Pixabay CC0 Public DomainWilliam de Gale, gestor del BlueBox Global Technology Fund. William de Gale, gestor del BlueBox Global Technology Fund
ACCI, asset management firm specialized in systematic strategies through its ACCI Dynamic fund family, has signed an exclusive agreement with Swiss fund manager BlueBox Asset Management to distribute its BlueBox Global Technology Fund in Latin America and Iberia (Spain, Portugal and Andorra).
In a press release, the firm has revealed that this 5-star Morningstar rated fund is managed by William de Gale, who was Portfolio Manager for 9 years for the BlackRock World Technology Fund. It was launched in March 2018 and has been backed by a broad range of institutional investors, which has allowed it to recently surpass 500 million dollars in assets under management.
In ACCI’s view, this is possible thanks to its differentiated approach among other strategies in the sector, largely avoiding mega-caps and focusing on enabler-type companies, with strong balance sheets, profitability and strong cash generation. It is a UCITS fund, available on the main trading platforms such as Allfunds, Inversis and Pershing, among others.
“This partnership with BlueBox will strengthen our product offering aimed at institutional clientele in Latam South and Iberia, adding a solid and consistent strategy such as BlueBox’s, with average annual returns of over 31% and 141% since its launch just over 3 years ago”, Antonio de la Oliva, Head of Distribution at ACCI, commented.
Gely Solis, Co-Founder of BlueBox Asset Management, said that this agreement with ACCI, “who have proven their impressive distribution capabilities in key regions” for us, will serve to broaden their investor base, consolidate their growth and “give access to a unique strategy such as BlueBox to a broad typology of investors in the region”.
ACCI continues its commitment to offer a wide range of high value-added strategies to institutional investors, complementing its own strategies with distribution agreements with outstanding alpha-generating asset management firms.
The transition from a fossil-fuelled economy to one powered by renewables carries the promise of being as transformational as the agricultural and industrial revolutions. But as things stand, hopes for containing climate change look ambitious.
New net zero pledges from the US, China and Europe are inadequate. They still leave the world far short of the Paris Agreement goal of limiting global temperature rises to below 2 degrees Celsius from pre-industrial levels. This is why carbon pricing is essential.
According to members of the Pictet-Clean Energy fund’s Advisory Board, a fully functioning carbon pricing mechanism could be the difference between halting climate change and allowing it to spiral out of control. Market forces, they argue, can be a powerful ally, helping change the behaviour of businesses and consumers.
The problem is finding a way to harness them effectively. Currently averaging globally at just USD 2 per tonne of CO2, the carbon market is clearly not doing the job it was set up to do. The International Energy Agency says carbon prices need to rise to as much as USD 140 by 2040 to meet Paris goals.
Breaking the tragedy
Getting there will not be straightforward. As former Bank of England Governor Mark Carney warned, the battle against climate change is hampered by the “tragedy of horizon”. In other words, the current generation has no direct incentive to fix the problem when catastrophic impacts of climate change will not be felt for decades. By making carbon emissions more costly today, however, there is the possibility of avoiding that tragedy.
The World Bank’s modelling has shown that carbon pricing has the potential to halve the cost of implementing Paris targets, saving some USD 250 billion by 2030. One problem is that carbon pricing schemes don’t cover nearly enough of the world’s emissions.
Globally, the carbon pricing market accounts for about 12 gigatonnes of CO2 equivalent – which translates into just under a quarter of all annual global greenhouse gas emissions (1).
The US, the world’s biggest polluter, does not even participate in carbon trading at the federal level while the Paris climate agreement did not include a provision for pricing carbon (2). Industry lobby groups in coal, oil and gas sectors had been fierce opponents too. And then there is a wide divergence in prices from country to country.
European countries set the example. Sweden levies the highest carbon tax in the world at SEK1,190 (EUR 117)/tonne CO2, covering about 40 per cent of its greenhouse gas emissions. In Europe, the world’s biggest and oldest market, carbon prices rose more than five-fold since 2018 to a record high in May (see Fig. 1).
But elsewhere, carbon remains under-priced. According to the IEA, the average carbon prices would need to rise almost 50-fold to USD 75-100 /tonne by 2030 and then USD 125-140 by 2040 to meet Paris Agreement goals.
University of California San Diego researchers believe even that will fall short. Their study puts the social cost of carbon – which takes into account empirical climate-driven economic damage estimations and socio-economic projections – at a staggering USD 417/tonne (3).
The lack of a harmonised market and a unified global carbon price are perhaps the most significant problems. Businesses, especially in energy-intensive industries, may relocate out of countries with high carbon costs into those with laxer emission constraints – in a phenomenon known as “carbon leakage”.
Our advisory board members say renewed international efforts to fight global warming could encourage more countries and regions to start adopting carbon pricing schemes. That should push prices higher in the long term and prevent carbon leakage.
The signs are encouraging. In China, which launched its national carbon market in February, market participants expect the price to average RMB 66/tonne (USD 10) in 2025 before rising to RMB 77 by the end of the decade (4). It has the potential to be the world’s biggest carbon market.
Elsewhere, the American Petroleum Institute, the powerful fossil fuel lobby, is now endorsing the introduction of carbon prices in a major policy reversal that underscored seriousness in tackling climate change.
What’s more, Brussels plans to present proposals to revise and possibly expand its emission trading system in line with the European Green Deal and its new target to reduce greenhouse gas emissions by at least 55 per cent by 2030.
One way to improve the emission pricing system is to expand the use of carbon credits. Governments can give out credits to businesses that lower their carbon footprint with carbon capture and storage (CCS) technology, reforestation activities or energy efficiency solutions.
This way, companies can gain flexibility in complying with carbon pricing regulations.
The discussion on carbon pricing and credits is likely to feature prominently during the landmark UN climate talks in Glasgow later this year as potential cornerstone to supporting climate goals.
Accelerating innovation
An overlooked benefit of effective carbon pricing is that it can also accelerate the pace of innovation in clean energy technologies and promote a faster and broader adoption of products and services that have yet to become commercially viable.
For example, our Advisory Board members say, certain types of hydrogen power generation that combines carbon storage could become cost competitive if carbon prices are set around EUR 60-70 per tonne of CO2.
Other technologies that could become viable at higher carbon prices include advanced power transmission mechanisms and next-generation batteries.
This would have significant benefits. The IEA estimates such technologies alone have the potential to cut global energy sector CO2 emissions by nearly 35 gigatonnes of CO2 by 2070, or 100 per cent of what’s considered sustainable in the same period.
The transition to a decarbonised economy will be among the most wrenching socio-economic shifts humans have ever experienced. Yet even though the survival of the planet is at stake, resistance to change is proving difficult to overcome. A higher carbon price can smooth the path.
(1) Carbon Pricing Dashboard, World Bank
(2) Article 6 of the Paris Agreement provides options for voluntary cooperation amongst countries in achieving their NDC (nationally-defined contributions) targets to allow for higher climate ambition, promote sustainable development, and safeguard environmental integrity
(3) Ricke, K., Drouet, L., Caldeira, K. et al. Country-level social cost of carbon. Nature Clim Change 8, 895–900 (2018). https://doi.org/10.1038/s41558-018-0282-y
(4) China Carbon Pricing Survey 2020
Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to risks and uncertainties that could cause actual results to differ materially from those presented herein.
Important notes
This material is for distribution to professional investors only. However it is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation. Information used in the preparation of this document is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning. Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.
This document has been issued in Switzerland by Pictet Asset Management SA and in the rest of the world by Pictet Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority, and may not be reproduced or distributed, either in part or in full, without their prior authorisation.
For US investors, Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act.
Pictet Asset Management Inc. (Pictet AM Inc) is responsible for effecting solicitation in North America to promote the portfolio management services of Pictet Asset Management Limited (Pictet AM Ltd) and Pictet Asset Management SA (Pictet AM SA).
In Canada Pictet AM Inc is registered as Portfolio Managerr authorized to conduct marketing activities on behalf of Pictet AM Ltd and Pictet AM SA. In the USA, Pictet AM Inc. is registered as an SEC Investment Adviser and its activities are conducted in full compliance with the SEC rules applicable to the marketing of affiliate entities as prescribed in the Adviser Act of 1940 ref. 17CFR275.206(4)-3.
The supply of private equity funds listed on the Mexican stock exchanges (BMV and BIVA), as well as AFOREs’ investments in them, have almost doubled in just over three years. Between December 2017 and March 2021, the number of vehicles increased from 88 to 172 vehicles (+ 95%) while the investments of the AFOREs rose from 7.797 million dollars to 15.365 million dollars (+ 97%).
Mexico is perhaps the only country that has private equity funds registered in its stock exchanges, however, this occurred since the institutional investor can only acquire securities that are the subject of public offering, so making it public was the solution found to give institutional investors access to this asset class in 2009.
In December 2017, investments in private equity were basically local, the real estate sector (30% of the capital called) led the list; followed by infrastructure (21%); private debt (17%); private equity (14%) and energy (11%) to name the most relevant.
By allowing global investment as of January 2018, what has been observed is a recomposition that has allowed the AFOREs to diversify both by sectors and globally.
In December 2017, 93% of the resources were concentrated in 5 local sectors, while by March 2021, 91% were concentrated in 6 sectors where 5 are local and one global. In another 5 additional sectors there are the remaining 7%.
In 2017, investments in CKDs and CERPIs accounted for 4.9% of assets under management and by May 2021 they reached 6.2%, however, it must be taken into account that in the period the assets under management of the AFOREs increased 55% from 160.251 million dollars in December 2017 to 247.825 million dollars as of May 2021.
If you break down 6.2% of the private equity investments held by the AFORE, it means that in just over three years 5.2% are local investments (from 4.9 to 5.2%) and 1% are global investments.
The incorporation of global investments in private equity is not only causing sector diversification, but also a rebalancing between local and global investments. We already observed this recomposition when the AFOREs were allowed to invest in equities (2005), where in the first instance they were allowed local investments and later global investments through a variety of vehicles such as ETFs, mandates and in recent years mutual funds. Currently 14.1% of the assets under management of the AFOREs are in international equities and 5.8% in national equities, which means that 71% of equities are international and 29% local.
Today the AFOREs’ investments in private equity, 80% are in local investments and 20% are global, so as assets continue to grow, the composition of local and global investments will continue to seek sectoral and global diversification.
Pixabay CC0 Public Domain. Jupiter AM nombra seis nuevos analistas para sus equipos de estrategias de inversión
Jupiter AM has announced in a press release the hiring of six new analysts within its sustainable investing strategies, doubling the size of the existing resources and “adding fresh investment expertise to key portfolios”.
The asset manager has highlighted that its sustainability suite of funds offers clients a range of differentiated investment options with a shared goal of generating attractive returns through long-term sustainable investing. Following a strategy refresh earlier this year, Abbie Llewellyn-Waters was appointed as Head of Sustainable Investing, working with Rhys Petheram, Head of the Environmental Solutions team.
The firm is now strengthening its offering with the appointment of new analysts. Specifically, Maiken Anderberg joins the Global Sustainable Equity team as Equity Analyst. Having previously interned with Jupiter’s Sustainable Investing team in 2018, she is returning to the company in a new permanent role, working closely with Abbie Llewellyn-Waters and analyst Freddie Woolfe with a dedicated focus on the Jupiter Global Sustainable Equities strategy
The Jupiter Global Sustainable Equities strategy was launched in 2018 to offer clients an alternative to mainstream global equities by combining financial returns with positive environmental and social returns – enabling clients to participate in the transition to a more sustainable world.
Joining Jupiter in a newly created role, Noelle Guo has beenappointed Equity Analyst of Environmental Solutions. Supporting fund manager Jon Wallace and reporting into Petheram, she will work across the equity strand of Jupiter’s environmental solutions suite. Guo has eight years of equity research experience, joining from an Investment Analyst role at Pictet Asset Management before which she was at AB Bernstein as a Senior Research Associate.
Laura Conigliaro has been named Analyst of the Environmental Solutions team. Having joined Jupiter in 2019 as a member of Jupiter’s Governance and Sustainability team, she will now work directly with fixed income specialist Petheram with a particular focus on fixed income verification, also providing sustainability research into the desk’s environmental impact themes. Prior to joining Jupiter, Conigliaro has held roles at the Inter-American Development Bank and sustainability management consultancy Critical Resource.
Jupiter’s Environmental Solutions suite of funds boasts a 33-year track record and over 890 million pounds in AUM across the Jupiter Global Ecology Growth and Jupiter Global Ecology Diversified funds, and UK onshore vehicles. The strategy looks to invest in companies intentionally focused on providing solutions to sustainability challenges across key environmental themes.
In an internal move, Jenna Zegleman joins the teams as Investment Director. Having arrived at Jupiter in 2018 as a product specialist, she will provide client-facing support across the full range of portfolios in the Sustainable Investing suite.
In addition to these hires, Anisha Arora and James Kearns have joined Jupiter’s Governance and Sustainability team. An emerging markets economist and strategist with 10 years’ experience across sell side research and buy side asset management, Arora joins from Allianz Global Investors and has experience in applying ESG considerations to macroeconomic analysis, as well as to the sovereign debt investment process. Kearns joins Jupiter from BNP Paribas, where he worked initially in CSR within their Global Markets division before moving to become a Sustainable Finance Analyst.
“As we navigate through this global pandemic, the importance of confronting the climate crisis, bridging social inequality and ensuring a sustainable future is more important than ever. By investing in companies leading a sustainable transition across our Global Sustainable Equities and Environmental Solutions strategies we are able to offer our clients a range of attractive and truly innovative solutions that deliver positive outcomes for planet, people and profit”, Abbie Llewellyn-Waters, Head of Sustainable Investing, commented.
Meanwhile, Stephen Pearson, CIO, added: “We are pleased to make these appointments to the team as we continue to grow Jupiter’s sustainability suite, helping us continue to innovate and build on our long heritage of sustainable investing. We are delighted to be making these appointments at this important point in time, cementing support for these key strategies with the addition of specialist insight and investment expertise.”
Pixabay CC0 Public DomainEmergentes . Asia emergente
Two questions about investing in emerging markets (EM) are increasingly common: Does it make sense to time allocations to emerging market equities? And given the MSCI’s EM Index’s historic, near-doubling from its March 2020 low, is it time to get out?
Trying to time shifts is difficult in any market, but even more so in emerging markets. Market timing questions aside, there are several compelling reasons to maintain a consistent and material allocation to emerging market stocks, if not increase it.
Why Emerging Markets Should Comprise a Consistent Allocation Within a Portfolio
Developing economies represent about 85% of the global population and generate nearly half of global gross domestic product (GDP), thanks in large part to a rapidly expanding middle class. Not only are these economies contributing a significant portion of the world’s economic output, but their collective GDP has also proven more resilient through the pandemic and is expected to rebound more this year and next. According to the International Monetary Fund’s World Economic Outlook from January, advanced economies are estimated to have declined 4.9% in 2020 and are forecast to expand 4.3% this year and 3.1% in 2022. By contrast, emerging and developing economies collectively declined just 2.4% in 2020 and are seen growing 6.3% in 2021 and 5% next year.
The faster economic growth should be supportive for emerging market earnings, if past experience is any guide. Despite the rapidly increasing importance of emerging markets in a global context, the companies in emerging markets represent less than one quarter of global stock market capitalization. This will very likely grow over time.
While the long-term investment opportunity in EM is compelling, there are portfolio benefits as well. Since its inception in 1988 through December 31, 2020, the MSCI EM Index has delivered a 10.2% annualized total return, which is similar to the S&P 500 Index’s 11% annualized gain and considerably more attractive than the MSCI EAFE Index’s 5.4% rise. Importantly, emerging markets tend to behave differently than their developed-market counterparts as they both under- and outperform each other at different points in time, providing meaningful asset diversification over market cycles.
Indeed, because EM economies and capital markets are less mature, emerging markets still experience pronounced business cycles. This attribute alone could provide a material performance advantage over time, particularly for portfolios that are actively balanced across the growth/value spectrum throughout the cycle. This balance can enhance diversification while positioning the portfolio to take advantage of sector and style rotations.
Although the S&P 500 Index extended its outperformance in the latter half of the last decade, the MSCI EM Index’s 18.7% return in 2020 slightly beat the S&P 500 Index’s 18.4% gain. And over the first two months of 2021, the developing country benchmark more than doubled the return of the S&P 500, perhaps signaling a turn in the cycle. If so, that would reinforce the long-term performance of emerging market equities as well as the portfolio diversification benefit of consistent exposure to emerging markets.
Putting the Last Few Years into Context
Emerging market equities frequently oscillate between strongly positive and sharply negative performance. Putting the moves of the last several years into context illustrates this dynamic nature of EM investing and supports our view that it’s always the right time to be invested in EM.
Following the 2008 Global Financial Crisis, emerging markets rebounded sharply on the back of strong domestic consumption trends and bold stimulus programs, particularly in China. Expectations and valuations grew quickly, but were subsequently disappointed as the debt-fueled stimulus programs began to wear off. Most emerging markets were left with a debt overhang. By 2015, the U.S. Federal Reserve had tapered its asset purchases and then steadily lifted its key rate from late 2016 through mid-2019, spurring a strengthening U.S. dollar. The dollar headwind was too much for most emerging market earnings translated into greenbacks, despite consistent underlying EM growth trends. And while relative valuations favored developing country stocks in recent years, the U.S.–China trade dispute and questions about the future growth rate of China also weighed on broader developing country equities.
Entering 2020, economic conditions looked strong for many emerging markets but the spread of COVID-19 and to a lesser extent an oil price war between Russia and Saudi Arabia ultimately resulted in the first quarter being the worst quarter for global equities since the Great Financial Crisis. A flight to safety ensued as a general sense of fear overcame the markets, resulting in elevated capital flows out of EM and into the perceived safety of the U.S. dollar. The impact was especially painful for EM economies with elevated macro sensitivity to oil as well as those seen as too dependent on foreign investment.
Ultimately, though, with vaccine developments stoking the reopen trade and the U.S. election easing geopolitical tensions, emerging market equities finished an unprecedented 2020 on a high note. The MSCI EM Index returned just under 20% during the fourth quarter, its highest quarterly return in more than a decade.
The years following the Great Financial Crisis have shown once again that emerging markets are volatile. However, investors who maintained consistent exposure to EM during this period would have realized an attractive return on their EM allocation, with annualized performance of 10% for the MSCI EM Index from December 31, 2008, through December 31, 2020. Note that during this period the MSCI EM Index outperformed the S&P 500 50% of the time on a quarter-by-quarter basis, illustrating again that EM markets behave differently than their developed-country counterparts and reinforcing the argument that maintaining a consistent allocation to EM can enhance asset allocation diversification.
What Lies Ahead?
Many of the structural drivers that were beginning to emerge prior to COVID will come back into focus, helping to position emerging markets to potentially outperform in 2021. Among them, capital markets that continue to broaden and deepen, improving consumption trends fueled by rising incomes and an expanding middle class and new types of products and services that are continuing to penetrate many EM economies. Combined with massive global liquidity injections, highly accommodative interest rates, a weakening U.S. dollar, accelerating global growth and the deployment of COVID vaccines, emerging market stocks should have the wind at their back in 2021. Indeed, a recent global fund managers’ survey from Merrill Lynch showed that a record 62% of global money managers were overweight EM and two-thirds predicted that EM will be the top-performing asset this year. Yes, emerging markets are volatile. But it’s our strong view that because of the compelling long-term returns and portfolio diversification benefits, emerging market equities should remain a consistent and material portfolio allocation.
Charles Wilson, PhD is a portfolio manager at Thornburg Investment Management.
Founded in 1982, Thornburg Investment Management is a privately-owned global investment firm that offers a range of multi-strategy solutions for institutions and financial advisors around the world. A recognized leader in fixed income, equity, and alternatives investing, the firm oversees US$45 billion ($43.3 billion in assets under management and $1.8 billion in assets under advisement) as of 31 December 2020 across mutual funds, institutional accounts, separate accounts for high-net-worth investors, and UCITS funds for non-U.S. investors. Thornburg is headquartered in Santa Fe, New Mexico, USA, with additional offices in London, Hong Kong and Shanghai.
The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.
This is not a solicitation or offer for any product or service. Nor is it a complete analysis of every material fact concerning any market, industry, or investment. Data has been obtained from sources considered reliable, but Thornburg makes no representations as to the completeness or accuracy of such information and has no obligation to provide updates or changes. Thornburg does not accept any responsibility and cannot be held liable for any person’s use of or reliance on the information and opinions contained herein.
Investments carry risks, including possible loss of principal.
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M&G has announced that Fabiana Fedeli will lead its 57 billion-pound (78.4 billion-dollar) Equities division from the newly created role of Chief Investment Officer. She will report to M&G’s CIO, Jack Daniels.
In a press release, the asset manager has highlighted that the appointment follows its commitment a year ago to revitalize its active equity investment capabilities, “which has focused on delivering more consistent investment performance and developing strategies to meet evolving customer and client needs”.
M&G has a rich heritage in active equities investment; from launching the UK’s first mutual fund in 1931 and continuing to develop innovative strategies since then, including the recent launch of a range of impact investment strategies to tackle global challenges such as climate change and healthcare.
With over 20 years of experience in the investment management industry, Fedeli joins from Robeco Asset Management where she was Global Head of Fundamental Equities; leading an international investment team managing a range of active equity strategies. She had direct portfolio management responsibility for three of those strategies and has extensive experience of integrating sustainability and impact into investment processes. Prior to Robeco, Fedeli held a number of roles both in portfolio management and equity analysis in London, New York and Tokyo.
“Equities will always have an essential role to play in an investor’s portfolio and we believe that active equity management will deliver greater value for clients over the long-term. Fabiana’s appointment demonstrates our commitment to this vital asset class, bringing a wealth of investment experience in both equities and sustainability. Fabiana will be working with M&G’s talented team of investors, to promote greater collaboration, idea-generation and innovation across the Equities division”, Daniels, CIO of M&G, said.
Meanwhile, Fedeli pointed out that M&G has “a long heritage in active equity management, a strong culture and clear investment values”. In her view, as the industry continues to evolve, it remains imperative for asset managers to anticipate and respond to their clients’ needs. “I look forward to working with the talented and experienced investment team to continue to develop M&G’s equities proposition”, she concluded.
The global economy is expanding at a solid pace. Developed countries are responsible for much of that growth thanks to the rapid vaccine rollout and the lifting of lockdown measures.
But economic momentum is beginning to ease as central banks prepare themselves to scale back monetary stimulus in response to rising price pressures.
A less favourable mix of growth and inflation, tighter liquidity conditions and high valuations for riskier asset classes lead us to maintain our neutral stance on equities.
Within equities, we are underweight economically-sensitive sectors – including consumer discretionary stocks – while in fixed income we are underweight riskier bonds such as US high yield debt.
At the same time, we continue to hold overweight positions in defensive assets such as US Treasuries and Chinese local currency bonds.
Our business cycle analysis shows price pressures are becoming more visible in the US.
The country’s consumer price index excluding food and energy is increasing at a 3-month annualised pace of 8.2 per cent, the highest since 1982.
Core PCE, the US Federal Reserve’s preferred measure of inflation, also rose 3.4 per cent to hit its highest level in nearly 30 years.
However, we believe the bout of inflationary pressure is transitory, owing to supply distortions and a surge in demand for items that were most affected by the pandemic, such as used cars.
Stripping out the impact from these Covid-sensitive items and the base effect, our analysis shows inflation is still stable at around 1.6 per cent (1).
The Fed now appears set to hike interest rates as early as end-2022 after it unexpectedly upgraded this year’s growth and inflation projections in June.
Higher interest rates could come even sooner if wage inflation picks up from the current 3 per cent year-on-year pace – which will in turn pressure corporate profit margins.
In Europe, economic conditions are improving rapidly as the bloc’s vaccination programme and business re-openings gather pace.
Further improving the region’s prospects, euro zone countries will soon begin receiving funds from the EUR750 billion recovery fund, which is expected to boost growth by at least 0.2 percentage points both this year and next.
Economic momentum in emerging countries is levelling off as Chinese growth cools after a strong rebound. We think domestic demand will replace exports as the main contributor to economic growth, which will in turn boost retail sales and fixed asset investments.
Our liquidity indicators support our neutral stance on risky asset classes.
Liquidity conditions in the US and euro zone are the loosest in the world, thanks to continued monetary stimulus from central banks.
In contrast, China’s liquidity conditions are now tighter than before the pandemic as Beijing resumes its crack down on debt after a 2020 boom in lending among small and medium enterprises.
However, a further slowdown in the world’s second largest economy may prompt the People’s Bank of China to switch to easier monetary policy later this year. This will see the central bank intervene in the foreign exchange market to weaken the renminbi currency.
Our valuation models suggest equity valuations are at their most expensive levels since 2008. Tighter liquidity conditions and a further increase in real yields are likely to pressure global price-earnings multiples, which we expect to decline by up to 20 per cent in the next 12 months.
Our model suggests that corporate profits should grow globally around 35 per cent year-on-year this year. We think consensus earnings growth forecasts for the next two years — at around 10 per cent — are too optimistic as that would take EPS clearly above the pre-Covid trend, which is unlikely given that profit margins are already stretched.
Our technical indicators remain moderately positive for equities. Within fixed income, Chinese government debt – in which we are overweight – is the only asset class for which technical signals are positive.
Opinion written by Luca Paolini, Pictet Asset Management’s Chief Strategist.
(1) Covid-sensitive items: lodging away from home, used cars, car rentals, airline fare, televisions, toys, personal computers.
Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to risks and uncertainties that could cause actual results to differ materially from those presented herein.
Important notes
This material is for distribution to professional investors only. However it is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation. Information used in the preparation of this document is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning. Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.
This document has been issued in Switzerland by Pictet Asset Management SA and in the rest of the world by Pictet Asset Management Limited, which is authorised and regulated by the Financial Conduct Authority, and may not be reproduced or distributed, either in part or in full, without their prior authorisation.
For US investors, Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act.
Pictet Asset Management Inc. (Pictet AM Inc) is responsible for effecting solicitation in North America to promote the portfolio management services of Pictet Asset Management Limited (Pictet AM Ltd) and Pictet Asset Management SA (Pictet AM SA).
In Canada Pictet AM Inc is registered as Portfolio Managerr authorized to conduct marketing activities on behalf of Pictet AM Ltd and Pictet AM SA. In the USA, Pictet AM Inc. is registered as an SEC Investment Adviser and its activities are conducted in full compliance with the SEC rules applicable to the marketing of affiliate entities as prescribed in the Adviser Act of 1940 ref. 17CFR275.206(4)-3.
Foto cedidaZeno Staub, CEO de Vontobel. Vontobel AM completa la compra de TwentyFour AM tras adquirir el 40% restante de la boutique
Vontobel Asset Management has completed the purchase of TwentyFour Asset Management after securing the remaining 40% of its capital. After acquiring a 60% stake in the fixed income boutique in 2015, Vontobel had intended to buy the remaining 40% in two tranches in 2021 and 2023. However, it has beaten its own deadlines and has already accomplished the operation.
In a press release, Vontobel AM has explained that it has taken “targeted steps” in recent years to develop a diversified range of products for its clients, and one of the main pillars was the acquisition of a majority stake in TwentyFour Asset Management LLP (TwentyFour), now a 24.2 billion swiss francs specialist fixed income boutique. Both firms have now agreed that Vontobel will have acquired the remaining 40% in one tranche as of 30 June 2021.
TwentyFour and Vontobel are thus underscoring the very positive development of the partnership. “By bringing the transaction forward it gives clients and investors clarity and ensures focus remains on delivering outstanding performance and client service for the long term”, the statement said.
After the transaction, TwentyFour will remain operationally independent and will continue to service its clients from offices in London and New York, as well as via Vontobel’s international network. Since the acquisition of the majority stake of 60% in 2015, all TwentyFour Partners have continued to play an active role in the company’s day-to-day operations. Besides, the asset manager has highlighted that the partners and portfolio management teams “remain committed to serving the interests of clients and ensuring the investment boutique’s ongoing success, hence will continue to serve as a driver of growth for Vontobel”.
Both parties have agreed not to disclose the purchase price but have revealed that the acquisition of this stake will be fully financed out of Vontobel’s own funds. Part of the transaction will be paid in the form of Vontobel shares, further underscoring the commitment of TwentyFour’s Partners.
“From the very beginning, we have been impressed by TwentyFour’s expertise and entrepreneurial culture, as well as its continuous growth. The acquisition of the remaining 40% stake is therefore the logical next step in our diversification and growth strategy. I look forward to our ongoing collaboration with our colleagues at TwentyFour, who are all supportive of this acquisition,” stated Zeno Staub, CEO of Vontobel.
Mark Holman, CEO of TwentyFour, claimed that after six years of working very closely together with Vontobel as a majority shareholder, the decision to move to full ownership was not a difficult one. “As a direct consequence of our partnership we have been able to spread our investment expertise to a far greater audience as we have moved from being a domestic player to genuinely global. Importantly though we have preserved the independence and entrepreneurial spirit of being a boutique, which I know is something that both our clients and staff really value and was at the core of our decision making for this transaction”, he added.
TwentyFour was founded in 2008 as a partnership, and has since grown to employ around 75 staff, responsible for providing a broad range of fixed income products to institutional investors. It is known for its disciplined investment philosophy and its proven investment process that generates sustained attractive risk-adjusted returns. The firm’s funds have been rated by Morningstar, which has assigned 99% of them (asset weighted) a four- or five-star rating. Furthermore, the quality of its products has been recognized by a variety of industry awards.
Foto cedidaWilliam Davies, CIO para EMEA y responsable global de renta variable, y próximo CIO global en enero de 2022.. William Davies asumirá el papel de CIO global de Columbia Threadneedle
Columbia Threadneedle Investments has put its Global Chief Investment Officer transition plan into action. The asset manager has announced the retirement of Colin Moore, who currently holds this position, after nearly 20 years at the firm. He will be replaced by William Davies, currently EMEA CIO and Global Head of Equities, in January 2022.
The firm has highlighted the “key role” that Moore has played in shaping its global investment capability, including its “well-established and highly successful investment process based on collaboration across asset classes, research intensity and independent oversight to foster continuous improvement.” Under his leadership, Columbia Threadneedle has generated consistently strong long-term investment performance for individual and institutional clients, and today has 103 four- and five-star Morningstar-rated funds globally.
“I would like to recognise and thank Colin for his numerous contributions, including establishing our global investment capability that has delivered an enviable track record of consistently strong investment performance for our clients. We have built an outstanding and experienced team of more than 450 investment professionals across our global footprint, and as we look forward, William is well positioned to assume the Global CIO role. He is both an exceptional investor and respected people leader with a deep understanding of our firm having joined us in 1993. I look forward to working with William and Colin to ensure a smooth transition”, said Ted Truscott, Chief Executive Officer of the firm.
Meanwhile, Mooreclaimed to be grateful for the opportunity he’s had to establish a broad and deep investment capability for their clients. “We have spent considerable time ensuring a thoughtful succession, and I am extremely pleased that William will assume the Global CIO role next year. It has been a privilege to lead our team of dedicated, experienced investors who will continue to focus on delivering consistent, competitive investment performance for our clients under William’s leadership”, he added.
Lastly, Davies commented that his focus is unchanged: “I will continue to work with my colleagues to consistently deliver the investment performance our clients expect. I am honoured to lead our talented global investment organisation and look forward to continuing our partnership with colleagues across the business to help our individual and institutional clients achieve their investment goals.”
Pixabay CC0 Public Domain. Flujos financieros: la fuente de la juventud para unas infraestructuras hidráulicas enfermas
Adequate water supply is essential for the human life as well for economies and businesses to thrive. Yet adequate water supply has become more of a luxury than a basic right due to a growing global water crisis where water supply is limited, quality issues prevail, and infrastructure is either old and breaking down or even non-existent in the case of the developing world.
Allianz Global Investors believes that the implications of inadequate water infrastructure and lack of access to fresh, high quality water supply has far reaching consequences impacting nearly every individual, economy, and business around the world. “Investments in new and upgraded water infrastructure are therefore necessary for high quality water supply access and effective wastewater treatment today and into the future. Such investments can support the development of resilient infrastructure which can more effectively meet both todays and future challenges tied to growing populations, urbanization, climate change and even cyber-attacks”, says the asset manager in a recent analysis.
Given the necessity for such investments, the US Senate recently approved the US Drinking Water and Wastewater Infrastructure Act of 2021, which authorizes USD 35 billion of water related investments to be allocated to improving wastewater, stormwater, drinking water and water recycling across the nation. It is one the few areas with bipartisan support in the US which highlights the urgent need for water investments.
Will funding run dry?
The makeover of US water infrastructure which still has to be passed by the House is just one part of the larger USD 2 trillion infrastructure bill. As unanimous as the consensus is about the urgency to make the world’s biggest economy’s drinking water, wastewater, and stormwater systems future-proof, is the remaining investment deficit as the USD 35 billion will only slightly move the needle. In 2019 alone, the accumulative investment gap on water infrastructure was USD 81 billion.1Other calculations suggest annual needs of more than USD 100 billion each year for the next 20 years.2
Allianz GI points out that the consequences of funding shortfalls for water-reliant businesses and households are “enormous” as breakdowns and quality incidents will continue to plague local communities and disrupt future economic growth. “So, filling this financial void is vital not only to allow for the current US water infrastructure to function properly but also to make it resilient for future requirements“, they add.
The state of US water infrastructure
The United States’ public drinking water, wastewater, and stormwater systems resemble an outdated patchwork rug formed by pipes and lines from different centuries and with different levels of functionality. Because many pipes and pumps are nearly a one hundred years old and are operating at higher capacity than initially designed for, they are past the end of their usable life, leaking large amounts of water and oftentimes failing to meet today’s needs.
The asset manager highlights that municipalities are facing the question whether to upgrade, replace, or fortify these systems and how to make the water infrastructure future-proof to tackle severe weather events brought on by climate change. Additionally, they face the challenge to connect all US households to a regulated and safe water system. Currently, around a fifth of all households rely on septic tanks over public wastewater systems, and over two million lack properly connected drinking water and sanitation systems.3 Around a quarter of Americans are very concerned about the quality of their community’s drinking water.4
The leaking lifeline
A modern and robust water infrastructure is vital to the country’s economic development as it secures not only the supply of water but also prevents the spread of illness and diseases, fosters economic growth, and ensures a higher living standard.
“The more water infrastructure leaks treated water, the more capital is lost negatively thus impacting both local residents and the local economy. It also affects the competitiveness of a city as a business located in an area with adequate water supply and infrastructure is more competitive and fosters long term growth”, they comment. According to ASCE’s 2021 Infrastructure Report Card5 there is a daily loss of approximately 6 billion gallons (approx. 22.7 million m³) of treated water due to water main breaks occurring at one-minute intervals, amounting to a yearly loss of 2.1 trillion gallons (approx. 7.9 trillion m³).
Within the next four years, almost three-quarters of all dams will be over 50 years old and gradually deteriorating. If not upgraded and rehabilitated, they will be vulnerably exposed to possible disaster scenarios leading to a loss of human lives and to a considerable damage of properties and existing infrastructure.
Following the estimations of the Association of State Dam Safety Officials6 there are more than 2,300 state regulated high-hazard-potential dams in poor or unsatisfactory condition and in need of remediation.
Urbanization combined with the age profile of wastewater treatment plans is increasingly resulting in system overloads and failures.
15% of wastewater treatment plants have reached/exceeded their designed capacity.
These are just a few examples illustrating the poor conditions of US water infrastructure and the dire need for infrastructure capital expenditure. The situation has far-reaching consequences and urgent action is needed to upgrade and modernize the world’s biggest economy’s drinking water, wastewater, and stormwater systems.
The investment gaps
For Allianz GI, while the infrastructure investment proposals currently making their way through the US Congress would be a step in the right direction, the US water infrastructure gap is still immense. Estimates indicate that over USD 2 trillion in water investments are needed over the next 20 years to close the funding gap and develop adequate water infrastructure across the nation. For example, the amount needed to replace the remaining lead pipes in the US is already over the projected USD 35 billion in the current proposal as estimates are as high as USD 45 billion to complete the replacements.
According to estimates of the Environmental Protection Agency (EPA) there are between 6.5 million and 10 million lead service lines in the US. On average, it costs about USD 4,700 to replace one single lead service line. Even if the EPA’s estimate is higher than needed in certain cases, the projected funds would quickly run dry.
Several angles for active investments
“Undoubtedly, the US Drinking Water and Wastewater Infrastructure Act of 2021 reflects a decisive first step to closing the existing funding gap. On the other hand, while it is ambitious it’s still short of meeting the most pressing water challenges as it cannot even address the remaining lead pipes which threaten the safety of US citizens. There are still substantial funding gaps that require capital expenditure to be addressed. That said, if this bill is passed later this summer, it will be a positive for water space and for water investments given the water equipment and projects that will be needed to make the upgrades”, explains the firm.
When considering the several aspects water infrastructure covers, we can clearly identify where active investments are needed and how they could pay off.
Replacement of lead pipes and service lines: The removal of all lead service lines in the United States not only ensures clean drinking water for every American but it is also contributing to improved public health by preventing severe chronic diseases like lead poisoning, ultimately easing the financial burden on health systems. Additionally, it is likely to result in an attractive investment opportunity in companies that provide piping systems. Investor-owned networks can also play a role here as they can make improvements independent of infrastructure stimulus, many times at lower costs than municipalities.
Leaking lines: To maintain and stop the loss of precious treated water companies have developed smart technologies and tools to detect leaks in water pipes.
Emerging contaminants and Per- and polyfluoroalkyl substances(PFAs)7: Specialised companies that offer advanced water treatment technologies can detect and remove emerging contaminants from drinking water and help protect citizens from developing cancer after consuming poor water quality for years at a time.
Aging wastewater treatment plants: The replacement of wastewater treatment plants reaching the end of their lifespan opens up interesting investment opportunities for companies who are experts in wastewater management and designing wastewater treatment plants.
Lookout
While the USA and a big part of the world is focussing on how the US Drinking Water and Wastewater Infrastructure Act will contribute to revitalizing the aging US water infrastructure, positively impacting economic and job growth over the medium to long-term, there are still many under-researched and prominent risks. Just take cyber security, a topic gaining increasing importance for the protection of water infrastructure against cyber criminals. The cyber-attack on the water supply in Oldsmar, Florida and the Cybersecurity and Infrastructure Security Agency’s call to “install independent cyber-physical safety systems”8is just one piece of evidence of the high relevance cyber security has for a future-proof water supply.
Investment implications
Global Water strategies help to address the very real water-infrastructure and water-quality related challenges in the US and the rest of the world by investing in pure play water companies delivering solutions to the most pressing challenges. “Investments may not only generate financial alpha given structural support of the theme, but also environmental and social alpha given the solutions-oriented approach. Such investments can help to upgrade and build resilient water infrastructure that is well prepared to face the challenges tied to climate change and ongoing population growth and urbanization”, says Allianz GI.
This approach allows investors the ability to participate in a compelling long-term growth opportunity and contribute to the solutions of modern water infrastructure, a lifeline to society and the economy.
