News

CORPORATE

Allianz Global Investors (AllianzGI) and Allianz Capital Partners (ACP) have announced that they will join forces. From 1 January 2018, ACP will become a discrete entity under the umbrella of AllianzGI. ACP and AllianzGI will jointly develop an investment offering for external clients. ACP will continue to provide their offering to Allianz Group companies and their clients. Jürgen Gerke, CEO of ACP, will report to Andreas Utermann, CEO of AllianzGI.
 
Andreas Utermann stated: “We are delighted to be extending our client offering in private equity strategies by joining forces with ACP. Jürgen and the team at ACP are seasoned investment professionals and have established an impressive track record investing on behalf of Allianz.
 
“Over the last five years, AllianzGI has expanded significantly its investment offering, adding a diverse range of teams and capabilities, with distinct market offerings, to ensure we continue to meet our clients’ evolving investment needs. ACP’s long-term investment experience, in areas such as direct infrastructure equity investments, will be highly com­plementary to our fast growing Alternatives business and of particular interest to our external clients.”

Jürgen Gerke said: “We are excited by the opportunity to pool Allianz and third party client commitments, which will further enhance our ability to participate in interesting investment opportunities for the benefit of our clients. With a diversified set of funding options available to us, we can increase our flexibility for individual transactions and further strengthen our reliability for our investment partners. This will benefit our clients as well as our employees.”

ACP currently manages €22 billion in alternative equity assets on behalf of Allianz. With this move, AllianzGI’s Assets under Management in Alternatives will total over €58 billion. Allianz Global Investors already manages over €36 billion of alternative assets on behalf of institutional and retail investors around the globe. AllianzGI’s Alternatives platform comprises a mix of both liquid and illiquid alternative investment solutions for clients, including an infrastructure debt capability and green-focused infrastructure equity team, and a global private debt business.

FUNDS

Morgan Stanley has announced the recent addition of a new sub-fund, Carrhae Capital Long/Short Emerging Market Equity UCITS Fund, under FundLogic Alternatives plc, a UCITS umbrella fund with segregated liability between sub-funds. The fund provides exposure to the investment strategy followed by Carrhae Capital LLP’s Master Fund LTD, which aims to generate returns with less volatility than emerging market equities, and little to no correlation to other asset classes. The FundLogic Alternatives plc platform currently has approximately US$3.4 billion in AUM.

Carrhae Capital was founded in 2011 by co-founders Ali Akay, Rob Kirkwood and Adrian Headon. Akay, who began his career as a business strategy analyst at McKinsey & Company, has managed capital across global emerging markets since 2003 at firms such as HBK and SAC.

Carrhae’s investment strategy seeks to capture idiosyncratic alpha from emerging markets through fundamental, bottom up portfolio construction of longs and shorts, on which macro insights, developed through experience, are overlaid. The goal is to deliver high quality risk-adjusted returns.

“We are pleased to announce the launch of the Carrhae Capital Long/Short Emerging Market Equity UCITS Fund on the FundLogic Alternatives platform,” said Will Smith, Head of Distribution for the FundLogic Alternatives plc platform at Morgan Stanley. Smith added, “Carrhae Capital offers access to an established emerging market focused team and demonstrates Morgan Stanley’s commitment to creating a diversified platform of UCITS funds on Fundlogic”.

Commenting on the launch, Akay, CIO of Carrhae Capital, said “We are excited to make our strategy available to UCITS investors for the first time. The opportunity set in Emerging Market equities looks the best we have seen it in many years - characterised by a synchronised global economic recovery, broader EM resilience to the prospect of higher US rates, and far reduced competition for ideas in our areas of focus. With stock correlations now close to a 20 year low, it is a very encouraging backdrop for a long/short approach to this inefficient asset class”.

FUNDS

Wells Fargo Asset Management (WFAM) has announced the launch of the Global Low Volatility Equity Fund and the Global Long/Short Equity Fund, each a sub-fund of the Wells Fargo (Lux) Worldwide Fund. The Global Low Volatility Equity Fund was launched on 19 June 2017, and the Global Long/Short Equity Fund was launched on 31 July 2017. Both funds are UCITS compliant and are available to institutional and retail investors.

The Global Low Volatility Equity Fund and the Global Long/Short Equity Fund are both subadvised by Analytic Investors, LLC, and led by Portfolio Managers Harindra de Silva, Dennis Bein and David Krider. A pioneer in low-volatility investing, Analytic Investors has researched and managed low-volatility investment strategies since 2004.

De Silva is an industry veteran with 30 years of investment experience, as is Bein with 26 years. Krider has 14 years of investment experience.

The Global Low Volatility Equity Fund seeks to produce returns that are similar to those of the MSCI World Index. The fund invests in a diversified portfolio of equity securities across all capitalisation sizes, sectors and industries but with low forecasted volatility.

The Global Long/Short Equity Fund seeks long-term capital appreciation whilst preserving capital in down markets. The fund invests at least two-thirds of its total assets in equity securities of companies located in no fewer than three countries, which may include the United States.

Ludger Peters, Managing Director, International Business Development, WFAM: “We are pleased to include Analytic Investors’ expertise in factor-based, risk-controlled solutions to our international product lineup. We believe the addition of these low-volatility funds provides clients with enhanced strategies to help meet their investment objectives.”

Both funds are available in Austria, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Singapore, Spain, Sweden, Switzerland and the United Kingdom. The funds anticipate registration in Hong Kong and South Korea in the future.

Investment strategies

Global Low Volatility Fund
The subadviser employs a quantitatively based investment process that evaluates multiple fundamental, statistical and technical characteristics covering share valuation, growth, return history, risk, liquidity and economic sensitivity.

Global Long/Short Equity
The subadviser employs a strategy of gaining long and short exposure in equity securities of issuers in developed markets. The fund considers developed markets to include countries included in the MSCI World Index. The fund will gain long exposure to equity securities that the subadviser believes will outperform the equity market on a risk-adjusted basis and will gain short exposure to equity securities that the subadviser believes will underperform the equity market on a risk-adjusted basis. The subadviser uses a quantitatively based investment process that evaluates multiple fundamental, statistical and technical characteristics covering share valuation, growth, return history, risk, liquidity and economic sensitivity.

FUNDS

Advisors & Partners LLP , an independent alternative investment specialist, today announced that 13 new funds were added to the A&P Emerging Manager Index (APEM Index) in December 2017, as part of the annual reconstitution process. The A&P Emerging Manager Index is designed to capture the total net returns of early stage & emerging hedge fund managers.

The constituents in the APEM Index represents total assets under management of approximately $1.37 billion. Long/Short equities represented the largest % share by strategy in the index with 40%. The APEM Index year to date performance (January 2017 - November 2017) was +8.31%, with an annualised standard deviation of 3.51%, Sharpe ratio of 2.00 and Sortino of 1.43.
 

REGULATORY

Dechert partner Monica Gogna has collaborated with the Investment Association to produce important industry guidance around the new obligations which come into force on 3 January 2018 for the acquisition of investment research by EU MiFID firms.

The new guidance, the Intragroup Research Checklist, serves to assist firms in their understanding and implementation of the new research requirements across global firms with multiple legal entities and was contributed to by the most senior level figures at a number of investment management firms.

The guidance highlights two key points:

  • Research acquired out of an asset management firm’s own resources (P&L) may be freely reused across the group without restriction.
  • Research acquired with the clients’ money, either in the EU or outside it, may be reused across the group as long as the firm can demonstrate that there is no material detriment or cross subsidisation to any client and the best execution process is not impacted.

The guidance is available in full to members on the Investment Association website.

Dechert LLP acted as sole external counsel in the drafting of the guidance.

Gogna has served as a member of the Investment Association’s working group responsible for the MiFID II inducement regime and the use of research and was a driving force in producing an industry wide solution and guidance in relation to the cross-border regulatory issues affecting the use of research on an intra-group basis.

FUNDS

Prestige has announced a new series of mandates from institutional investors outside the UK for its private lending credit funds. The mandates are the latest to be received from non-UK institutions that are allocating to the UK-based private lending specialist.

The investors include:

  • A Swiss-based industrial corporate pension fund
  • A South Korean-based financial group
  • A Spanish-based university endowment

Despite last year’s Brexit referendum, Prestige continues to see a high level of institutional interest, including in some of the sterling based share classes of its credit funds. In addition, several dedicated share classes have been created for larger investors such as sovereign wealth funds and state-backed pension schemes.

Craig Reeves, Founder of Prestige, said: “Non-UK investors like the plain vanilla yield characteristics of private lending strategies. Part of the attraction is also our focus on areas of the market neglected by traditional lending institutions, and the diversification of risk across hundreds of individual loans.”

The mandates were secured over the course of the last 12 months, demonstrating the confidence foreign investors still have in the UK economy despite the ongoing Brexit negotiations. Prestige has raised approximately $1.5 billion since 2008 and currently manages approximately $875 million.

Prestige, through its two UK-based, specialist finance operations, has provided almost 15,000 loans to 6,000 clients since it launched. It focuses on two main strategies: a Cambridge-based, credit team that lends to small companies in the agricultural sector with a focus on short and medium term ‘asset finance’ and ‘project finance’, and a London-based, direct lending team with a focus on short term ‘invoice’ and ‘cashflow’ finance. Both teams consist of a number highly experienced former commercial bankers, finance and risk specialists, and both businesses are increasingly playing a consulting role in assisting small firms to ‘finance in’ productivity; and to ‘finance out’ some of their fixed costs, generating significant value beyond simply lending money.

“This is a strategy that is expanding considerably and is increasingly being viewed by some institutional investors as an asset class in its own right,” Reeves commented. Indeed, AIMA, which now operates a dedicated ‘Alternative Credit Council’, recently published significant new research suggesting that assets in private debt funds may grow to USD1 trillion by 2020.

“More funds of this type are launching across many different specialist commercial and industrial sectors so it is important that investors look closely at the expertise of the teams assembled to carry out lending and the due diligence activities on the ground as well as their ability to understand (and mitigate) any non performing exposures. Specialisation and strong sector knowledge as well as remaining close to your customers is key.”

FUNDS

Value Partners’ equity investment team expects Hong Kong stocks to continue its upward trend in 2018 as China’s pledge to deliver quality and sustainable growth, together with Hong Kong’s recent initiatives to bring in additional market liquidity are expected to shore up investor sentiment for Chinese stocks.
 
Chung Man Wing, Investment Director of Value Partners said, “2017 is a year of recovery for Hong Kong and Chinese stocks.  It has been a very strong rally that is driven by structural instead of cyclical factors.  China has been making further progress to deliver quality and sustainable growth via reforms in the services sector and state-owned enterprises, as well as financial deleveraging.
 
“As China continues to move towards a more efficient economy with higher return on equity and lower gearing, this will get more international investors turned to Chinese stocks, particularly those listed in Hong Kong, which is a freely accessible market.”
 
As of 31 October 2017, MSCI China Index, which represents Chinese stocks listing offshore, has risen 48.9% year-to-date, compared with a full-year return of 0.9% in 2016.
 
“Elsewhere in Hong Kong, a number of initiatives are being discussed to add breadth and depth to the listing universe of the city.  By luring a broader range of companies to list in Hong Kong, this will bolster liquidity and vibrancy of the local bourse,” said Chung.
 
Investment themes for 2018
Among the Chinese stock universe, there are three types of companies that are more preferred with better investment potential.
 
1. Consumption upgrade
As China’s urbanization and the growth of middle class continue, this will unleash huge consumption demand, particularly those for consumption discretionary goods and services such as insurance services.
 
2. Industrial upgrade
The application of automation, robotics and information technology in Asia’s services and manufacturing industries has helped Asian corporates move up the global value chain.  Within Asia, China and South Korea are the key countries demonstrating the industrial upgrade and this can be shown in the increases in exports and patent applications.
 
3. Technology leaders

Asia, particularly in China, has demonstrated its ability to foster world-class high-technology companies and the robust growth in the technology space.  Currently, China has the largest online retail market in the world and it is still growing at a double digit rate year-on-year.

FUNDS

In reaction to comments around Brexit at the Autumn Budget, Michael Metcalfe, global head of macro strategy for at State Street Global Markets has offered his views.
 
Metcalfe commented: “The government has committed funds to help with the preparation for Brexit contingency planning, but the real challenge for UK markets revealed in the budget came from the Office for Budget Responsibility (OBR) and the significant downgrades to the UK growth outlook. Still high inflation and an expected weakening in growth provide a potentially troubling backdrop for markets even without the political uncertainties created by Brexit.”

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