CC-BY-SA-2.0, FlickrPhoto: Chris Potter. Variations on the Scarcity Theme
UBS Global Asset Management and BB Gestão de Recursos DTVM S.A (“BB DTVM”), the asset management arm of Banco do Brasil (“BB”), today announced a joint collaboration to provide Brazilian institutional investors the opportunity to invest in global sustainable equities.
“We believe that UBS’s Global Sustainable Equity strategy is an interesting offering to meet this growing demand.”
Global investing is increasingly capturing the attention of institutional investors in Brazil. The local pension fund system, with close to R$ 674 billion in total assets, is currently allocated almost entirely to domestic investments but beginning to invest internationally. In addition, sustainable investing is becoming a key focus for investors, with 17 leading Brazilian pension funds now signatories to the United Nations’ Principles for Responsible Investment.
To meet this growing demand, BB DTVM will launch a registered feeder fund (in compliance with CMN Resolution 3,792) giving investors access to the UBS Global Sustainable Equity portfolio. GSE seeks to maximize total return with a sustainable investment approach, using a unique positive screening process that combines material sustainability factors and fundamental valuation analysis. Managed by UBS Global AM’s Sustainable Equities team, GSE has a track record that dates back to 1997 and ranks2 in the top quartile of Global All Cap Core Equity managers (eVestment Alliance) over 1, 3 and 5 years.
UBS Global AM has committed USD 20 million (approximately R$62 million) to launch the local fund.
Photo: Ines Hegedus-Garcia. How Big is the US Offshore Market?
Latin America has more than a trillion dollars in offshore money, these figures were published recently in “Global Wealth 2015: Winning the Game Growth”, the Boston Consulting Group’s latest global wealth report, according to which Switzerland is no longer the main destination for this money, having been displaced by the US and the Panama-Caribbean region, each holding 29% of the offshore money with Latin American origin. Switzerland, which until last year was the main destination of this wealth, currently receives 27% of the money leaving Latin America.
In total, the United States holds almost 300 billion dollars of wealth from residents in Latin America, a figure that is growing compared to previous years. In fact, in 2014 the offshore wealth originating in Latin America has been one of the main sources of growth in the world, generating 100 billion dollars of new money which has left their home countries, mainly looking for stability in their destination offshore centers, due to the political instability in some of the countries in which that money originated.
In correspondence, Latin America is the number one source of all the offshore money which reaches the United States, representing 41% of the total. United States holds more than 700 billion dollars of offshore money, so that 41% brings us back to approximately that round figure of 300 billion dollars.
Miami, New York, Houston, and San Diego are, in this order, the four major US offshore centers which serve the owners of this Latin American wealth.
Other good news is that Boston Consulting Group expects this growth to continue. For the next five years, United States is, after Singapore and Hong Kong, the offshore wealth destination with higher growth prospects globally.
CC-BY-SA-2.0, FlickrPhoto: Edward Dalmulder. Fresh Volatility But Renewed Confidence
Fresh volatility on bond and equity markets and- toa lesser extent- in currency trading is not all that surprising. Market volatility had been abnormally low for months as investors piled into the same strategies dictated by the ECB’s massive quantitative easing programme. Two events disrupted the calm; higher-than-expected inflation in Europe which officially marked a sharp reduction in deflation risk (and therefore visibility on the ECB’s QE campaign) and concerns over default risk in Greece or Grexit as talks got bogged clown.
Concerning fixed income, faced with bond market volatility, investors had been reassured by the ECB’s flexibility following comments from Benoít Coeuré that the bank could take advantage of swings to accelerate bond buying. But then Mario Draghi said investors would have to get used to volatility, thereby reducing hopes the ECB would try torein in market pressure. As a result, yields on the 10-year German Bund jumped 80bp between April 20 and June 9 or enough to undermine European equity markets.
At the end of April, we moved to an underweight position on European government bonds as they had become extraordinarily expensive. But the extent of the subsequent fall has led us to turn neutral. Even after this correction, European bonds are still expensive but it seems a done dealthat the ECB will stick to its quantitative easing calendar until its official end date of September 2016. This means that with negative yields on some bond market segments, there is justification for bonds to remain expensive. And generally speaking, we believe it is still too early to position portfolios for the end of quantitative easing. Moreover, we would not be surprised to see other ECB interventions ifyields should rise further as the bank wants to keep real rates neutral to negative to shore up the recovery. Against this backdrop, it makes more sense to remain neutral.
On the equity side, if the bond market correction has in fact come to an end, equity markets should rally. In so far as credit spreads remained rather stable as yields rose, the risk of equity markets being contaminated needs to be put into perspective. Earnings expectations are trending higher in the eurozone and in Japan with fewer and fewer downward revisions in the US, UK and emerging countries. And after the weak spell at the beginning of 2015, the US economy is likely to rev up again, thereby facilitating the incipient recovery in Europe and Japan. We expect upward earnings revisions to continue and help equity markets move higher. We had underweighted UK equities ahead of the elections there but a certain degree of stability has returned and we have turned neutral on the market. The thorny issue of the referendum on whether to stay in the European Union will return to centre stage next year but it is still too earlyto position portfolios to reflect this risk. All together, these developments have led us to increase European equity ratings and equity ratings as a whole.
As well as the return of Russo-Ukrainian tensions, political risk is still acute in Greece where talks are dragging on ahead of sizeable repayments to the IMF scheduled for the end of June. We are sticking with our core scenario that a favorable solution will be found as all parties have an interest in reachingan agreement.
Column by EdRAM. Benjamin Melman is Head of Asset Allocation and Sovereign Debt in Edmond de Rothschild Asset Management (France).
The data, comments and analysis in this document reflect the opinion of Edmond de Rothschild Asset Management (France) and its affiliates with respect to the markets, their trends, regulation and tax issues, on the basis of its own expertise, economic analysis and information currently known to it. However, they shall not under any circumstances be construed as comprising any sort of undertaking or guarantee whatsoever on the part of Edmond deRothschild Asset Management (France). Any investment involves specific risks. Main investment risks: risk of capital loss, equity risk, credit risk and fixed income risk. Any investment involves specific risks. All potential investors must take prior measures and specialist advice in order to analyse the risks and establish his or her own opinion independent of Edmond de Rothschild Asset Management (France) in order to determine the relevance of such an investment to his or her own financial situation.
Special warning for Belgium: Please note that this communication is intended for institutional or professional investors only, as mentioned in the Belgian Law of July 20th, 2004 on certain forms of collective management of investment portfolios This notice is also intended only for investors who are not consumers as described in the Belgian Law of July 14th, 1991 on trade practices and information and protection of consumers.
State Street Global Advisors (SSGA), the asset management arm of State Street Corporation, has announced the appointment of Greg Ehret as president.
Ehret is in charge of SSGA’s client facing, product and marketing, operations and infrastructure teams and will lead the execution of the non-investment aspects of strategy.
Ehret joined SSGA 20 years ago. He has held several executive positions in operations, sales and product development, including co-head of the firm’s exchange traded fund (ETF) business.
Ehret has led SSGA’s business in Europe, the Middle East and Africa (EMEA) from July 2008 to September 2012 including the purchase of the Bank of Ireland Asset Management and managed State Street’s European ETF franchise.
SSGA has $2.4trn of assets under management as of 31 March 2015.
CC-BY-SA-2.0, FlickrPhoto: Loremo
. Energy Efficiency: Global Growth Opportunities
The Henderson Global Growth strategy, which reached its 5-year anniversary in May 2015, seeks to identify key themes driving world change. One of these is greater energy efficiency. This has been a key theme within the portfolio of the Henderson Gartmore Global Growth Fund for a number of years with holdings well placed to benefit from further government initiatives and technological advances.
The quest for greater energy efficiency is being driven by a combination of factors. Firstly, from an environmental perspective, global temperatures are rising and energy related CO2 emissions are a material contributor to this change. Warmer temperatures are linked to higher incidence of extreme weather, which in turn has a disruptive effect on global food production and water supply.
Energy independence
Secondly, carbon fuels are ultimately a finite reserve and intensity of consumption must be curbed while alternative energy sources are developed for mass use. Additionally, energy independence has become a key topic for governments wishing to insulate their economies from fluctuating commodity prices and supply restraints. Confronting these issues, governments in countries covering 80% of global passenger vehicle sales have set stringent targets for fuel economy or emissions.
Increasing fuel efficiency
In the US, for example, the National Highway Traffic Safety Administration (NHTSA) has mandated that the average passenger car’s fuel economy must increase from around 35 miles per gallon (mpg) today to 56mpg by 2025, and other regions and countries are following suit as shown in the chart below.
We believe that in order to meet these government mandated standards, improving the efficiency of the internal combustion engine will be a key consideration for automotive manufacturers for at least the next 10 years.
Smarter engineering
The US Department of Energy estimates that only 18-25% of the energy in gasoline is converted to powering the wheels in the average internal combustion engine powered car, so there is clearly room for gains to be made through smarter engineering.
We invest in companies that manufacture parts and sell technologies which increase the efficiency of the internal combustion engine, and are growing the value of their parts within the car. Stocks currently held related to this theme include Continental, a Germany-based automotive supplier, Valeo, a multinational automotive supplier based in France, along with US auto component manufacturers Delphi and BorgWarner.
Many of the improvements being made by these companies are typically based on proprietary technology, generated through superior engineering and provide the companies with a long-term competitive advantage, which protects their high market shares. The table below shows the positive effects from using various types of car technology on fuel consumption and carbon dioxide emissions.
We believe the market has undervalued the pace and sustainability of the growth which these auto component companies possess, creating an attractive investment proposition today for our funds.
For example, Continental, which the fund has a weighting in of approximately 1.7%, has strong market positions across its powertrain division with a broad portfolio of engine parts from turbochargers to start-stop technology, geared towards increasing fuel efficiency and reducing emissions. Based on our investment criteria, Continental is attractive on a number of measures:
Continental also has one of the market-leading tyre brands and currently trades on 14 times 2016 estimated earnings*. With a rapidly improving balance sheet and strong cash flow generation, investors in Continental have benefited from recent capital growth, as shown in the chart below, as well as a healthy return of cash. We see further upside based on the company’s high exposure to the secular growth areas of carbon dioxide reduction, active safety and in-vehicle infotainment (systems in automobiles that deliver entertainment and information content).
Photo: Conservatives. Good news for Osborne Ahead of Summer Budget
Improving public finance figures in U.K. today gave Chancellor George Osborne a fair wind ahead of his summer Budget on July 8, said Investec´experts. Public sector net borrowing (PSNB) in May, excluding the cost of bank bailouts, was £10.1 billion, a fall of £2.2 billion compared with May last year.
Lower government investment spending, higher VAT receipts and fines levied on banks all helped to generate the improved fiscal outlook.
Alongside May’s figures, the data showed the PSNB figure, again excluding the cost of bank bailouts, for the financial year from April 2014 to March 2015 had been £89.2 billion, down by £9.3 billion on the previous year.
Room to manoeuvre
July 8 will see Mr Osborne deliver his first “Conservative”, as opposed to Coalition, Budget and these figures widen his room for manoeuvre. The justification for having a second Budget after that of March 19 is to start to implement the policies on which it won the May 7 General Election, point out Investec.
Announcing the summer Budget, the Chancellor said: “I don’t want to wait to deliver on the commitments we have made to working people.
“It [the summer Budget] will continue with the balanced plan we have to deal with our debts, invest in our health service and reform welfare to make work pay.”
Welfare savings
The Conservative Government is pledged to axe £12 billion a year in welfare spending but it is not yet clear how most of this will be achieved, explained the firm in its last analysis.
Announcing this second Budget, Mr Osborne said: “We will always protect the most vulnerable, but we also need a welfare system that’s fair to the people who pay for it.”
The best-known welfare pledge is that of reducing the “benefit cap” per household from £26,000 a year to £23,000. But the independent think tank, the Institute for Fiscal Studies (IFS), has noted: “Because in total fewer than 100,000 families would be affected… the policy reduces spending by only £0.1bn.”
Similarly, the pledge to remove housing benefit from 18-21-year-olds would save, again, just £0.1 billion, said the IFS. Overall, it said, the public is still in the dark as to £10.5 billion of annual welfare cuts.
Campaign commitments
On the other side of the equation – spending – critics suggest the Chancellor needs this second Budget to raise the money to pay for uncosted commitments made on the campaign trail when the polls were running neck and neck.
These included a commuter rail fare freeze, a huge increase in free child-care for working parents, an increase in the tax threshold and subsidies for home purchase.
Focus on productivity
Mr Osborne said: “There will be a laser-like focus on making our economy more productive so we raise living standards across our country.”
Britain’s productivity performance has been dire in recent years and output per hour, on the latest figures, is actually slightly lower than it was in 2007. But some fear that poor productivity is the price to be paid for record levels of employment.
The Chancellor himself, speaking to the business lobby group the CBI on May 20, said: “I would much rather have the productivity challenge than the challenge of mass unemployment.”
Photo: FrancPallares, Flickr, Creative Commons. Natixis Global Asset Management Launches New Singapore-Based Expertise Dedicated to Emerging Markets
Natixis Global Asset Management has launched Emerise, a new stock picker Singapore-based expertise dedicated to emerging markets. The firm manages a range of emerging markets equity funds to offer investment solutions that combine long-term growth and portfolio diversification.
The potential of emerging markets remains underestimated by investors: emerging economies represent more than 50% of global GDP, while their market capitalization only accounts for 10%. Furthermore, positive long-term prospects make these markets particularly attractive, both in terms of growth potential and portfolio diversification.
“To meet investors’ long-term expectations, we believe it’s crucial to focus on the original principles of emerging markets investing: growth and diversification,” said Stéphane Mauppin-Higashino, Managing Director of Emerise.
Identifying emerging small & mid cap companies with high growth potential
Based in Singapore and Paris, Emerise relies on local teams and research. Its offering covers all emerging regions – Europe, Asia and Latin America – as well as all market capitalisations, from large caps to small & mid caps. The firm employs an innovative and original index: the MSCI Emerging Markets Investable Market Index – IMI.
Convinced that small & mid cap stocks with strong growth prospects can provide superior returns to other corporate categories, Emerise aims to include such high value-added stocks in all of its portfolios, with the conviction that small & mid cap companies represent the true emerging corporate world.
Offering the upside potential of growth stocks over the long term
As a stock picker, Emerise selects growth stocks combining three key fundamentals: stable earnings growth, solid economic fundamentals and clear competitive edge with high value-added. On-the-ground research and in-depth knowledge of companies’ management teams form the core of its investment philosophy.
Emerise’s fund managers make almost 1,500 company visits every year, analyse approximately 300 companies in depth, and constantly monitor close to 100 of these companies. With an approach combining bottom-up research and a rigorous selection of growth companies, the funds managed by Emerise hold 50 to 70 stocks on average. The portfolios are concentrated to provide investors with the best of the emerging world over the long term. Emerise has four areas of equity expertise: Global emerging, Asia, Emerging Europe, and Latin America.
Emerise’s fund range is distributed via Natixis Global Asset Management’s global distribution platform and is designed for all types of investors, both professional (institutional investors, companies, multimanagers, private banks, IFA5 and banking networks) and non-professional.
. MUFG Investor Services to Acquire UBS Global Asset Management's Alternative Fund Services Business
MUFG Investor Services, the global asset servicing group of Mitsubishi UFJ Financial Group, has reached an agreement with UBS Global Asset Management to acquire its Alternative Fund Services (AFS) business. The transaction is expected to close in fourth quarter 2015, subject to regulatory approvals and customary closing conditions.
“This transaction is part of our strategy to build MUFG Investor Services into an industry-leading administrator, both organically and through acquisitions,” said Junichi Okamoto, Group Head of Integrated Trust Assets Business Group, Deputy President, Mitsubishi UFJ Trust and Banking Corporation.
“AFS’ strong client franchise, global footprint, and notably its strong presence in Asia, are an excellent strategic fit,” he continued. “We are confident that our clients will benefit from the depth of combined resources and capabilities and from our commitment to innovation coupled with AFS’ market-leading technology platform. We welcome AFS to our growing business and look forward to continuing to provide our clients with best-in-class service.”
Ulrich Koerner, President of UBS Global Asset Management, said: “We have a sharp focus on executing our strategy, with a clear goal of delivering best-in-class investment management capabilities to our clients. With this in mind, and in light of the increasing drive towards scale in fund administration, we concluded that the future development of AFS in servicing its clients would be best ensured as part of an organization with a strategic focus on asset servicing.”
“MUFG’s commitment to invest in the client franchise and the people, together with their strong focus on ensuring a seamless transition, were important factors in our decision-making,” Koerner added.
Photo: José Francisco del Valle Mojica. AXA IM Boosts EM Portfolio Management Team
AXA Investment Manager (AXA IM) has announced the appointment of Alex Khosla as equities analyst and the promotion of Ian Smith and Paul Birchenough as co-managers of the AXA Framlington Emerging Markets fund.
Both will work with Julian Thompson, head of the Emerging Markets Team, as part of a core emerging markets portfolio management team.
Mark Beveridge, global head of AXA Framlington, comments: “We believe in recognising and rewarding talent coming through the ranks. We already adopt a team approach to portfolio management and Paul and Ian have been part of our EM team since 2011 and 2012 respectively. They both have extensive experience in emerging markets and we are confident that they will continue to successfully manage the fund.”
Alex Khosla joins the team as an Emerging Markets equities analyst from UBS Investment Bank. He will be responsible for covering the energy, beverages and tobacco sectors as well as monitoring macroeconomic issues in India, Chile, Peru and Colombia.
Commenting on the hire of Alex Khosla, Julian Thompson, head of Emerging Market Equities at AXA Framlington, said: “Alex is a strong addition to our growing emerging markets team and we are very pleased that he has chosen to join us. Alex knows the team well from his previous role in Latin American equity sales at UBS and brings with him considerable experience in Latin American equity markets.”
. Lazard Asset Management Hires Léopold Arminjon as European Long/Short Equity Portfolio Manager
Lazard Asset Management announced that Léopold Arminjon has joined the Firm as a portfolio manager/analyst. Based in London, Mr Arminjon will be responsible for running a new European long/short equity strategy to be launched later this year.
“Léopold brings with him over 18 years of investment experience in European equities, which will benefit both our clients and our investment platform,” said Bill Smith, CEO of Lazard Asset Management London. “This new strategy will complement our strong European equity capabilities and will broaden our already robust expertise in long/short equities, a core focus of our investment offerings for clients.”
As of 31 March 2015, LAM has $180 billion of assets under management, including $7.6 billion globally across a number of alternative investment strategies, investing in global long/short equity, emerging market debt and hedged credit strategies.
Prior to joining LAM, Mr Arminjon was a lead portfolio manager at Henderson Global Investors for both the Henderson Horizon Pan-European Alpha Fund and the Alphagen Tucana Fund. Previously, he was a senior analyst at Gartmore as well as being one of the five members of the Continental Europe equities team running both long-only and long/short funds.
LAM offers a range of equity, fixed-income, and alternative investment products worldwide. As of 31 March 2015, LAM and affiliated asset management companies in the Lazard Group manage $199 billion of client assets.
