South America – Institutional Asset Manager

S-Network launches ESG based IndexAmericas

Beverly Chandler — Tue, 18 Apr 2017 08:08:17 +0000

In their latest collaboration with the Inter-American Development Bank (IDB), S-Network Global Indexes, a firm that supports socially responsible investment publishing best-practice benchmark indexes in collaboration with Thomson Reuters, has created the IDB-IIC Latin America Corporate Sustainability Index (IndexAmericas).

The methodology, developed by IDB/IIC, is based on 172 ESG indicators including 15 specific to the Latin America and Caribbean region. The ESG data is powered by Thomson Reuters Global ESG Research. S-Network provided methodology verification and the ranking calculation and IndexAmericas will be recalculated and reconstituted semi-annually by S-Network with oversight by the IndexAmericas Committee.

Gregg Sgambati, Head of ESG Solutions at S-Network Global Indexes, explains that the IndexAmericas is not a financial index, published on an exchange, but a next step in creating such an index.

“All involved feel it’s an obvious next step,” Sgambati says. “The driver comes from the IDB and their desire to encourage a greater amount of sustainable behaviour for companies in the Latin American region, reflecting an approach towards shared value, which does good for the company but also has an impact for the region.”

Although the new index is based on financial information, its ultimate methodology is a collaborative effort that makes it an index that reflects a ranking related to the region rather than a general world ranking.

“The index does not have any financial stock price information so it wouldn’t be used by investors at this point,” Sgambati says. “However, when you have a company that has achieved the status and recognition of a ranking, which we believe this is, then it does have some value that investors might consider.”
The aim is to encourage companies to take steps towards greater sustainability and shared value in the region.

The IDB finances large development projects in the region and for the most part works with corporations as part of the system of bringing funds to the regions. Sgambati explains that their mission is to return a profit but also to have that impact on the communities in which it operates.
“The companies in the ranking are achieving potential status and recognition and that’s important to their stakeholders,” Sgambati explains. “And in the aggregate, it’s good ESG and corporate social responsibility and good efforts do have financial benefits.”

Overall these companies are acting strategically in these ways and see lower costs of capital and more interest in investments by large pension funds.
Sgambati concludes: “Ultimately I think the way to characterise this is that investors today are looking for ways to get exposure in emerging markets and they are concerned about sustainable values. It’s natural to believe, with today’s desire for ETFs as an investment vehicle, that it can be a potential product for the future.”

Emerging market hedge funds hit new record level

Beverly Chandler — Fri, 18 Nov 2016 10:26:14 +0000

Latest data from hedge fund data providers HFR shows that Emerging Markets (EM) hedge funds ended the third quarter at a new record asset level, eclipsing the prior record from the second

Latest data from hedge fund data providers HFR shows that Emerging Markets (EM) hedge funds ended the third quarter at a new record asset level, eclipsing the prior record from the second quarter of 2015.

HFR writes that assets dedicated to EM hedge funds increased to USD199.66 billion in the third quarter (1.37 trillion RMB, 687 billion Brazilian Real, 13.5 trillion Indian Rupee, 12.9 trillion Russian Rouble, 748 billion Saudi Riyal), up USD9.8 billion from the prior quarter as a result of strong performance-based quarterly gains and despite a net investor outflow of USD850 million, according to the latest HFR Emerging Markets Hedge Fund Industry Report.
The HFRI Emerging Markets (Total) Index gained +5.06 per cent in the third quarter and added +1.10 per cent in October, led by regional exposures to Latin America, Russia, and Emerging Asia; the HFRI EM Index is up +9.1 per cent YTD through October.

Hedge funds focused on Latin America extended the powerful YTD surge, leading all areas of hedge fund performance through October. The HFRI EM: Latin America Index vaulted +6.2 per cent in the third quarter, and added another +5.4 per cent in October, bringing YTD performance to +33.0 per cent. Recent gains for the volatile LatAm Index follow performance declines in four of the last five years, including the last three. The total number of hedge funds focused solely on investing in Latin America remained at 107, while total capital increased to USD6.7 billion in the third quarter.

Hedge funds investing in Russia and Eastern Europe also posted strong gains, with the HFRI EM: Russia/Eastern Europe Index gaining +6.5 per cent in the third quarter of 2016 and +1.0 per cent in October, increasing YTD performance to +20.7 per cent, driven by gains in both Russian equities and the Rouble. As of the third quarter, over 170 hedge funds were regionally focused on Russia/Eastern Europe, with these managing an estimated USD28.9 billion.

Emerging Asia performance was led by the HFRI China Index, which advanced +7.3 per cent in the third quarter, fully erasing the decline from the first half of the year to post a narrow gain through the third quarter. The HFRI China Index topped the Shanghai Composite Index by over 480 bps in the third quarter, and by over 1500 bps YTD through 3Q. The HFRI India Index jumped +7.6 per cent in the third quarter and added +1.3 per cent in October, bringing YTD performance to +7.8 per cent. Total hedge fund capital invested in Emerging Asia increased to USD50.6 billion in quarter three, as over 520 funds remain focused on the region.

The only regional area of EM performance to suffer a decline in quarter three was the Middle East, as the HFRI MENA Index fell -0.5 per cent in the quarter before rebounding +2.0 per cent in October, settling YTD performance at -4.7 per cent thus far in 2016. An estimated 50 hedge funds are currently focusing their exposures in the MENA region, with total capital at approximately USD4.3 billion.

“Emerging Market hedge fund capital increased to a record level in 3Q as currency, fixed income and commodity markets adjusted to the impacts of shifting trade and monetary policies from both Brexit and the U.S. election,” says Kenneth J. Heinz, President of HFR. “As regional EM equity markets have surged, EM hedge funds have effectively complemented these directional gains and mitigated risks with tactical, non-directional trades created by shifting policies and temporary dislocations. The coming period of US and UK trade and monetary policy adjustments are likely to produce compelling opportunities for EM hedge funds, extending their performance leadership and capital expansion into 2017.”

Hermes welcomes adoption of stewardship code in Brazil

Emily.Perryman — Fri, 28 Oct 2016 12:21:35 +0000

Hermes Investment Management and its stewardship and engagement team, EOS, have welcomed the launch of the Brazilian Stewardship Code, which they see as a significant step towards the development of a culture of stewardship among institutional investors in Brazil.

The code was drafted by a working group including members of AMEC, the Brazilian capital markets association, and a representative of EOS.

The process began in January 2016 and included a benchmarking of international stewardship codes, interviews with local and international asset managers and owners, and a public consultation.

EOS was the only non-resident member of the working group drafting the code.

Saker Nusseibeh, chief executive, Hermes Investment Management, says: “Hermes continues to be an industry leader in stewardship and responsible investment. The launch of a stewardship code in Brazil demonstrates that momentum for stewardship continues to grow globally. Moreover, they will move responsible investment up the agenda of investors, enhance the relationship between local companies and their shareholders and thus ensure adequate accountability along the investment chain, while improving corporate governance and behaviours.”

Dr Hans-Christoph Hirt, co-head of EOS, Hermes Investment Management, says: “Hermes continues to support the development and implementation of stewardship guidelines globally. Over time, such guidance will make an important contribution to the development of stewardship activities of institutional investors around the world, which is a key factor in enhancing the corporate governance of companies they invest in. We believe that better governed companies produce superior and more sustainable returns for investors and benefit all stakeholders.”

Assisting in the development of global stewardship guidance for institutional investors complements the company-specific voting and engagement work EOS undertakes on behalf of a group of 42 clients globally.

T. Rowe Price says exit of ‘damaging’ Dilma positive for Brazilian recovery

Beverly Chandler — Thu, 01 Sep 2016 09:21:20 +0000

T. Rowe Price’s Gonzalo Pangaro, portfolio manager of the T. Rowe Price Emerging Markets Equity Fund, has commented on the news that Brazil’s Senate has thrown Dilma Rousseff out of office, overwhelmingly voting to impeach the country’s first female president.

Pangaro writes that investors have recently been buoyed by the prospect of regime change in Brazil, particularly as Michel Temer took the reins as interim president after the suspension of Dilma in May. The business-friendly Temer will continue as president for the remaining two years and three months of Dilma’s term.

Pangaro says: “Over the last five years, Dilma has been the driver of policies that have ultimately been harmful for the Brazilian economy and damaging for the fiscal and debt dynamics. A change in government is a first step in changing policy direction.

“Political change is needed to address the fiscal mess, with Brazil now back in a primary budget deficit for the first time in over a decade. While the commodity downturn has been unhelpful, a large part of the fiscal deterioration has been due to government mismanagement. There are risks a prolonged extension of the economic downturn could cause further deterioration of the fiscal and debt dynamics and may make monetisation of the deficit unavoidable. Inflation and interest rates would then be anchored at high levels.

“New President Michel Temer has no choice other than to move in the direction of market-friendly policies and inspire confidence of an economic revival. Social security reforms will need to be on the table as an anchor for fiscal consolidation, alongside other revenue raising measures and reforms to encourage investment.”