CC-BY-SA-2.0, Flickr. Adrien Pichoud Appointed New Chief Economist at SYZ Asset Management
SYZ Asset Management has announced the appointment of Adrien Pichoud as Chief Economist. Adrien Pichoud is also a member of the Strategy Committee, which defines the Group’s investment policy. Under the direction of Fabrizio Quirighetti, Chief Investment Officer of SYZ Asset Management, Adrien Pichoud also assumes the function of co-manager of the OYSTER European Fixed Income and OYSTER USD Bonds funds.
Adrien Pichoud joined the SYZ Group in 2010 as an economist. Prior to that, he spent seven years as an economist in a brokerage firm in Paris. He holds a master’s degree in finance from the University of Grenoble (France) and a BA in Economics from the University of Sussex (UK). Adrien Pichoud is a well-known commentator in the Swiss investment media to which he frequently contributes.
“Adrien Pichoud’s skills as an economist greatly contribute to the quality of our investment strategy and the performance of our bond and multi-asset funds. This promotion demonstrates a strong internal progression confirmed by results,” commented Katia Coudray, CEO of SYZ Asset Management.
In addition, Adrien Pichoud is a member of the management team of the OYSTER Multi-Asset Absolute Return EUR and OYSTER Absolute Return GBP funds as well as other multi-asset funds and institutional mandates in absolute return strategies.
Ken Hsia, Manager of European Equity Strategy at Investec. Great Britain and the Franco-German Axis make up the Bulk of European Equity Strategy at Investec
Ken Hsia, manager of European Equity Strategy at Investec recently visited Miami. His strategy invests in companies listed on the European stock exchanges, including the UK, as well as in those that, while trading in other markets, carry out most of their operations on the continent.
It is precisely the British market which Hsia mostly favors, concentrating more than one third of the positions of the strategy which he manages. France, Switzerland, Germany, and Norway, complete the group of the five markets which he perceives most positive, whilst Spain is in sixth position. This strategy has a class which hedges all currencies in the portfolio – not only the Euro – ,ensuring a real exposure to the behavior of the underlying companies.
“Overall, there have been very few changes since November, but there has been a recovery of corporate earnings, often due to a reduction in costs through corporate reforms,” says the manager. “In the past nine months, both the Euro, in respect to the dollar, as well as oil prices, since June, have weakened, favoring a continent which, on the one hand, is almost twice as sensitive as the United States to exports, because much of its production is exported all over the world, and, on the other hand, is a net consumer of oil, which, with the low prices, the value is transferred from the producers to the consumers. Eight of the 10 Star ideas have exposure to Europe, “he says.
Hsia supports his positive view of the consumer, industrial, and technological sectors stating that “money is in the hands of consumers.” According to him, the relative value of European markets to the United States is unbalanced downward. “The European stock market is still down and there is a 45% gap between the European and US stock markets, which has to close,” he adds. “Indeed, my job is to find companies that have less than 10x EPS, with further growth in profits,” he says.
The average tenure of companies in the portfolio is two years, “despite market speculation, I have not had to change my portfolio more than normally,” says Hsia. It is an actively managed fund which concentrates its positions on three ideas: global winners, the assets with European exposure but which benefit from reduced competition, and a third group in sectors which are in question, but which are beginning to turnaround.
Among the first, which from about a year ago, account for between 50% and 60% of the portfolio, are Bayer, Novartis or Teleperfomance. The weight of shares of companies in the second group, TUI, DS Smith or Dixons Carphone, is growing as a result of improved profits, which are based on achieving better contracts due to reduced competition. A couple of examples: in TUI’s case, it’s margin has risen from 4% to 6% by negotiating major global contracts, and benefits are expected to grow in the coming years, resulting in a positive impact on the distribution of dividends; and with regard to Dixons Carphone, it will clearly benefit from the disappearance of its biggest competitor because the private equity which bought it out loaded it with debt.
The third group, the one in sectors in question, is composed of companies which, within the telecom and utilities sectors, for example, are expected to perform better than their competitors, and in the future become part of one of the other two groups. This could be the case withEndesa, which will benefit from the sale of its Latin American operations, with greater exposure to the Spanish recovery and therefore higher dividends predicted.
By sector, the manager is positive in discretionary consumer and technology (software and hardware) and negative in utilities and energy, as the fall in energy prices will decrease the sector’s corporate profits, and especially in banks, due to the efficiency problems they suffer. “There are not many cheap banks according to their results. In the UK, banks which are too-big-to-fail are being penalized. It currently makes no sense to have large banks,” although he admits havingKBC (Belgium) and ING (Netherlands).
Manuel Díaz - Photo: Funds Society. Manuel Diaz Joins WE Family Offices as Senior Family Councelor
WE Family Offices, the independent, family-focused wealth management firm, in response to a growing demand for family office services from multi-jurisdictional, ultra-high net worth families, announces the hire of international private wealth executive Manuel Diaz. Mr. Diaz will be based in the Miami office and will use his extensive experience to help WE serve international families from the United States and Latin America.
“As the wealth industry continues to become more globalized, we have seen the growing need to hire individuals who can appropriately serve these cross-shore families,” said Maria Elena Lagomasino, managing partner and CEO of WE Family Offices.
When asked about this critical hire, managing partner Santiago Ulloa comments, “We are thrilled to welcome Manuel to our team. With his numerous years of experience serving wealthy families, he will add critical value for our clients who need a counselor with a sophisticated global perspective and deep international expertise.”
Mr. Diaz’s career in international wealth management spans more than four decades. Beginning his career as an assistant professor of Latin American studies, Mr. Diaz spent 30 years in international private banking at Republic International Bank of New York, where he served as president and CEO. He continued as president of HSBC Private BankingLatin America until he served in a senior position at Safra Bank. Mr. Diaz joined WE Family Offices in July of 2015 as a senior family counselor.
Russian equities are among the cheapest in the world amid political and economic controversy. Yet investors might be surprised to discover that the rapidly developing retail industry offers undervalued opportunities with attractive return potential, said AB experts.
Russian equities are trading at an average P/E ratio of 6.5x versus the emerging-market average of 12.5x. There are good reasons for the discount: Russia’s economy is under severe pressure because of a weaker oil price and international sanctions as a result of its role in the conflict in Ukraine. The ruble has plunged versus the US dollar, inflation has shot up and Russia’s GDP is shrinking. Ordinary Russians are feeling the pinch in the form of declining real incomes.
“So, even the most contrarian investor needs to tread very cautiously before venturing into Russian stocks. That said, we believe selected large Russian food retailers represent a compelling structural opportunity for investors given the long-term modernization and consolidation of the country’s food retail industry”, points out Henry S. D’Auria, Chief Investment Officer, Emerging Markets Value Equities at AB, and Justin Moreau, research associate in the team.
Room to Grow?
In size terms, the industry is potentially massive; Russia’s population is as large as Germany and France combined. However, modern supermarkets remain relatively few and far between and the industry is still highly fragmented. The biggest retail chains have been expanding rapidly. Together, they’ve rolled out more than 2,000 new stores in each of the last five years. But they still have lots of room to grow and to win greater market share.
This growth potential doesn’t seem to be priced into the big Russian food retailers’ valuations, which look cheap compared with many of their emerging-market peers, opine both AB experts.
This is particularly surprising since they’re highly profitable. In other countries, intense competitive pressures have resulted in price wars, driving down industry-wide profitability. In Russia, these pressures are kept in check because the country’s vast geography and harsh climate represent significant logistical barriers to entry. Western food retailers have largely decided to stay away. The challenging business environment, economic sanctions and their unfamiliarity with the local market have persuaded them not to target Russia.
Riding out a Spending Squeeze
“Clearly, declining wages and soaring prices could curb Russian spending on food. Retailers are also pressured by government food import restrictions. Imports of fruit, vegetables, meat, fish and dairy products are banned from countries that imposed sanctions in protest at Russia’s role in Ukraine. The resulting shortages are making some items still more expensive. In this challenging environment, we think the big players are much better positioned to thrive than smaller chains and stand-alone stores” said D’Auria and Moreau.
The biggest modern chains are relatively young companies, having emerged in the 1990s and become publicly listed in the last 10 years. But they’ve fast gained the size and reach that we regard as key ingredients for success in today’s food retailing market.
Russia’s economic woes have driven down both labor and real estate costs—the big players’ two largest operating expenses. This should make it cheaper for them to open more stores in future—providing yet another boost to their consolidation prospects.
“Russia isn’t an obvious investment target in these difficult times. But because many investors are steering clear of the region, it’s an opportune moment to take a strategic look at the market. In our view, the retail sector is a good place for investors to shop for bargains that should benefit from structural change during current economic and political uncertainties, as well as—in the long run—when the conflict is ultimately resolved”.
CC-BY-SA-2.0, FlickrPhoto: Guillermo Viciano
. The Summer Months Seem Prone to Market Setbacks
The old investment adage, ‘Sell in May and go away, come back again on St Leger’s Day’ seems more pertinent than usual this year. The summer months seem prone to market setbacks in thin trading conditions. This time around not only are there some clear event risks on the horizon, but also market liquidity is likely to be even worse than usual, explained John Stopford, co-Head of Multi-asset at Investec.
The key risks are probably the threat of Greek default and of higher interest rates in the US. “To some extent, these possible events must already be partly in the price, because they are known. It is unlikely, however, that they are fully priced in as their likelihood remains uncertain and their market impact is unclear”, said Stopford.
In the case of Greece, investors appear to still put a high probability on a default being avoided. This assumes that fear of the consequences of default will force an 11th hour compromise between the institutions and Greece. The rhetoric of late, unfortunately, suggests that the risk of an accident is rising. Even if a deal is struck it may only to buy a little time for further negotiations, and would need to be passed by unpredictable parliaments and possibly electorates.
Greece is too small to have major direct economic ramifications for the global economy, and now that the ECB is buying government bonds, there is more support for peripheral markets. “At some level, however, Greek default and possible Euro exit would mark a failure of European monetary union. This should leave investors feeling less comfortable about holding other Southern European debt, at least without a higher yield premium”, point out Investec expert.
A near-term tightening of US monetary policy is seen, more so than Greek default, as quite likely. Despite this, the bond market continues to price the balance of risks towards a more dovish outcome. Investors are conditioned by post crisis experience, perhaps, to expect the FOMC to err on the side of caution. Labour market data, however, suggest that spare capacity is being used up quickly and the Fed board is in danger of falling behind the curve. Historically, said Investec the bond market has been slow to price in possible interest rate increases until they are imminent, and then the market has tended to over react.
“So the potential for a negative market reaction this summer to either event seems reasonably high, with a likely spill over into broader market volatility. The fear is that any sell-off will be exaggerated by poor liquidity, especially in bond markets. Trading volumes have been negatively impacted by market regulation which has reduced the ability and willingness of investment banks to make markets. Liquidity is likely be further diminished over the next few months, by the absence of many risk takers from their desks over the summer holiday season”, argued Stopford.
As a consequence, it seems prudent to take some risk off the table, or to buy protection. Any weakness, however, will probably be a buying opportunity as risks become more fully priced in. This is especially true for equity markets, where volatility tends to cause corrections rather than marking the end of bull markets.
Photo: Steven S.. Family Firms, an Opportunity for Minority Investors?
Family-owned firms are not just key drivers of economic growth, but also key employers. But do they generate returns comparable to benchmarks, and what type of specific risks do they pose for external shareholders?
To find out whether family firms generate returns comparable to non-family-owned peers, the Credit Suisse Research Institute analyzed financial data from the CS Global Family 900 universe, a proprietary basket composed of 920 family-owned businesses located across the globe.
From an investment point of view, sector-adjusted share price returns show that since 2006 family-owned companies have delivered superior performance: The CS Global Family 900 universe has generated a 47 percent outperformance compared to the benchmark MSCI ACWI index. This equates to an annual excess return of 4.5 percent over the nine-year period to the end of April 2015, according to the Research Institute’s study “The Family Business Model.”
Considering profitability in terms of return on equity (RoE), superior RoEs were seen in family-owned companies both in Asia and EMEA (Europe, Middle East and Africa), while US- and European-based family firms posted lower returns on equity (RoE) than benchmark. “Lower RoEs in more developed markets are indicative of more conservative strategies as well as broader priorities for family ownership beyond simply financial returns,” explained Richard Kersley, Head of Global Equity Research Product for Credit Suisse’s Investment Banking division.
But looking beyond a simple RoE analysis, data showed that the family firms in the CS Family 900 universe, excluding banks and regulated utilities, generated annual cash flow return on investment (CFROI) averaging 130 basis points higher than companies in MSCI ACWI. Over the longer term, family firms have generated twice the economic profit (earnings in excess of the opportunity cost of using assets or capital) than the benchmark.
US- and European-based family firms use less leverage than their non-family-owned peers and showed faster deleveraging following the recent financial crisis compared to benchmarks. Asian family companies, however, operate with higher leverage than the benchmark. Globally, family-owned businesses delivered smoother and more stable business cycles than the benchmark. “Sales growth is less volatile through the cycle with lower peaks and less pronounced troughs,” said Julia Dawson, an equity analyst at the bank’s Investment Banking division.
Annual sales growth has also been higher in family-owned firms – 10 percent compared to 7.3 percent for MSCI ACWI companies since 1995 – and less volatile during both the Internet bubble and the financial crisis. “A longer term corporate strategy is fundamental to the structural nature of this higher and less volatile (sales) growth,” Dawson said. “The importance of product or service quality, the development of long-term client relationships and brand loyalty, along with the focus on core products and innovation in these products rather than diversifying are all elements explaining this outperformance,” she underlined.
A founder’s premium was established when analyzing the CS Global Family 900 universe. Over the past nine years, first generation companies have delivered a share price compound annual growth rate (CAGR) of 9 percent. Share price returns are indeed the highest in the first generation, when investing alongside the founder, and then decline as family ownership passes down successive generations and the companies mature. “It pays to invest alongside the company founder, in the early years of a company’s existence that is likely to correspond to a period of high growth,” Dawson concluded.
Maria Eugenia Cordova. Maria Eugenia Cordova Appointed US Offshore Sales Manager for Miami at Henderson
Maria Eugenia Cordova has been appointed as the new Sales Manager with Henderson Global Investors for the US offshore market. She will be based in Miami, Florida, with immediate effect.
Henderson Global Investors’ has a strong commitment to these markets, with US $6 billion assets under management in the Iberian & Latin American region combined.
Maria Eugenia will report to Ignacio de la Maza, Head of Sales Iberia & Latin America, and she will be responsible for thewholesaleside of US Offshore markets.
Maria makes a welcome new addition to the team, and brings the headcount to a total of six sales people looking after Iberia & Latin America region. There are plans to further grow the sales team in Miami over the next 12 months.
Bilingual in both Spanish and English, Maria has a ten year career in asset management. Most recently she worked at Aberdeen Asset Management. Previously she was employed by Franklin Templeton, Pioneer and Chase Investment Services. She graduated from University of Florida with a BA in Economics and Finance.
Commenting on the appointment, Ignacio de la Maza, said, “Maria has an excellent blend of skills both in the asset management sector and the US Offshore market. She has spent a number of years fostering relationships with clients, and she understands their investment priorities. She adds great value to the growing presence that Henderson has in the US Offshore market.”
Photo: Pedro Ribeiro. Nikko Asset Management Expands UCITS Range
EMEA (Europe, Middle East and Africa) investors’ strong appetite for gaining exposure to specialist investment strategies is driving Nikko Asset Management to expand its range of UCITS funds.
“UCITS funds are an excellent way for clients in EMEA and other regions to access global investments in an easily accessible and efficient manner,” said Takuya Koyama, executive vice president and global head of sales at Nikko Asset Management. “The launch of more UCITS funds is central to our strategic effort to significantly expand our business in EMEA.”
Nikko Asset Management is launching two new UCITS funds this month that invest in global equities and multi-asset. These institutional quality strategies will allow sophisticated global investors access to a broad range of exposures across developed and emerging markets.
“As we position ourselves as Asia’s premier global asset manager, we are eager to leverage our expanded investment capabilities and expertise,” said Yu-Ming Wang, global head of investment at Nikko Asset Management. “We have a first-rate team of investment professionals, and now we are making their skills available to an even broader range of global clients.”
Over the past two years, Nikko Asset Management has been expanding its existing investment capabilities. The most recent addition was the highly experienced UK-based global active equity team led by William Low in August 2014. The global multi-asset team headed by Al Clark joined the company in March 2014 and the Asia ex-Japan equity team headed by Peter Sartori joined in October 2013.
The Tokyo-based asset manager has plans to launch more UCITS funds in the coming months in order to meet global investors’ evolving demand for exposure to more markets and strategies.
Photo: A Guy Taking Pictures. Aberdeen Launches Multi-Asset Fund
Aberdeen Asset Management has launched the Aberdeen Global – Multi-Asset Income Fund to be managed by its Edinburgh-based Multi-Asset Income Team. Share classes of the Luxembourg-domiciled UCITS fund are registered for public distribution to investors in Belgium, Czech Republic, Hungary, Luxembourg, Netherlands, Switzerland and Singapore (restricted to Qualified Investors).
The Fund is designed to address the increased demand for multi-asset investment products and the challenges that investors are facing when they seek income in the current low rate environment. It combines a broad range of high quality income-generating assets with the aim of producing a high, but sustainable, annual yield while maintaining the real value of capital over the medium term.
The eight-strong Multi-Asset Income team will manage the fund. The team will also draw on knowledge and research from the broader 60-strong Investments Solutions division.
The Fund’s strategic asset allocation is determined by the yield expectations of a range of assets and reviewed on a regular basis. Throughout this process, the focus is on creating a diversified portfolio of high quality income-generating assets.
Mike Turner, Head of Multi-Asset at Aberdeen Asset Management, comments: “In the post-financial crisis world, income is harder to come by. Using our team’s extensive experience in multi-asset investment, we aim to provide a product which can deliver a sustainable annual yield while maintaining the real value of investors’ capital over the medium term.”
Aberdeen’s Investment Solutions division currently manages over €129 billion in multi-asset portfolios on behalf of clients around the world.
CC-BY-SA-2.0, FlickrPhoto: Daniel Lobo. Greek Mattress Stash Up to 30% of GDP
The stock of banknotes put into circulation by the Bank of Greece rose by a further €5.3 billion in June to a record €50.5 billion – see chart. The central bank’s liability to the rest of the Eurosystem related to the supply of notes is now €22.8 billion, on top of a €107.7 billion TARGET2 deficit.
The stock of notes is equivalent to 30% of forecast GDP in 2015 and 37% of bank deposits of Eurozone residents in Greek banks at end-May. For comparison, the Eurozone-wide stock equals 10% of GDP and 9% of bank deposits.
The ECB has accommodated a huge shift in Greek liquidity preference caused by the confidence-wrecking manoeuvres of the former finance minister and associated “Grexit” fears. His claim of deliberate “liquidity asphyxiation” is surreal.
