Photo: Kevin Charleston, new CEO and President of Loomis, Sayles & Company. Loomis Sayles Announces New Chief Executive Officer
After 20 years as Chairman of the Board and Chief Executive Officer (CEO) of Loomis, Sayles & Company, Robert J. Blanding has decided to transition his CEO responsibilities to Kevin Charleston, President, effective May 1, 2015. Bob Blanding will retain the Chairman position and actively participate in the strategic direction of the organization.
“Having partnered with Kevin, Jae and each individual on our management committee for over a decade (and some for many more), I have every confidence in our ability to work collaboratively for the future growth and success of Loomis Sayles.”
“This is the right time to transfer my day-to-day responsibilities as CEO,” said Bob Blanding. “I’m proud of the work of our management committee and tremendously confident about its ability to continue delivering the quality of services that our clients have come to expect.”
Bob became Chairman and CEO in April 1995 after joining Loomis Sayles in 1977. During this time, he has transformed the organization structurally and significantly extended its global reach. Bob oversaw an increase in assets under management from $38 billion (in April 1995) to $240 billion today.
“It has been a privilege,” said Dan Fuss, Portfolio Manager and Vice Chairman, “to work in partnership with Bob to meet our goal — superior investment results for our clients — while providing a vibrant, supportive environment for our employees. I am pleased that we will continue to benefit from Bob’s guidance as Chairman.”
Dan also expressed his full confidence in the leadership of Kevin Charleston and Jae Park, Chief Investment Officer (CIO) who oversees all of investment management. “Having partnered with Kevin, Jae and each individual on our management committee for over a decade (and some for many more), I have every confidence in our ability to work collaboratively for the future growth and success of Loomis Sayles.”
Jae Park joined Loomis Sayles in 2002 from IBM where he was Director, fixed income investments. Kevin Charleston joined Loomis Sayles in 2000 as Chief Financial Officer and was named President in April 2014.
“I am honored to assume my new role. Bob Blanding has set an outstanding example for me,” said Kevin Charleston. “Our definition of success remains the same – the achievement of consistently strong investment results for our clients. As CEO and President, I will continue to partner closely with Bob, Dan, Jae and the rest of the leadership team to deliver those results.”
Paintings by Frida Kahlo (1907–1954) and Diego Rivera (1886–1957), two of the most celebrated artists of the early 20th century, will be on view in a group exhibition of 75 works at NSU Art Museum Fort Lauderdale from February 26 through May 31, 2015: Frida Kahlo and Diego Rivera from the Jacques and Natasha Gelman Collection & 20th Century Mexican Art from the Stanley and Pearl Goodman Collection.
Showcasing the rich artistic traditions of Mexico and the passionate and patriotic pride of its artists, the exhibition features masterworks by Kahlo and Rivera along with paintings, sculptures and works on paper by other influential Mexican artists involved in the country’s political and social struggles, including Leonora Carrington, Gunther Gerzso, José Clemente Orózco, Wolfgang Paalen, Alfredo Ramos Martinez, David Siqueiros, Rufino Tamayo and Remedios Varo. Together, their work helped to define Mexican modernism, demonstrating the broad range of artistic expression and varying political forces that shaped the country’s cultural heritage.
Accompanying these works are photographs of Frida and Diego by American and Mexican photographers such as Leo Matiz, Martin Munkácsi and Nickolas Muray, who documented the vastly different personalities of Kahlo and Rivera in portraits included in the exhibition. The artists’ mutual passions and shared political and artistic convictions bound them closely.
The exhibition brings together works from both the world-renowned Jacques and Natasha Gelman Collection and major works by Mexican modern artists collected by Stanley and Pearl Goodman of Fort Lauderdale, who pledged their collection of more than 75 works by modern Latin American artists to the NSU Art Museum Fort Lauderdale.
The Jacques and Natasha Gelman Collection is known for its significant holdings of work by Kahlo. Outstanding paintings from the collection include many of Kahlo’s best-known self-portraits including Diego on my Mind (Self-Portrait as A Tehuana); Love Embrace of the Universe, Earth (Mexico), Myself, Diego and Señor Xolotl and Self-Portrait with Monkeys.
The Gelman Collection also includes major works from Rivera including his provocative Portrait of Natasha Gelman, Calla Lily Vendor,Landscape with Cacti.
The Goodmans’ collection includes Surrealistic paintings by Kahlo and other artists, including Leonora Carrington, Gunther Gerzso, and Wolfgang Paalen. Works from David Siqueiros are also shown. The first painting purchased by the Goodmans was his gouache on paper, Fligh. Also in the collection are works by Alfredo Martínez Ramos, Remedios Varo and Ramos.
Presented by AutoNation, the exhibition is organized by NSU Art Museum Fort Lauderdale in association with the Vergel Foundation.
Kommer van Trigt, from Robeco, explains where he sees value in fixed income. Robeco's Rorento Strategy Points Out 3 Sources of Value Within the Fixed Income Universe
Kommer van Trigt is responsable of fixed income investing at Robeco. In this interview with Funds Society, he explains his view about where to find value in the asset class this year.
After the ECB´s QE, have your investment perspective for European fixed equity changed or improved? What assets do you think should benefit from the QE? Will it serve equally to peripheral debt core to the peripheral or corporative?
Our key take away when the ECB announced it will engage in government bond purchases, was that the bank made clear it will buy securities with a maturity up to thirty years. This was not expected and is a big support for the longer end of the market. Both long dated securities in core and peripheral government debt markets will benefit. A significant part of our exposure in European bonds is concentrated in long dated bonds. Also from a valuation perspective this makes sense. Take German government bonds: securities with a maturity up to five years trade at negative yields.
In this sense, are you positive to peripheral countries debt, especially Spain? On what grounds, and to what extent, yields could be compresed?
We have exposure to Italian, Spanish, Irish and Portuguese government bonds. The ECB’s purchase program will continue to support these markets. We have shifted our exposure in these markets further out the curve. Exception being our holdings in Portugal where we invest in short dated bonds. Fair value assessments are difficult to make for these markets, but we envisage that the search for yield is here to stay. Central bank liquidity will find its way to these markets. A continuation of the liquidity driven rally is what we foresee. Obviously, improvements in the fundamental economic outlook will help this investment case. In this respect Ireland and Spain are clearly making most progress.
If the ECB´s QE leads to a higher inflation in the long term… Could it harm long-term assets, such as core government bonds?
In the end for sure. However for the upcoming period if anything there is a real risk that long term inflation expectations will remain low. The looming threat of deflation has been the reason in the first place why the ECB took the historical decision to go for QE. In the case of the US, you see how difficult it is to raise inflation expectations. The Fed initiated QE back in 2008 and 7 years later inflation expectations are still low and heading south.
One of the consequences of the ECB´s QE could be the depreciation of the euro. What do you think? Could it be a parity with the dollar?
In the long term that is possible. Back in 2002 the euro already traded below parity. Having said that, for the coming period we believe the euro depreciation will make a halt. It is quite a consensus position by now. Furthermore the ECB QE announcement is already behind us. Obviously a lot will depend on whether or not the Fed will make a start with normalizing its official target rate in the coming months.
The Fed is expected to meet. What do you expect to happen this year? Will there be a monetary normalization, or not?
The surprise would obviously be when they will stay on hold for the rest of the year. A June rate hike is more or less discounted by the market. The counter argument could be as follows: why would they act already with headline inflation nearing zero, long term inflation expectations well behaved, modest wage inflation, a significant US dollar strengthening and other central banks across the globe actually easing policy.
How the Fed will act towards the euro to dollar depreciation? Do you thin the FED would try to avoid it?
The effects of the strong US dollar on the US economy are already becoming clear. The net contribution of exports to fourth quarter growth was already negative. More and more companies are reporting headwinds related to the strong currency. The US economy is a relatively closed economy though, and other sectors can compensate for exports being somewhat under pressure. Up until now the US policy makers seem to be at ease with the exchange rate. As long as the overall US growth outlook remains constructive, they probably can live with it. Of course this is a key question: how will the US economy evolve in the coming quarters. Some weakness here and there is already visible. Stay tuned.
Which do you think will be the consequences of the Fed policies? With the ECB and the Bank of Japan being active, will there be a stability for market liquidityor may negative consequences be arising?
When Bernanke started talking about tapering, back in 2013, markets reacted sharply. Amongst others, emerging debt markets sold off heavily. Uncertainty about the consequences of a change in monetary policy, could be another reason why the FED might opt to wait a little longer to raise interest rates.
In the emerging world, many talk about a possible “monetary easing” in China, do you think that possible?
It is clear that economic growth is slowing in China. More stimulus measures are likely. A currency depreciation can be part that. However we believe the depreciation will be gradual. China is in the midst of transforming it economy. Less export led, more driven by domestic demand. A sharp currency depreciation would go against that strategy.
Is it attractive the emerging market debt? Or is not yet the time?
Yield levels look appealing. The average yield on emerging local debt is close to 6%. Compare that with 0.40% on German 10-year government bonds. However, that yield is only attainable when you leave open the currency exposure. Most emerging currencies are still under pressure. This can continue. The fundamental economic outlook for most of the countries in the universe doesn’t look promising either. On top of that lack of reform appetite in many countries and looming rating downgrades, also refrain us from re-entering these markets right now.
In the current global context, do you prefer “duration” or “credit” risk?
In October last year, we increased our duration risk following the dramatic decline in energy prices. The subsequent drop in long term inflation expectations as well as additional central bank easing across the globe, did indeed result in lower yields and positive bond returns. Over Summer we did cut back on our exposure in global high yield based on our assessment that spread levels were close to fair value. In the months that followed US credit markets have struggled, party driven by the turbulence in the energy sector which represents a sizeable part of the whole US credit market. Instead we much rather prefer to invest in subordinated bonds issued by financial institutions. This is a more European credit category with much room for great investment returns. Banks are becoming more safer and transparent institutions which from the perspective of a bond investor is good news. Regulation and intensified oversight, play out here. Of course, issuer selection for this more risky fixed income category is very important.
Where do you see value for fixed income in the current low rates environment?
Next to peripheral government bonds, subordinate bonds issued by financials, we also favor Australian government bonds. We anticipated the recent rate cut by the Australian central bank. The Australian economy has come under some pressure after commodity prices have slumped. The sizeable mining sector will no longer be the growth engine for the country. A weaker currency to support other exports sectors is very welcome. Australian 10-year yields are close to 2.5%, a “high yielder” in today’s bond market! The creditworthiness of the country is unquestionable with dent to GDP as low as 33%!
What are your bets on currencies?
For a long time we have anticipated US dollar strength versus the euro, the Japanese yen and the Australian dollar. Recently we scaled back on these positions taking profit on some significant moves.
CC-BY-SA-2.0, FlickrPhoto: Jon Russell. China’s New Generation of Entrepreneurs
In 2000, I was in the U.S., sitting in my college auditorium, listening to a panel of speakers discuss the whirlwind changes around the development of the Internet. That was shortly before the Internet bubble burst. One of the speakers was a Chinese school teacher-turned-entrepreneur, Jack Ma, who had just started an obscure e-commerce business. Even as charismatic and dynamic as he was, probably no one at the time could anticipate the later success he would find as one of China’s prominent Internet titans. Fast forward about a dozen years and China has managed to surpass the U.S. in online retail sales. In fact, its online sales grew another whopping 50% from 2013 to 2014, to reach about US$450 billion. By comparison, U.S. consumers pur- chased about US$300 billion in online goods last year.
China is often perceived to be a breeding ground for business copycats and has struggled with rampant intellectual piracy. Many businesses have indeed been founded in China based on business models that originated in the U.S. or Europe. But what’s been overlooked in recent years is China’s rising “innovation machine,” particularly in the technology sector. China’s new generation of entrepreneurs, represented by Jack Ma, is making waves and increasingly competitive against Western counterparts. They also continue to leapfrog their Western peers in creating innovative business models.
A good example is one of China’s most dominant smartphone players, Xiaomi. Its latest round of financ- ing has valued the private company at over US$45 billion. Xiaomi has become the world’s most valuable private technology start-up, surpassing all private firms in Silicon Valley whose valuations themselves reach up to the tens of billions of dollars. This is even more remarkable if you consider that Xiaomi was founded only four years ago. Although it uses Google’s Android system for its underlying operating system, this start-up has been an innovation engine. It provides a customized user interface, on top of the Android, that is appealing to end consumers. It has also successfully leveraged social networks to solicit user feedback in a way that has not been seen in the U.S. Probably most innovative of all, it has managed to sell a vast majority of its smartphones online directly to consumers, bypassing traditional telecommunications carriers.
Wave of Innovation
The current wave of innovation among small companies in China has been underpinned by further spending on research and development (R&D). The Chinese government’s favorable policies toward R&D have certainly helped. R&D spending in the country has been rising at double-digit rates in recent years, far outpacing most other countries. Entrepreneurs in China fully understand that, as labor costs continue to rise, and China’s ability to play labor arbitrage relative to neighboring countries continues to be eroded, it’s imperative for them to climb up the value chain.
So, whereas past generations of entrepreneurs set up manufacturing shops, churning out cheap shoes and apparel, the new generation of entrepreneurs is setting up shop in areas such as health care, electronics or online services. I used to be able to consider business models in China by comparing them against U.S. or European counterparts as reference points. But these days when I speak with some Chinese entrepreneurs, I am frequently struck by how often no equivalent business model exists yet in the West. For example, companies are developing e-commerce business models based on such things as residential communities or the selling and distributing of semiconductor chips online.
Even traditional hardware manufacturing businesses, which Chinese firms have long dominated, have moved on to new frontiers over the past two decades. Dozens of small independent and community-operated, techrelated workspaces known as hackerspaces, have popped up across the country in recent years. These collabora- tion spaces allow entrepreneurs who are interested in design and technology to tinker and create everything from drones to robots. What’s different from prior gen- erations of entrepreneurs that exported apparel (given massive government subsidies) is that entrepreneurs are now equipped with open-source software, emerging 3D printing technology and Silicon Valley-style venture funding—or even peer-to-peer lending.
The current wave of innovation among small companies has not gone unnoticed. Increasingly in recent years, we’ve seen multinational companies acquiring small China-based firms. This has happened across many busi- ness segments, including industrials, the medical device industry and consumer staples. They are not merely taking a minority stake as a passive shareholder, but often taking a controlling stake or even acquiring entire companies outright, with the approval of local regulators.
Having talked to many multinational companies as well as Asian companies over the years, I think there are a few reasons why multinational companies are interested in buying small companies in China. The obvious one is gaining access to the local Asian market. Also, the process of setting up an extensive distribution network across many Asian countries—where infrastructure is poor—tends to be very lengthy and costly. Many mul- tinational companies, thus, try to take a shortcut by acquiring a smaller, local firm that already has a distribu- tion network in the region.
Market Competitive Dynamics
The second factor is much less obvious. Multinational companies want to access local technology and R&D resources. This might seem very counter-intuitive. In most industries, multinational companies own the most advanced technology, while local small companies in Asia remain in the catch-up stage. Market-competitive dynamics in Asia are often such that multinational companies occupy the high end of the market while locals are at the low end. Over the years, however, having realized that they’re missing a big chunk of the market at the mid-to-low end of emerging Asian countries, they’ve been thinking of ways to move down the market. At the same time, local small companies, not content to reside at the low end, have been moving up the market.
To attack the mid-to-low end of the market, some multinationals have attempted to simply dumb down the higher-end products they offer in the U.S. or Europe. This approach has largely failed because they don’t have the right cost structure—you can’t support a much lower price point in Asia with U.S. or European-based R&D and manufacturing. Another reason is that a product development approach from the ground up is needed, rather than tweaking edges or eliminating features from an existing higher-end product. Therefore, in recent years multinationals have begun to acquire local small companies in China outright—often a more cost-effective approach than taking time to organically develop their Asian business.
But there is more. Technology gained through these acquisitions isn’t just used for local markets, but also exported to other emerging markets. Furthermore, with reverse innovation, technologies and products developed by entrepreneurs in China are increasingly brought back to the value segment of the market in the U.S. and Europe. In this way, small Chinese companies are no longer copycats; their impact is increasingly felt worldwide.
At the recent World Economic Forum in Davos, Switzerland, Chinese Premier Li Keqiang delivered a speech in which he remarked, “Mass entrepreneurship and innovation, in our eyes, is a gold mine that provides a constant source of creativity and wealth.” After decades of running the economy by central command and control, China’s leaders are now eager to promote grassroots-level entrepreneurship. If the current trend continues, foreign investors in China will not lack inter- esting opportunities that could possibly lead to the next Amazon or Google of China.
Beini Zhou, is portfolio manager at Matthews Asia.
The views and information discussed represent opinion and an assessment of market conditions at a specific point in time that are subject to change. It should not be relied upon as a recommendation to buy and sell particular securities or markets in general. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Matthews International Capital Management, LLC does not accept any liability for losses either direct or consequential caused by the use of this information. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. In addition, single-country funds may be subject to a higher degree of market risk than diversified funds because of concentration in a specific geographic location. Investing in small- and mid-size companies is more risky than investing in large companies, as they may be more volatile and less liquid than large companies. This document has not been reviewed or approved by any regulatory body.
Matt Krummell, portfolio manager of the strategy. MFS Launches Luxembourg Domiciled High Conviction US Equity Fund
MFS Investment Management announced the launch of MFS Meridian Funds – U.S. Equity Opportunities Fund. The fund is a concentrated, high-conviction US multi-cap equity strategy that utilises a disciplined, bottom-up stock selection and portfolio construction process that combines MFS’ fundamental and quantitative research.
The fund is an extension of an existing MFS strategy available through its US mutual funds since 2000. Managed by Matthew Krummell, CFA, it seeks to generate long-term risk-adjusted performance over a full market cycle of three to five years.
“We believe this style of equity investing offers a differentiated approach that can help meet the needs of investors seeking the right balance between risk and return,” said Lina Medeiros, president of MFS International Ltd. “The fund leverages two distinct approaches to security selection through the continuous assessment of fundamental and quantitative research. The strength of this design places clients at the heart of an investment process that has the potential to generate strong risk-adjusted returns in various market cycles”, she added.
The portfolio manager, in conjunction with MFS’ deep team of research analysts, routinely reviews position size and evaluates securities for inclusion in the portfolio. MFS’ blended research approach is widely used across multiple strategies at the firm and also used in investment strategies with more than $13.6 billion in assets under management.
Commenting on the launch, Matt Krummell said, ‘In our view, fundamental and quantitative research are complementary, the inherent strengths of one type of research generally offset the inherent weaknesses of the other. The combination of two independent stock selection processes in this portfolio means that we leverage only our best ideas for the benefit of our clients’.
The fund follows a disciplined, systematic approach to portfolio construction. It combines two independent stock selection processes. When a stock is simultaneously rated with both a quantitative and fundamental ‘buy’ recommendation, it is considered for the fund. We believe these are stocks of high-quality companies, trading at attractive valuations, and have a growth catalyst. Typically the fund may invest in 40 to 50 stocks. Holdings are primarily eliminated from the portfolio upon being downgraded to a ‘hold’ or a ‘sell’ by a fundamental analyst or the quantitative model.
CC-BY-SA-2.0, FlickrFoto: Sebastien Bertrand. La Fed, a punto de pasar de muy acomodaticia a acomodaticia
As explained in last week’s FridayMail, by AllianzGI, more and more high-quality issuers can afford to offer negative bond yields. Attractive bond yields are becoming scarcer around the globe, putting investors on a diet. At the same time, the Greek budget is in for lean times, too. Even if Athens has agreed with the “institutions” on an extension of the bail-out programme until the end of June, it will not receive financial support immediately. The agreement will bring some relief for Greek banks, though (not least because Greek bonds will probably become eligible for ECB refi operations again).
Despite the tense situation, not least with regard to the still unresolved conflict in Ukraine, stock prices rose in both Europe and the US at the beginning of the week and crossed the thresholds of 18,000 (Dow Jones) and 11,000 (DAX), respectively. Market participants‘ trust in the central banks‘ willingness to act works like a sedative, and the ECB’s ultra-expansionary monetary policy is a treat for the European stock markets in particular.
Speaking of monetary policy, Allianz GI believes that even though Fed Governor Janet Yellen’s testimony statements were largely regarded as dovish, the Fed is slowly moving towards its first rate hike – while the global bond markets are still not willing to believe that. A repricing of the Fed’s and the Bank of England’s (BoE) monetary policy will therefore remain one of the key investment themes during the coming months, said the week’s FridayMail of AllianzGI.
Meanwhile, the PMIs suggested that the US upswing is still intact, despite recently disappointing data. While the downtrend in consumer prices might trigger a deflation discussion in North America, too, the oil price slide is the main reason for the price decline. In the medium term, the economic uptrend – and the labour-market recovery in particular – should increase inflationary pressures. Interestingly, according to the minutes of its January meeting, even the Bank of Japan does not seem to see any necessity for additional monetary stimulus, as downward risks to inflation abate.
Photo: vice1. Asian Debt Is Expected to Outperform Developed Market Bonds in 2015
Asian debt is expected to outperform developed market bonds in 2015, thanks to healthy corporate credit dynamics, supportive global liquidity, stable economic and political environments and investors’ demand for yield.
Joep Huntjens, head of Asian Debt at ING IM said: “Although the anticipated rise in US interest rates may present a challenge for Asian bonds, the Federal Reserve is still only likely to remove its zero-rate monetary policy gradually. Furthermore, the impact of this will be outweighed by the spread cushion offered by Asian credit/high yield and the additional yield offered by the region’s local currency bonds.”
ING Investment Management anticipates Asian credit, including USD-denominated, High yield and Local Currency bonds, to deliver a total return potentially as high as 8.6% in 2015, although the base case is between 2.0 to 4.0%. Asian high yield could be as high as 11.4%, with the base case between 5.3% and 7.3%.
Huntjens said Emerging Asia is once again set to generate the fastest rate of global growth with the region’s largest economies China, India and Indonesia set to continue economic reforms. Lower oil and commodity prices will result in better external balances and lower inflation for most Asian economies and will afford policymakers a greater degree of freedom to enact expansionary policies..
The key risk to Asian local bonds, said the head of Asian Debt at ING IM, comes from currency performance versus the greenback. Aggressive central bank policies aimed at stocking growth and warding off disinflation in Japan, Europe and elsewhere are likely to help the dollar strengthen. However, performance is relative, and versus other regional EM currencies, such as Latin America, Asia should outperform given its respectively lower average volatility.
Photo: Antonio Tajuelo. Higher Returns Thanks to ‘Sin Stocks’
If you’d invested a dollar in American tobacco shares 115 years ago, you’d be USD 6.3 million better off now. If you’d have invested the same dollar in the wider American market on that same day, you’d have to make do with USD 38,255 today.
This 5% outperformance by the tobacco industry over such a long period is impressive – and it’s not hidden behind a smokescreen either. Mark Glazener, fund manager of Robeco NV, summarizes the success in four words: “A good business case. How many products are there that elicit such a sudden moment of panic in users: ‘Have I got any at home, or on me?’ Not many.”
Twenty percent of the Western population smokes – a market share that is shrinking only very slightly – and the demographic development in emerging markets is providing tailwind. The degree of penetration is reasonably stable, but the population is growing and therefore the number of users continues to rise.
And then you have the pricing power, which according to Glazener is of unprecedented importance. “Rounded off, the tax on a packet of cigarettes is four euros and is raised occasionally by the government. And tobacco manufacturers have the opportunity to increase their margins each time the excise duties are raised. Basically, volumes are falling slightly worldwide – but this is more than made up for by the margins. In addition, the production costs rarely increase and tobacco manufacturers are not allowed to advertise – saving them millions each year. Unilever invests 11% of its budget in advertising.”
Exclusion from portfolios
Another advantage is that there has been no major consolidation in the tobacco industry. Barring a few specific American players, there are but three big global names: British and American Tobacco, Philip Morris and Japan Tobacco. The competition from e-cigarettes doesn’t pose much of a threat either. “The nicotine hit from e-cigarettes is much less intense. You don’t get the same level of satisfaction from taking a drag.”
Glazener believes that the momentum in the tobacco industry can be maintained at least until 2020, thanks to the increasing prices that are compensating for the slight decline in volumes. But the prices of cigarettes cannot continue to rise without challenge, in particular because the majority of users are from low income groups. “During the crisis, the turnover in Italy and Spain plummeted because smokers switched to imitation brands, bought via the illegal circuit.”
Tobacco shares are examples of ‘sin stocks’ – shares in controversial sectors and activities, like the weapons industry and alcohol and gambling companies. As a result, these shares are avoided by a growing group of investors that is guided by principles concerning ESG (Environment, Social, Governance). But not by Glazener, who applies the best in class principle for his fund. “Excluding certain sectors limits your possibilities and opportunities as a fund manager and we only do that when it is required by law, like with cluster bomb makers. At the end of the day, you are judged by your returns in the financial sector.”
Immune for headwind
Shares that are excluded by groups of investors tend to be traded at a discount. Due to the taint on the sector or industry, as a rule they are valued lower than the market average. This doesn’t apply to tobacco shares – these certainly aren’t cheap.
The merits of investing in shares in tobacco firms outweigh the disadvantages of the tobacco industry. “As long as these shares continue to perform above average, investors will continue to buy them.” Shares in tobacco will keep doing surprisingly well for now, even against the sentiment of the modern world. “The industry has survived billions in claims, the ban on smoking in public places, shocking messages on cigarette packs and even a ban in Australia on printing brand names on packets. But these shares have proven exceptionally immune to every type of headwind.”
The 5% extra return is obviously just too tempting to resist. Even the pension fund for GPs was investing in tobacco shares until a year ago. It has excluded this industry now, as has PGGM’s Zorg & Welzijn (Health & Welfare) pension fund. A complete end to investing in tobacco shares is not in sight either.
But that time may come, thinks Glazener. “If further government restrictions cause the sector to lose its appeal, for instance.” Until then, investors remain caught in the devil’s dilemma of return versus ESG considerations. Glazener too, despite the fact that the management team of Robeco NV is looking into whether tobacco shares can be replaced in the portfolio – preferably by an alternative with the same risk-return profile.
. Jaco Rouw, Senior Portfolio Manager at ING Investment Management Joins Miami Summit
Jaco Rouw, senior portfolio manager at ING Investment Management, is set to present on the topic of ‘Global Bond Opportunities: Flexible Approach to Fixed Income”, when he takes part in the Fund Selector Summit Miami 2015, being held 7-8 May at the Ritz-Carlton Key Biscayne.
The event – a joint venture between Open Door Media, the owner of InvestmentEurope and Miami based Funds Society – is targeting locally based fund selectors with the opportunity to hear input from a range of managers.
In times of uncertainty, it’s best to be positioned for various outcomes. For financial instruments, that means diversification. In past decades, the decline in yield levels has been generally beneficial. The latest push has been asset price inflation, driven by the Fed, the ECB and the BoJ. With central banks keeping rates continuously low, investors have responded by shifting their holdings to higher yielding asset classes such as Credits or EMD. But this poses enormous challenges, especially in managing the risk posed by interest rates, currencies duration, security selection and tactical asset allocation. The answer to these challenges has been the use of flexible global fixed income strategies, which employ tools and techniques to benefit from a wider spectrum of investment opportunities.
Jaco Rouw is based in The Netherlands and has been a senior portfolio manager with ING Investment Management since 2013. Jaco has worked at ING IM since 1998 and is currently responsible for global core fixed income investment policy and model portfolio construction. He is also responsible for managing client mandates and flagship fixed income mutual funds. Jaco has had a varied career at ING IM and since 2008 he has also been responsible for currency overlay and the management of dedicated currency portfolios, and from 2001-2008 he was a portfolio manager within the Global Fixed Income team at ING IM.
You will find all information about the Funds Society Fund Selector Summit Miami 2015 through this link.
Photo: Fred Hsu . Agnelli Family Seeks Buyers for Cushman & Wakefield
According to the Wall Street Journal, the Italian family Agnelli has hired Goldman Sachs and Morgan Stanley to find a buyer for the third largest real estate company in the world, Cushman & Wakefield Inc, under their control, quoting people familiar with the matter.
The sale could fetch as much as $2 billion, for the company that recorded $163 million in earnings in the 12 months that ended in September, according to the newspaper, and acquired New York-based Massey Knakal Realty Services for $100 million late last year.
The Agnelli family, which currently owns 81 percent of the company, paid $565.4 million for a 67.5 percent stake in Cushman & Wakefield 8 years ago, according to the WSJ. “There is currently no transaction to disclose, nor guarantee that such a review may result in any transaction involving Cushman & Wakefield,” a Cushman & Wakefield spokesman said.
