DOCSLIB.ORG

Asset Management Industry – a Next Step Towards Further Consolidation

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Asset Management Industry – a Next Step Towards Further Consolidation Asset management industry – A next step towards further consolidation Financial Advisory, November 2020 The asset management industry continuous to be an attractive market in terms of revenue growth and profitability, however the industry is facing challenges from different angles There is substantial pressure on profitability and active players struggle to outperform passive product offerings including a need for scale to operate efficiently not the least because of compliance and regulatory requirements. In response many asset management companies have been changing strategies to expand scale trusting that size will result in a competitive advantage © 2020 Deloitte The Netherlands Investment management – A next step towards further consolidation 2 1. Introduction Total net asset increase of word wide regulated open-end funds (EUR trillion) The asset management industry has shown substantial 60 growth in net assets driven by driven by a search for yield 45 9.5% c. EUR 49 on investments trillion 30 year-end 15 in 2019 For the period 2010 to 2019, the asset management industry* has 0 shown substantial growth in net assets** driven by low term yields on 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 government bonds, mainly in the EU zone, and driven by a search for US and EU 10 year government bonds yield on investments. 4.0% We expect for the near future a further increase in growth for the US investment management industry driven by i) an increase in appetite 3.0% EU for long term personal savings and ii) attracting new clients by offering 2.0% new investments – PE investments and more cross border activities. 1.0% Due to fee pressure from increased regulatory costs and investments to improve customer experience, together with a scattered investment manager landscape in the Netherlands, we expect a further -1.0% Jan 2010 Aug 2020 consolidation in the market of investment managers. MSCI index (Jan 2010 as starting point) 250 200 150 100 50 * In this document asset management industry includes both pure play asset management companies as well as wealth investment management companies. 0 Jan 2010 Aug 2020 ** Measured based on regulated funds (bonds, money-market, mixed and equity funds) Source: ICI factbook 2020, Capital IQ © 2020 Deloitte The Netherlands Investment management – A next step towards further consolidation 3 1. Introduction We have performed an analysis to provide industry insights of the investment management industry and to share our view for the foreseeable future Other sections in this document We have performed an analysis to provide Outlook industry insights of the global investment 6 management industry in terms of some of the key industry’s financial metrices. As we experience an increase in M&A The Netherlands transactions over the last few years we focus 5 on some integration pitfalls followed by valuation considerations for asset management companies globally. Valuation Next, we provide a condensed overview of 4 Considerations the asset management industry in the Netherlands followed by our expected outlook for the foreseeable future given current industry challenges and trends. M&A and synergy 3 realisation 2 Industry insights © 2020 Deloitte The Netherlands Investment management – A next step towards further consolidation 4 Asset Managers peer group’s AUM 2019 (€bn) 2. Industry insights BlackRock, Inc. 6,621 Amundi SA 1,419 The top 10 listed global asset management companies Invesco Ltd. 1,093 T. Rowe Price Group, Inc. 1,075 account for more than 90% of total AUM of our peer Affiliated Managers Group, Inc. 644 Franklin Resources, Inc. 635 Top-10 asset managers group Schroders plc 590 Federated Hermes, Inc. 513 Janus Henderson Group plc 334 Anima Holding S.p.A. 186 For years, the asset management industry has been an attractive BrightSphere Investment Group Inc. 182 industry given the high margins, high historical growth and capital GAM Holding AG 122 Artisan Partners Asset Management Inc. 108 requirements which are in general less tight compared to banks. Man Group plc 105 Virtus Investment Partners, Inc. 97 Industry concentration is a key characteristic of the asset management CI Financial Corp 91 industry. Globally, the ten largest listed asset management companies Ashmore Group PLC 74 Cohen & Steers, Inc. 64 account for over 90% of total assets under management. Pendal Group Limited 62 Mid-size asset managers Magellan Financial Group Limited 60 We have analysed the development of key financials of publicly listed Jupiter Fund Management Plc 51 Pzena Investment Management, Inc 37 asset management companies* to assess if there are any differences in GAMCO Investors, Inc. 33 terms of profitability in relation to size. Liontrust Asset Management PLC 18 Perpetual Limited 17 Manning & Napier, Inc. 17 Based on reported 2019 asset under management (“AUM”) we divided Impax Asset Management Group plc 17 our sample of 40 companies in three groups: Brooks Macdonald Group plc 15 Polar Capital Holdings plc 14 Value Partners Group Limited 13 • Top 10 asset management companies Premier Miton Group plc 7 Small size asset managers City of London Investment Group PLC 5 • Mid-size asset management companies Hennessy Advisors, Inc. 4 Australian Ethical Investment Ltd. 2 • Small size asset management companies U.S. Global Investors, Inc. 2 Easton Investments Limited 1 JS Investments Limited 0 K2 Asset Management Holdings Ltd 0 * Peer group companies selected based on publicly owned financial service providers of which Shriram Asset Management Company Limited 0 the majority of the activities consist of asset management. 0 200 400 600 1,200 1,400 6,800 © 2020 Deloitte The Netherlands Investment management – A next step towards further consolidation 5 2. Industry insights The smallest listed asset management companies are mainly located in Europe and the Asia-Pacific region The US and Canada show the highest concentration of the top-10 asset Asia is one such market for asset management companies as major management companies followed by Europe. None of the top-10 largest demographic shifts are taking place in the region. This region accounts asset management companies is located in the Asia-Pacific region. for c. 62% of the world’s millennials as well as 63% of the world’s aging workforce. Investment managers are aiming to provide investment Asset management companies in Asia-Pacific are mainly present in the solutions to both of these groups. According to earlier analysis*, this small size bucket (c.26%). Although the Asia-Pacific asset management opportunity may result in EUR 2.3 trillion AUM in 2020. industry is growing, the firms are still comparatively small. Finding new markets and investors for existing products is key for * Deloitte, 2020 investment management outlook, 2019 profitable growth for asset management companies. Top-10 Asset managers 2019 Mid-size asset managers 2019 Small size asset managers 2019 US and Canada 11.5% 7.7% Europe 19.3% 25.7% Asia / Pacific Top-10 >€15bn AUM <€15bn AUM 33.9% (excl. top10) 54.6% 80.7% 66.6% © 2020 Deloitte The Netherlands Investment management – A next step towards further consolidation 6 2. Industry insights Investment management has shown high growth in terms of AUM, revenues and profit. Profitability margins are decreasing from 2015 to 2019, due to greater price transparency and increasing cost awareness among clients Assets under management (€bn) Revenues (€bn) Costs (€bn) Profit margin (%) 3.2% 10.0% 10.8% 4.5% 2.0% -6.0% 32 34 30 30 30 14.5% 9.5% 29 29 29 25 26 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 Total AUM increased with an annual Total revenues increased with a Costs increased by a CAGR of 4.5% EBIT margins remain behind as costs growth rate of 14.5% between 2010 CAGR* of 10.8% for the period for the period 2015-2019. It shows a are rising at a higher pace than and 2014 and with 10.0% for the 2010 to 2014 and with 3.2% for the faster increase than revenues for the revenues. Changes to current period 2015 - 2019. This growth is period 2015 - 2019. On a relative same period indicating lower profit operating models are necessary in the result of net inflows in funds, as basis, increase in revenues is margins for asset managers. The main order to stay profitable in the future. well as a favorable market lagging AUM growth implying a driver of cost increases relates to environment. pressure on fees. regulatory costs and investments to Note: Above graphs are based on the peer group of * Compound annual growth rate improve customer experience. listed Asset Managers presented on p.5 © 2020 Deloitte The Netherlands Investment management – A next step towards further consolidation 7 2. Industry insights Revenue growth remains behind AUM growth in all AUM CAGR 2015 - 2019 Revenues CAGR 2015 - 2019 regions, indicating that fees are under pressure 12.5% 9.4% 7.8% Even though the US / Canada dominate the asset management industry, 6.9% there has been significant growth in AUM in Asia-Pacific and Europe in 3.7% the past five years. Europe has been the strongest contributor in terms of AUM growth, averaging 12.5% per year since 2015. 2.0% However, revenue growth remained behind AUM growth rates in all US / Canada Europe Asia / Pacific US / Canada Europe Asia / Pacific * regions, indicating that fund fees are under pressure. Both in the US / Canada and Europe costs exceed revenue growth rates during the past five years, showing on average declining margins in these mature markets. Costs CAGR 2015 - 2019 Improvement (decline) of absolute EBIT margin 2015 vs 2019 In US / Canada and Europe profitability is under pressure resulting in a decline in the development of EBIT-margins for the period 2015 - 2019.
Load more

Recommended publications
  • Description Iresscode Exchange Current Margin New Margin 3I
    Description IRESSCode Exchange Current Margin New Margin 3I INFRASTRUCTURE PLC 3IN LSE 20 20 888 HOLDINGS PLC 888 LSE 20 20 ASSOCIATED BRITISH ABF LSE 10 10 ADMIRAL GROUP PLC ADM LSE 10 10 AGGREKO PLC AGK LSE 20 20 ASHTEAD GROUP PLC AHT LSE 10 10 ANTOFAGASTA PLC ANTO LSE 15 10 ASOS PLC ASC LSE 20 20 ASHMORE GROUP PLC ASHM LSE 20 20 ABERFORTH SMALLER COM ASL LSE 20 20 AVEVA GROUP PLC AVV LSE 20 20 AVIVA PLC AV LSE 10 10 ASTRAZENECA PLC AZN LSE 10 10 BABCOCK INTERNATIONAL BAB LSE 20 20 BARR PLC BAG LSE 25 20 BARCLAYS PLC BARC LSE 10 10 BRITISH AMERICAN TOBA BATS LSE 10 10 BAE SYSTEMS PLC BA LSE 10 10 BALFOUR BEATTY PLC BBY LSE 20 20 BARRATT DEVELOPMENTS BDEV LSE 10 10 BARING EMERGING EUROP BEE LSE 50 100 BEAZLEY PLC BEZ LSE 20 20 BH GLOBAL LIMITED BHGG LSE 30 100 BOWLEVEN PLC BLVN LSE 60 50 BANKERS INVESTMENT BNKR LSE 20 20 BUNZL PLC BNZL LSE 10 10 BODYCOTE PLC BOY LSE 20 20 BP PLC BP LSE 10 10 BURBERRY GROUP PLC BRBY LSE 10 10 BLACKROCK WORLD MININ BRWM LSE 20 65 BT GROUP PLC BT-A LSE 10 10 BRITVIC PLC BVIC LSE 20 20 BOVIS HOMES GROUP PLC BVS LSE 20 20 BROWN GROUP PLC BWNG LSE 25 20 BELLWAY PLC BWY LSE 20 20 BIG YELLOW GROUP PLC BYG LSE 20 20 CENTRAL ASIA METALS PLC CAML LSE 40 30 CLOSE BROTHERS GROUP CBG LSE 20 20 CARNIVAL PLC CCL LSE 10 10 CENTAMIN PLC CEY LSE 20 20 CHARIOT OIL & GAS LTD CHAR LSE 100 100 CHEMRING GROUP PLC CHG LSE 25 20 CONYGAR INVESTMENT CIC LSE 50 40 CALEDONIA INVESTMENTS CLDN LSE 25 20 CARILLION PLC CLLN LSE 100 100 COMMUNISIS PLC CMS LSE 50 100 CENTRICA PLC CNA LSE 10 10 CAIRN ENERGY PLC CNE LSE 30 30 COBHAM PLC
    [Show full text]
  • Parker Review
    Ethnic Diversity Enriching Business Leadership An update report from The Parker Review Sir John Parker The Parker Review Committee 5 February 2020 Principal Sponsor Members of the Steering Committee Chair: Sir John Parker GBE, FREng Co-Chair: David Tyler Contents Members: Dr Doyin Atewologun Sanjay Bhandari Helen Mahy CBE Foreword by Sir John Parker 2 Sir Kenneth Olisa OBE Foreword by the Secretary of State 6 Trevor Phillips OBE Message from EY 8 Tom Shropshire Vision and Mission Statement 10 Yvonne Thompson CBE Professor Susan Vinnicombe CBE Current Profile of FTSE 350 Boards 14 Matthew Percival FRC/Cranfield Research on Ethnic Diversity Reporting 36 Arun Batra OBE Parker Review Recommendations 58 Bilal Raja Kirstie Wright Company Success Stories 62 Closing Word from Sir Jon Thompson 65 Observers Biographies 66 Sanu de Lima, Itiola Durojaiye, Katie Leinweber Appendix — The Directors’ Resource Toolkit 72 Department for Business, Energy & Industrial Strategy Thanks to our contributors during the year and to this report Oliver Cover Alex Diggins Neil Golborne Orla Pettigrew Sonam Patel Zaheer Ahmad MBE Rachel Sadka Simon Feeke Key advisors and contributors to this report: Simon Manterfield Dr Manjari Prashar Dr Fatima Tresh Latika Shah ® At the heart of our success lies the performance 2. Recognising the changes and growing talent of our many great companies, many of them listed pool of ethnically diverse candidates in our in the FTSE 100 and FTSE 250. There is no doubt home and overseas markets which will influence that one reason we have been able to punch recruitment patterns for years to come above our weight as a medium-sized country is the talent and inventiveness of our business leaders Whilst we have made great strides in bringing and our skilled people.
    [Show full text]
  • Investor Presentation Transforming to a Specialist Wealth Manager
    Investor Presentation Transforming to a specialist wealth manager March 2016 Van Lanschot at a glance Van Lanschot’s profile Solid performance on all key financials • One strategy: pure-play, independent wealth manager focusing on 2015 2014 preservation and creation of wealth for our clients • Net profit € 42.8m € 108.7m • Underlying result € 60.1m € 54.2m • Two leading brands: Van Lanschot and Kempen & Co • CET I ratio 16.3% 14.6% • CET I ratio, fully loaded 15.4% 13.4% • Total Capital ratio 17.0% 15.2% • Three core activities: Private Banking, Asset Management and • Leverage ratio, fully loaded 6.1% 5.3% Merchant Banking • Funding ratio 94.1% 95.3% • Client assets € 62.6bn € 58.5bn Good progress with strategy Financial targets 2017 • Private Banking: € 0.3 billion net inflow, € 1.5 billion entrusted to Evi Target van Lanschot, commission income +12% 2015 2017 • Asset Management: acquisition of fiduciary management KCM UK as • Common Equity Tier I ratio 16.3% >15% step stone for further international growth, new mandates won early 2016 adding approximately € 2 billion of AuM • Return on Common Equity Tier I 4.9% 10-12% • Merchant Banking: commission income +28%, solid market share in • Efficiency ratio 74.4% 60-65% selected niches, research coverage expanded • Corporate Banking: initial run-off target achieved, run-off continues Van Lanschot Investor Presentation - March 2016 1 1. Profile & Strategy of Van Lanschot 2. Financial Performance FY2015 Agenda Van Lanschot Investor Presentation - March 2016 2 Transforming from small “universal”
    [Show full text]
  • Going Public Production Company Through Its a Shares
    Co-published section: United Kingdom About NWR • A pure play hard-coal-mining and coke Going public production company through its A Shares. • A leading supplier of hard coal in the fastest growing region in Europe. Partial exits can benefit PE firms, as a £3.5 billion Czech IPO • Owns five established mines and two coking facilities in northeast Czech shows. Adam Levin and Claudine Ang of Dechert explain Republic. It is pursuing opportunities in n May 2008, the shares of New World cant minority stake, following which RPG Poland and elsewhere. Resources NV (NWR), a Dutch-incor- Industries acquired that majority investor (in • One of the largest industrial groups in the porated company (formerly a 2004) and took OKD private (in 2005), after Czech Republic in terms of assets and wholly-owned subsidiary of RPG a squeeze-out of minority interests. It was one revenues. IIndustries SE) with mining operations in the of the largest leveraged finance transactions in • Second largest private employer in the Czech Republic, were admitted to trading on Central Europe at that time. country with approximately 18,341 the London, Prague and Warsaw stock The restructuring that followed shows the employees and 3,563 contractors. exchanges. The offering, after exercise of the focus that private equity houses can bring to a greenshoe option, was approximately £1.3 business. This included: the consolidation of the billion (approximately $2.5 billion) resulting mining businesses within one entity, OKD, the Mining Division or its assets. The IPO was in a market capitalisation of about £3.5 bil- rather than the five entities within which the only with respect to the A Shares.
    [Show full text]
  • Finn-Ancial Times Finncap Financials & Insurance Quarterly Sector Note
    finn-ancial Times finnCap Financials & Insurance quarterly sector note Q3 2020 | Issue 9 Highlights this quarter: Elevated uncertainty and volatility have been hallmarks of the last 18 months, with Brexit, the UK General Election and more recently COVID-19 all contributing to the challenges that face investors wishing to carve out solid and stable returns amid these ‘unprecedented’ times. With this is mind, and simulating finnCap’s proven Slide Rule methodology, we found the highest quality and lowest value stocks across the financials space, assessing how the make-up of these lists changed over the period January 2019 to July 2020, tracking indexed share price performance over the period as well as movements in P/E and EV/EBIT valuations. The top quartile list of Quality companies outperformed both the Value list and the FTSE All Share by rising +2.5% over the period versus -5.4% for the All Share and -14.3% for Value stocks. Furthermore, the Quality list had protection on the downside in the market crash between February and March 2020, and accelerated faster amid the market rally between late March and July 2020. From high to low (January to March), Quality moved -36.3% against the Value list at -45.5%, while a move off the lows to July was +37.4% for Quality and +34.0% for Value. There was some crossover between the Quality and Value lists, with 7 companies of the top quartile (16 companies in total) appearing in both the Quality and Value lists. This meant that a) investors could capture what we call ‘Quality at Value’ (i.e.
    [Show full text]
  • LIVK Merger Announcement with Agilethought Press Release
    AgileThought, a pure-play digital solutions provider that delivers high-end software development at scale, to list on Nasdaq through a business combination with LIV Capital Acquisition Corp. • AgileThought is a leading pure play provider of agile-first software, end-to-end digital transformation and consulting services to Fortune 1000 customers with diversity across end-markets and industry verticals • AgileThought delivers high-end software development at scale under a uniquely competitive onshore and nearshore business model that leverages talent from the U.S., Mexico and other Latin American countries to serve U.S. corporations • The business combination between AgileThought and LIV Capital Acquisition Corp. (“LIVK”) (the “Transaction”) values the combined company at a proforma enterprise value of approximately $482 million and is expected to provide approximately $124 million in primary gross proceeds to AgileThought, including $81 million of cash held in LIVK’s trust account (assuming no redemptions in connection with the Transaction), and a fully committed $43 million investment by PIPE investors and LIV Capital at $10.00 per share. The fully committed investment will, at funding, satisfy the minimum cash requirement to close the Transaction • The Transaction will enhance AgileThought’s position at the forefront of the more than $750 billion digital transformation services market in the U.S., offering one of a kind, agile software development capabilities with onshore and nearshore delivery • The Transaction is expected to close in the third quarter of 2021 subject to LIVK’s shareholders approval and other customary conditions. Following the closing of the Transaction, the combined company will remain listed on Nasdaq under the new ticker symbol AGIL • AgileThought and LIVK will host a joint investor conference call to discuss the details of the proposed Transaction on May 10, 2021 at 11:00 AM EST.
    [Show full text]
  • Powerpoint Presentatie
    Analyst Meeting Amsterdam, 1 December 2010 Programme 2.30 pm Ieko Sevinga Private Banking 3.00 pm Arjan Huisman Operations 3.30 pm – 4.00 pm Break 4.00 pm Constant Korthout Funding and Basel III 4.30 pm Floris Deckers Strategy & Outlook for the sector 5.30 pm Drinks & dinner 1 Analyst Meeting Ieko Sevinga, member of the Board of Managing Directors Van Lanschot’s strategy To offer high-quality financial services to wealthy individuals, Mission director-owners and other select client groups Van Lanschot aims to be the best private bank in the Netherlands Vision and Belgium To be able to measure the achievement of its vision, Van Lanschot Targets has formulated targets relating to clients and employees and 2010-2013 financial targets 1. Focus on private banking 2. Enhance commercial effectiveness Strategy 3. Invest continually in service quality 4. Maintain a solid profile Independent Professional Core values Committed Ambitious 3 Strategic priorities Focus on Full-service offering Private Acquisition focused on high net-worth individuals and Banking entrepreneurs and their businesses Enhance Growth of client satisfaction commercial Growth in number of clients effectiveness Growth in revenues Invest Customer care continually in Transparent and good product and service offering service quality Operational excellence Risk management Maintain Cost control a sound Stricter deployment of capital for clients with a view to expected profile higher capital requirements 4 Focused business model FULL SERVICE OFFERING Business Private Banking
    [Show full text]
  • Invitation and Agenda to the Annual General Meeting of Shareholders Of
    invitation and agenda to the annual general meeting of shareholders of van lanschot nv, to be held in the auditorium of the van lanschot tower, leonardo da vinciplein 60, ’s-hertogenbosch, the netherlands, on thursday 15 may 2014 at 2 p.m. 1 invitation and agenda ANNUAL GENERAL MEETING OF 9. Extension of powers of the Board of Managing SHAREHOLDERS OF VAN LANSCHOT NV Directors a) Extension of the power of the Board of Managing Directors to issue ordinary shares (voting item) Van Lanschot NV invites its shareholders and holders of b) Extension of the power of the Board of Managing Directors depositary receipts to attend the Annual General to limit or exclude the pre-emption right in the event of the Meeting, to be held in the auditorium of the Van Lanschot issue of ordinary shares (voting item) Tower, Leonardo Da Vinciplein 60, ’s-Hertogenbosch, the Netherlands, on Thursday 15 May 2014 at 2 p.m. 10. Any other business and closure of meeting Availability of meeting documents 1. Opening Prior to the meeting, the following documents can be obtained by the shareholders and holders of depositary receipts at no cost 2. 2013 annual report from the office of Van Lanschot NV (Leonardo da Vinciplein 60, a) Report of the Supervisory Board (discussion item) 5223 DR, ’s-Hertogenbosch, the Netherlands): b) Report of the Board of Managing Directors for 2013 – the agenda with explanatory notes; (discussion item) – the report of the Supervisory Board; c) Strategy implementation status report (discussion item) – the Report of the Board of Managing Directors for 2013; – the 2013 financial statements and other information; 3.
    [Show full text]
  • Investor Presentation
    Investor presentation April 2021 Van Lanschot Kempen at a glance Profile Solid performance on all key financials • Well capitalised, profitable wealth manager with a strong specialist position in the market 2020 2019 • • Strong brand names, reliable reputation, rich history Net result €49.8m €80.2m* • Clear choice for wealth management, targeting private, wholesale & institutional and corporate clients • CET 1 ratio 24.3% 23.8% • • Tailored, personal and professional service Total capital ratio 27.4% 26.9% • Uniform way of servicing our client segments • • Strong track record in transformation processes and de-risking Client assets €115.0bn €102.0bn of the company • AuM €99.0bn €87.7bn • Strong balance sheet and attractive capital strategy • Loan book €8.4bn €8.7bn (excluding provisions) Our wealth management strategy 2025 financial targets Supported by our strong client relationships we are a leading player in our relevant markets and geographies 2020 Target 2025 • Common Equity Tier 1 ratio 24.3% 15 - 17% Our strategic pillars: • Return on CET1 • Accelerate growth – organically and inorganically 4.4% 10 - 12% • Activate our full potential • Efficiency ratio 85.7% 70 - 72% • Advance through digitalisation and advanced analytics • Dividend pay-out • Adapt the workforce 65% 50 - 70%** • Achieve our sustainability ambitions *Adjusted for the sales of our stakes in AIO II and VLC & Partners, and goodwill impairments **Of underlying net result attributable to shareholders 2 Van Lanschot Kempen is a well-capitalised, profitable, independent wealth manager Van Lanschot Kempen’s rich history reaches back over 280 years Acquisition Staalbankiers’ private banking activities Strategic Partnership review Successful with a.s.r.
    [Show full text]
  • Ten Reasons Why Commodities
    10 Reasons Why Commodities LAZARD GLOBAL COMMODITIES 1. Build a bridge to the new economy Commodity trading is indispensable in the production and delivery of the fossil fuels that power today’s economy, and it will be equally indispensable as energy markets evolve. Global futures markets are developing for the trading of carbon allotments as well as wind and solar power. And even now many of the components of tomorrow’s transport—such as the rare metals used in batteries for electric vehicles—trade on futures exchanges. 2. Invest in the global recovery Commodity returns rise fastest when business confidence returns and the pace of economic growth begins to quicken. Base commodity demand does not vary—people have to heat and eat regardless of economic conditions. As the business cycle revives, as it has recently, incremental demand should surge. 3. Profit from inflation Rising Inflation Just as rising commodity prices drive Average Month-on-Month Change (1990–Present) consumer price inflation, they also drive (%) Commodities Equities Bonds commodity returns. No other asset class 2 responds more or more consistently 1 to heightened inflation and inflation 0 expectations. At low inflation levels like those -1 currently, commodities have historically -2 -3 delivered positive returns in contrast to 1%–2% Inflation 2%–3% Inflation 3%–5% Inflation 5%+ Inflation equity and fixed income markets, and these (25 Months) (53 Months) (73 Months) (11 Months) returns have remained positive when inflation As of 30 November 2017 Inflation was rising in 167 months and not rising in 167 months. Months of rising has become extreme.
    [Show full text]
  • Corporate Methodology
    Criteria | Corporates | General: Corporate Methodology Global Criteria Officer, Corporate Ratings: Mark Puccia, New York (1) 212-438-7233; [email protected] Chief Credit Officer, Americas: Lucy A Collett, New York (1) 212-438-6627; [email protected] European Corporate Ratings Criteria Officer: Peter Kernan, London (44) 20-7176-3618; [email protected] Criteria Officer, Asia Pacific: Andrew D Palmer, Melbourne (61) 3-9631-2052; [email protected] Criteria Officer, Corporate Ratings: Gregoire Buet, New York (1) 212-438-4122; [email protected] Primary Credit Analysts: Mark S Mettrick, CFA, Toronto (1) 416-507-2584; [email protected] Guy Deslondes, Milan (39) 02-72111-213; [email protected] Secondary Contacts: Michael P Altberg, New York (1) 212-438-3950; [email protected] David C Lundberg, CFA, New York (1) 212-438-7551; [email protected] Anthony J Flintoff, Melbourne (61) 3-9631-2038; [email protected] Pablo F Lutereau, Buenos Aires (54) 114-891-2125; [email protected] Table Of Contents SUMMARY OF THE CRITERIA SCOPE OF THE CRITERIA IMPACT ON OUTSTANDING RATINGS EFFECTIVE DATE AND TRANSITION METHODOLOGY WWW.STANDARDANDPOORS.COM/RATINGSDIRECT NOVEMBER 19, 2013 1 1218904 | 300023050 Table Of Contents (cont.) A. Corporate Ratings Framework B. Industry Risk C. Country Risk D. Competitive Position E. Cash Flow/Leverage F. Diversification/Portfolio Effect G. Capital Structure H. Financial Policy I. Liquidity J. Management And Governance K. Comparable Ratings Analysis SUPERSEDED CRITERIA FOR ISSUERS WITHIN THE SCOPE OF THESE CRITERIA RELATED CRITERIA APPENDIXES A. Country Risk B. Competitive Position C. Cash Flow/Leverage Analysis D.
    [Show full text]
  • The Most Important Chart in Sustainable Finance?
    fAGF. AGF SUSTAINABLE MARKET INSIGHT The Most Important Chart in Sustainable Finance? By Martin Grosskopf and Andy Kochar AGF SUSTAINABLE fAGF. A great deal has been written in the last few All financial assets and in fact all investment theses have years about the rise of sustainability in the some aspect of duration embedded in their valuation and premiums. For equities, duration can be considered as the financial sector – often either on sustainability time it takes to recoup one’s initial investment through itself (corporate or policy objectives) or on the future cash flows. An estimation of today’s equity market opportunity and risks for financial markets duration is provided in Figure 1. The idea is that long- duration equity investments have a significant proportion (stock prices and fund flows). As we all know, of their intrinsic value tied to their terminal value, thereby the COVID-19 crisis accelerated this movement, making them susceptible to drawdowns when interest with sustainability-linked products taking the rate volatility picks up on a cyclical basis. lion’s share of new fund flows, and with many As one can see from this estimation, the duration of the sustainability-linked themes significantly U.S. equity market has until very recently been increasing since the Great Financial Crisis, thanks to falling interest outperforming in 20201. rates and the significant, growing presence of long- However, 2021 has brought some significant rotation duration sectors such as Information Technology and away from companies with the most to benefit from Health Care. On the other hand, although the fixed capital inflows and the most to offer over the long income market has had its share of duration extensions term – for example, pure EV and battery companies, as well, S&P 500 equities have stretched to a duration of renewables, and so on.
    [Show full text]