head of Research of International Wealth Management, said: “The consequences of the 2008-2009 recession will continue to have a material impact on growth, which is pointing more and more towards a long-term stagnation. The emergence of a multi-polar world, confirmed by the impact of the Brexit vote in the UK and by the US Presidential election, is likely to exacerbate such a trend, which could possibly lead to a new normal lower rate of wealth growth.”
Key themes addressed in the Global Wealth Report include:
Wealth outlook
Trends in the number of millionaires
The wealth pyramid
Bottom billion
Inequality
For a copy of the Global Wealth Report 2016, follow this link.
CC-BY-SA-2.0, FlickrPhoto: Jeff Gunn
. The Old Mutual Global Investors’ Annual Conference in Boston Brought Together 55 Delegates
Last October, about 55 delegates from Miami, Bogota, Montevideo, Santiago, Lima, Houston, Dallas, San Antonio, San Francisco, and New York, gathered in Boston for the Old Mutual Global Investors’ annual conference.
With Chris Stapeton, Head of Distribution for the Americas, as Master of Ceremonies, attendees were able to listen to several of the company’s portfolio managers, such as Lee Freeman-Shor, portfolio manager of the European Best Ideas Fund, who spoke about his post-Brexit vision, and John Peta’s presentation on emerging market debt, as well as Josh Crabb, Head of Asian equities.
John Peta joined OMGI in 2015 from Threadneedle. In recent years, the company has been attracting professionals of a very high-level. An example is that of Mark Nash, who arrived at Old Mutual from Invesco (fixed income), or Rob Weatherston (Asian Equities), who came from BlackRock. “They have come to Old Mutual because our managers can develop their strategies, based on their vision, to generate alpha in their teams,” explained Warren Tonkinson, Managing Director of Old Mutual GI, in his opening speech.
The presentation led by Ned Naylor-Leyland, Manager of the new Gold & Silver Fund strategy, entitled “Gold’s Perfect Storm,” attracted the attention of the audience and detailed, among other things, why “Gold ETFs do not make much sense,” or, that right now, the precious metal “is the only asset you can have that is not discounting another round of quantitative easing.”
Old Mutual Global Investors’ path to its current position as a benchmark company in the Asset Management industry and ranked in the top 5 in the United Kingdom, could be described as meteoric. Founded in 2012 from the merging of two smaller UK management companies, OMGI has gone from managing 17.9 billion dollars in assets to 35.7 billion. Its team, which started with 140 people, currently has 273 professionals. Tonkinson explained that in order to grow, they first invested in their investment, operational, and risk platforms, and later in their distribution platform by opening sales offices in several markets. They started with London, Hong Kong and Boston, and recently added Miami, Uruguay, Singapore, Zurich, and Milan.
The managing director pointed out that while at the beginning 95% of its assets were generated in the United Kingdom, currently only half of their flows come from there, due to its internationalization process. Old Mutual GI has also carried out a diversification process by type of client, just last year, they took their first steps in the institutional business, and thus far they have received 750 million dollars in assets from this type of client.
CC-BY-SA-2.0, FlickrPhoto: Carlos ZGZ
. Why Brexit Offers Opportunities for Private Equity
According to Christopher Moxon, Antoon Schneider, and Philippe Morel from BCG, the UK’s vote to exit the European Union is already leaving a mark on the country’s economic landscape. They believe that while the full timing and extent of the break are uncertain and may not be known for several months, many British companies are starting to reassess aspects of their business. Therefore, private equity firms will have to step up their due diligence and accept additional risk in UK investments. But the breakup also offers an opportunity for PE firms that have honed their capabilities in helping companies deal with change.
The company is certain PE firms have notable advantages over corporate acquirers and IPOs during periods of change since they combine abundant capital with a sense of urgency, yet their longer investment horizons allow them to acquire companies in uncertain times. “Whether the goal is operational efficiency, investment for growth, bolt-on acquisitions, or spinoffs, companies can generally move more aggressively under private equity than under corporate or independent ownership.”
Among sectors likely to be hit by Brexit, they identified four of particular interest to PE firms, as well as several secondary sectors. They chose them mostly because they think they present the greatest opportunities, but also because they illustrate the advantages that PE firms have in competing for these assets, especially in the short term. Most promising are companies that depend heavily on EU trade, workforces, or regulations.
For the BCG team Industrial Distribution, Private Medical Clinics and Laboratories, Aerospace Manufacturing, and Employment and Recruitment Services, will face substantial risks at this time of uncertainty and volatility. But PE firms, especially those focused on adding value to opera- tions, are well placed to help them succeed.
Other sectors of interest include Nonfood Retail, Agricultural Suppliers, Specialty Chemicals and Asset Management.
Regarding AM they mention that like other areas of financial services, “this sector could be hit hard by companies shifting activity from London to elsewhere in Europe. It was already slowing down before Brexit, and now many banks are withdrawing from the market. But with the Bank of England keeping interest rates around zero, investors will continue to seek asset managers that can offer higher returns. PE’s best opportunity here may be with niche asset management companies.”
You can read their complete article following this link.
CC-BY-SA-2.0, FlickrPhoto: Ana Patricia Botín, World Travel & Tourism Council
. Santander Buys Back its AM Unit From Warburg Pincus and General Atlantic
After Santander and Unicredit decided not to merge its Asset Management branch with Pioneer Investments –which would have given them over 400 billion in assets under management, Santander has reached an agreement to buy back the 50% stake Warbug Pincus and General Atlantic bought back in 2013.
The deal, for an undisclosed amount, will give Santander full control of Santander Asset Management, which in 2013 was valued at 2.05 billion.
In a statement to Spain’s financial regulator, the CNMV, the spanish bank mentioned that, as part of the deal, the parties are considering a sale of Allfunds bank, confirming previous rumors. Santander, Warbug Pincus and General Atlantic, currently own 50% of the business, while Italian Intesa Sanpaolo holds the other 50% stake of Allfunds. Santander created Allfunds in 2000 to help financial institutions get access to so-called open architecture funds. Italian lender Intesa acquired a stake in 2004 as part of Allfunds’s international expansion. The company has offices in Spain, Italy, the U.K., Chile, Colombia, Dubai, Luxembourg and Switzerland andcould be valued at about 2 billion euros ($2.2 billion) and attract interest from private equity firms.
Allfunds reported profit of 69 million euros in 2015, up from 46.4 million euros a year earlier, according to the company’s financial report.
Santander Asset Management has over 170 billion euros in AUM and presence in 11 countries. Santander Asset Management has over 755 employees worldwide, of which around 220 are investment professionals. they expect that in 2018 this operation will give them a ROI above 20% and above 25% for 2019.
CC-BY-SA-2.0, FlickrPhoto: Bert Kaufmann
. Michael O’Grady, to Become Northern Trust's New President
Northern Trust Corporation‘s Board of Directors elected Michael O’Grady as their next President of the Corporation, effective Jan. 1, 2017, reporting to Frederick H. Waddell, Chairman and Chief Executive Officer. O’Grady was also elected to the Board of Directors of Northern Trust Corporation, effective January 1, 2017.
“Mike has proven himself to be an exceptional leader, both internally and externally, and a highly regarded member of our executive management team,” Waddell said. “He has deep industry experience, a keen understanding of Northern Trust, and a strong track record of translating vision and strategy into execution.”
Until a successor is named, O’Grady will retain his current responsibilities as President, Corporate & Institutional Services (C&IS). Steve Fradkin, President, Wealth Management, and Steve Potter, President, Asset Management, will report to O’Grady effective January 1, 2017.
Prior to becoming President of C&IS in July 2014, O’Grady served as Executive Vice President and Chief Financial Officer. Before joining Northern Trust in 2011, O’Grady served as a Managing Director in the Financial Institutions Investment Banking Group at Bank of America Merrill Lynch. He joined Merrill Lynch in 1992 as an Associate. O’Grady worked for Price Waterhouse from 1987 to 1990. He graduated from the University of Notre Dame with a bachelor’s degree in Accountancy and received an MBA from Harvard Business School. He is a member of the boards of trustees of The Field Museum and the Museum of Contemporary Art Chicago, the Finance Council of the Archdiocese of Chicago, and the Board of Advisors of Catholic Charities.
CC-BY-SA-2.0, FlickrPhoto: Joe Le Merou. Muzinich's New Hires Prepare Two Fund Launches
Corporate debt specialist Muzinich & Co is to launch two new funds to be managed by Torben Ronberg, Stuart Fuller, Sam McGairl and Alex Woolrich, the loans team who recently joined from ECM Asset Management Limited, a Wells Fargo Asset Management company.
Ronberg and his team, who took up their posts this week, will now prioritise the launch of a new European senior secured loans vehicle, the Muzinich European Loans Fund. They are also putting the foundations in place for the launch of a multi-asset vehicle, the Muzinich Senior Secured Fund, which will have a broader investment mandate. This vehicle will primarily invest in senior secured loans and senior secured high yield bonds, combining the core strengths of the joining team with that of the established team at Muzinich.
Both funds will sit under Muzinich’s Irish-domiciled ICAV, which has been established as a Qualified Alternative Investment Fund. They will be aimed primarily at pension funds, insurance companies and other institutional investors.
George Muzinich, founder and Chairman of Muzinich, said: “We’re thrilled to welcome Torben and his team, who have worked together for over a decade and established an outstanding reputation in the industry.”
Ronberg said: “We have built a 10-year benchmark-beating track record, delivering strong single-digit annualised returns through senior secured loan strategies. We’re confident that this asset class can continue to deliver attractive risk-adjusted returns. We believe there’s growing interest in senior secured loans from pension funds and other institutional investors. Senior secured loans offer attractive all-in floating rate returns, so they provide some protection against interest rate rises.”
