One of the risks of today’s world is brought by Brexit, which will have consequences for the asset management industry. SFAMA explained how this event will be a game changer, the consequences of which cannot be entirely foreseen. There is a «stupid» approach to it, with no specific regulation for financial markets and no equivalent application of EU Fund directives and MIFID II by the UK. The issues for the AM market can be sector specific, like delegation of activities for EU funds in third-countries, cross-sectorial or transitional. ESMA published its opinions in July, which raised concern in the industry with an unclear political impact. They refer to the UK, but the content applies to other countries as well. Brexit will however have a limited influence on Switzerland for the time being. The worst-case scenario shows a bigger level of protectionism from the EU. The country will keep being an attractive business scenario, however, and may attract more interest.
Investing in emerging market debt with ETFs was the core of the presentation by Vanguard. Active or passive are different approaches to decision making, many factors matter, among which the user’s expertise. According to Vanguard, a good (EM Debt) ETF is chosen following tracking quality, liquidity, cost-efficiency and broadly diversified benchmark. EM sovereign debt offers a yield pick-up and has lower duration risk than many other fixed income sub-asset classes.
Asset Management Platform goes into detail about the asset management market, like the fact that 70 per cent of invested assets are externally managed. Switzerland ranks in fourth place in Europe in terms of assets under management, with 2,000 billion euros managed. Globally, it ranks 5th but the USA are leading by a huge margin, a little short of 35,000 billion dollars versus the 5,000 of the UK in second place. Data relate to 2016. Switzerland relies on pillars like its institutions, infrastructure, education and efficiency. Its attractiveness as a market includes traditional strength in distribution, which leads to highly diverse offering from a multitude of providers. On the contrary, equivalence with EU regulations is missing and this is seen as a downpoint. The AMP is then presented as an institutionalized, permanent platform to promote the Swiss Asset Management industry. It acts as a think tank and as a partner in political and regulatory discussions.
Mainfirst Group presented its investment team, performances over the years, and its strategy, like balancing with a minimum average rating of BB and a maximum of 55% in high yield or diversification across multiple layers: regions, countries, sectors, ratings, technical factors.
Momentum started with some data about the crisis in Italy, from 2007 to 2016, and explained some of the consequences. The light at the end of the tunnel is also represented by the birth of new, specialized players. A few instruments fill the gap left by the banking systemPrivate Equity Funds Special Purpose Acquisition Companies, Individual Saving Plans. These entities also benefited from the ultra- expansive monetary policy adopted by the ECB. The presentation goes on to explain a few of these more in detail and its conclusion is that moderate optimism is justified.
UBS gave a 360 degree angle about emerging markets, also comparing performances between fixed income and equity. The role of the emerging markets, moreover, has substantially increased over the last 30 years, and currently Emerging Markets represent more than 10% of the entire equity exposure. Debt was then taken into consideration, then touching the importance of diversification. Another presentation focused partly on the same topic, explaining for example the role of the emerging middle class. By 2023, China and India alone will have 1.6 billions middle class earners. Quality assessment helps avoid accidents.
Columbia Threadneedle investments spoke about how to navigate challenging markets, wondering for example about the possibility of a tech bubble and the difference from the one in 2001. It then went on to explain the company’s philosophy and brought as an example Amazon with its history of growth and the E-commerce business growing at 20% per annum with additional drivers over next five years from AWS, Instant Video, Groceries.
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