News https://www.la-francaise.com/ RSS La Francaise Group en La Française Fri, 29 Mar 2024 00:00:22 +0100 Fri, 29 Mar 2024 00:00:22 +0100 news-3749 Fri, 22 Mar 2024 09:19:43 +0100 World Water Day – Co-operation and innovation for the water sector /en/who-we-are/news/detail/world-water-day-co-operation-and-innovation-for-the-water-sector/ By Deepshikha Singh, Deputy Head of La Française Sustainable Investment Research & Head of Stewardship, La Française AM At the United Nations Water Conference in 1977, the first Action Plan for addressing the water crisis was created, recognizing that, “all peoples, whatever their stage of development and social and economic conditions, have the right to have access to drinking water in quantities and of a quality equal to their basic needs.”

Almost five decades later, we are nowhere close to ascertaining this basic human right. According to the United Nations University Institute for Water, Environment, and Health  (the Think Tank on Water), approximately 72% of people worldwide live in water-insecure countries, c. 2bn people do not have access to clean and safe drinking water and approximately 3.6bn people (46% of the world’s population) lack adequate sanitation services. Many of these issues are attributed to unprecedented population growth in many countries, but there are other reasons. Most notably, our consumption patterns have become highly water intensive - everything from the production of clothing to harvesting crops for food to the manufacturing of electronics requires an immense amount of water. 

Water on Earth is scarce – despite 70% of our planet’s surface being covered by water, only 1% of it is potable. Additionally, water is not an easily renewable resource – replenishing ground water can take decades, if not centuries. Water availability is further compromised by extreme weather events, pollution and aging infrastructure. Water contamination from chemicals, drugs, agricultural run-off, microplastics and ‘forever chemicals’ add to water insecurity across the world. This affects not only people and society but our investee companies as well. The Panama Canal backlog created by historic droughts and low water levels raised costs for countless firms in 2023. Drought is the third highest risk identified in India, and 59% of Indian firms reported as being affected . Companies are exposed to water-related physical climate risks in one way or another - through their own operations or their supply chains.

The water sector provides public and private benefits. However, many of these benefits cannot be easily monetized, thus limiting revenue streams from investments. The water sector requires a considerable amount of financing, with estimates ranging from $182bn to $664bn annually (2019). This gap includes various areas such as water supply and sanitation ($116bn to $229bn per year), flood protection ($23bn to $335bn per year) and irrigation ($43bnto $100bn per year), as well as funding for the implementation of water resources management.  Our existing water infrastructure is not well adapted as necessary investments have been neglected for decades. Utility companies report that one out of every six gallons of water is lost between the water treatment plant and the end customer – termed as ‘non-revenue water’. Without investments and proper water governance, there is likely to be increased competition for water between public and private sectors and an escalation of water crises of various kinds, triggering emergencies in a range of water-dependent sectors. Regulatory barriers can also limit innovation and prevent the adoption of new technologies or approaches.

Nevertheless, there is still hope. Co-operation and innovation are key – between companies, investors, communities and countries. The development of sustainable financing models can be enabled by public sector backing. For the sustainable management of water resources, in addition to constructing new infrastructure, investments are necessary to maintain, operate and enhance the resilience of current facilities (especially ageing infrastructure). In addition, effective incentives and regulation can redirect funding towards climate-smart, resilient and nature-positive investments. We need public and private finance to work hand in hand. In Ghana, different actors, including the private sector, non-governmental organizations, charities and development partners, financed the increase of coverage of safely managed drinking water services by 28 percentage points from 2000 to 2020, totalling 41% of the population in 2020 . At the global level, it is also necessary for increased data sharing and improved interoperability of all Sustainable Development Goal global databases. On the industry level, CEO Water Mandate brings together 240+ companies to share good practices and forge partnerships to address urgent water challenges related to scarcity, quality, governance and access to water and sanitation. 

The water sector sits comfortably at the intersection of climate, nature and social themes creating opportunities for investments for all sustainability-focused investors. However, most water investments till now have been focussed on water utilities which address the public demand/need for water. But there are many well established companies as well as new start-ups that are now working to solve water security issues using innovative technology and solutions. According to some analysts, the global addressable market opportunity for the water and wastewater industry is estimated between $700 and $800bn. In-sourced OEM (original equipment manufacturers) and Construction/EPC (engineering, procurement & construction) cover over half of the market while the remaining is covered by enablers, including general equipment, such as pumps, valves and meters, outsourced operations & maintenance services, water treatment and various parts & consumables. Earth observation technologies, including satellites and drones, present a transformative opportunity for both the public and private sectors to enhance water resources management. Governments can also use innovative methods, such as offering tax reductions for nature-based solutions and conservation spaces or payments for ecosystem services to preserve water-critical green infrastructure, making it lucrative for private finance to kick in. 

The theme of World Water Day 2024 is ‘Water for Peace’. On this World Water Day, public and private sectors need to come together to govern, innovate and finance a water resilient future in which people and businesses can thrive in peace and harmony.

This commentary is provided for informational and educational purposes only. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, 326 817 467 R.C.S. Paris, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management (314 024 019 R.C.S. Paris; 128 bld Raspail, 75006 Paris) was approved by the AMF under no. GP97076 on 1 July 1997.

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news-3748 Tue, 19 Mar 2024 09:00:00 +0100 When will the Fed initiate interest rate cuts? /en/who-we-are/news/detail/when-will-the-fed-initiate-interest-rate-cuts/ The Federal Open Market Committee (FOMC) is widely expected to keep policy rates unchanged at the March meeting. Fed officials will update their projections for the U.S. economic outlook in the ‘Summary of Economic Projections’ (SEP) and the outlook for interest rates (‘dot plot’). We believe Fed projections will predict higher growth in 2024 but no significant change in the annual inflation forecast over the projected horizon. In this context, the median ‘dot’ is likely to remain at 75 basis points (bps) of cuts this year.

Please find below what we expect:

  • The target range for the Fed’s benchmark rate to remain unchanged at between 5.25% to 5.50%, the last interest rate increase came in July 2023.
  • Fed Chair Powell to confirm that interest rates should move lower later this year, eventually in the summer, if inflation continues to ease as the Fed expects. Jerome Powell will underline that the pace of cuts will be data dependent.
  • The Federal Reserve to continue its quantitative tightening (QT) program as planned (at $95bn/month) as it deems that excess liquidity is still comfortable overall. We do not expect the FOMC to indicate when the Federal reserve will start the slowdown of its balance sheet runoff. Consistent with influential Fed official Christopher Waller ‘s last comments, Chair Powell will underline that balance sheet policy will be independent of interest rates decisions and a reset of the balance sheet towards shorter-term Treasury bills. 
  • New economic projections should evolve as follows : 
    • Growth will be revised significantly upwards in 2024, from 1.4% to 2% but projections will remain unchanged in 2025 and 2026 at 1.8% and 1.9% respectively.
    • Projections for both headline and core PCE (personal consumption expenditures) inflation will remain broadly unchanged from 2024 to 2026 relative to December 2023 projections.
  • Median interest rate projections at the end of 2024, 2025 and 2026 should remain unchanged, but in the longer run, the views of some FOMC members may exceed 2.5%. 

In summary, the Fed should remain cautious. Future changes in monetary policy stance (timing and sizing) should be data dependent. The Fed is biding its time, especially after recent higher-than-expected inflation data. During the press conference, Fed Chair Jerome Powell will likely repeat that more evidence is needed to confirm that inflation is slowing back to the 2% target. As during his report to Congress, Jerome Powell might reference the healthy economy and that interest rate cuts may not be too far off. Consequently, the March FOMC is likely to push U.S. interest rates slightly lower and US stocks higher.

This commentary is provided for informational and educational purposes only. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management (314 024 019 R.C.S. Paris ; 128 bld Raspail, 75006 Paris) was approved by the AMF under no. GP97076 on 1 July 1997.

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news-3744 Wed, 06 Mar 2024 09:00:00 +0100 European commercial property market - poised for a rebound in activity in 2024 ? /en/who-we-are/news/detail/european-commercial-property-market-poised-for-a-rebound-in-activity-in-2024/ In 2023, the tightening of central bank monetary policies to combat inflation caused a sharp rise in financial rates, which in turn pushed up yields on all asset classes and real estate in particular. As prices adjusted, investors adopted a wait and see attitude, which resulted in a significant drop in commercial real estate investment volumes across Europe and in France. With rate hikes put on hold and the fall in bond yields at the end of 2023, real estate market conditions and more specifically valuations, became easier to read. Hence, we expect a pick-up in investment activity in 2024 as the property risk premium has adjusted. 

In 2024, the investment market will likely be driven by parties that are forced to sell assets due to new financing conditions or that are unable to inject sufficient capital to meet the latest environmental and/or technical standards. These forced sales will provide opportunities for equity-rich investors.

Offices are inevitably hit by the new emphasis on diversification

Following the sharp rise in key interest rates and evolving financing conditions, European commercial real estate investment volumes fell by 47% year on year to €131 billion. Offices, an asset class marked by the trend towards flexible and home working, posted the largest decline. To a lesser extent, the logistics sector, hit by high asset valuations, also suffered from investors' wait and see attitude.

However, the decrease in investments did not hit all asset classes homogeneously. Indeed, investors have stepped up their diversification strategies. As a result, alternative assets accounted for 27% of investments in 2023 (a relative increase compared to 2022).

Geographically, the UK and Spain held up better, posting losses of around 35%, while Germany, the Nordics and the BeNeLux suffered the sharpest declines, between 55 and 60% year on year. France and Italy are in line with the European average, falling by around 45%. In general, the large deal segment suffered the most from tightening financing conditions.

Prime office yields keeping pace with rate movements

After a year of rising yields, real estate valuations may have found a ‘sweet spot ', helping to kick start activity in real estate markets. However, with few deals, especially large deals, yields remain difficult to estimate. At the end of 2023, prime office yields of European capitals ranged between 4% and 5.25%. Germany and the BeNeLux saw the most significant rate rises in 2023. The prospect of looser financial conditions and lower volatility bodes well for a gradual recovery in the investment market in 2024. It should be noted that the environmental challenge, at the heart of real estate strategies, requires significant brown discounts for the most energy intensive assets.

Widening spread between take-up and supply

While office supply continued to increase in 2023, up 14% year on year, the fourth quarter saw an overall stabilization, even a slight increase, in demand for central locations, such as Amsterdam and Brussels. 

European markets are on divergent trajectories, highlighting the importance of geographic diversification of real estate portfolios. Over the year, supply increased by more than 50% in Berlin, Munich and Dublin, but fell in Brussels and Milan, as well as in many central locations such as the central business district of Paris or Madrid. Future supply, constrained by higher construction costs and tighter financing conditions, should, however, remain limited.

Vacancy rates: the gap between prime and secondary assets is widening 

Increasing user expectations of environmental performance and quality of life at work are widening the gap between prime and secondary assets. Rents for next generation assets continue to rise, averaging +4.4% in the euro area in 2023, while rents for secondary assets, particularly in the periphery, are decreasing; a trend that is reinforced by incentive measures.

While vacancy is growing across Europe, it is rising primarily in peripheral locations and is still largely made up of secondary assets, highlighting the mismatch between the existing stock and user demands. Central locations continue to suffer from a lack of supply, especially for new or restructured offices. This is particularly the case in the central business district of Munich, Paris and Amsterdam, which have low vacancy rates of 0.7%, 2.5% and 3.1% respectively.

By Virginia Wallut, Director of Real Estate Research and Sustainable Investment, La Française Real Estate Managers.

Sources: CBRE, MBE, La Française REM Research

The information contained in this document is believed to be accurate at the time of publication and reflects the current views of La Française Real Estate Managers. The content of this document has no contractual value and may differ from the opinions of other management professionals. Published by La Française AM FINANCE Services, whose registered office is located at 128, boulevard Raspail, 75006 Paris, 326.817.467 R.C.S. Paris France and authorised by the ACPR ("Autorité de contrôle prudentiel et de résolution") under no. 18673 as an investment service provider. The portfolio management company La Française Real Estate Managers (399,922,699 R.C.S. Paris/128 Bld Raspail, 75006 Paris) received AMF accreditation No. GP-07000038 on 26 June 2007 and AIFM accreditation under Directive 2011/61/EU, dated 24/06/2014 (www.amf-france.org) 
 

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news-3743 Fri, 08 Mar 2024 09:00:00 +0100 The untapped potential of gender diversity as a growth driver /en/who-we-are/news/detail/the-untapped-potential-of-gender-diversity-as-a-growth-driver/ In the aftermath of the Covid-19 pandemic, women globally were re-entering the labour force at higher rates than men, signalling a modest recovery in gender parity. Despite this hopeful trend, the Global Gender Gap Report in 20231 reveals a sobering reality: while the global gender score is improving, the current trajectory suggests it would take an alarming 131 years to close the gap entirely. Despite progress in terms of access to education, workforce entry and career prospects, the observed global decline in women’s labour-force participation rates, presents a tangible risk to overall productivity growth. Urgent action is needed to address this disparity and fuel future growth. 

Governments play a crucial role in advancing gender equality in the labour market; policymakers can develop and implement policies and regulations that actively promote women in the workplace. Despite progress, the challenge remains significant, and more needs to be done, especially in the context of sluggish growth and retreating inflation, be it slowly. Countries like Sweden and Iceland have made significant strides in promoting gender equality in the workforce. In Sweden, policies such as generous parental leave, quotas for female representation on corporate boards and the prioritization of affordable childcare have contributed to its reputation as a leader in gender equality. Similarly, Iceland became the first country in the world to enforce equal pay for equal work by law in 2018. 

For companies, acknowledging the dual role that women play within the workforce and outside, typically as caregivers, is essential. By embracing diversity, promoting inclusivity and strategically leveraging women’s skills and talents, businesses can become more resilient and successful. Implementing policies that support work-life balance, such as childcare initiatives and flexible work-from-home options, ensures that women can fully participate and thrive in the workforce. According to the World Economic Forum, the increasing presence of women in the paid labour force since 1970 has contributed $2 trillion to the broader U.S. economy2. Fully integrating women into the labour market would substantially boost economic output, notably in Europe, where the toll of the gender employment gap is estimated at €370 billion per year3.

Ultimately, fostering an environment where women can excel, contributes to the overall success and sustainability of organisations in today’s dynamic economic environment. In fact, companies with more women in leadership positions tend to have higher returns on equity, higher earnings growth and better stock price performance4&5


1 Global Gender Gap Report 2023, World Economic Forum, June 2023

2 Gender pay inequality, Consequences for women, families and the Economy, US Congress joint economic committee, April 2016, p.11

3 The gender employment gap: Challenges and solutions, Eurofund, October 2016

4 Is gender diversity profitable? Evidence from a global survey, Peterson Institute for International Economics, February 2016

5 Delivering growth through diversity in the workplace, McKinsey & Company, January 2018

This commentary is provided for informational and educational purposes only. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, 326 817 467 R.C.S. Paris, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management (314 024 019 R.C.S. Paris; 128 bld Raspail, 75006 Paris) was approved by the AMF under no. GP97076 on 1 July 1997.

By Claudia Ravat, ESG Analyst, La Française AM.

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news-3740 Mon, 04 Mar 2024 09:00:00 +0100 Pre ECB Commentary by François Rimeu /en/who-we-are/news/detail/pre-ecb-commentary-by-francois-rimeu/ Preliminary discussions about interest rate cuts will begin, but there’s no rush  

It is widely expected that the Governing Council (GC) will keep its policy rates on hold at the March meeting for the third consecutive meeting. Inflation has not receded sufficiently at this stage. The European central bank (ECB) will release their new quarterly macro-economic projections. We expect them to show lower headline inflation, especially in 2024 given the falling of gas prices, to an all-time low since 2021. However, we do not expect material change in core inflation (which excludes energy and food) over the projected time horizon due to the tight labor market and robust wage growth. Core inflation will probably stand above the 2% ECB target until 2026. In this context, we believe the GC will not want to cut interest rates too quickly, despite debate as to when to start. 

Please find below what we expect : 

  • The European Central Bank (ECB) to maintain its key interest rates at 4.0% for the deposit rate, 4.5% for the Refi rate and 4.75% for the marginal lending facility. 
  • ECB President Lagarde to reiterate that even though the latest inflation data are encouraging, ECB officials need to be more confident that the disinflation process is sustainable. Therefore, Christine Lagarde will reaffirm that it is still too early to cut interest rates. 
  • The ECB President to indicate that the timing of the ECB’s first cut will remain data dependent, and especially dependent on wage growth data. 
  • Compared to December 2023 projections, we expect that Euro GDP growth for 2024 will be revised slightly down, from 0.8% to 0.7%, and will remain broadly unchanged for the next two years at around 1.5 % per year. In terms of prices, we expect that the headline HICP (Harmonised Index of Consumer Prices) will be projected lower this year, down by 0.3 percentage points (pp) to 2.4% and to be quite similar to the December forecasts for 2025 and 2026, respectively at 2.0% (-0.10 pp downgrade from December) and 1.9% (unchanged). In parallel, core inflation will decline over the projection period, from 2.6% in 2024 (-0.10 pp compared to December 2023 projections) to 2.2% in 2025 (-0.10 pp compared to December 2023 projections) and then converge to the 2% objective with 2.1% in 2026 (unchanged).

To conclude, we believe that the ECB will try to buy more time for future decision-making regarding interest rate cuts. 

During the press conference, Christine Lagarde will probably keep a balanced tone: she will reaffirm the ECB’s strong commitment to bring inflation back towards its 2% target. Overall, the economy is more resilient, and inflation is receding more slowly than originally anticipated some weeks ago. Hence, a change in monetary policy stance is less pressing. The ECB still has time and can wait until June. All in all, we expect little impact on financial markets.  

This commentary is provided for informational and educational purposes only. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management (314 024 019 R.C.S. Paris ; 128 bld Raspail, 75006 Paris) was approved by the AMF under no.  GP97076 on 1 July 1997. 

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news-3738 Fri, 01 Mar 2024 14:27:04 +0100 Growth outlook for Europe in 2024 /en/who-we-are/news/detail/growth-outlook-for-europe-in-2024/ By Audrey Bismuth, Global Macro Researcher, La Française AM Japan, the United Kingdom, and Germany are among the developed G7 countries that officially entered a technical recession at the end of 2023, with two consecutive quarters of economic decline. UK and German economies contracted by 0.3% in Q4 2023, while Japan's GDP shrunk by 0.1%. These declines highlight the fragility of global economic recovery after the COVID-19 pandemic, Russia's invasion of Ukraine and the continued erosion of purchasing power. 

While US activity is showing greater resilience thanks to households that have drawn on their accumulated savings since the pandemic and to rising public spending, the European economy is facing weak consumer confidence given the rising cost of living as well as weak business confidence given rising energy costs, accelerating nominal wages and low productivity gains in a context of high borrowing costs, linked to the very restrictive monetary policy of central banks. These challenges underline the need for targeted policy responses, tailored to the specificities of each economy. Growth momentum is expected to rise in the European Union (EU) and the UK this year, as per official forecasts. The European Commission's winter economic projections anticipate a growth rate of 0.9% in the EU and 0.8% in the Euro Area (EA), up from 0.5% in both regions in 2023. The International Monetary Fund’s (IMF) January 2024 World Economic Outlook predicts a modest increase in growth for the UK, from 0.5% in 2023 to 0.6% in 2024.

However, uncertainties loom over the economic landscape, casting shadows on the prospects for sustained recovery. The Economic Expectations Survey (EES), conducted by the IFO Institute in cooperation with the Institute for Swiss Economic Policy (IWP), reveals concerns about the potential for recession in some countries by year-end notably in Germany and in the United Kingdom with a probability of 38%, compared to 26% for the United States. Factors such as geopolitical events, energy prices, political instability and consumer spending dynamics contribute to the heightened risk perception among economic experts. These uncertainties underline the importance of proactive government measures (fiscal consolidation, structural reforms to improve European supply capacity) and prudent calibration of monetary policies to avoid lowering interest rates either too early or too late, thereby minimizing risks and ensuring the resilience of the European economy. 

Optimism for the UK and European economies in 2024 rests on three primary catalysts: a gradual decline in inflation, robust wage growth and a looser monetary policy stance throughout the year. Leading indicators such as the ZEW and the Sentix show an improvement, particularly in the manufacturing sector, which should recover after two years of sluggish growth. This resurgence of the manufacturing sector, which is a necessary boost for employment and capital expenditures, bodes well for world trade despite geoeconomic fragmentation which should persist. 

Inflationary pressures, which have been a cause for concern, are projected to ease in 2024, offering a reprieve to policymakers. The IMF forecasts lower annual average headline and core inflation for about 80% of the world's economies in 2024. The European Commission predicts a decline in HICP  inflation from 6.3% to 3.0% in the EU and from 5.4% to 2.7% in the EA, with similar projections for the UK. These forecasts provide a more favourable outlook for price stability, allowing central banks to adopt accommodative monetary policies to support economic growth. Indeed, it is likely that the European Central Bank (ECB) and the Bank of England (BoE) will start to cut interest rates as of June 2024, which is already reflected in the slight easing of credit conditions since the fourth quarter of 2023. This dovish turn comes after aggressive monetary policy tightening in response to inflation peaks.

In conclusions, UK and Euro Area growth is expected to strengthen in early 2024, supported by rising real disposable income, robust wage growth and a tight labour market. Stimulus measures, such as the Next Generation EU program (temporary measure from 2021 to 2026) and tax cuts in the UK, which should be announced on March 6th, are also expected to contribute positively to growth. Regarding monetary policy, the ECB and the BoE are expected to adopt a cautious approach to the calibration of monetary policies due to the risk of persistent core inflation (excluding volatile items, energy and food) and geopolitical risks. The priority for central bankers remains controlling of inflation, unless major economic disruptions are to occur (deterioration of the macroeconomy, financial stability risks).

Source: Bloomberg

This commentary is provided for informational and educational purposes only. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management (314 024 019 R.C.S. Paris ; 128 bld Raspail, 75006 Paris) was approved by the AMF under no. GP97076 on 1 July 1997.

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news-3737 Tue, 20 Feb 2024 15:43:38 +0100 SYSTEMS-BASED INVESTING - SOLVING THE RUBIK’S CUBE /en/who-we-are/news/detail/systems-based-investing-solving-the-rubiks-cube/ Deepshikha Singh, Deputy Head of La Française Sustainable Investment Research & Head of Stewardship, La Française AM The concept of the polycrisis , popularised by the World Economic Forum (WEF) in its Global Risks Report 2023 , refers to a state where multiple crises intertwine - their causes and processes inextricably bound together to create compounded effects. The report warned that the world faced the risk of an emerging polycrisis in relation to “shortages in natural resources such as food, water and metals and minerals” by 2030. A year later, the complexities we face in the world today remain as challenging, if not more. Roughly 10% (783m people) of the world’s population is undernourished as of 2023  and the number of people living in extreme poverty has risen to nearly 700m , a significant share living in conflict-affected areas. From wars in Gaza and Ukraine to hostilities in the Middle East, conflicts and violence have led to mass migrations, food and energy insecurity and disruption in trade which has caused ripple effects through society. The entire 2.2m population of Gaza is faced with the risk of famine as the war continues . Geopolitical risks have also increased the probability of recession in Europe and the US , while the economies of several emerging countries like Lebanon, Argentina, Sri Lanka and Bangladesh are already holding on by a thread.  

Around the globe, unforeseen climate emergencies in 2023 – like torrential rains in Southeast Asia and droughts in Africa - have taken thousands of lives, caused billions in infrastructure and economic damage and have displaced vulnerable populations.  During the wrap up of COP28, the United Nations (UN) issued an appeal for $46.4bn for 2024, in order to bring aid to 181m people worldwide, suffering from famine and disease or subject to mass displacement, stemming from conflicts, climate emergencies and collapsing economies. People, planet and profit – all three P’s have been put under threat in this age of polycrisis.

Investing based on systems – a case for transformative investing

Big problems require strong actions. To address the polycrisis that we are experiencing, society needs to invest in transformative change across multiple planetary, societal and economic ecosystems. Systems-based investing or transformative investing is a school of investing that is theoretically guided by a systemic theory of change  and that applies a comprehensive systems intervention approach. 

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news-3734 Tue, 20 Feb 2024 15:37:02 +0100 Science-based targets for banks – towards harmonized guidelines in 2024? /en/who-we-are/news/detail/science-based-targets-for-banks-towards-harmonized-guidelines-in-2024/ By Armand SATCHIAN, ESG Analyst, La Française AM In November 2023, a report published by Reuters  announced that the commitments to set science-based targets of several European banks were removed from the Science-Based Target Initiative (SBTi)  website. According to the report, this was the result of decisions by the banks to withdraw their commitment following SBTi’s June 2023 publications . However, in the absence of an official communication from the stakeholders, the exact rationale behind the deletion of the banks’ names from the website remains unclear.

This development puts the emphasis on the challenges faced by the banking industry to agree on harmonized guidelines, including precise criteria, in order to align their activities with ambitious science-based targets. Year after year, the number of banks that commit to support a net zero economy is growing. For example, the Net Zero Banking Alliance (NZBA)  gathers 141 members as of January 2024 (vs. 29 members when it was launched almost three years ago ). Thus, such guidelines are becoming even more essential to support the banking industry’s transition from commitment to action (e.g., setting ambitious science-based targets with an appropriate coverage, develop appropriate exclusion policies)
Too many cooks spoiling the broth?

Several initiatives provide guidelines for climate target setting specifically for banks, such as the Institutional Investors Group on Climate Change (IIGCC) Net Zero Standard for Banks , the NZBA Guidelines for Climate Target Setting for Banks , SBTi Financial Institutions Net Zero Standard Draft, ACT Finance draft , etc. As an asset management firm, we acknowledge that the initiatives play distinct roles but their lack of alignment on key topics, such as the criteria defining the concept of science-based targets in line with a net zero pathway, is concerning. 

A concrete example of that misalignment is the status of fossil fuel criteria, which are explicitly mentioned in the SBTi Net Zero Draft Standard but not in the NZBA guidelines. The latter suffered criticisms from both external and internal stakeholders claiming that its approach to fossil fuel financing was too lenient, and members left the initiative or warned that they would leave without stricter rules on the topic . 

While a variety of initiatives to set and assess climate transition plans (and associated science-based targets) might be beneficial, the lack of harmonization on key requirements could favour more flexible initiatives, when the climate emergency requires just the opposite. A closer look at the top 60 fossil fuel financiers  reveals that as of January 2024, c. 70% are members of the NZBA, while less than 20% commit to the SBTi or have established SBTi validated targets,. 

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news-3705 Wed, 07 Feb 2024 09:43:48 +0100 PRI 2023 assessment /en/who-we-are/news/detail/pri-2023-assessment/ La Française achieves at least 90% of the maximum score in its asset management specialities, confirming its position as a benchmark sustainable investor. These excellent scores reaffirm La Française's sustainable investment approach, launched in 2008, and highlight the progress made by La Française in deploying its ESG strategy. 

With results close to or above 90%, La Française is demonstrating its ability to integrate ESG criteria into its management processes across its various asset classes, as well as its determination to take action through its commitment policy. 

In the space of two years, La Française has improved by more than 10 points to reach almost 90% of the maximum score for real estate asset classes and almost 95% of the maximum score for corporate fixed income products. Active fundamental asset management of listed equity products remains broadly stable at 86% of the maximum score. 

Finally, it should be noted that Policy Governance and Strategy, and Confidence building measures modules have each received the maximum score of 5 stars.

Laurent Jacquier Laforge, Head of Sustainable Investment at the La Française Group:

"These results are a clear approval and encourage us to continue our efforts to become an active and influential player and to report on our impact to our stakeholders. The merger with Crédit Mutuel Alliance Fédérale to form an asset management division gives us the opportunity to deploy an ESG strategy with broader coverage in terms of the size of assets under management and the diversity of asset classes covered".

Laurent JACQUIER-LAFORGE, Global Head of Sustainable Investing Groupe La Française

The La Française Group signed the Principles for Responsible Investment (PRI)1  in October 2010 to strengthen its engagement in terms of sustainable finance and support the adoption of ESG criteria in investment. This approach underlines the importance the management company attaches to long-term, sustainable growth, shared value creation and greater transparency.
It is therefore committed to respecting the six principles established by the United Nations with regard to asset management: 

  • Integrate ESG issues into its investment analysis and decision-making processes.
  • Integrate ESG issues into its shareholder policies and practices.
  • Seek appropriate disclosure on ESG issues by the entities in which La Française invests. 
  • Promote the acceptance and implementation of the PRIs within the investment industry.
  • Work in partnership with financial players who are committed to respecting the PRIs to improve their effectiveness.
  • Report on activities and progress towards implementing the PRIs.

You can find our evaluation and transparency reports on our publications page on our website here.

1 The Principles for Responsible Investment (PRI) were launched by the United Nations in 2006. The PRI is an initiative created in partnership with UNEPFI (United Nations Environment Programme Finance Initiative) and the United Nations Global Compact.

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news-3703 Mon, 05 Feb 2024 09:00:00 +0100 CSRD, the beginning of a new era in sustainability reporting, by Yingwei LIN, ESG Analyst, La Française AM /en/who-we-are/news/detail/csrd-the-beginning-of-a-new-era-in-sustainability-reporting-by-yingwei-lin-esg-analyst-la-francaise-am/ Business activities can contribute to sustainable economic growth while inflicting harm on the very resources their long-term prosperity depends on. Increasingly, jurisdictions are promoting and enforcing standardized reporting rules to ensure that companies consider the positive and negative externalities occasioned by their business activities. However, when it comes to reporting, not all companies are equal. Few companies monitor and disclose associated risks and opportunities, and even fewer properly assess related externalities. Under the European Green Deal, approved in 2020, the EU aims to direct capital flows to sustainable businesses and unlock investments needed to achieve its 2050 climate-neutral target . Aware that the Non-Financial Reporting Directive did not provide comparable and strategic ESG information, the European Commission (EC) proposed Corporate Sustainable Reporting Directive (CSRD) in April 2021. The objective of CSRD is to improve the standards and comparability of ESG disclosures by extending both the scope and amount of information required. It also adopts a more prescriptive approach by specifying what information a company should publish and how it should be reported. All companies subject to CSRD must report their sustainability information using the European Sustainability Reporting Standards (ESRS), developed by European Financial Reporting Advisory Group (EFRAG). More than 50k companies are expected to report under the ESRS between 2024 and 2028, including non-EU companies with a significant presence in the EU.

ESRS characteristics : 

The final version of ESRS is materiality-centered, giving companies flexibility in defining the topics that are relevant to their activities. CSRD is the first regulation to require double materiality assessments from firms. As per the double materiality principle, companies are expected to report, across their entire value chain, on how sustainability issues affect their business activities AND on how their business activities affect the environment and those around them. Limited assurance is required on the reported sustainability information. However, the European Commission is considering extending this to reasonable assurance in the future to ensure more reliable information.

Rules under pressure in EU and beyond

Further delays in finalizing the CSRD are expected due to lobbying and political interference. In 2022, four associations, including the American Chamber of Commerce to the EU, wrote an open letter calling for greater alignment between the ESRS and IFRS Sustainability Disclosure Standards (IFRS SDS), and to give non-EU companies an option to use other national/international standards under the CSRD . The IFRS SDS are developed by the International Sustainability Standards Board (ISSB) and are also known as ISSB standards. 

According to the EC, EFRAG and ISSB worked jointly to enhance the compatibility of their sustainability reporting standards. However, there are still significant differences between the two. The main one being that of materiality - ISSB standards are made for investors and focus mainly on financial materiality, whereas the ESRS addresses all prominent stakeholders and focusses on wider topics, such as society, workforce and environment. The ISSB’s chair has been vocal about the board’s intention to not adopt the double materiality principle . This structural divide makes the CSRD’s broader implementation even more challenging. Even though ISSB Standards represent less reporting burden for firms and have inspired commitment from c.60 jurisdictions, we believe double materiality is more meaningful to companies and investors when addressing sustainability topics. In November 2023, the EC announced a 2-year delay (until 2026) in the adoption of requirements for non-EU companies. For companies that opt to report under ISSB standards now, there will be reluctance to switch to ESRS in future. 

There is also a threat of political interference blocking the implementation of CSRD. In October 2023, 42% of European Parliament members voted in favor of a resolution to block the adoption of ESRS  and called for limitations on it; claiming that it puts too much burden and complexity on EU firms  and could affect their competitiveness. The European Parliament election is scheduled for 2024, and its outcome will affect the EU's sustainability reporting ecosystem. The results of the ongoing SFDR consultation could also substantially change the CSRD rules as both regulations are part of the EU Green Deal.

Everchanging standards, companies need more visibility

There is a lot of uncertainty for companies as the rules are still a work in progress. In October 2023, the EC increased the size threshold for larger undertakings and small and medium-sized companies (SMEs) subject to CSRD by 25% . European officials stated that the measure had been taken to ensure the competitiveness of EU companies . Potentially more modifications are yet to come. Furthermore, there is a staggered implementation timeline for the CSRD. As shown in Figure 1, the implementation is progressive depending on the company's size. Companies already subject to the NFRD must report across their entire value chain starting 2024. However, smaller companies or non-EU companies with a significant presence in the EU will have more time to adopt the ESRS. 
 

Initially [...]

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news-3698 Thu, 01 Feb 2024 09:00:00 +0100 La Française Real Estate Managers (REM) acquires primary care unit in Cherrywood, an emerging mixed-use suburb of Dublin, Ireland /en/who-we-are/news/detail/la-francaise-real-estate-managers-rem-acquires-primary-care-unit-in-cherrywood-an-emerging-mixed-use-suburb-of-dublin-ireland/ La Française Real Estate Managers (REM), a real estate asset management firm with assets under management of over €32 billion (as at 30/06/2023), has finalized the off-market acquisition, from Spear Street Capital, of a primary care unit in Cherrywood, the largest single urban development in Ireland, located in South Dublin. The property is located within The Campus, a dedicated business park in the Cherrywood Strategic Development Zone. Cherrywood is a picturesque location with expansive outdoor space (150 acres of public parkland) and unparalleled amenities. The development is conveniently connected to Dublin City via the M50 motorway and the LUAS Green Line (Tram network). The master plan of the zone is designed to house up to 25 000 residents.

The former office building was refurbished in 2023 to a high standard, with good ESG fundamentals, to provide a three-storey (ground level and two upper levels) primary care facility in the state-of-the-art, sustainable and pedestrian-friendly mixed-use development. Refurbishments include the installation of a new air conditioning system, LED lighting, upgraded lifts and a new entrance lobby. The building, which will develop 25,361 sq. ft of surface area, provides bright and flexible space that will provide a range of medical treatment spaces.  The property caters to soft mobility solutions with the provision of ample bike racks and ten EV charging stations. To the rear of the property is a lake and wilderness area, with meeting pods that benefit all occupiers of the estate. At completion, the property is expected to have a Building Energy rating Certificate of B1.

The property is fully let to Laya Healthcare Limited on a 25-year lease. Laya Healthcare is the second largest provider of health insurance in Ireland and operates a number of walk-in urgent Care Clinics across Ireland. Laya Healthcare’s fit-out will provide a mixture of rooms for treatment, minor theatre, consultation, MRI scans and associated staff administration and rest areas. 

Peter Balfour, Head of Real Estate UK for La Française Real Estate Managers said, “Let to a leading private healthcare provider under a long-term lease and located in a rapidly emerging location with a growing population, this primary care facility with good ESG credentials is a quality addition to our European healthcare portfolio.”

This acquisition, for a transaction volume of just under £13 million, was closed on behalf of a collective real estate investment vehicle. 

La Française REM was advised by Knight Frank, Matheson on legal and Hollis on technical and environmental due diligence.
 

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news-3696 Tue, 30 Jan 2024 09:00:00 +0100 La Française Real Estate Managers negotiates lease renewal and extension with long-standing tenant of Crystal Park, Neuilly-sur-Seine (92 - France) /en/who-we-are/news/detail/la-francaise-real-estate-managers-negotiates-lease-renewal-and-extension-with-long-standing-tenant-of-crystal-park-neuilly-sur-seine-92-france/ La Française Real Estate Managers (REM) is pleased to announce a twelve-year lease renewal and extension signed with PwC, a long-standing tenant since 2004 of Crystal Park, a 43 300 m2 office building located at 61-63 rue de Neuilly in Neuilly-sur-Seine (92 – France), a prime location in close vicinity to the Paris Central Business District (CBD) and La Défense. The asset manager has successfully negotiated a 1 500 m2 office lease extension (effective March 2024) and renewal, a deal that allows the multinational professional services giant to continue its development in its headquarters office through 2035.

As such, Crystal Park is 100% let to three tenants, including PwC who will occupy 66 % of the building, representing 26 700 m2.

Crystal Park was acquired in 2019 by La Française Real Estate Managers, acting on behalf of South Korean institutional investors through a fund managed by Mastern IM. Located in a dynamic business environment, the building offers over 43 300 m2 of office space and a landscaped park of more than three acres. The asset which is a landmark in Neuilly-sur-Seine was completed in 1959 as the original headquarters of a French multinational corporation and heavily refurbished in 2000 and 2018 by the renowned architectural firm Valode & Pistre. The property offers extensive facilities, including a two-floor restaurant reserved for on-site staff, an auditorium, concierge services, a conference and business centre, a fitness centre, etc. It is unique in offering such a high-quality campus in close proximity to the CBD and the sought after residential districts to the west of Paris. Crystal Park features solid ESG (Environmental, Social and Governance) credentials with a BREEAM Excellent certification and the EcoJardin Label for its listed park, signifying the ecological gardening of the surrounding green spaces.

David RENDALL, Managing Director, Institutional & International Divisions of La Française REM said, “We are pleased to be able to accommodate the development of our tenant and would like to extend our thanks to PwC for its renewed confidence. Crystal Park is a unique asset, providing an exceptional working environment for its occupants and a marketing tool to attract talent to their organisations.”

Philippe DEPOUX, President of La Française REM said, “This is yet another deal that illustrates the level of satisfaction of our tenants with our asset management capabilities and the quality of our real estate portfolio. I would personally like to congratulate our asset management team, Xavier BARREYAT, Cédrick BECKER and Claudia REN on the management of Crystal Park.” 

For this operation, La Française Real Estate Managers was advised by Ashurst.

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news-3695 Mon, 29 Jan 2024 12:36:25 +0100 Pre Fed Commentary by François Rimeu /en/who-we-are/news/detail/pre-fed-commentary-by-francois-rimeu-1/ The first rates cut is coming !

The Federal Open Market Committee (FOMC) is widely expected to keep policy rates unchanged at the January meeting. We believe dovish Fed chairman Powell will leave the door open to a potential interest rate cut in March, depending on data.

Please find below what we expect :

  • The target range for the Fed’s benchmark rate to remain unchanged at between 5.25% to 5.50%.
  • The Fed Chair Powell to announce that the Fed will start to cut interest rates soon, eventually in March. The labor market is in better shape and the underlying inflation is slowing especially with the 3 and 6-month annualized core Personal Consumption Expenditures Price Index (PCE) (the Fed’s preferred inflation gauge) below the 2% target.
  • The Fed to adopt a careful and data dependent approach to calibrate the magnitude of the rates cut.  
  • On balance sheet reduction, as suggested by the minutes of the December 2023 FOMC, the Fed to confirm preliminary discussions guiding the end of Quantitative Tightening (QT) to ensure a sufficient supply of reserves to meet bank demand without clearly indicating what is the ample-reserves regime. We believe Chair Powell will underline that there are no signs of stress in the financial market and reserves are still ample. Consequently, Mr. Powell will probably indicate a gradual process to end QT without giving any timeline at this stage. 

In summary, we believe the Fed will allude to the timing of cuts at this meeting. Jerome Powell will probably keep his dovish rhetoric which surprised markets at the December 2023 press conference as the Fed is becoming more confident that inflation is moving back sustainably to the 2% PCE inflation target. Nevertheless, he will remain cautious relative to the magnitude of cuts in 2024 by reaffirming the 75 basis points rates cut as implied in the December 2023 projections even through the Fed will make monetary policy decisions on data. This meeting may lead the US interest rate curve to steepen, the dollar lower and support risky asset prices.

This commentary is provided for informational and educational purposes only. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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news-3692 Mon, 29 Jan 2024 09:00:00 +0100 TICKERS AND THERMOMETERS: Decoding the complexities of portfolio temperature alignment /en/who-we-are/news/detail/tickers-and-thermometers-decoding-the-complexities-of-portfolio-temperature-alignment/ With the release last March of the final installment of the Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report (AR6) (1), 2023 marked a turning point in the global climate change narrative. Across its nearly 10,000 pages, the highest authority on climate change science brought into sharp focus the pressing reality that global warming is now more likely than not to reach 1.5°C in the near to medium term. The final installment fed the United Nations Framework Convention on Climate Change (UNFCCC) Global Stocktake report  which highlights that the 1.5° C trajectory now requires global emissions to fall by 43% by 2030 vs. 2019 levels and 60% by 2035. In the aftermath of both landmark reports, the role of financial institutions has never been more crucial, and the financial sector has found itself further thrust into the epicenter of the action. The influence of the finance industry over global capital allocation provides it with a unique opportunity to drive the transition towards a sustainable, low-carbon economy. This, alongside ever-stricter global regulations, is leading to an increasing number of institutions pledging alignment with the Paris Agreement.

However, the journey towards ‘Net Zero’ is complex. As the window of opportunity to keep global warming below 1.5°C narrows, investors are grappling with one of the most critical tools in their climate strategy toolkit: portfolio temperature assessment. This measure is more than a mere symbol of the environmental impact of a portfolio; it is a tangible reflection of the potential degree of global warming that the emissions from the underlying investments could cause.

The portfolio ‘temperature’ provides investors with insights that are crucial on several fronts. First, it offers a means to monitor and measure progress towards decarbonisation targets. Regular temperature assessments can serve as a performance tracker, allowing investors to gauge whether a portfolio is on track towards achieving ‘Net Zero’. Secondly, assessments help identify and mitigate climate-related financial risks. A portfolio skewed towards high-emitting assets is not only environmentally unsound but could also face significant financial risks – regulatory, market, reputational and litigation – in a world transitioning towards lower carbon alternatives. Lastly, a robust temperature assessment can enhance accountability and transparency, addressing the rising demand of stakeholders for comprehensive climate disclosures and ethical investments.

However, determining a portfolio’s temperature is not a straightforward task. The absence of a universally approved approach implies navigating a complex landscape of methodologies, each with its unique strengths, limitations and inherent biases. Be it the “Climate Disclosure Project (CDP) - World Wildlife Fund (WWF) Temperature Rating”, S&P’s “Trucost Portfolio 2°C Alignment Assessment” methodology, “The Paris Agreement Capital Transition Assessment” (PACTA), MSCI’s “Implied Temperature Rise” (ITR) model or Carbon4’s “Carbon Impact Analytics” (CIA) methodology, investors are faced with a diverse suite of tools to guide their journey to ‘Net Zero’.

But how do these methodologies compare, and what are their relative merits and potential pitfalls? How do we navigate the inherent uncertainties? And, as investors, what conclusions can be drawn from the various outputs relative to the contribution of portfolios to a low-carbon future?

Understanding the array of methodologies is a necessary first step. The choice of methodology will obviously shape investors’ climate strategies, thereby influencing divestment decisions, capital allocations, shareholder engagements and policy advocacy. In a world facing unprecedented climate challenges, these decisions could make the difference between a future char- acterised by runaway climate change and a ‘Net Zero’ world. 
 

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news-3691 Tue, 23 Jan 2024 10:50:23 +0100 ECB to proceed with caution. Based on current data, too early to cut interest rates /en/who-we-are/news/detail/ecb-to-proceed-with-caution-based-on-current-data-too-early-to-cut-interest-rates/ It is widely expected that the Governing Council (GC) will keep its policy rates on hold at the January meeting. Please find below what we expect:

  • The European Central Bank (ECB) to maintain its key interest rates at 4.0% for the deposit rate, 4.5% for the Refi rate and 4.75% for the marginal lending facility.
  • The GC to maintain the meeting-by-meeting approach. 
  • President Christine Lagarde to underline that the ECB does not want to cut interest rates too early because of the underlying price pressures. However, the ECB does not want to keep rates too high for too long because of the risks of excessive tightening on growth and labor market.
  • Christine Lagarde to reiterate that the central bank will cut interest rates this year once ECB members are totally convinced that the inflation outlook is close to the 2% target on a sustained basis (in 2025 according to ECB December 2023 economic projections). 

In summary, and given what was shared at Davos, we expect that President Lagarde will continue to push back against bets on early and extensive rate cuts. At this meeting, with no fresh macro-economic projections, we do not expect any clear guidance on the timing or size of rate cuts this year due to the ECB’s data dependent approach and uncertainty (i.e., especially related to wages development). Nevertheless, we believe that the ECB communication will be balanced, evoking risks of overtightening and risks of premature easing. This committee may lead to a slight steepening of the interest rate curve and a moderate weakening of the Euro currency.

This commentary is provided for informational and educational purposes only. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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news-3689 Tue, 23 Jan 2024 09:49:32 +0100 La Française REM acquires a coliving asset for seniors in chaville (92, france) /en/who-we-are/news/detail/la-francaise-rem-acquires-a-coliving-asset-for-seniors-in-chaville-92-france/ La Française Real Estate Managers (REM), acting on behalf of a collective real estate investment vehicle, has acquired off market a coliving residence for seniors, located at 9 avenue Sainte Marie in Chaville (92, France) and operated by Chez Jeannette, under a 12-year lease. The asset is located in the western suburbs of Paris in Chaville, accessible on foot from multiple stations: Chaville Vélizy (RER C), Chaville Rive Droite (transiliens L, U) and Chaville Rive Gauche (transilien N). Chaville is crossed by the 910 departmental road that connects Paris to Versailles and constitutes the main shopping street, which is just a 7-minute walk from 9 avenue Sainte Marie.

The acquisition concerns a nineteenth century private hotel, former home of the painter Dunoyer de Segonzac. The villa, which is surrounded by green spaces, offers a surface area of 310 m ² spread over 4 levels and will be transformed into shared senior housing with services (house master and living aids), which can accommodate 8 residents (8 rooms, each with a bathroom). Renovations to convert the space, which include the installation of an elevator, and investments to achieve very good energy performance will be financed by the buyer. 

The Chez Jeannette concept is a new way of caring for the elderly, by offering an alternative to existing solutions to support seniors who are losing their autonomy and by developing a shared and supervised housing model. The goal of Chez Jeannette is to provide support services, create social ties and develop a home living environment. 

Jérôme VALADE, Director of La Française REM's Healthcare Real Estate Division, concluded: “The ageing of the population combined with longer life expectancy is a long-term trend observed throughout Europe. It is naturally accompanied by growth in the demand for assets in line with new uses, including coliving assets for seniors. This is La Française Real Estate Managers' first investment in a coliving asset dedicated to seniors and we are pleased to have permitted the opening of a new site operated by Chez Jeannette, whose founding values are perfectly compatible with our investment strategy.” 

For this acquisition, La Française REM was advised by 14-PYRAMIDES for the notarial audit, ARCHERS for the legal audit and DELPHA Conseil for the ESG and technical audit.

About La Française

The major changes linked to environmental and societal challenges are opportunities to consider the future. Identifying the drivers of change and understanding how they will shape global growth and ultimately influence the long-term performance of financial and real estate assets is at the heart of La Française's mission. It is in this spirit that the asset manager forges his/her investment beliefs and develops his/her mission.

The group uses its innovative capacity and customer-focused technology to design investment solutions that combine performance and sustainability.

Structured around two business lines, "Financial Assets" and "Real Estate Assets", La Française Group serves institutional and wealth management clients in France and abroad.

La Française manages over €45 billion in assets through its offices in Paris, Frankfurt, Hamburg, London, Luxembourg, Madrid, Milan, Seoul and Singapore (30/06/2023)

La Française is a member of Crédit Mutuel Alliance Fédérale, which has long-term ratings of A+/Aa3/AA- from S&P (11/2023), Moody's (07/2023) and Fitch (10/2023).

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news-3683 Fri, 19 Jan 2024 09:46:47 +0100 NOTICE TO SHAREHOLDERS OF THE SUB-FUND MULTISTRATEGIES OBLIGATAIRES (THE “SUB-FUND”) EN-LU /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-multistrategies-obligataires-the-sub-fund-en-lu-1/ Luxembourg, 15 of January 2024 Dear Shareholder,

The Company’s board of directors (the "Board") hereby informs you of its decision to amend the investment policy with effect from 15 of February 2024 (the “Effective Date”) in order to introduce the possibility for the Sub-Fund to invest in options on credit default swaps, among the core derivatives.

Therefore, as from the Effective Date, The investment policy will read as follows1 :

“Derivatives and techniques (…) In addition to core derivatives, the sub-fund may use credit default swaps (single name and index), options on credit default swaps and total return swaps based on developed and emerging market government debt and corporate bonds.(…)”

The introduction of options on credit default swaps in the investment policy of the Sub-Fund is aimed to provide more flexibility and diversification, while offering the opportunity to adjust credit risk exposure and generate additional income. It will not have an impact on the way the Sub-Fund is managed or its risk/return profile.


Shareholders are reminded of the fact that in compliance with the prospectus of the Company: (i) no redemption fee is payable in case of redemption of shares and that (ii) they are entitled to require the redemption of their shares. 1 Insertions appear in blue color.

The updated version of the prospectus (reflecting among others the above change) will be available at the registered office of the Company as soon as visa-stamped by the Luxembourg supervisory authority of the financial sector.

Yours faithfully,

On behalf of the Board

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news-3680 Thu, 25 Jan 2024 09:00:00 +0100 La Française Real Estate managers acquires off-plan a serviced residence for seniors in Villeneuve d'ascq (59, France) /en/who-we-are/news/detail/la-francaise-real-estate-managers-acquires-off-plan-a-serviced-residence-for-seniors-in-villeneuve-dascq-59-france/ La Française Real Estate Managers (REM), acting on behalf of Crédit Mutuel Nord Europe and its real estate investment company, has acquired off-plan a serviced residence for seniors. The residence, located at avenue du Bois in Villeneuve d'Ascq, was acquired off-market from ICADE and Groupe Duval. Located in the heart of the municipality of Villeneuve d'Ascq, nicknamed the “green technopole”, the residence enjoys all the medical and commercial amenities as well as the cultural offer of the residential city. The serviced residence for seniors has an ideal location in one of the greenest areas of the city (Brigode) and is in the immediate vicinity of the town centre. The property, serviced by the Lille ILEVIA public transport network, is easily accessible by soft mobility as well as by car via the N227 and the M506. The residence will have a bicycle room and two car-sharing vehicles.

The asset, which is expected to be delivered at the end of the first quarter of 2026, will provide 6,200 m2 spread over 4 floors and will include 130 housing units, ranging from one to three room apartments. For the well-being of occupants, it will offer many services including a dining room, a fitness room, a hairdresser, a multimedia lounge and an environmentally friendly garden. 5 parking spaces for people of reduced mobility are planned. The residence will be operated by Happy Senior under a long-term lease. The Happy Senior Residences of the Groupe Duval offer all the day-to-day services and quality support for independent and healthy seniors.

The serviced residence for seniors aims to obtain the NF Habitat HQE Niveau Très Performant certification, which attests to the overall quality of the housing and a performance of RT2012-20%, thanks in particular to the installation of a solar hot water production facility.

Leslie VILLATTE, Director of Institutional Real Estate Investment and Development - France at La Française Real Estate Managers - Institutional Division, concluded : “We are delighted to have been able to acquire this asset on behalf of Crédit Mutuel Nord Europe, a responsible player, committed to the development of its territories. This asset is also perfectly in line with La Française Real Estate Managers' sustainable approach and presents all the fundamentals necessary to preserve its value over time.” 

For this transaction, La Française REM was advised by Cheuvreux, Reed Smith and Theop.

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news-3678 Wed, 17 Jan 2024 09:00:00 +0100 La Française Real Estate Managers acquires a higher education facility in Bordeaux (33, France) /en/who-we-are/news/detail/la-francaise-real-estate-managers-acquires-a-higher-education-facility-in-bordeaux-33-france/ La Française Real Estate Managers (REM), a real estate asset management company with almost €32 billion in assets under management (30/06/2023) acting on behalf of a closed-ended real estate investment vehicle, has acquired off-plan a 1,935 m2 higher education facility, located on boulevard Godard in Bordeaux, the 9th biggest city in France. The building, classified as an ERP (publicly accessible building), is part of a programme developed by Eiffage Immobilier Sud-Ouest and Jops Conseils comprising 9,000 m2 spread over five buildings, and will be delivered at the end of the first half of 2024. The project is located in the Chartrons district, an attractive area for the quality and number of its green spaces, cultural venues, schools and universities. The asset will be easily accessible by public transport, notably by tramway line C and several bus routes. It is leased in its entirety to a public higher education institution under a future state of completion lease.

The ground floor will feature an auditorium, while the upper levels will offer classrooms and conference rooms. It will also have a parking space for people with reduced mobility and two charging points for electric cars.

In terms of energy and environmental performance, the building, with its timber-framed facades, is aiming for NF HQE Bâtiments Tertiaires Neuf Très Bon certification, the E+C- level E2C2 label and savings of 35% compared with RT2012 requirements, thanks in particular to its use of the district heating network.

Leslie Villatte, Director of Institutional Real Estate Investments and Development – France of La Française Real Estate Managers – Institutional Division, concluded: "The asset's location in the heart of Bordeaux, its energy efficiency targets and the tenant's long-standing ties with Bordeaux all point to a favourable valuation outlook for an asset that perfectly complements the existing portfolio." 

For this transaction, La Française REM was advised by the notary firm Allez & Associés (Maria-Hélène Kremer) and by Emenda as project manager.

 

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news-3667 Fri, 22 Dec 2023 09:00:00 +0100 Announcement via the Internet: Introduction of liquidity management mechanisms /en/who-we-are/news/detail/announcement-via-the-internet-introduction-of-liquidity-management-mechanisms/ In order to strengthen the protection of unitholders or shareholders in UCIs managed by La Française Asset Management, it has been decided to introduce a redemption gates mechanism for the funds listed in the Appendix with effect from 29 December 2023. This mechanism may be supplemented by the implementation of swing pricing. This decision was taken following the publication by the Autorité des marchés financiers of its new instruction on the procedures for introducing liquidity management mechanisms. • Redemption gates mechanism :

This mechanism may be triggered by the fund management company when exceptional circumstances so require and if the interests of the unitholders/shareholders or the public so dictate. This mechanism allows redemption requests to be spread over several net asset values if they exceed a certain level, as determined in the objective manner laid out in the fund documentation. When redemption requests exceed the trigger level, the management company may however decide to honour redemption requests in excess of the limit, and thus execute some or all of the orders that might otherwise be blocked.

• Swing pricing mechanism :

This mechanism aims to protect the UCI unitholders/shareholders in the event of significant subscriptions or redemptions of the UCI’s liabilities, by applying an adjustment factor to unitholders/shareholders who invest or redeem significant amounts of outstanding assets. This is likely to generate costs for unitholders/shareholders entering or leaving that would otherwise affect all unitholders/shareholders in the UCI.
These two mechanisms are described in the regulatory documentation of the relevant UCIs listed in the Appendix.

***

These updates are not subject to approval by the Autorité des marchés financiers and do not require any specific action on your part.

The other characteristics of the UCIs – in particular their investment strategies, risk/return profiles and all their charges – remain unchanged.

We draw your attention to the necessity and importance of reading the regulatory documentation of investment funds (KID PRIIPS, prospectus, regulations, and SFDR annex) available on the website www.la-francaise.com.

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news-3661 Mon, 01 Jan 2024 09:00:00 +0100 Happy New Year 2024 /en/who-we-are/news/detail/happy-new-year-2024/ Best wishes In 2024, our group will begin a new chapter,
and our story will be centered around you.

Thank you for your trust

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news-3659 Wed, 20 Dec 2023 09:00:00 +0100 La Française Real Estate Managers (REM) and EDF Invest acquire the Memphis building in Paris (75013), France /en/who-we-are/news/detail/la-francaise-real-estate-managers-rem-and-edf-invest-acquire-the-memphis-building-in-paris-75013-france/ La Française Real Estate Managers (REM), acting on behalf of two collective real estate investment vehicles, and EDF Invest have acquired the Memphis building, a mixed-use property, office and retail, located at 111 avenue de France in the 13th arrondissement of Paris. Asset management is entrusted to the Institutional division of La Française REM. Located in the heart of the ZAC (development zone) Paris Rive Gauche, in a mixed business and retail environment that welcomes large national and international companies, the Memphis building is well serviced by public transportation (Metro Line 14/RER Line C – Bibliothèque François Mitterrand Station and Line 6 - Quai de la Gare Station).

Fully renovated in 2021 by architects Ory and Saguez & Partners, the 8-storey building is one of three composing the M7 property complex. It develops 14,415 m2, including 10,059 m2 of office space and 4,239 m2 of retail space, and offers many green outdoor spaces (two terraces and a rooftop of 400 m2) and services (café, restaurant, concierge, “cool working” space, bicycle garages).

The Memphis building is BREEAM Excellent certified and has the WiredScore Gold label. It underwent major renovations to improve its energy performance, including the installation of high-performance fan convectors and energy efficient lighting, and the replacement of air handling units. A plan to improve the energy performance of the retail space is also planned in 2024.

The asset is fully leased to eight tenants operating in a variety of sectors such as biotechnology research and development, cosmetics, the agri-food industry, digital transformation consulting and sports equipment.

Philippe Depoux, President of La Française Real Estate Managers, concluded :We are extremely satisfied with the conclusion of this investment which associates our collective real estate investment vehicles and EDF Invest. We sincerely thank EDF Invest for its confidence. The Memphis building summarizes well all the fundamentals expected by La Française REM. Its centrality and the quality of its renovations and services are all factors that should support the attractiveness and valuation of the asset.

Assia Oudni, Investment Director - Real Estate, EDF Invest, added : This acquisition is consistent with our belief in the necessity for high quality and flexible office space for tenants and reflects our confidence in the market fundamentals of the zone. EDF Invest is delighted with this partnership alongside La Française REM.

La Française REM and EDF Invest were advised by the notarial office Allez & Associés, Fairway on the transaction and financing and Artelia on technical aspects. The firms Mayer Brown and Lacourte Raquin Tatar respectively supported La Française REM and EDF Invest.

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news-3657 Mon, 18 Dec 2023 17:54:00 +0100 COP28 : A Bittersweet Symphony /en/who-we-are/news/detail/cop28-a-bittersweet-symphony/ COP28 was a rollercoaster ride marked by its president’s affirmation that there is ‘no science’ behind demands for the phase-out of fossil fuels to limit global warming to 1.5°C. For thirteen days, the world held its breath for as long as it took for a much-awaited final agreement to be negotiated. What ultimately came out is arguably bittersweet. Beyond a renewed commitment to 1.5°C, the Global Stocktake (GST) text has the merit of standing out from previous UN climate conference outputs in that it calls upon a "transition away from fossil fuels”, which goes beyond just coal to include oil and gas for the first time. The failure to mention this during the previous twenty-seven summits was blatant, which is why the language chosen in this year’s text is so symbolic. The symbolism does not, however, make up for the vagueness of the text. Many countries, including EU nations and the Alliance of Small Island States, pushed for a commitment to “phase out” fossil fuels, but the term failed to make it into the final text. This, in addition to the absence of interim targets across the 2050-time horizon essentially means that countries are free to follow their own paths to net zero, and that we are unlikely to see much action from oil and gas companies in the short term.

The Loss & Damage (L&D) Fund, initially agreed at COP27 and intended to compensate countries which do not have the means to adapt to climate change, saw somewhat of a breakthrough in Dubai with the agreement of its “operationalisation” in 2024. However, important details regarding who should pay and who should benefit (with China’s status being a key point of disagreement) remain. Additionally, the Vulnerable 20 Group reported that its members (68) had lost USD 525bn over the last twenty years due to climate change2  whereas the initial amount of pledged funds was less than USD 1bn3 . Envisaged financing is grossly short of what is required. While compensating the relevant countries for their losses is long overdue, the level of uncertainty around the Fund’s functioning and therefore its efficiency remains significant in our opinion.

Eagerly anticipated by many were the negotiations around the Global Goal on Adaptation (GGA), a collective commitment under Article 7.1 of the Paris Agreement. Unfortunately, many developed countries were reluctant to discuss adaptation financing following their commitments to the L&D Fund. We find the final output of the GGA Framework to be anticlimactic. Parties were “urged” to reach goals which, in our view, are not sufficiently specific to actually meet the needs of the most vulnerable (e.g. “Attaining resilience against climate change-related impacts” or “Reducing climate impacts on ecosystems and biodiversity”). In parallel, COP28 decided to launch a two-year work programme on indicators for measuring progress achieved towards the above targets. We look forward the outputs.

While the lukewarm outcome of GGA negotiations was expected to some extent, some of the discussions around Article 6 of the Paris Agreement came as a surprise. Some Parties even called for the moratorium of carbon markets in the Agreement. The elements to consider for the “authorisation” of internationally transferred mitigation outcomes (ITMOs) (Art. 6.2) were watered down with each new draft. The final text merely “encourages” Parties to include the elements… at their discretion. We believe this puts the credibility of ITMOs under question. Furthermore, the absence of a decision regarding emissions avoidance (Art. 6.4) further emphasises the lack of necessary consensus to find a clear path towards Net Zero.

Amidst the frustration, there are some glimmers of hope. For the first time, the final agreement refers to the objectives of ‘tripling renewable energy’ and ‘doubling the global average annual rate of energy efficiency’ by 2030. Initially endorsed by the G20 in September, these targets were adopted by a coalition of 130 countries under the COP28 Global Renewable and Energy Efficiency Pledge. Around 50 oil and gas producers and 29 other national oil companies have signed an agreement to “zero-out” upstream methane emissions and to end routine flaring by 2030. As investors, it is crucial that we continue to engage with these companies in order to understand their associated action plans and hold them accountable for their implementation. We also warmly welcome the Declaration on Climate and Health, signed by 123 countries at the Summit, which highlights the importance of preparing healthcare systems to cope with ever-increasing climate-related health issues. Similarly, we welcome the UAE Declaration on Sustainable Agriculture, Resilient Food Systems and Climate Action, which was signed by 134 countries. It includes a landmark, new sustainable food systems pledge which has already mobilised USD 2.5bn.

While the debate around the success of COP28 seems to be ongoing, one evident and critical concern looms: to support transition and adaptation and to compensate damages, it remains unclear where the necessary capital, especially for developing countries, will come from in the medium to long term. Of the ca. USD 83bn mobilised at the Summit (including USD 30bn pledged by the UAE in an investment vehicle which, it claims, could mobilise USD 250bn in investment by 20304), it remains to be seen what will be channelled where. The past two weeks have shown that the true challenge lies not only in raising capital, but also in ensuring its just and efficient allocation. Furthermore, a 2022 OECD report5  revealed that between 2013 and 2020, overall climate finance consistently fell short of the USD 100bn annual goal defined at COP156 , with a >45% gap at its worst. Hence, COP28 ends with a deal on fossil fuels, but the hardest part is not behind us. As the world grapples with the escalating impacts of climate change, the ability of the international climate summit to bridge the gap between promise and practice will be crucial in determining the global community’s capacity to mitigate and adapt to these challenges.

By Océane BALBINOT-VIALE, Senior ESG Analyst, La Française AM

1 Cop28 president says there is ‘no science’ behind demands for phase-out of fossil fuels | Cop28 | The Guardian

2 NEW: Climate Vulnerable Economies Loss Report - CVF (thecvf.org)

3 Estimated USD 792 million. The World Bank will host the Fund for an interim period of four years.

4 UAE commits US$30 billion in catalytic capital to launch landmark climate-focused investment vehicle at COP28

5 Aggregate Trends of Climate Finance Provided and Mobilised by Developed Countries in 2013-2020 | en | OECD

6 It was later reiterated at COP21 and extended to 2025.

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news-3655 Thu, 14 Dec 2023 17:40:23 +0100 La Française Real Estate Managers (REM) acquires off-plan a multi- disciplinary healthcare facility in Bordeaux (33), France /en/who-we-are/news/detail/la-francaise-real-estate-managers-rem-acquires-off-plan-a-multi-disciplinary-healthcare-facility-in-bordeaux-33-france/ La Française Real Estate Managers (REM), acting on behalf of a collective real estate investment vehicle, has acquired off-plan a multi-disciplinary healthcare facility located at 27 rue Henri Dunant in Bordeaux (33). The transaction volume amounts to almost €22 million (deed in hand). La Française Real Estate Managers (REM), acting on behalf of a collective real estate investment vehicle, has acquired off-plan a multi-disciplinary healthcare facility located at 27 rue Henri Dunant in Bordeaux (33). The transaction volume amounts to almost €22 million (deed in hand).

Co-developed by GCC Real Estate and WYHO Promotion, the project is on the right bank, in the Deschamps Belvédère district, which is an old industrial site undergoing considerable change, situated between the Pierre bridge and the Saint Jean bridge. The site is less than 10 minutes from the left bank and 20 minutes from Saint Jean Station. Urban development plans are advancing well and include the construction of residential properties, offices, schools, hotels, business parks and retail space as well as a variety of green spaces by 2024/2025.

The project will be carried out by the general contractor GCC Aquitaine, and delivery is expected in the 2nd quarter of 2025. The facility will develop a total surface area of 5,427 m2, spanning over seven floors and will include a healthcare center (consultations, radiology), a wellness center (rehabilitation), professional and research spaces, a restaurant and bicycle storage space. The design of the building will offer great flexibility to its occupants and distant conversion prospects. Equipped with 100% LED lighting, a hot water sanitation and heating system connected to the urban heating network and a dual-flow air treatment plant, the project aims for the BREEAM Very Good certification, “E+C- level E3C1” and “biosourced building level 1” labels and an energy performance level RT2012 -30%. All the criteria of La Française REM's New Building Charter are respected. The asset is pre-leased under a long-term agreement to Medicina, a company that creates and manages multi-disciplinary healthcare facilities, based on a new business model which aims to improve patient care by offering a comprehensive package of services covering prevention, care and well-being.

Jérôme VALADE, Head of Healthcare Assets at La Française REM, concluded: "After the acquisition of the first MEDICINA healthcare facility, avenue Rockefeller in Lyon in late 2021, we are delighted to renew our partnership with Medicina, a healthcare player whose development model is fully aligned with our objective to fight against the lack of healthcare infrastructures and to improve the quality of care. This asset matches perfectly with our overall investment strategy in healthcare and more generally speaking with La Française REM’s sustainable approach.” 

For the acquisition, La Française REM was advised by Archers, 14 Pyramides and ARC PM.

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news-3654 Tue, 12 Dec 2023 11:48:26 +0100 European commercial real estate market – the first signs of an imminent rebound ? /en/who-we-are/news/detail/european-commercial-real-estate-market-the-first-signs-of-an-imminent-reboundnbsp/ While European real estate markets have been adjusting to the new financial environment for several quarters now, some segments seem to have found a new equilibrium that could provide the basis for a rebound in investment volumes in the short term, and in terms of valuations in the medium term. All real estate markets are affected by the rise in interest rates and financing costs, but some are adjusting more quickly than others. While real estate activity continues to fall overall, it is stabilising or even picking up again in some areas. Similarly, while yields continue to rise in most markets, a consensus seems to have been reached on several others, such as logistics in Germany and retail in the UK. France, which traditionally lags behind other markets, continues to exhibit signs of transition.

Investment volumes: the first signs of a recovery ?

The wait-and-see attitude of investors and lenders at the start of the year was reflected in a sharp fall in investment volumes over the first three quarters. The decline was particularly marked in the large transactions segment, given the greater recourse to financing.

Over the past twelve months, European investment volumes on a downward trend, with an average drop of 55%: -50% for the United Kingdom, -52% for France and -60% for Germany. At the end of September, offices accounted for 30% of investment volumes in 2023, compared to 51% in 2019. The proportion of diversification assets has continued to rise, reaching 24% at the end of September 2023.

There are a few exceptions, notably in Germany and the Netherlands, where investment volumes are back on the rise, with a rebound of around 30% over the quarter. Slower than its neighbours in the price adjustment phase, the French market is suffering from competition from other European countries that are beginning to present interesting opportunities.

Prime office yields keep pace with rising interest rates

In the wake of the European Central Bank's tenth straight interest rate hike, real estate yields continue to rise across Europe. In addition, the high cost of debt results in negative leverage in many European countries. Prime office yields rose by between 10 and 50 bps over the last quarter, bringing the year-on-year increase to between 35 and 170 bps (Dublin 35 bps, London 50 bps, Paris 75 bps, Brussels 75 bps, Munich 150 bps). In logistics, prime yields rose by an average of 7 bps over the quarter, suggesting an attractive entry point for an asset class with good rental fundamentals.

The rise in yields varies within a same market depending on the quality and location of the assets. An additional risk premium in excess of 150 bps is often expected by investors for assets located in peripheral areas. The trend is the same for "obsolete" assets, in terms of both durability and functionality.

A rise in supply, difficult to control

Following the example of Germany and confronted with the economic slowdown, cost-cutting is a key issue for companies. Take-up* in Europe's main office markets fell by 21% year-on-year, mainly due to a reduction in leased space. However, some markets, such as Paris, Lyon and Amsterdam, saw demand stabilise or even increase in the third quarter. Companies are primarily looking for quality assets, offering smaller spaces with good accessibility.

In Europe, office supply rose by 4% over the quarter, bringing the year-on-year increase to 14%. Some markets stand out, such as Brussels, Amsterdam and Milan, where supply fell in the third quarter.

Polarisation of rental markets with the emergence of a middle ground

The polarisation of rental markets is evolving in tandem with the emergence of a third segment. Until now, the rental market included :

  • prime assets in central locations, where supply is becoming scarce, exerting upward pressure on rents. Across Europe, with the exception of the UK, prime rents rose in the third quarter; and
  • secondary assets in peripheral locations, where the abundant supply continues to increase, driving down rental values

As the economic environment darkens, an intermediate segment is emerging: prime and environmentally friendly assets which are available at competitive rent levels due to their peripheral location.

The rise in vacancy rates across Europe highlights a problem of inadequate supply, both in terms of location and quality. Supply continues to increase in peripheral locations but is declining in central locations. The central business districts of Paris and Munich have vacancy rates of 2.1% and 0.6% respectively, while peripheral locations have vacancy rates close to 20%. Two opposing trends will determine future supply. The high volume of vacancies over the next 24 months will increase the supply of second-hand assets while new construction is falling sharply. In the Greater Paris region, for example, for every m² of good quality supply, there are 2.5m² of obsolete space.

By Virginie Wallut, Director of Real Estate Research and Sustainable Investment at La Française Real Estate Managers

Sources: CBRE, Trading Economics, MBE, La Française REM Research
*Take-up in the 12 main European cities: Brussels, Lille, Lyon, Paris, Berlin, Frankfurt, Hamburg, Munich, Dublin, Milan, Amsterdam, Madrid

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news-3652 Tue, 12 Dec 2023 10:31:52 +0100 Pre ECB Commentary /en/who-we-are/news/detail/pre-ecb-commentary-5/ All eyes are on the new economic forecasts.

As suggested by ECB members, the Governing Council (GC) will maintain its interest rates at the December meeting. The pivotal focus is on the updated macro-economic projections, particularly since the latest inflation data fell below the central bank's expectations. We anticipate these projections will indicate weaker forecasts for growth and inflation. Notably, the ECB is expected to unveil the inflation projection for 2026, aligning it with the 2% target. Additionally, we anticipate an ECB announcement regarding an accelerated pace of quantitative tightening (QT).

Anticipated outcomes include :

  • The European Central Bank (ECB) maintaining its key interest rates at 4.0% for the deposit rate, 4.5% for the Refi rate, and 4.75% for the marginal lending facility.

  • The GC maintaining its meeting-by-meeting approach and reiterating guidance that sustained restrictive rates will prompt inflation to return to target in due course. Christine Lagarde will emphasize that the ECB cannot claim victory yet.

  • The ECB's probable announcement of the gradual conclusion of Pandemic Emergency Purchase Programme (PEPP) reinvestments next year, with details expected in January. We anticipate the ECB will likely rule out outright bond sales from either the asset purchase programme (APP) or PEPP portfolios, as suggested by Isabel Schnabel to Reuters.

  • Projected weaker growth in 2023 and 2024. Inflation projections for 2024 and 2025 will be key; we expect those forecasts to be lowered from 3.2% and 2.1% to 2.7% and 2% respectively.

In summary, given the recent comments from most ECB officials, there seems to be a gradual shift towards a more dovish stance within the GC. President Christine Lagarde will likely emphasize the efficiency of monetary policy tightening, noting the slowdown in bank lending growth, economic weakening and the faster-than-expected decline in underlying inflation. She might caution against early 2024 interest rate cuts due to uncertainties in wage growth and weak productivity. However, market sentiments might overlook Lagarde's warning, and consequently, we do not anticipate a significant impact from this meeting. 

This commentary is provided for informational and educational purposes only. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997. 

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news-3651 Mon, 11 Dec 2023 14:01:29 +0100 “A just transition”, the underlying theme of the UN Forum on Business and Human Rights /en/who-we-are/news/detail/a-just-transition-the-underlying-theme-of-the-un-forum-on-business-and-human-rights/ Insights from the 12th United Nations Forum

During the 12th United Nations Forum on Business and Human Rights, a diverse assembly of stakeholders, including representatives from NGOs, activists, companies and government officials, gathered in what was known as Room XX of the Palais des Nations in Geneva. The conference deliberated on the current state of human rights, recent progress and future endeavours. A compelling call was made to cease separating the climate crisis from the human crisis, emphasizing their interconnected nature. Against the backdrop of the 75th anniversary of the Universal Declaration of Human Rights, participants acknowledged the intricate links between these challenges, paving the way for discussions on how businesses can play a transformative role in crafting sustainable solutions. This affirmation underscored the vital role of decisive action in ensuring a just and sustainable climate transition.

Human Rights, state and violations

The conference delved into today’s global human rights landscape, where a triad of challenges – political conflicts, climate change and technological advancements – looms large. The interconnection between climate and human crises underscores the imperative of a just transition. Notably, the supply chain emerged as a focal point of discussions, revealing itself as a risk hotspot referencing human rights abuses. Indigenous communities, that safeguard 80% of remaining biodiversity1 , bear the brunt of human rights violations, facing challenges such as discrimination, land-grabbing and resource exploitation, and are the most vulnerable to the negative effects of climate change. Strikingly, communities, already heavily impacted by climate change, are doubly burdened and victims of climate transition initiatives which involve large-scale infrastructure and renewable energy projects on their lands and intensified mineral extraction. The forum emphasized the significance, yet limited practice, of Free, Prior and Informed Consent (FPIC) rights, calling for companies to engage with indigenous communities. The shift in mindset from a moral consideration to a strategic allocation of resources is crucial for fostering responsible and sustainable business practices.

Additionally, the complexities of human migration, especially in response to climate change, bring to light significant gaps in legal and policy frameworks. The deepening crisis of forced labour and child labour poses a threat to men, women and children and is primarily fuelled by private economic interests. We estimate that today 50 million individuals are victims of modern slavery2. A closer examination of workers’ rights within this context reveals pressing concerns, including freedom of association, access to remediation and fundamental workplace rights. Even in the most developed countries, workers face obstacles in safeguarding their rights and negotiating fair working conditions. The forum emphasized the need for robust protection mechanisms, access to justice and remediation for workers subjected to human rights abuses, including those stemming from climate-induced changes.

Future regulations and solutions

Celebrating the decade-long journey of the United Nations Guiding Principles on Business and Human Rights (UNGPs), the forum reaffirmed the global standard. Endorsed by the UN Human Rights Council in 2011, the UNGPs provide a comprehensive framework, “Protect, Respect and Remedy”, outlining the responsibilities of states and businesses regarding human rights. International Labour Organization and OECD3 standards were also discussed, emphasizing the imperative of strengthened due diligence, particularly concerning indigenous populations. The necessity for heightened transparency and risk assessment of supply chains was also underlined, illustrating the pivotal role businesses can play in respecting and safeguarding human rights.

In contemplating the future, the forum resounded with a call for innovative solutions and concerted efforts to address the intricate nexus between business activity and human rights. Discussions highlighted the efforts of the Open-ended intergovernmental working group (OEIGWG) to elaborate a “legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises”.  The Working Group on Business and Human Rights is poised to deliver a report to the UN Human Rights Council in June 2024, which will explore the alignment of Environmental, Social and Governance (ESG) practices in the financial sector with the UNGPs.

At the close of the forum, the UN High Commissioner of Human Rights concluded with “I urge you to put human rights at the centre of all climate decision making at COP 28 and beyond.”

By Claudia RAVAT, ESG Analyst, La Française AM

The Role of Indigenous Peoples in Biodiversity Conservation, Claudia Sobrevila, The World Bank, May 2008

Global Estimates of Modern slavery report, International Labour Organisation, September 2022

Organisation for Economic Co-operation and Development

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news-3648 Wed, 22 Nov 2023 10:53:00 +0100 COP28, getting back on track /en/who-we-are/news/detail/cop-28-getting-back-on-track/ Climate negotiations will resume on November 30th in Dubai amidst extreme weather events, geopolitical conflicts and increasing public scrutiny of the integrity of public commitments. However, it remains to be seen if the COP will lead the way to ground-breaking advancements. The World Meteorological Organization estimates that the average surface temperature, between 2023 and 2027, is expected to be 1.1° to 1.8° C higher than the average temperature at the end of the 19th century. Much of this increase is the result of recent activity. The results of the Global Stocktake report  (which tracks the implementation of the Paris Agreement and assesses progress towards long-term goals) specifically note that 42% of emissions generated since 1850 come from the era running from 1990-2019. It is clear that to keep the 1.5° C target alive, more ambitious financial policies and commitments are necessary.

After several years of stagnation or even disillusionment, this COP needs to demonstrate that climate negotiations remain relevant and capable of inducing real change, up to the climate challenge. Remember that the 1.5° C trajectory now requires global emissions to fall by 43% by 2030 vs. 2019 and by 60% by 2035 . For context purposes, since the Paris Agreement, CO2 emissions were higher in 2021 and must reach their peak before 2025 if the trajectory is to be conceivable.

The COP 28 presidency wants to mobilize public and private contributions in the following areas, which could generate more or less disruption : 

  • Acceleration of the energy transition and reduction of emissions before 2030;
  • Securing climate financing;
  • Nature, just transition and people;
  • Inclusion.

On more traditional topics of energy transition, attention will focus on accelerating the phasing out of coal, which is not expected to be the source of a positive surprise. Indeed, the AR6 (Sixth Assessment Report of the Intergovernmental Panel on Climate Change) projections show that an alignment with 1.5° C would require a 67 to 82% reduction in coal use by 2030 vs. 2019 . This alignment would require a fuller exit than what has been agreed, whereby there is still room for interpretation with ‘phasing down’.

On the other hand, it would appear that we could expect a commitment from the oil industry to halve Scope 1 and 2 emissions and target zero methane emissions throughout the value chain.

In terms of replacement capacity, we also expect a commitment to increase threefold the global renewables capacity by 2030. The trend is positive here and based on the massive fall in unit energy prices between 2010 and 2019; on average, an 85% unit price reduction for solar and 55% for wind.

Within the finance sector, one of the greatest disappointments has been the commitment to mobilizing public and private funding for the fight against climate change, which was supposed to reach USD100bn per year in 2020 and after falling short once, has never been achieved since. However, according to the 5th biennial high level ministerial dialogue on climate finance, there is hope that the target will finally be reached this year. There may be a light at the end of the tunnel given optimism surrounding financing, which is widely considered as an indicator of climate ambition. All parties now expect greater commitments to finance climate change adaptation and the most vulnerable countries.

The ‘Stocktake 'mentions that job creations related to the energy transition would be 3.5x higher than job cuts by 2030. Indeed, real progress could result from the notion of a just transition, which is inclusive of nature and people.

At COP27, oceans and forests emerged in negotiations given their fundamental link with climate change. Health, whether it affects humans or agriculture, is expected to be formally mentioned for the first time at the upcoming COP. Climate change is disrupting health systems: higher incidence of heat strokes, tougher working conditions, increased virus borne diseases, changes in crop nutrition and yields.

One thing is clearly different this year, and it lies in the general awareness of the inadequacy of action. Global Stocktake strives to suggest more ambitious policies that could be the basis for a promising future post COP 28. The key to keeping the 1.5° C target alive is international cooperation around coordinated domestic objectives, regardless of historical emissions. “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.

By Marie Lassegnore, CFA, Head of Sustainable Investments, La Francaise AM

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news-3644 Wed, 29 Nov 2023 09:00:00 +0100 La Francaise Real Estate Managers secures significant refinancing for SO OUEST office building in upmarket suburb of Paris /en/who-we-are/news/detail/la-francaise-real-estate-managers-secures-significant-refinancing-for-so-ouest-office-building-in-upmarket-suburb-of-paris/ La Française Real Estate Managers (REM) has secured refinancing for So Ouest, a prime office asset located 35 rue d’Alsace in Levallois-Perret, an upmarket suburb of Paris, located northwest of the city. The asset management team of the institutional division of La Française REM, acting on behalf of a Korean institutional investor, successfully negotiated the refinancing through Helaba, the loan agent, and DekaBank, acting as co-lenders. Designed by Glaiman & Epstein and fully developed between 2009 and 2011, the SO OUEST office building has a total surface area of 33 252 m2, spread over 22 upper floors and is well serviced with a staff restaurant, cafeteria, conference room with 171 seats, meeting and reception rooms, accessible terrace and a concierge’s lodge.

David RENDALL, Managing Director of the International Division of La Française REM said, “After leasing out 32 000 m2 in SO Ouest last year by way of a 12-year lease renewal for ca. 26 700 m2 signed with SAP and long-term leases for ca. 5 000 m2 with Industrious and Meiyume, this refinancing deal clearly reflects a high level of confidence in our asset management capabilities and the underlying value of the asset.”

Philippe DEPOUX, President of La Française REM said, “In an era of market uncertainties and high interest rates for longer, La Française REM is redefining real estate asset management to attract tenants, reduce vacancies, protect assets and ensure property values. I would personally like to congratulate our asset management team, Xavier BARREYAT, Cédrick BECKER and Valentin BIESSY on the management of SO OUEST.”

For this operation, La Française Real Estate Managers was advised by Ashurst on legal and Flusin Miralles Esteve on the notarial aspects.    

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news-3642 Thu, 30 Nov 2023 09:00:00 +0100 Thomas OSTRÉ appointed Head of Business Development – Middle East and Global Financial Institutions Relationship Manager of La Française /en/who-we-are/news/detail/thomas-ostre-appointed-head-of-business-development-middle-east-and-global-financial-institutions-relationship-manager-of-la-francaise/ Paris, 30 November 2023 – La Française, an asset management group with more than 45 billion euros in assets under management (as at 30/06/2023), is pleased to announce the appointment of Thomas OSTRÉ as Head of Business Development – Middle East and Global Financial Institutions Relationship Manager of La Française, reporting to Gerardo DUPLAT, Head of International Business Development. Gerardo DUPLAT declares "Like La Française, Thomas is a cross-asset expert, specialising in real assets and financial assets. His professional background has enabled him to develop extensive experience in cross-border relations. We firmly believe in the market potential of the Middle East and the Global Financial Institutions segment. As such, we are strengthening our organisation and are well positioned to achieve our international growth objectives".

Thomas OSTRÉ, 34 years old, Head of Business Development – Middle East & Global Financial Institutions Relationship Manager of La Française

Thomas has nine years of experience in the asset management industry. He started his career with La Française as Marketing Product Manager in 2014 and shortly thereafter joined the distribution team of Fred Alger Management in London, as International Sales Manager.

Owing to his product expertise, Thomas was able to develop the Institutional and Wholesale segments in the UK while supporting the international development (Europe/Asia) of Fred Alger Management. After four years in London, he returned to Paris and was appointed International Real Estate Business Development Manager at La Française, developing the real estate range for institutional clients in Europe, EMEA and Canada.

Thomas OSTRÉ holds a Bachelor of Economics and Management from La Sorbonne University (Paris) and a Master's degree in Management from the Rouen Business School. He was top of his class in the Real Estate Management Masters at ESSEC Business School (Paris/Singapore). Thomas is a member of the RICS. 

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news-3640 Tue, 28 Nov 2023 09:30:00 +0100 La Française Real Estate Managers (REM) acquires off-plan a light industrial property in Collégien (77), France /en/who-we-are/news/detail/la-francaise-real-estate-managers-rem-acquires-off-plan-a-light-industrial-property-in-collegien-77-france/ La Française Real Estate Managers (REM), a real estate asset management firm with assets under manager of over €32 billion (as at 30/06/2023), has finalized the off-plan acquisition, from Altarea Logistique, of a business park, Technoparc de Lamirault, in Collégien (77), at the entrance of the Economic Activity Zone (ZAE) de Lamirault. The business park is located at the intersection of highways A4 and A104, 20 minutes from Paris and 30 minutes from the Charles de Gaulle and Orly airports. It is easily accessible and well serviced with retail shopping centers in the vicinity as well as the research and training cluster « Cité Descartes ».

The business park Technoparc de Lamirault encompasses seven buildings (representing a total surface area of 16 690 m2). La Française REM had already acquired six buildings which are today fully let. The acquisition of building F, which will offer 3 793 m2, marks the completion of the operation. With delivery expected in 4Q 2024, the light industrial asset will meet HQE (high performance level) standards. A clean construction site charter imposes the safeguarding of biodiversity and the recycling of at least 70% of waste materials. Additionally, solar panels (covering 30% of the roof surface), a smart water meter and a charging station for electric vehicles will be installed.

Thierry MOLTON, Managing Director of La Française Real Estate Managers - Retail Division, concluded, “The good location of the asset (East of Paris), in a zone already well developed and home to a hundred businesses, the taking into account of La Française ESG prerequisites from the outset of construction, etc. are all factors that underline the quality of this investment.”

This acquisition, for a transaction volume of just over €7 million (deed in hand), was closed on behalf of a collective real estate investment vehicle.

La Française REM was advised by 14 Pyramides.

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news-3633 Thu, 09 Nov 2023 09:00:00 +0100 Guillaume GENTINA, appointed Head of European Assets for La Française Real Estate Managers /en/who-we-are/news/detail/guillaume-gentina-appointed-head-of-european-assets-for-la-francaise-real-estate-managers/ Paris, 9 November 2023 – La Française Real Estate Managers (REM), a real estate asset management firm with assets under management of more than €32 billion (as at 30/06/2023), is pleased to announce the appointment of Guillaume GENTINA as Head of European Assets, effective November 6th. As such, Guillaume will act as a hub, overseeing relations between the Paris-based home office and satellite offices in Frankfort and London. Guillaume joins the Asset Management division of the Commercial Property Department of La Française, headed by Loïc JARDIN, Director of Asset Management. Loïc JARDIN said, « In today’s context, La Française Real Estate Managers clearly distinguishes itself by capitalizing on its professionals and reinforcing its resources with the recruitment of new talent.  The organization of our asset management team is now complete with the arrival of Guillaume. With three dedicated divisions, Office, Retail and European, respectively supervised by Laurent ADRIEN, Eric DERENNE and Guillaume GENTINA, the client-centric Asset Management Department of La Française REM is fully operational. » 

Guillaume GENTINA, 53, Head of European Assets for La Française Real Estate Managers

Guillaume has twenty years of experience in finance and real estate, intervening at every stage of the value chain: acquisition, asset management, arbitrage and fund management.  In 2001, Guillaume joined General Electric Medical Systems, first as Finance Manager, then as Financial Planner and Analyst Manager. In 2005, he was named Senior Financial Planner of General Electric Real Estate and was responsible for a pan-European portfolio weighing USD14 billion. After two years, Guillaume was poached by DTZ Investors as Client Relationship and Investment Manager. He was later promoted to Deputy Finance Manager of DTZ Investors France, where he was in charge of third-party fund management on a European level.  Prior to joining La Française REM, Guillaume was Associate Director of DTZ Investors France, whereby for close to thirteen years, he managed a commercial real estate portfolio (€4 billion in assets) and led the implementation of an energy consumption reduction program. 

Guillaume GENTINA holds a Master of Business Administration from Manchester Business School and a Master of Science from Ecole Polytechnique Universitaire de Lille. 

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news-3629 Tue, 07 Nov 2023 10:30:00 +0100 Should the Fed reconsider its strategy to fight inflation in view of US employment data ? /en/who-we-are/news/detail/should-the-fed-reconsider-its-strategy-to-fight-inflation-in-view-of-us-employment-data/ Historically speaking, in order to break an inflationary spiral rooted in the economy, as is now beginning to take shape in the United States, it is necessary at the very least to provoke a sharp slowdown in the economy and, in most cases, a recession. The inflationary crises of the 1970s and 1980s ended this way when former Federal Reserve (Fed) Chairman Paul Volker kept key rates high to break the upward spiral in prices, leading to a recession in 1982. This strategy was adopted following the recommendations of the American economist Milton Friedman, who also pointed out that inflation is – above all – a political phenomenon. We are in a similar situation today : inflation in the US and across the globe is primarily the outcome of political decisions. The scale of the fiscal stimulus provided by the US government since the Covid crisis is almost unprecedented in modern history, with the post-war period undoubtedly the most comparable. Since 2020, the US budget deficit was -15.2% in 2020, -10.5% in 2021, -5.4% in 2022 and should be close to -6% this year (Source: Bloomberg), which is enormous !

The balance between fiscal policy and monetary policy will ultimately determine the future of inflation: As long as the US government continues to pursue an expansionary fiscal policy, the Fed will have no choice but to continue its restrictive monetary policy in order to prevent the economy from overheating and inflation from continuing.

At the end of September, US inflation stood at 3.7%, after having reached over 9% in June 2022, with many disparities between the various sectors of activity (Source: Bloomberg). The fall in raw material prices and negative base effects account for the vast majority of this decline, but they are not the only factor. The end of the supply shock linked to the Covid crisis has also allowed inflation on goods to slow sharply, with the figure now close to 0 over the last 12 months. Here too, the fall in energy commodities helped to contain the rise in prices through second-order effects. It should also be noted that base effects will now have a positive impact on inflation, which should lead to a rise in energy and goods inflation.

The part of the economy that is still posing problems is the services sector, with price rises remaining high at 5.7% over the past year. This is due to the "OER" (owner equivalent rent) component, whose variations lag behind those seen on the property market. However, this is not the only explanation. While the services sector requires far less product processing than the goods sector and is therefore less dependent on fluctuations in the price of raw materials, it does, on the other hand, account for far more jobs. Wage inflation and inflation in the services sector are therefore intrinsically linked, as we have seen historically.

It is thus logical for the Fed to want to rebalance demand and supply on the labour market, a necessary condition on the journey to driving inflation back to close to 2%. But Fed policy does not have much impact on job supply, which is affected by migration policies, demographics and the preferences of each category of jobseeker. The Fed's only leverage is therefore to try and influence job demand, which is what it seeks to accomplish by pursuing an increasingly restrictive monetary policy to slow down the economy.

The Fed is therefore right to pursue a restrictive monetary policy in order to curb inflation by moderating wage inflation, but this is not the only factor that will determine the future of inflation.

Political resolutions will also undoubtedly be more important, whether they be decisions to increase the job supply or not, or more or less expansionary fiscal policies. 

On the supply side, after migratory flows came to a halt during Covid, they have now picked back up in a fairly vigorous manner, which should help to rebalance the market in the months ahead. Similarly, the rise in the participation rate in recent months, particularly among the 55+ population, is also pushing up supply-side employment. This should help the Fed, even if there is still a long journey ahead.

As far as budgetary policies are concerned, however, it is difficult to be very optimistic insofar as it is electorally suicidal to pursue so-called restrictive policies (tax increases, cuts in subsidies, etc.), all the more so in an election year, which is the case in 2024. If history is any guide, we can also note that periods of geopolitical instability, such as the one we are currently experiencing, often go hand-in-hand with major budget deficits. 

By François Rimeu, Senior Strategist, La Française AM

The information is provided for information purposes only.

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news-3627 Thu, 02 Nov 2023 09:00:00 +0100 La Française Real Estate Managers (REM) acquires a business park in Saint-Jean-d'Illac (33), France /en/who-we-are/news/detail/la-francaise-real-estate-managers-rem-acquires-a-business-park-in-saint-jean-dillac-33-france/ La Française Real Estate Managers (REM), a real estate asset management company with €32 billion in assets under management (as at 30/06/2023), has acquired a business park from SCI Porta Romana at 91 Impasse Johannes Kepler in Saint-Jean-d'Illac (33), west of Bordeaux. In the heart of an industrial zone with over 300 companies, the warehouse is located 6 km from the Rocade motorway and 7 km from Bordeaux’s airport. It has a total surface area of 3,960 m2, including 500 m2 of office space. The premises, equipped with modern, high-performance hot and cold air production equipment, are leased in their entirety to a company specialising in the import of Italian gastronomic products. There are also plans to install solar panels on the asset by 2028.

Thierry Molton, Managing Director of La Française Real Estate Managers - Retail Division, concluded: "The final stage of this three-phase operation was completed in 2022. As a result, we reap the benefits of the running ten-year guarantee on the asset, which meets the latest energy standards. In addition, the fact that the tenants have been in place since 2010 helps to mitigate rental risk. The geographic location of the asset, a couple of miles outside of Bordeaux, is a real strong point given the boom in e-commerce.” 

This acquisition, for just over €4 million, was made on behalf of a collective real estate investment vehicle. 

La Française REM was advised by 14 Pyramides Notaires ; the seller was advised by the notary office Meyssan et Associés. Both parties were advised by BNP PARIBAS REAL ESTATE TRANSACTION France's regional investment team.

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news-3625 Mon, 30 Oct 2023 17:00:00 +0100 Never trust analysts specialized in banks /en/who-we-are/news/detail/never-trust-analysts-specialized-in-banks/ Let’s start with a paradox. Banks are by far the biggest sector within corporate bond markets1. Yet analysts and fund managers specialized in them are rather scarce and looked upon as geeks. These specialists – and I include myself as one – often like to hide behind their gobbledygook, with terms such as “Common Equity Tier 1”, “risk-weighted assets”, “cost of risk”, “IFRS9 loan impairments”, “MREL bond issuance”, “Additional Tier 1 capital layer” and so on. As wide as the market for bank bonds may be, it still looks like a niche, where analysts are mere meteorologists, who can never really predict how, when or even why a bank may die. Banks do not really go bust as non-financial companies do

Banks never really “die” or go into bankruptcy. They are too economically relevant and prone to contagion risk to really go bust, as a regular non-financial company would do. Banks can be placed “into resolution”, “under supervision by the central bank”, be “nationalized” or sold at a symbolic price to another bank. There are many laws and regulations overseeing how banks could die in an orderly fashion, but they have quite often been circumvented (e.g., several German banks these past few years) or laws have been changed overnight to accommodate regulators (e.g., Credit Suisse).

Bank resolutions (that is the official designation of when a bank goes bust) never resemble one another for a reason that has always been underestimated by analysts and investors: they are first and foremost political decisions, aimed at preserving financial stability. This is our own “whatever it takes”2. However, it has a consequence for bond investors: depending on which kind of bond layer you are invested in (classified by subordination, i.e., how likely you are to suffer losses), the outcome of a resolution may not always be logical, nor easy to estimate.

To illustrate that, let’s take two examples :

  • Banco Popular : although the fundamental and corporate governance woes of the bank were quite well known for some time, things escalated very quickly when rumors emerged that some local Spanish politicians were advising others to withdraw their deposits from Popular. While its solvency metrics were still optically fine, the bank endured a liquidity crisis in only a few weeks, when the ECB decided to step in and sell it to Santander for €1. All shareholders and subordinated debt holders were completely wiped out with absolutely no recovery. Senior debt was preserved and transferred to Santander.

  • Credit Suisse : the bank had been largely affected by corporate governance issues and controversies that arose as soon as 2020 and which peaked in 2022 when the bank lost close to a third of its deposit base between Q2 and Q3 2022. A capital increase and abysmal Q4 2022 results failed to restore confidence, and Credit Suisse was then fatally wounded by the contagion arising from the deposit flights of three US banks. Its solvency and liquidity metrics were still sound a few weeks before its ultimate collapse though. UBS bought the bank and, while equity holders of Credit Suisse got heavily diluted, they fared somewhat better than Additional Tier 1 bond holders, who lost everything, due to a change in the law passed one day before the regulatory decision.

These two examples serve to show that bank failures can arise relatively quickly and surprise a lot of investors, as they cannot pursue a classic “corporate restructuring” process. We have several other examples where all stakeholders were spared and some others where most stakeholders were hit, and to very different degrees.

Why do banks die and how can we predict that, or at least protect ourselves from that ?

You can feel a pattern emerging when discussing the examples of Banco Popular and Credit Suisse. Banks always die because of bank runs (i.e., deposit flights) and not because of solvency nor profitability issues.

After what happened in the US these past few months, where three banks collapsed in a matter of weeks due to fast deposit flights, it could be argued that all European banks could be at risk. Yet, there is no fire without smoke. Deposits should not disappear overnight just because customers are better remunerated elsewhere. The usual deposit base of European banks is stickier, as other opportunities come at a cost. The three US banks had deeper balance sheet issues and poor risk management, which then led to bank runs.

There is one problem though : how can you know whether a bank will collapse due to a liquidity crisis or not ? How reliable are all those nerdy figures given by bank analysts on solvency and liquidity metrics, when banks can still collapse in a few weeks ? We can split that issue into several categories :

  • Profitability issues and risks on assets : turning a net profit is the most usual way to build stronger capital ratios, which, in turn, enable banks to sustain harsher macroeconomic or idiosyncratic shocks. Of course, it matters way more for shareholders than bondholders, who just want the bank to stay afloat in the future. Some banks can have negative net profits for several years and still stay alive (Natwest, formerly known as Royal Bank of Scotland, had been loss-making for 8 straight years without any liquidity crisis !).

  • Controversies & legal issues : several banks have been involved in miscellaneous scandals over the past 15 years. Deutsche Bank was infamously known at some point for being involved in most of them, which even led them to the verge of collapsing in 2016. BNP Paribas also got a hefty $9bn fine by US authorities in 2013 and still managed to cope with it. These issues have more in them than just being hindrances to profitability: they show a lack of good corporate governance and a potential inability to restore confidence, unless strong responses are taken.

  • Solvency issues: European banks have been heavily forced by regulators and governments to build stronger capital ratios over the past ten years. Those who could not do that have been forced to merge with other institutions, which led to a much higher degree of sector concentration (Spain is a very good example of such a trend). Should a bank fail to respect its solvency requirements, the regulator will push it to raise capital, sell activities or force it to merge with someone else. A bank with low solvency metrics poses a threat to its investors, who may become more reluctant to lend money to it on bond markets. But the central bank is always there to provide liquidity, if need be, unless...

  • Liquidity issues & deposit flights: now, that’s where things can turn sour very quickly. A bank can have as much capital and profit as possible, but it cannot sustain the distrust from its clients and counterparties. Deposit flights are a self-fulfilling prophecy and a vicious circle, whereby clients want to jump out of the train as quickly as possible. A central bank can act as a “lender of last resort”, but it will be reluctant to burn hundreds of millions of cash everyday just to keep a bank afloat. Moreover, regulators and central banks want contagion risks to be contained as fast as possible, in order to avoid a systemic crisis. This is why most banks die during weekends, just to let governments, regulators and central banks find the right solution.

Conclusion: are we really that powerless ?

Looking at credit metrics (profitability, asset quality, solvency and liquidity ratios) is insufficient to assess whether a bank can bear the risk of a liquidity run. Do not get me wrong, these metrics do matter, as the root of a collapse can always be traced back to poor corporate governance, leading to balance sheet issues and/or controversies. However, the health of a banking system is too tied to politics and monetary policy to let investors be solely reliant on quarterly figures given by financial institutions.

Investors and analysts are not powerless though. Going beyond financial metrics is more than ever mandatory, as deposit flights arise from distrust, which comes from corporate governance. It takes time and effort to analyze such matters, so you have two choices: sticking to “good quality names” or pushing your luck to pursue higher yields, but at the risk of losing something, or everything, if you are not careful enough.

By Jérémie BOUDINET, Head of Investment Grade Credit Portfolio Management, La Française AM

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news-3624 Fri, 27 Oct 2023 11:18:28 +0200 The Fed expected to "proceed carefully” /en/who-we-are/news/detail/the-fed-expected-to-proceed-carefully/ As suggested by Federal Reserve (Fed) Chair Powell’s cautious message at the Economic Club of New York on October 19, the Federal Open Market Committee (FOMC) is expected to maintain the federal funds target rate steady at its November meeting. Indeed, fast-soaring long-term interest rates have further tightened financial conditions. As suggested by Federal Reserve (Fed) Chair Powell’s cautious message at the Economic Club of New York on October 19, the Federal Open Market Committee (FOMC) is expected to maintain the federal funds target rate steady at its November meeting. Indeed, fast-soaring long-term interest rates have further tightened financial conditions.
Please find below what we expect:

  • The target range for the Fed’s benchmark rate to remain unchanged at between 5.25% to 5.50% even though the latest economic data reflects robust 3rd quarter activity. 
  • Fed Chair Powell will emphasize that given FOMC tightening actions since March 2022 and the rapid rise in long-term Treasury rates since September, the US economy is poised to slow in the coming months. However, Mr. Powell will likely leave the door open to a potential rate increase after November if policymakers see further signs of resilient economic growth.
  • The Fed to pursue its balance sheet reduction plan at $95bn per month.

In summary, Fed Chair Powell’s recent comments, ahead of the current blackout period, echo those of other Fed officials:  rates will have to remain high for an extended period of time until the Fed is confident that inflation will drop down to the 2% target rate. Consequently, we do not expect any surprises. FOMC announcements should have a limited impact on financial markets. 

This commentary is provided for informational and educational purposes only. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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news-3602 Thu, 26 Oct 2023 09:30:00 +0200 La Française Real Estate Managers (REM) acquires retail premises, located "Place Masséna" in Nice (06), France /en/who-we-are/news/detail/la-francaise-real-estate-managers-rem-acquires-retail-premises-located-place-massena-in-nice-06-france/ La Française Real Estate Managers (REM), a real estate asset management company with €32 billion in assets under management (as at 30/06/2023), has acquired from a private investment firm a retail unit located in the heart of Nice (06), on the iconic "Place Masséna", close to one of the city's busiest crossroads. Close to public transport links, the retail space is located under the arcades which are characteristic of the square, and it has an impressive 14-metre façade. The LED-lit retail premises span 868 m² over three levels (lower floor, ground floor and first floor). 

The retail space is 100% leased to the Roche Bobois group, a company specialised in the design and distribution of contemporary furniture.

Thierry Molton, Managing Director of La Française Real Estate Managers - Retail Division, concluded: "This acquisition is a good addition to our retail portfolio because of the quality of the tenant, its visibility and the prime location of the property and, more generally, its proximity to a number of well-known retailers". 

This acquisition, for ca. €9 million "deed in hand", was carried out on behalf of a collective real estate investment vehicle. 

La Française REM was advised by 14 Pyramides Notaires; the seller was advised by Flusin & associés. Both parties were advised by Catella Property.

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news-3598 Fri, 20 Oct 2023 17:03:14 +0200 An anticipated pause /en/who-we-are/news/detail/an-anticipated-pause/ As alluded to during its September meeting, we expect that the Governing Council (GC) will leave its interest rates unchanged at the October meeting. Please find below what we expect:

  • The European Central Bank (ECB) to maintain its key interest rates: 4.0% for the deposit rate and 4.5% for the Refi rate. Underlying inflation (i.e., excluding energy and food) is trending downwards but remains far from the 2% target rate. The latest rise in European bond yields, linked mainly to the surge in US treasuries since September, is tightening monetary conditions and should weaken the growth trajectory of the Eurozone. 
  • The GC to maintain the meeting-by-meeting approach given the high level of uncertainty (wage growth dynamics, energy price pressure namely due to the impact of the Middle East conflict on oil prices). Hence, President Lagarde will likely warn that the ECB is ready to hike rates again if necessary.
  • Christine Lagarde to reiterate that the central bank will keep interest rates high for as long as necessary until ECB officials are ‘sufficiently confident’ about reaching the 2% inflation target within the projected horizon (by 2025). 
  • On quantitative tightening, discussions will likely intensify given the latest comments from ECB hawkish officials. However, we do not expect further details concerning the reinvestment of securities under the Pandemic Emergency Purchase Programme (PEPP), especially before the ECB has concluded its review of the operational framework in the spring of 2024. 

In summary, we expect :

(i) that the ECB’s communication will focus on higher-for-longer interest rates in order to achieve the central bank's key objective of bringing inflation back to its 2% target by the end of 2025; 
(ii) that the European Central Bank will keep the door open to further rate hikes in the future, given upside risks on inflation. We also believe that this intermediate meeting will have a limited impact on financial markets. 

This commentary is provided for informational and educational purposes only. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.
 

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news-3596 Thu, 19 Oct 2023 09:30:00 +0200 La Française Real Estate Managers acquires corporate headquarters office building in London /en/who-we-are/news/detail/la-francaise-real-estate-managers-acquires-corporate-headquarters-office-building-in-london/ Paris, 19 October 2023 - La Française Real Estate Managers (REM), acting on behalf of two collective real estate investment vehicles, has acquired from Grosvenor’s UK Property business a corporate headquarters office building, located in exclusive Belgravia at 10 Ebury Bridge Road in London (SW1 8PZ). A short walk from Victoria Station and Sloane Square, the building is located in a mixed-use neighborhood, characterized by a blend of office, Regency and Georgian-style townhouses, apartment buildings, high-end retail and green garden squares.

Designed by leading London architects Rolfe Judd, the office building was originally constructed in 1992 and provides 62,587 sq. ft. of flexible office and ancillary accommodation arranged over Lower Ground, Ground and six upper floors.Located on a virtual island site, the property is one of the very few self-contained headquarters office buildings (with shower facilities, a staff canteen, an electric vehicle charging station, gated bicycle spaces) in the Victoria submarket. The building is fully let under a 15-year lease expiring in 2038 to an Italian multinational energy provider as their long-standing London headquarters for what has been over thirty years.

The building benefits from 3.6 metre slab to slab heights and largely column free floor plates. These features align with contemporary occupier demands. The office space also enjoys good natural light from all sides with views across London on the upper floors, in addition to a large central atrium which provides landscaped courtyards at ground and lower ground-floor levels, offering external amenity space for occupiers. Refurbishment works, due to be completed imminently, have been undertaken by the tenant to enhance the sustainability credentials of the buildings (Energy Performance Certificate Rating of C, compliant with the compulsory 2025 deadline) and to elevate the quality of the workspace to meet current occupier demands.

Peter Balfour, Head of Real Estate UK for La Française Real Estate Managers said, “As one of the few self-contained headquarters office buildings in Belgravia, the rarity factor, as well as the strong covenant, long unexpired lease term and potential for conversion to other commercial uses, should sustain the long-term value of the investment. Furthermore, as our first acquisition in the West End of London, the asset is complementary to our existing London portfolio.”

La Française Real Estate Managers was advised by RX London, Ashurst on legal, tax and financial aspects and CS2 on technical and environmental due diligence. The vendor, Grosvenor, was advised by JLL.

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news-3593 Thu, 12 Oct 2023 09:00:00 +0200 Andrea Bertocchini appointed Head of Benelux & Nordics for La Française /en/who-we-are/news/detail/andrea-bertocchini-appointed-head-of-benelux-nordics-for-la-francaise/ Paris, October 12, 2023: La Française, a multi-expertise asset management group with over €45 billion in assets under management (06/30/2023), announces the appointment, effective October 2, of Andrea BERTOCCHINI as Head of Benelux & Nordics. Andrea joins the International Development Department, reporting to Gerardo DUPLAT, Head of International Business Development. Gerardo DUPLAT comments, "We are delighted to welcome back Andrea BERTOCCHINI. During his nine years with La Française, he has played a decisive role in the development of several European markets, across all customer segments, identified as key for our asset management group. Tomorrow, he will lead the development strategy for the Benelux and Nordics regions, supporting the group's overall growth objectives.”  

Andrea BERTOCCHINI, 50, Head of Benelux & Nordics, La Française

Andrea benefits from twenty years of international experience in asset management and brings to investors a solid knowledge of real and listed assets, as well as an acute understanding of cross-cultural relations. He began his career with Carmignac in Luxembourg in 2003, before joining Chahine Capital in 2006 as Institutional Sales Manager. In 2010, he joined BNP Paribas Real Estate Investment Management as Business Development Manager - Benelux, Switzerland and UK, acquiring a real estate expertise, a necessary asset for supporting institutional investors’ allocation strategies. Andrea then embarked on a nine-year career with La Francaise, during which he developed the group's business first in Benelux, then in the Nordics and finally in Italy. Before rejoining La Française in 2023, Andrea spent two years with TOBAM as Managing Director, Head of Sales EAFE. 

Andrea is a graduate of Einaudi, Italy.

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news-3591 Tue, 10 Oct 2023 15:00:00 +0200 Insight into potential consequences of Israeli-Palestine conflict /en/who-we-are/news/detail/insight-into-potential-consequences-of-israeli-palestine-conflict-by-francois-rimeu/ By François Rimeu, Senior Strategist, La Française AM How the conflict between Israel and Palestine will unfold is extremely uncertain today. We do not claim to know the outcome, but have identified a certain number of potential consequences that we will evoke briefly below : 

  • The situation is explosive, and it arises in a world already plagued by numerous imbalances: climatic, migratory, diplomatic between China and the United States, linked to the conflict between Russia and Ukraine, etc. All of these imbalances militate in favor of financial markets volatility during the months ahead.
  • The conflict is unlikely to have a direct impact on oil production, but it could have an indirect impact :
  • Hopes that relations between Israel and Saudi Arabia would normalize in the short term have likely disappeared. The United States has been working on this for months, which could have led to an increase in oil production by Saudi Arabia early next year. This is unlikely to happen.
  • The United States has reduced the level of sanctions applied to Iran over the past year, which has led to an increase in Iranian oil production. This increase is estimated at 700,000 barrels/day (source: Bloomberg). Given the ties between Iran and Hamas, it is possible that US sanctions will resume, resulting in a drop in oil exports from Tehran.
  • Discussions have been difficult in recent months between US Republicans and Democrats over support for Ukraine: they are likely to be even more so if the US government has to "arbitrate" between support for Israel and Ukraine.  

Fortunately, we have not reached this level of escalation yet, but it is always worth remembering that a war is by its very nature “inflationary”, and more often than not, results in higher commodity prices. The weekend's events could therefore make the mission of central banks even more difficult.

This commentary is provided for informational and educational purposes only. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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news-3589 Tue, 10 Oct 2023 09:21:18 +0200 Without private intervention, the road will remain blocked to reach the SDGs /en/who-we-are/news/detail/without-private-intervention-the-road-will-remain-blocked-to-reach-the-sdgs/ By Marie Lassegnore, CFA, Head of Sustainable Investments, La Française AM Encompassing areas such as poverty eradication, climate change, gender equality and sustainable economic growth, the Sustainable Development Goals (SDGs) represent a shared global vision for a more inclusive, equitable and sustainable future. According to the latest SDG Report, progress is slow or even in decline. Indeed, only 15% of the Sustainable Development Goals are in line to be met by 2030 while progress is stagnating or even retreating for a majority1.;The main cause highlighted is the lack of funding and private capital allocation to the Sustainable Development Goals in the current post Covid, hyper inflationary environment.

To provide perspective, the funding gap of €4,000 billion per year in 2020 now exceeds €10,000 billion2.  This is all the more alarming given that the 2030 deadline is approaching at alarming speed and the environment is becoming more complex. Just look at SDG 3 “Good health and well-being”, where the situation has deteriorated with 50% of the world's population lacking access to essential health services3. More than 380 million people were pushed even further into extreme poverty due to health spending in 20194.The infant immunization rate is another hard fact. It has seen its largest decline in 30 years along with an increase in mortality from tuberculosis and malaria compared to pre-Covid5. To compensate, private sector capital will need to be directed towards financing health, thus also contributing to a sustainable future.

The role of the private sector is essential in identifying stakeholders, active in ensuring healthy lives and promoting the well-being of all, especially given global population growth which will exacerbate socio economic inequalities. The world's population in 2050 is estimated at nearly 10 billion6, which for developed countries, translates into a health budget equal to 14% of GDP, compared to 6% today7. Redirecting private capital towards health would bridge the financing gap while creating investment opportunities. For example, investing in vaccine R&D, as was done during the period running from 2015 and 2022, would generate an economic profit of over €1,300 billion by 20308. The telehealth sector is yet another example, for which an average annual growth rate of 20% is expected between 2023 and 20309.  And the list goes on.

SDGs in the Investment Landscape

Integrating SDGs into investment decision making processes would allow investors to benefit from performance prospects while generating positive social and environmental results. There are many opportunities combining performance prospects with positive contributions: for example, a US biopharmaceutical company specialised in the treatment of rare diseases. Its goal is to approve at least five new products, for unaddressed patient needs, by the end of this decade. The company provides grants for medical education and supports public policy initiatives that improve access to care and health equity measures. It also provides a free drug program for eligible uninsured patients in the US. Over the past five years, it has achieved revenue and operating profit growth of +20% and +14% per year, respectively. 

Another example is a global leader in bioanalysis. The group operates clinical diagnostic laboratories and offers quality control services for the environment, food, pharmaceuticals and cosmetics. The growth prospects on these segments are significant, with a projected +8% per year over the next ten years for food and environmental tests and more than 10% per year in bio pharmaceuticals. In addition to supporting health, the company provides a wide range of environmental analytical capabilities. In agriculture, for example, the company offers a new suite of soil carbon testing to help transition to more sustainable practices. 

The private sector is a key partner in pursuing the Sustainable Development Goals. Leveraging on its strengths in terms of agility, innovation and investment capabilities, the private sector has the potential to drive transformative change. Through funding, companies can align their strategies and operations with SDGs and generate positive social and environmental impacts while opening new venues to sustainable growth. 

The commentary is provided for information and education purposes only. The views are expressed by the La Française Group. These views may differ from those of other investment professionals. Published by La Française AM Finance Services, whose registered office is located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de contrôle prudentiel as an investment services provider under number 18673 X, an affiliate of La Française. La Française Asset Management has been authorised by the AMF under number GP97076 since 1 July 1997.

sources

  1. https://unglobalcompact.org/news/5143-09-14-2023
  2. UNGC _ SDG _ Stocktake _ Report _ 2023
  3.  Report of the World Bank and the World Health Organisation (WHO), 2017
  4.  UNGC _ SDG _ Stocktake _ Report _ 2023
  5. UNGC _ SDG _ Stocktake _ Report _ 2023
  6. 9.7 billion on Earth by 2050, but growth rate slowing, says new UN population report | UN News
  7. OECD Health Statistics 2023
  8. UNGC _ SDG _ Stocktake _ Report _ 2023
  9. Bloomberg, Exclusive report on Telemedicine industry, April 2023
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news-3587 Thu, 05 Oct 2023 09:30:00 +0200 La Française Real Estate Managers acquires off-plan a hotel resort in Serre Chevalier (05) /en/who-we-are/news/detail/la-francaise-real-estate-managers-acquires-off-plan-a-hotel-resort-in-serre-chevalier-05/ La Française Real Estate Managers (REM), a real estate management company with €32 billion in assets under management (30/06/2023), has acquired off plan from ADIM Lyon, a subsidiary dedicated to VINCI Construction's real estate development, a 4-star hotel resort close to the centre of La Salle-les-Alpes. Located at the foot of the slopes of Serre-Chevalier (05), the resort is ideally located between Grenoble and Turin. This off-market transaction was concluded on behalf of a real estate investment fund. Designed by the architectural firm Studio Arch, the 4-star resort develops over 12,000 m2 spread over six floors (ground+5). It includes 164 units with natural lighting (2 to 4 room suites). It offers a wide range of services including relaxation areas (sauna, hammam), a lounge, a laundry room, a ski rental shop as well as clubs for teenagers and children. Everything has been designed to promote soft mobility with a bicycle room, 24 charging stations for electric vehicles and an electric shuttle to join the lifts.

The programme offers very good environmental credentials, both for winter and summer thermal comfort, with accommodations meeting the requirements of the RE 2020 and the amenities meeting the requirements of the RT 2012-20%. The project aims to obtain ‘Very Efficient’ NF Habitat HQE certification. Heating and sanitary hot water production will be provided by a boiler unit powered by wood pellets and by 300 m2 of solar panels.

With regards to biodiversity, the project includes a green roof, replanting the lining river banks, installing birdhouses and more broadly the ecological management of the site. The resort aims for the Biodivercity® “Performant” label.

The delivery date is set at the end of 2025 and the asset will be fully leased under a long-term lease to an experienced operator, MMV. A subsidiary of Compagnie des Alpes, MMV has been operating in the French Alps for more than 30 years, with 21 sites in 16 prestigious stations in the Alps.

Leslie VILLATTE, Director of Institutional Real Estate Investments and Development - France at La Française Real Estate Managers - Institutional Division, concluded, “In the current macroeconomic context, tourism assets, with their defensive profile, are taking on their full meaning. The resort’s prime location, sustainability characteristics as well as its experienced operator, are factors that should support its valuation over the long term.”

For this operation, La Française REM was advised by Lexfair (Virginie Blanc), Reed Smith (Carole Steimlé) and Domeka (Damien Becquart).

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news-3580 Tue, 26 Sep 2023 15:44:32 +0200 La Française chooses Allfunds Blockchain to streamline the international distribution of its funds /en/who-we-are/news/detail/la-francaise-chooses-allfunds-blockchain-to-streamline-the-international-distribution-of-its-funds/ La Française and Allfunds Blockchain have entered into a partnership in view of using blockchain technology to gain operational efficiency and reduce costs associated with the international distribution of Funds to professional investors. La Française will join the Allfunds Blockchain network and run its own blockchain node allowing it to directly receive and process orders for its Funds (subject to local fund registration).

Allfunds Blockchain enables streamlined order routing and provides real-time viewing of all related processes to its participants, increasing transparency, efficiency and reducing costs of distribution for asset managers. In addition and once operational (target date: 1 semester 2024), this new setup will allow La Française’s professional investor client base to benefit from more accurate cut-off times and improved reporting.

With a clear initial focus on international distribution, La Française and Allfunds Blockchain are planning to leverage further on blockchain technology. They will explore options, using the same approach, based on concrete and scalable “use cases” with a demonstrable ROI, combined with a strategic view of how the Allfunds Blockchain value proposal can open the door to new applications in the finance industry and new distribution models around tokenization.

Thierry Gortzounian, Managing Director of La Française AM Finance Services, said: “The cooperation between Allfunds Blockchain and La Française will allow us to continue to improve the array of services that we provide to our clients, namely by processing their orders more efficiently in a simplified yetsecure framework. The blockchain platform deployed by Allfunds Blockchain will facilitate access to La Française's securities asset management expertise and provide value to professional investors.”

Christophe Descohand, Head of Innovation of La Française AM Finance Services, added: “This partnership marks a first step in La Française’s overarching strategy to associate technology and asset management. As such, we will be capable of offering improved operational processing at a reduced cost to our clients. We are delighted about the partnership with Allfunds Blockchain and looking forward to being operational.”

Ruben Nieto, Managing Director of Allfunds Blockchain, added: “We are thrilled and deeply honored to embark on this collaboration with an asset manager that has consistently been a pioneer in innovation. This new expression of trust reaffirms our vision for blockchain within the industry: unlocking its potential to streamline existing inefficient processes and using these initial strides as a springboard to expand its adoption.”
 

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news-3577 Thu, 28 Sep 2023 16:38:00 +0200 Frédéric ROCOLLE appointed REAL ESTATE SRI MANAGER at La Française Real Estate Managers /en/who-we-are/news/detail/frederic-rocolle-appointed-real-estate-sri-manager-at-la-francaise-real-estate-managers/ Paris, 28 September 2023 - La Française Real Estate Managers (REM), a real estate management company with nearly €32 billion in assets under management (as at 30/06/2023), is pleased to announce the appointment of Frédéric ROCOLLE as Real Estate SRI Manager (effective 21 August), in charge of mobilizing La Française REM’s tenant-clients around climate issues and energy transition. Frédéric joins the Real Estate Research and Sustainable Investment Department, headed by Virginie WALLUT, and reports to Antoine VINCKE, Real Estate SRI Director at La Française REM.  

Antoine VINCKE explains that: "Frédéric brings a wealth of experience to La Française Real Estate Managers in property and technical management, both in France and abroad. Working in tandem with La Française REM's Asset Management teams, he will create synergies with our tenants to improve the carbon footprint and sustainability characteristics of our real estate portfolio. With Frédéric's arrival, the Real Estate SRI team is now structured around four areas of expertise: technical issues, stakeholder engagement, regulations and data management.

Frédéric ROCOLLE, 32 years old, Real Estate SRI Manager at La Française Real Estate Managers

Frédéric has almost seven years' experience in technical property management. He began his career in 2016 with the Economat des Armées in Abu Dhabi as a facility manager, overseeing the maintenance and renovation of a portfolio of residential and tertiary buildings. After nearly three years in that role, he joined Nexity Property Management in 2019 as a technical property manager, bringing his expertise in environmental regulations to a portfolio of more than 250 retail properties across France. 

Frédéric ROCOLLE holds a Master of Science from Glasgow Caledonian University and a master’s degree in civil engineering from the Ecole Spéciale des Travaux Publics.
 

 

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news-3576 Wed, 20 Sep 2023 15:29:00 +0200 La Française Real Estate Managers (REM) acquires a multi-disciplinary health clinic in inner Paris /en/who-we-are/news/detail/la-francaise-real-estate-managers-rem-acquires-a-multi-disciplinary-health-clinic-in-inner-paris/ La Française Real Estate Managers (REM), acting on behalf of a collective real estate investment vehicle, has acquired a multi-disciplinary health clinic at 77 rue Pelleport, 75020 Paris. The value of the transaction is just over €4 million. Completely refurbished in 2019 and located at the foot of the building, the multi-disciplinary health clinic covers more than 400 m2 spread over two levels and offers consultation rooms, an ultrasound room and physiotherapy facilities. The clinic enjoys a prime location in the heart of Paris, close to avenue Gambetta and public transport links (line 3bis - Saint-Fargeau and Pelleport stops). 

The asset is 100% leased to an inter-professional outpatient care company, comprising 11 practices that work closely with the TENON hospital. It offers a comprehensive, coordinated care package to improve patients' care pathways: GPs, ENT specialists (vertigo and hearing problems), endocrinologists, physiotherapists, midwives and nurses.  

Jérôme Valade, Head of Healthcare Assets at La Française REM concluded: "This fully refurbished multi-disciplinary health clinic is centrally located within Paris, close to transport links and in the vicinity of the TENON hotel - enabling a strong transfer of activity from the hospital. It is a good illustration of our investment strategy, which gives priority to well-located, multi-disciplinary urban medical assets that can be converted to meet the need for local primary care. 

For this acquisition, La Française REM was advised by the firm 14 Pyramides for the notarial audit, by Jeantet for the legal audit and by ISOME for the technical and ESG audit.
 

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news-3573 Tue, 19 Sep 2023 09:07:20 +0200 Key interest rates to remain unchanged /en/who-we-are/news/detail/key-interest-rates-to-remain-unchanged/ At this week’s meeting, the US Federal Reserve (Fed) will most likely leave key rates unchanged, as widely anticipated by the markets. However, this meeting could bring a lot of volatility to markets given the many uncertainties about the direction of the Fed’s future decisions. Here is what we expect: 

  • Policy rate to remain unchanged at 5.25%-5.50%. 
  • Consistency in the message delivered by Mr. Powell; he should repeat what he already said at the Jackson Hole conference: "the fight against inflation is far from over", the Fed "will keep at it until the job is done" and "restoring price stability will likely require an extended period of elevated interest rates". 
  • Even if the Fed is and remains "data dependent", we believe that Jerome Powell will start preparing the market for a potential rate increase before the end of the year due to economic growth which is still above its potential level (overheating), a job market that shows little sign of moderation and a barrel of oil that has risen sharply since June. 
  • Continued balance sheet reduction at a rate of $95bn per month. 
  • A "dot plot" that should continue to show an additional rate hike by the end of the year, even if the changes in voters make forecasts difficult. The "dots" for 2024 and 2025 should be unchanged and the "dot" for 2026, which appears for the first time, should be in line with the long term “dot”. With regards to the latter, it does not seem impossible to us that it will be revised upwards. 
  • Macroeconomic forecasts to evolve as follows: 
    • Growth revised significantly upwards in 2023, from 1% to 2% but unchanged in 2024 and 2025. Growth in 2026 is expected to be close to potential growth at 1.8%. The 2023 unemployment rate is also expected to be revised slightly downwards from 4.1% to 3.9%. 
    • A rate of inflation that should not be significantly revised. 


In summary, we expect the Federal Reserve to keep a hawkish bias at this press conference and reiterate the message that rates will have to remain high for an extended period of time in order to bring inflation down to the 2% mandate. This meeting could therefore lead to higher rates and a moderate flattening of yield curves.

This commentary is provided for informational and educational purposes only. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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news-3569 Tue, 12 Sep 2023 09:49:57 +0200 To hike or to pause? It's a close call, but we're betting on the latter! /en/who-we-are/news/detail/to-hike-or-to-pause-its-a-close-call-but-were-betting-on-the-latter/ We expect that the Governing Council (GC) will leave interest rates unchanged at the September meeting due to worsening growth. It is a close call considering market pricing, current inflation levels, and rising oil prices, but we believe that ultimately, they will choose to stay on hold at this meeting.   We expect the European Central Bank (ECB) to: 

  • Maintain the deposit rate at 3.75% and the Refi rate at 4.25% given weakening growth and slightly slowing underlying inflation. 
  • Continue with a meeting-by-meeting approach with the possibility of maintaining or raising rates after September. President Lagarde will emphasize the ECB’s dependence on incoming data for subsequent meetings.
  • Reaffirm that the ECB will keep policy rates in restrictive territory for a longer period to ensure inflation converges to the ECB's 2% target. 
  • Reiterate that the outlook for inflation is uncertain. Price pressures and wage increases remain, but risks are viewed as more balanced. President Lagarde will highlight that underlying inflation has likely passed its peak.
  • Potentially signal that the ECB will begin discussions on an earlier end to Pandemic Emergency Purchase Programme (PEPP) reinvestments. They will need to strike a balance in their press conference by incorporating some hawkish elements to satisfy hawkish members.
  •  Indicate lower growth rates in 2023 (revised downwards from 0.9% to 0.7%) and 2024 (from 1.5% to 1.3%) due to weaker demand. We anticipate that growth will remain unchanged at 1.6% in 2025. 
  • Revise inflation upwards in 2023 by 0.2% and downwards in 2024 by 0.1% while keeping 2025 unchanged. 

 

In summary, we expect the ECB to maintain an overall tightening bias despite the pause. During the press conference, President Lagarde will make strong efforts to avoid a dovish communication, clearly indicating that further tightening is possible. This meeting may result in a modest steepening of the yield curve. 

 

This commentary is provided for informational and educational purposes only. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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news-3568 Fri, 08 Sep 2023 09:24:21 +0200 Sustainable development goals: tapping into the well of opportunity created by the private financing gap /en/who-we-are/news/detail/sustainable-development-goals-tapping-into-the-well-of-opportunity-created-by-the-private-financing-gap/ By Claudia RAVAT and Yingwei LIN, ESG Analysts, La Française AM Since their inception in 2015, the Sustainable Development Goals (SDGs) have emerged as a powerful framework to address and overcome the pressing challenges facing the world. With their wide-ranging scope, encompassing areas such as poverty eradication, climate change, gender equality and sustainable economic growth, the SDGs represent a shared global vision for a more inclusive, equitable and sustainable future.

In 2014, estimated SDG financing needs were around US$5 to US$7 trillion per year. Following the Covid-19 pandemic, estimates reached US$7 to US$9 trillion per year. The financing gap increased by US$ 1.7 trillion according to the OECD, landing at around US$4.2 trillion in 2020.

From the outset, the private sector has been recognised as a key partner in the pursuit of these goals. Leveraging on its inherent strengths, being agility, innovation and investment capabilities, the private sector possesses the potential to drive transformative change. By aligning their strategies and operations with the SDGs, companies can generate positive social and environmental impacts whilst unlocking new opportunities for sustainable growth.

The private sector’s engagement with regards to the SDGs extends beyond mere philanthropy or corporate social responsibility. Rather, it represents a strategic imperative for businesses to future-proof their operations and secure long-term value creation. Embracing the SDGs enables companies to enhance their competitiveness, attract investment, foster innovation and build resilient business models capable of navigating the evolving global landscape.

This report aims to provide insight into the pivotal role of the private sector in driving the achievement of the Sustainable Development Goals (SDGs). It further explores how investors can effectively incorporate these goals into the investment decision-making processes, thereby contributing to the overall progress towards a sustainable future. 

For investors, recognising the importance of the SDGs in shaping the future investment landscape is paramount. Integrating the SDGs into investment decision-making processes allows investors to align their portfolios with sustainability principles and contribute to positive social and environmental outcomes. This approach involves incorporating environmental, social and governance considerations into the investment analysis, actively seeking out companies that demonstrate strong commitment and progress towards the SDGs and engaging with portfolio companies to drive sustainability practices.

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news-3566 Tue, 05 Sep 2023 14:28:00 +0200 La Française Trésorerie ISR available on Cachematrix By Blackrock /en/who-we-are/news/detail/la-francaise-tresorerie-isr-available-on-cachematrix-by-blackrock/ Paris, 5 September 2023: La Française, a multi-expertise management group with €49 billion in assets (31/12/2022), is pleased to announce that La Française Trésorerie ISR (a French mutual fund) is available on Cachematrix by BlackRock, an open architecture online trading and reporting system that allows institutional investors to place purchase and redemption requests, analyse cash portfolios, and produce detailed reports on money market fund holdings. La Française now offers institutional investors domiciled in Austria, Belgium, France, Germany, Spain and Italy, the possibility of accessing its “flagship” money market fund (distinguished with the French SRI Label  and classified Art. 8 SFDR ) which boasts 3.03 billion euros in assets under management (as at 24/08/2023) via the Cachematrix by Blackrock platform. Cachematrix by BlackRock offers a variety of advantages to La Française's institutional investors, including:

  • Simplified investment processes,
  • Auto-settlement capabilities with reporting and custodian booking,
  • Enhanced analytics and reporting.

Thierry GORTZOUNIAN, Chief Operating Officer of La Française AM Finance Services said, "As a client-centric and innovative asset manager, La Française relentlessly pursues all venues capable of democratising access to its securities asset management expertise while creating value for the end investor. As a platform designed to simplify the daily cash management of institutional investors, Cachematrix by BlackRock is an additional milestone in the right direction.” 

La Française Trésorerie ISR

Asset Class:
    Standard money market fund with variable net asset value
Share class:     I share / FR0010609115
Objective:     The Fund's management objective is to seek market opportunities on short-term maturities in order to offer the same performance 
    as the capitalised €STR, less management fees, by investing in a portfolio of issuers screened in advance according to 
    Environmental, Social and Governance criteria.
Synthetic Risk Indicator:     1 on a scale of 1 to 7, 7 representing the highest risk
Investment Horizon:     3 months
Minimum initial subscription:     €500,000
Main associated risks:     risk of capital loss, interest rate risk, ESG investment risk, sustainability risk, discretionary risk, counterparty risk.

The SRI Label does not guarantee the Fund's performance.

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news-3563 Tue, 29 Aug 2023 17:02:51 +0200 Jackson Hole, no real surprise /en/who-we-are/news/detail/jackson-hole-no-real-surprise/ Jackson Hole confirms the rather “hawkish” bias on Jerome Powell’s and the Fed’s part. The president of the Fed reasserted messages communicated in previous speeches, that is, the Fed is not convinced that inflation is decreasing towards its 2% objective and three conditions are required for the Fed to be reassured: the pursuit of decreased inflation following the good figures of June and July, a decrease in growth below the potential growth (which has not yet been the case) and a rebalancing of the labour market. In the following months, we might expect interest rates at best stable, and potentially increased in case of poor developments due to inflation. He also mentioned the uncertainty surrounding “R-Star” (the real neutral interest rate). This came as no surprise to the market; the topic having already been discussed by several Fed members at the beginning of August.

Christine Lagarde’s message was more neutral, which is reasonable considering the less favourable European economy. Some members of the European central bank (ECB) reaffirmed their respective biases, Martin Kazaks’ and Joachim Nagel’s were rather “hawkish”, while Mario Centeno took a more neutral stance.

Finally, Kazuo Ueda, the governor of the Bank of Japan, emphasized Japan’s accommodative monetary policy and his belief that the actual pressures linked to inflation would not last.

There were no big surprises globally, especially regarding the worries of the market surrounding a potential increase in “R-Star” in the US. The market feared the Fed’s insistence on it, but it has not been the case. It also needs to be noted that Mr Ueda was more accommodating than the market expected.

This commentary is provided for informational and educational purposes only. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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news-3560 Mon, 21 Aug 2023 14:22:49 +0200 Making water circularity a priority of the state /en/who-we-are/news/detail/making-water-circularity-a-priority-of-the-state/ by Frédéric YO, ESG Analyst, La Française AM Water is essential for the survival of life on earth, but under the pressures of population growth and climate change, freshwater resources are becoming scarce. More than 2.3 billion people live in countries subject to water stress (when demand exceeds available resources), amounting to more than a third of the world's population. Experts predict that by 2025, almost 460 million people in Africa will be living in water-stressed areas, while 230 million Africans will be facing water shortages1 . Efforts are being made to implement solutions such as water recycling, but there are still many obstacles to overcome.

Water recycling - a long time coming

Wastewater reuse, also known as water reclamation or water recycling, is increasingly recognised as a sustainable solution to the world's growing water crisis. Rather than considering wastewater as a product to be disposed of, it can be treated and purified to limit freshwater consumption. The treated water can be used for agricultural and industrial purposes or for groundwater replenishment. Some countries have already taken action on a large scale. In Italy and Spain, for example, respectively 8% and 14% of wastewater is reused. In Israel, 85% of wastewater is recycled.

 As a consequence of climate change, many regions around the world are seeing their water resources diminish drastically. The United Nations even estimates that global demand for freshwater will exceed supply by 40% by 20303 . In France, a record period of 32 days without rain was recorded between January and February 2023, delaying the replenishment of groundwater and impacting available water resources. In South Africa, the severe drought suffered between 2018 and 2021, combined with the rise in population, has further exacerbated the crisis.

Despite the many benefits of wastewater reuse, its uptake has been slow and primarily restricted to countries the most exposed to water stress, in other words the most vulnerable. In France, for instance, only 1% of wastewater is reused. This figure is far behind Spain and Italy, which are exposed to recurring droughts. Another obstacle is the stigma associated with recycled-water use, even though numerous reports show that recycled wastewater is not only as safe as conventional potable water but can even be less toxic than certain natural water sources4 . A recycled-water safety communication campaign would be a prerequisite to overcome public objection. However, the primary obstacle to implementing recycling methods is no doubt the lack of technology and expertise in the field.

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news-3554 Wed, 25 Jan 2023 10:10:00 +0100 La Française AM actively pursues its responsible investment strategy to promote gender diversity /en/who-we-are/news/detail/la-francaise-am-actively-pursues-its-responsible-investment-strategy-to-promote-gender-diversity/ As a member of the Club 30% France Investor Group, La Française is working alongside asset managers representing EUR 6,000 billion in assets under management to promote greater gender diversity at Management Committee level. La Française AM, an asset management company and subsidiary of the La Française Group, recently joined the Club 30% France IG, which aims to encourage issuers listed on the SFB 120 to promote the appointment of women to Executive Committees. Acting as a coalition of 16 French asset management companies, the Club 30% France IG is urging companies to achieve a minimum target of 30% female representation by 2025.

As a staunch and responsible participant of this project, La Française is involved in a number of initiatives that fall directly in line with its principles surrounding sustainability and is committed to supporting companies in their transition by ensuring that regular and constructive dialogue remains firmly in place.

This new engagement is consistent with La Française AM's diversity voting policy, which includes voting against the election or re-election of male members of the Board of Directors if less than 40% of the Board members are women.

Marie Lassegnore, CFA, Head of Sustainable Investments:

"La Française Group is continuing its active engagement to helping businesses make the transition to a more socially responsible society. By joining Club 30% France IG, we will be helping to promote increased gender diversity and greater transparency between companies and investors".

The publication of the Club 30% France Investor Group's second annual report looks back over the 2022 engagement campaign, highlighting good practices in favour of professional and financial equality for women in SBF 120 companies, as well as a MEDEF study on the commitment to equality among these companies, while also criticising unhelpful preconceptions surrounding the issue.

For more information on the actions and engagements of the Club 30% France IG coalition, download the 2022 annual report below.

As part of its CSR policy, the La Française Group is reaffirming its ambitions and engagements in its role as investor as well as in the actions it is taking as a company. In terms of gender equality in the workplace, La Française group launched the FurtHer programme at the end of 2020, an initiative working towards equal opportunities with the aim of promoting female leadership, accelerating the rise of female talent and encouraging a cross-sectoral approach and gender diversity at all levels of the company. With a number of conferences, workshops, feedback sessions and a mentoring programme set up in 2021, this programme is making a real contribution to the equality goals set up within La Française.

For nearly 15 years, La Française group has been developing and employing an approach to responsible investment through new initiatives and engagements, helping to improve and promote the consideration of ESG factors in its third-party asset management business.

To find out more about La Française Group's engagement policy and report, as well as La Française AM's specific 2022 voting policy:
https://www.la-francaise.com/en/who-we-are/our-expertise/sustainable-investment/sustainable-documentation/

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news-3553 Fri, 21 Jul 2023 10:31:08 +0200 Cautious optimism /en/who-we-are/news/detail/cautious-optimism/ Despite some progress in monetary policy, it is widely expected that the Federal Open Market Committee (FOMC) will resume rate increases at its July meeting after skipping an upward move in June. Please find below what we expect: 

  • The FOMC to hike rates by 25 bps to a range of 5.25%-5.50%. 
  • Chair Powell to signal that the Fed could “ skip ” a hike at their next meeting in September. However, he will warn that the pause may not be the end of the Fed's tightening cycle, i.e., the June dot plot for 2023 projected the fed funds rate peaking at 5.6% this year.  
  • Jerome Powell to indicate that the increase could come later in the year, leaving time to evaluate how the U.S. economy is evolving. In addition, he is expected to reiterate that the Fed will not rule out more rate hikes, if needed. The Fed will not allow inflation expectations to become unanchored. 
  • Fed chairman to signal supply and demand are coming into better balance, with inflation decelerating and positive but slowing job growth. However, he will emphasize that ‘wage growth is still running at a pace that is well above what would be consistent with the Committee’s 2% objective’.  
  • Mr. Powell to reiterate that the Fed needs to keep interest rates high for a while to make sure inflation comes down to its 2% target. 
  • The Fed to continue its quantitative tightening at $95bn per month. 

In summary, we believe that the FOMC will not overreact to the latest encouraging data on price pressures as the labor market remains tight. We expect the Fed to continue with its June dot plot plan (i.e., one further 25 bps rate hike). Fed chair Powell will indicate that the FOMC is satisfied with progress so far while Fed policy makers will remain very cautious with falling, but still elevated (underlying) inflation. We do not expect this committee to come as a surprise for investors. Consequently, it should have a limited impact on financial markets.  

This commentary is provided for informational and educational purposes only. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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news-3552 Fri, 21 Jul 2023 09:19:32 +0200 No guidance for September: a pause, a skip or a hike??? /en/who-we-are/news/detail/no-guidance-for-september-a-pause-a-skip-or-a-hike/ It is widely expected that the European central bank (ECB) will raise its interest rates by 25 basis points (bps) at the July meeting. Please find below what we expect: 

  • The ECB to increase its key interest rates by 25 bps, bringing the deposit rate to 3.75% and the Refi rate to 4.25%.
  • The Governing Council (GC) to maintain the meeting-by-meeting approach with the possibility of pausing rate hikes in September as data since the June meeting showed the eurozone economy losing steam and inflation falling for a third straight month in June.
  • President Lagarde to indicate that the monetary policy stance for September is conditional on new data and the updated assessment of economic projections.
  • Christine Lagarde to reaffirm that the ECB will maintain policy rates in restrictive territory for a longer period in order to break the persistence of inflation.
  • The ECB to leave Pandemic Emergency Purchase Programme (PEPP) forward guidance unchanged; maturing securities will be reinvested in a flexible manner at least until the end of 2024. We believe President Lagarde will indicate that the GC is not considering an early end to PEPP reinvestments at this stage or even discussing the outright sale of bonds held on its balance sheet to accelerate its quantitative tightening (QT) despite some recent comments from hawkish ECB members. 

In summary, we expect the ECB to continue its strategy that is a “data-dependent approach and meeting-by-meeting optionality” as the GC approaches the potential peak rates. It is unlikely that President Lagarde will pre-commit to any explicit guidance for September and beyond. However, she will likely warn that the ECB tightening cycle is not over. Nevertheless, the ECB’s communication may be more balanced, especially after surprisingly dovish comments from two ECB-member hawks (Klaas Knot and Joachim Nagel). Consequently, this meeting may push the Euro currency and eurozone interest rates slightly lower. 

This commentary is provided for informational and educational purposes only. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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news-3550 Tue, 18 Jul 2023 14:42:37 +0200 La Française Real Estate Managers acquires a hotel off-plan from BNP Paribas Real Estate Property Development to be operated by the RUBY HOTELS Group in the centre of Marseille (13) /en/who-we-are/news/detail/la-francaise-real-estate-managers-acquires-a-hotel-off-plan-from-bnp-paribas-real-estate-property-development-to-be-operated-by-the-ruby-hotels-group-in-the-centre-of-marseille-13/ On 23 June, La Française Real Estate Managers (REM), a real estate management company with close to €32 billion in assets under management (31/05/2023), acquired off market an off-plan 8,778 sqm (ground floor + 9 floors) mixed-use development from BNP Paribas Real Estate Property Development at 49-53 boulevard des Dames in Marseille.

Ideally located just a 10-minute walk from the Old Port of Marseille, a few minutes from Les Docks Village shopping centre and near the historic Panier district, the development is situated in a prime location. Easily accessible by public transport (Metro Line 2 - Joliette stop, Tram Lines 2 and 3 - République Dames stop), the mixed-use development will include a 237-room hotel with 7,582 sqm and a 945 sqm co-working space spread over three floors, as well as a 251 sqm pharmacy, which already exists and will not be altered by the project.

Designed by the GENSLER / Claire FATOSME & Christian LEFEVRE consortium and entirely redesigned by BNP Paribas Real Estate Property Development, the hotel will offer a host of upmarket services, including a rooftop terrace and lounge bar on the ninth floor. Delivery is scheduled for the end of 2025. After handover, the hotel and co-working space will be operated by the hotel operator Ruby Hotels. Established in 2013 and with sixteen existing properties and twenty more in planning or under construction, Ruby Hotels bases its offering on the concept of "Lean Luxury", with the aim of providing guests a high-end experience at an affordable price.

The complex will be certified BREEAM "Very Good" and will be connected to the Thassalia urban marine geothermal network. The project will be integrated into the "Booster du Réemploi" to promote the circular economy, and at least 5% of site hours will be reserved for the integration of vulnerable groups or populations that are excluded from the labour market, making it an exemplary project from both social and environmental perspectives.

Leslie Villatte, Director of Institutional Real Estate Investments and Development – France of La Française Real Estate Managers – Institutional Division, concluded: "The asset benefits from an ideal location that is consistent with the positioning of the Ruby Group, a first-rate tenant. It boasts a host of top-of-the-range facilities and excellent accessibility thanks to its location in the heart of the Marseille city centre. Moreover, this investment strengthens the diversification of our portfolio of tourism assets with the addition of a first-rate operator.

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news-3539 Tue, 11 Jul 2023 09:20:00 +0200 La Française Real Estate Managers acquires office building in Bochum, Germany /en/who-we-are/news/detail/la-francaise-real-estate-managers-acquires-office-building-in-bochum-germany/ La Française Real Estate Managers (REM), acting on behalf of a collective real estate investment vehicle, has acquired its first office building in Bochum from Landmarken AG. The six-storey office building is located at Suttner-Nobel-Allee 7, in a new office submarket of Bochum, otherwise known as the “Innovation or MARK 51°7 Quarter” where research and development companies operating in the technology and science-based sectors have settled. The property is strategically located between the city center of Bochum and the university and is well serviced by public transportation. A tram stop directly in front of the building links the site to the main station in under 20 minutes.

The 5 290 m² building was completed end of 2022 and will be LEED Gold certified. The property also features strong environmental credentials with namely solar panels on the rooftop, a connection to the district heating system, a planted roof, 10 charging stations for electric vehicles and an external area for 55 bicycles.

The office building is fully rented under long-term leases to five tenants, including two companies specialized in cybersecurity and Landmarken AG.

Mark Wolter, Managing Director of La Française Real Estate Managers Germany, commented: "We are pleased to have acquired our first office building in Bochum. This acquisition is perfectly in line with our strategy to diversify our German real estate portfolio with properties that perform very well in terms of ESG criteria, as well as to expand our footprint in economically strong regions and urban centers other than the 'top 7'. We are convinced of the long-term attractiveness of the new neighborhood and the sustainability of the property."

La Française Real Estate Managers was advised on legal aspects by Görg Partnerschaft von Rechtsanwälten mbB and on the technical due diligence by TA Europe GmbH. Cushman & Wakefield handled the marketing of the property on behalf of the seller.

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news-3536 Wed, 28 Jun 2023 11:21:00 +0200 Acquisition of a portfolio of 5 healthcare assets /en/who-we-are/news/detail/acquisition-of-a-portfolio-of-5-healthcare-assets/ La Française Real Estate Managers and ELSAN, France's leading private hospital group, have signed a strategic partnership agreement and completed an initial transaction involving a portfolio of five healthcare facilities, which includes setting up a joint fund to modernise these clinics La Française Real Estate Managers (REM), acting on behalf of two collective real estate investment vehicles, has acquired a portfolio of five clinics from the ELSAN group. The Sale & Leaseback transaction 
amounts to more than €120 million (deed in hand). 

The portfolio includes three medical and rehabilitation centres (centres de soins médicaux et de réadaptation – SMR) and two clinics specialising in medicine, surgery and obstetrics (médecine, chirurgie, 
obstétrique – MCO), all of which will be let to ELSAN under long-term leases. A key player in the French healthcare landscape, ELSAN is present in all areas of the hospital sector and in every region of France. Its social utility is an integral part of its mission to offer quality care to everyone, everywhere. The aim of ELSAN's corporate social responsibility initiative is to foster the implementation of its values (caring for others, social cohesion and team spirit), in line with its strategic objectives. It reflects their efforts to meet the societal challenges they face and the expectations of all of its stakeholders, both internal and external. As a major player in the healthcare sector, the responsible and committed Group is fully integrated in public service assignments and contributes to the teaching of doctors, continuous learning, clinical research and technological innovation. ELSAN’s purpose is to act responsibly and innovatively to provide healthcare everywhere.

As part of this strategic partnership, La Française Real Estate Managers and ELSAN have agreed to set up a modernisation fund for healthcare establishments, financed jointly by ELSAN (the operator) and La 
Française REM (the lessor). This fund will help finance projects to modernise and improve reception conditions and work to improve the energy and environmental performance of all the establishments 
concerned. 

Description of assets:

  • Clinique Supervaltech - SMR (rue Arnaud de Villeneuve, Saint Estève), located in the Greater Perpignan area. Clinique Supervaltech employs more than 135 staff and 9 doctors who treat more than 1,600 patients a year. The facility, which is EMAS (Eco-Management and Audit Scheme; 2017) registered, has a total surface area of 7,254 m². The 178-bed clinic specialises in the care and support of the elderly and has a technical platform dedicated to geriatric rehabilitation (occupational therapy, physiotherapy, rehabilitation room) to help patients regain their independence and return home. Supervaltech also offers out-patient care for cardiorespiratory rehabilitation in a modern, well-lit setting. As part of the transaction, the purchaser is planning and financing the creation of new accommodation capacity and the installation of photovoltaic panels for self-consumption.
  • Clinique du Sud - SMR (Chemin de la Madeleine, Carcassonne), strategically located in the immediate vicinity of the Carcassonne hospital. The Clinique du Sud has more than 73 staff and 8 doctors who treat more than 1,400 patients a year. The 5,181 m², 64-bedroom facility is the only one in the Aude department to be 100% dedicated to acute care and rehabilitation. It specialises in the rehabilitation of disorders related to the musculoskeletal, nervous, cardiovascular and respiratory systems. The healthcare facility was the only one in the Aude region to be accredited by the regional health agency at the end of 2021 for the treatment of long Covid. As part of the transaction, the purchaser is planning and financing the installation of photovoltaic panelsfor selfconsumption.
  • Clinique Valdegour - SMR (772 Chemin de Valdegour, Nîmes), is located in the immediate vicinity of the Nîmes University Hospital, in the department of Gard. The Clinique Valdegour specialises in disorders of the musculoskeletal system and the rehabilitation of the elderly. It has 87 staff and 6 doctors who treat more than 1,200 patients a year. The healthcare facility has been certified by the Haute Autorité de Santé (HAS) since 2021 for its confirmed quality of care. The 8,166 m² complex includes a new building dedicated to the Nemoscan medical imaging centre, equipped with a state-of-the-art scanner and MRI unit, soon to be complemented by a radiology and ultrasound platform. As part of the transaction, the purchaser is planning and financing modernisation works and the conversion of double rooms into single rooms.
  • Clinique du Cambrésis - MCO (102 Boulevard Faidherbe, Cambrai), located in the city centre close to Cambrai TER station, which links it to the department's major towns, including Lille which is 80 km to the north. The Clinique du Cambrésis has more than 41 staff and 19 doctors who treat more than 4,089 patients a year across a wide range of medical specialities. The clinic has a total surface area of 3,666 m². As part of the transaction, the purchaser is planning and financing the creation of an open-door, out-patient care unit within the clinic.
  • Clinique Les Lauriers - MCO (147 rue Jean Giono, Fréjus), located in the Var department. The Clinique Les Lauriers has more than 80 staff and 59 doctors who treat more than 30,000 patients annually. There is a bus stop in front of the building. The complex covers a total of 4,787 m² and has 71 beds and day-patient places. Since 26 April 2018 and for a period of six years, the Clinique Les Lauriers has been V2014 certified by the HAS with the highest level "A" for the quality of patient care. As part of the transaction, the purchaser is planning and financing the extension of the operating theatre with the creation of a new operating room. 

 

Jérôme Valade, Head of healthcare assets at La Française REM concluded: "The acquisition of this portfolio of five clinics marks the start of a long-term partnership with ELSAN, and we look forward to 
repeating this type of operation together. Indeed, the joint modernisation fund which will support these assets in the climate transition towards a better energy and environmental footprint reflects our shared 
commitment to responsible real estate asset management."

Simon Levy, Chief Executive Officer of the ELSAN Group: "This new strategic partnership is in line with ELSAN's desire to continue developing the activities of its establishments by joining forces with a major 
player in the healthcare real estate sector. We also want to continue to work with La Française REM to invest in modernising and improving conditions for our patients, while ensuring the energy and 
environmental transition of our facilities.”

For this acquisition, La Française REM was advised by ALLEZ & ASSOCIES, MAYER BROWN for legal, ARTELIA for technical and ESG due-diligence and by ADAMA CONSEIL ET TRANSACTIONS for the 
operational audit.
 

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news-3533 Thu, 22 Jun 2023 17:24:56 +0200 NOTICE TO SHAREHOLDERS OF THE SUB-FUND MULTISTRATEGIES OBLIGATAIRES (THE “SUBFUND”) /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-multistrategies-obligataires-the-subfund/ Dear Shareholder,

The Company’s board of directors (the "Board") hereby informs you that the investment policy of the Sub-Fund will be updated in order to reflect the submission of the Sub-Fund to the disclosures requirements under article 8 of the Regulation 2019/2088 on sustainability-related disclosures in the financial services sector. Further to this update, the Sub-Fund will promote environmental, social and governance (ESG) characteristics as part of its investments.

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news-3532 Thu, 22 Jun 2023 17:23:05 +0200 NOTICE TO SHAREHOLDERS OF THE SUB-FUND EURO INFLATION (THE “SUB-FUND”) /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-euro-inflation-the-sub-fund/ Dear Shareholder,

The Company’s board of directors (the "Board") hereby informs you that the investment policy of the Sub-Fund will be updated in order to reflect the submission of the Sub-Fund to the disclosures requirements under article 8 of the Regulation 2019/2088 on sustainability-related disclosures in the financial services sector. Further to this update, the Sub-Fund will promote environmental, social and governance (ESG) characteristics as part of its investments.

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news-3522 Wed, 21 Jun 2023 18:11:57 +0200 NOTICE TO SHAREHOLDERS OF THE SUB-FUND MULTISTRATEGIES OBLIGATAIRES (THE “SUBFUND”) CH-EN /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-multistrategies-obligataires-the-subfund-ch-en/ Dear Shareholder,

The Company’s board of directors (the "Board") hereby informs you that the investment policy of the Sub-Fund will be updated in order to reflect the submission of the Sub-Fund to the disclosures requirements under article 8 of the Regulation 2019/2088 on sustainability‐related disclosures in the financial services sector. Further to this update, the Sub-Fund will promote environmental, social and governance (ESG) characteristics as part of its investments.

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news-3518 Mon, 12 Jun 2023 17:33:00 +0200 ECB monetary tightening, when will the effects be felt? /en/who-we-are/news/detail/ecb-monetary-tightening-when-will-the-effects-be-felt/ by François Rimeu, Senior Strategist, La Française AM The time it takes for monetary policies to have an impact on the economy has been the subject of numerous research papers over the last few decades, and the conclusions often vary significantly. The academic conclusions can be summarised as follows:

  • Restrictive monetary policies take longer to materialise than expansionary policies.
  • The effects are not linear, which means that short-term effects may differ from the longer-term effects. For example, an initial rise in interest rates may lead to a stronger immediate reaction in certain interest-sensitive sectors, such as real estate or consumer loans, before the effects gradually spread to the economy as a whole.
  • The time lag can vary from three to six months to even three years, depending on financial stability and the efficiency of monetary transmission channels.


Given the characteristics of the current cycle, it seems fairly logical to assume that the lag will be extensive, maybe up to three years. We are coming out of ten years of highly accommodative monetary policy, which have enabled the vast majority of private-sector actors to enter this new phase with healthy balance sheets and very low financing costs. As a result, the rate hikes have had a fairly limited impact on these actors. We should also bear in mind that while monetary policies have become restrictive, this is not at all the case for fiscal policies, which have been and remain very generous: the more governments protect their economies by limiting the negative effects of inflation, the harder it is to defeat inflation, forcing central banks to adopt increasingly restrictive monetary policy.

Taking all these factors into account, it is logical for the ECB to think that the effects of its monetary tightening will be more palpable in 2024 than in 2023.

If we take into account the current strength of the labour market, the shortage of available labour and the eagerness of employees to regain all or part of the purchasing power lost over the last two years, it is likely that wage inflation will continue over the coming months or quarters. Moreover, if fiscal policies continue to offer support to households and in turn consumption, which accounts for just over half of eurozone growth (51.6%; Source: Eurostat), we may even see wage inflation continuing for longer. Assuming wage inflation remains at around 4 to 5%, i.e. the current rate, it will be extremely difficult to see core inflation fall significantly in the eurozone.

Markets are anticipating that inflation will be around 3% at the end of the year and higher core inflation of around 4% (Source: Bloomberg). It is interesting to note that the dispersion around core inflation forecasts is currently fairly high, which is not illogical given macroeconomic uncertainty. If we assume that wage inflation persists, it will be difficult to bring the rate of inflation down significantly in the eurozone, which will lead to rising inflation expectations. At present, the market is working on the assumption that the ECB will cut interest rates by around 80 basis points in 2024. However, in a climate of persistent inflation, these rate cuts would no longer serve any real purpose.

Ultimately, everything will also depend on the resilience of the European economy, whose growth is currently close to zero at best, and on the dynamics of credit supply and demand. A credit event could undermine financial stability – which the ECB holds dear– thus sharply increasing the speed of monetary transmission, but we are not there yet.

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news-3517 Tue, 13 Jun 2023 17:08:00 +0200 A temporary pause, but all eyes on the June CPI report /en/who-we-are/news/detail/a-temporary-pause-but-all-eyes-on-the-june-cpi-report/ We expect that the Federal Open Market Committee (FOMC) will leave the federal funds target rate unchanged for the first time since early 2022. However, we anticipate that the new median dot plot will show 25 basis points of additional tightening in 2023. The Federal Reserve (Fed) will update its new Summary of Economic Projections (SEP) and will probably indicate higher growth and a lower unemployment rate at the end of 2023 vs its March projections. Please find below what we expect:

  • The FOMC to maintain its policy rate unchanged within a range of 5.00%-5.25%.
  • Jerome Powell to reiterate that the Fed needs to keep interest rates higher for longer. He will likely emphasize that this is not the end of the tightening cycle, and that future monetary policy decisions will be based on growth and inflation outlooks.
  • The Fed to continue quantitative tightening at a rate of $95bn per month.
  • Referencing the dot plot, we expect to see the median dot revised upwards for 2023 (compared to March projections at 5.4%) and 2024 (March projections at 4.5%). We anticipate no change for 2025 or over the longer-run.
  • Regarding revised economic projections, we expect to see higher growth for 2023 (from 0.4% to 0.7%) and no change for 2024 and 2025 (remaining at 1.2% and 1.9% respectively). We expect the committee to keep its median headline and core inflation expectations broadly unchanged for 2023 (at 3.3% and 3.6% respectively) and the next two years (at 2.5% and 2.6% for 2024 and at 2.1% for both for 2025). We also expect unemployment rate expectations for 2023 to be revised downwards from 4.5% to 4.2-4.3%.

In summary, we expect that the FOMC will choose to adopt a wait and see approach at this meeting, unless there is a significant positive inflation surprise on June 13 which would coincide with the start of this meeting. However, despite this pause, Chair Powell is expected to signal that Fed policy rates might not be sufficiently restrictive given the persistent nature of inflation and the resilience of the U.S. labor market. We believe this committee could push U.S. interest rates moderately higher.

This commentary is provided for informational and educational purposes only. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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news-3513 Thu, 08 Jun 2023 15:00:22 +0200 Modern Risk Management in times of Machine Learning /en/who-we-are/news/detail/modern-risk-management-in-times-of-machine-learning/ by Dr. Denisa Čumova, FRM, Head of Portfolio Management and Quantitative Research & Dr. Philipp J. Kremer, CAIA, Senior Portfolio Manager & Quant Researcher ARTIFICIAL INTELLIGENCE METHODS IN ASSET MANAGEMENT 

The launch of ChatGPT by Open AI at the beginning of the year highlighted the revolutionary character of artificial intelligence methods. While artificial intelligence was already present in translation services, digital assistants in customer chats, as well as image and speech recognition in medical science, ChatGPT has further revealed the variety of applications of artificial intelligence in our everyday lives. 

In the asset management industry, adopting Machine learning techniques can contribute to optimizing the investment process and can ameliorate risk management. Machine learning (ML), as a subfield of Artificial intelligence (AI), refers to algorithms and models that can learn complex patterns from input data in order to make predictions. Hence, ML methods can provide new insight on how to capture and evaluate capital market drivers. 

ML algorithms can model complex capital market relationships more precisely and can respond more dynamically to changes in market environments than traditional quant models since the structure of ML models is derived from input data. However, as ML methods are demanding with regard to data and computing power, they have for a long time not lived up to their full potential, despite the fact that the first models date back to the 1980s.

For the asset management industry, the solution to these limitations was resorting to a linear world, utilizing economic models such as the Capital Asset Pricing Model or the Arbitrage Pricing Theory, where the return and risk of an asset depends linearly on a set of factors. While the interpretability of such models is simple, economic reality reveals that relationships among variables are inherently non-linear in nature and that many non-linear economic relationships are not properly captured by traditional econometric models. Figure 1., where monthly US equity returns are plotted against US breakeven inflation rates, illustrates such a relationship. Clearly, a non-linear model is superior in capturing the underlying relationship.

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news-3511 Tue, 06 Jun 2023 09:48:29 +0200 The Exodus from NZIA /en/who-we-are/news/detail/the-exodus-from-nzia/ By Claudia RAVAT, ESG Analyst, La Française AM Over the last two weeks, ten major insurance and reinsurance companies have left the Net Zero Insurance Alliance (NZIA), including AXA, Allianz, SCOR and Swiss Re, some citing antitrust allegations. Last Friday, the alarm sounded when Lloyd’s (and QBE) added its name to the list. At its peak, the alliance represented about 15% of world insurance premium volume but now six of the eight founding signatories have left, merely 2 years after its establishment. According to the NZAI website, the alliance now comprises 17 members, including large names such as Aviva and Generali. Those that have left are obviously those with the largest exposure to the American market, where anti-climate and anti-ESG sentiment has become extremely politicised. There is no doubt that for the firms leaving, and the alliance itself, reputation is at stake.

Why have major insurance companies decided to withdraw from the Net Zero Insurance Alliance?

AXA, for instance, said that it was leaving to “continue its individual sustainability journey”. While this statement may not provide extensive detail, a letter sent to the Alliance dated May 16th sheds some light on the situation. Signed by 23 US state attorneys general, the letter raises concerns that certain climate-related targets outlined in the Alliance’s goals may potentially be in violation of state and federal antitrust laws. They pointed fingers at the alliance for pushing insurance companies and their clients to rapidly reduce their emissions leading to increased costs, which are being passed on to consumers.

This combination of political and legal pressure in the United States has created significant strain on the climate initiative. Four of the former signatories have significant U.S. activity, which has naturally fuelled debate among American politicians.

Another reason given for the departures is the stringency of the alliance requirements. According to the current rules of membership, all insurers are required to meet one of the five mandated objective within the first year of joining, and three within three years of joining. Just last week, prior to announcing its departure, the CEO of Lloyd’s expressed his concerns, emphasizing the necessity for the alliance to make its membership rules less prescriptive, or otherwise running the risk of dismantlement.

The implosion of such an alliance may represent a hurdle for collaborative efforts in the insurance space. It could be considered as a step backwards for the collaborative approach to target-setting. Moreover, for the past two years, the alliance has provided valuable support to insurers and nonmembers, in developing tools and methodologies to measure and disclose GHG emissions associated with underwriting portfolios. 

What does it mean for the NZAM and other Net Zero initiatives ?

The Net Zero Asset Managers initiative (NZAM), Net Zero Asset Owner Alliance (NZAOA) and Net Zero Banking Alliance (NZBA) are the other major coalitions, all part of the Glasgow Financial Alliance for Net Zero (GFANZ) umbrella. Interestingly, despite having left NZIA, AXA and AXA Investment Managers are both still members of NZAO and NZAM, respectively.

Regrettably, the GFANZ, its associated initiatives and their members have been facing increased criticism and antitrust accusations from U.S. Republican senators. On October 19, 2022, 19 Republican state attorneys general served six U.S. banks with civil investigative demands, seeking information related to their involvement with the NZBA and raising antitrust concerns. At the end of last March, 53 of the largest asset managers in the US received a letter from 21 state attorneys general, cautioning them against engaging in what they referred to as “woke” environmental and social initiatives. Notably, this letter was directed to large asset managers such as BlackRock, Franklin Templeton and Goldman Sachs, all members of the Net Zero Asset Managers initiative. Compared to their insurance counterparts, these asset managers exert a strong influence on the U.S. political landscape, which makes them less vulnerable and better equipped to navigate through difficult times. This is no doubt why we have not witnessed a similar flee.

Nevertheless, there have been exits. Last April, Green Century left the NZAM initiative, following in the steps of Vanguard. Green Century, the fossil-free fund manager, mentioned compliance challenges as the motivation of their departure. On the other hand, Vanguard, the second-largest asset manager in the world, cited the need for independence and a desire to provide clarity on its investment views.

The various alliances are already responding to these challenges by watering down their rules to retain members. The GFANZ amended its membership rules by dropping its requirement to commit to the UN-supported Race to Zero campaign after major U.S. banks were considering withdrawing from the group. Similarly, the NZBA refused to impose restrictions on fossil-fuel financing on its members. However, such compromises have led to criticism from green activists which fear that alliance objectives are being unduly diluted. On the regulatory side, the EU commission also joined the effort and relaxed its antitrust guidelines for companies which team up to solve climate challenges. The objective is to help companies engage in legitimate and genuine sustainability co-operation while creating a safe harbour from prosecution.

The mass exodus from the NZIA and staggered exits from other initiatives raises questions on the credibility and effectiveness of collaborative groups, including the GFANZ and beyond. It is still debatable whether climate leaders, in many cases, are withdrawing from these alliances due to concerns about potential business losses in the U.S. or actual legal jeopardy. It is important to combat antitrust claims against climate action, and it remains crucial for the financial community – insurers, asset managers and asset owners – to strengthen and uphold their climate commitments. However, doubts will persist regarding the true impact of their actions if they operate independently. There will be challenges, no doubt, from legal, political and operational points of view. However, collaborative efforts can be more effective in driving meaningful change and addressing the planetary emergency.

This commentary is provided for informational and educational purposes only. The opinions expressed are by La Française Group. These opinions may differ from those of other investment professionals.

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news-3510 Tue, 06 Jun 2023 09:37:59 +0200 European commercial real estate market – an anticipated pause in Q1 /en/who-we-are/news/detail/european-commercial-real-estate-market-an-anticipated-pause-in-q1/ By Virginie Wallut, Director of Real Estate Research and Sustainable Investment at La Française Real Estate Managers The European commercial real estate market hit pause in Q1 2023. Tightening monetary policy, rising inflation and European and US bank crises weighed heavily on investment activity. While the current context is slowing down the pace of transactions and pushing some investors to adopt a wait-and-see attitude, it is also creating opportunities for equity-rich investors, who can create value through renta reversion or by improving the features – particularly the environmental characteristics – of assets and
for opportunistic global investors.

Market segments characterized by a structural supply shortage or more immune to economic cycles are attracting investors’ attention. These include healthcare, tourism and manages residential assets.

Investment volume down year-on-year

The European real estate market is experiencing a period of adjustment. Investors, eager to position themselves in the new macroeconomic and financial context, are necessarily trying to establish new benchmarks. In Europe, the volume of commercial real estate investment dropped 63% year-on-year, reaching 26.5€ in Q1 2023. In Q1 2023, the share of global investors (versus European investors), looking to take advantage of price levels, was on the rise.

Across the board, all asset classes and markets registered declining investment volumes. Nevertheless, diversification assets stood out, given their more defensive profile. For example, the volume of European healthcare real estate investment over the past twelve months ending March 2023 declined, standing at €9.5 billion, nevertheless above its long-term average. The United Kingdom and Germany remain the most dynamic European real estate markets despite the respective drops in investment volume of 68% and 71% year-on-year. Ireland, Belgium and France on the other hand are the most resilient, registering declines of less than 30%.

Broadly stable prime office yields

The upward trend in peripheral location real estate yields continued within a range of 25 to 50 basis points across Europe in Q1, while prime office yields remained broadly stable. Paris, London, and the main German cities (Berlin, Hamburg, Munich and Frankfurt) still offer prime yields below 4%, while regional cities (i.e., Lille) offer yields of around 4.5%. High inflation and growth in rental values, supported by weak vacancy in central locations, should contribute to offsetting the effect of rising interest rates on prime real estate asset values.

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news-3506 Tue, 30 May 2023 16:58:00 +0200 The Debt Debate /en/who-we-are/news/detail/the-debt-debate/ The U.S. debt ceiling is the maximum amount of money that the U.S. government is authorized to borrow, which is set by Congress. The date that the U.S. Treasury may be unable to fund its deficit spending without increasing the debt ceiling is rapidly approaching. Whether or not Congress approves a deal in the coming weeks, we believe it is important to look at the bigger picture to understand the trend of U.S. debt and interest costs and how that may impact the economy going forward.
  • Earlier this year, U.S. federal debt surpassed the debt ceiling of $31.4 trillion. Congress will need to raise the ceiling so the government can pay its interest and spending obligations or significantly cut spending to avoid defaulting on its debt.
     
  • The accelerated pace of projected growth in the federal debt may continue to be in the spotlight well after this debt ceiling debate, as the Congressional Budget Office (CBO) estimates the U.S. federal debt to rise to $52 trillion by 2033. That would be approximately 137% of GDP, considerably higher than the 119% peak after World War II. Moreover, U.S. federal interest costs are also expected to rise from under 2% of GDP in 2022 to 3.6% by 2033 and to 6% by the middle of the century, according to the CBO.
     
  • We believe the higher U.S. debt burden could weigh on economic growth going forward unless the growing debt is managed with combination of lower spending or increased taxes. However, we believe investors should view the U.S. debt to GDP relative to the rest of the world, where many countries have higher debt levels (e.g., Japan with >250% debt/GDP according to the IMF). Moreover, we believe the U.S.remains central to the global economy, which is home to some of the most innovative companies in the world and has successfully weathered many economic storms throughout its history.
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    news-3505 Tue, 30 May 2023 16:52:00 +0200 Jobs of Tomorrow /en/who-we-are/news/detail/jobs-of-tomorrow/ We believe that companies and industries which gain market share in the economy may gain share in the stock market, with the potential of outperforming the overall market. But which industries may be set to outgrow the economy over the next decade? Below, we discuss the potential areas of growth.
  • According to the U.S. Bureau of Labor Statistics (BLS), the total number of jobs in the U.S. is forecasted to grow at a relatively slow pace of about 0.5% annually or 5% cumulatively from 2021 to 2031, compared to 0.7% annually from 2010 to 2020. However, there are specific occupations that are forecasted to grow much faster, as shown in the table above.
  • A closer examination of the potentially fastest growing occupations reveals a strong presence in the Information Technology and Health Care sectors, which we believe represent key growth drivers of the economy.
  • To understand the factors propelling the rapid expansion of these occupations, the BLS rationale includes: the rise of the internet of things, growth in digital data, increased demand for health care services, growing complexity in logistics, and greater need for cybersecurity. In our view, these are all areas of growth that may stand to benefit from the increase in workers needed to meet growing demand.
  • While recent advancements in artificial intelligence have raised concerns about job losses, we believe that the expansion of technology-driven industries may create new, high-demand roles related to innovation. As such, we believe potential opportunities may exist in the areas outlined in the chart above, where an increase in skilled workers may provide an opportunity for greater productivity.
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    news-3504 Tue, 30 May 2023 16:37:00 +0200 Small Cap Foundation /en/who-we-are/news/detail/small-cap-foundation/ While valuations for small cap growth stocks have fallen considerably over the past year, we believe the market may be underappreciating their potential earnings growth and financial strength compared to other segments of the market, such as small cap value stocks. How might investors assess financial durability when identifying potential opportunities over the long-term?
  • Historically, small-cap growth stocks have exhibited higher EPS growth projections, which indicates a company’s potential for long-term growth, compared to small-cap value stocks.1 We believe this growth potential stems from their ability to gain market share with innovative products or services.
  • Moreover, small cap growth stocks have historically exhibited higher free cash flow margins than their value counterparts, demonstrating greater efficiency in converting revenues into cash that can be used for reinvestment, debt repayment, acquisitions, or shareholder distributions.2
  • Finally, companies with relatively lower financial leverage may be in a healthier financial position compared to those with higher financial leverage. Historically, small cap growth stocks have exhibited a lower net debt/EBITDA ratio than small cap value stocks.3 Moreover, having lower financial leverage could potentially make small cap growth fundamentals more resilient during economic downturns, as they may be able to better manage debt obligations with potentially greater flexibility to gain market share and pursue growth opportunities, in our view.
  • During times of market uncertainty, investors may seek to own companies that can weather challenging economic conditions and discount those that may be more susceptible to a weak macroeconomic environment. As such, we believe investors may want to consider these characteristics when exploring potential opportunities in small cap growth equities.
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    news-3503 Tue, 30 May 2023 16:07:00 +0200 Navigating Digital Disruption /en/who-we-are/news/detail/navigating-digital-disruption/ To stay competitive in today’s rapidly evolving economy, businesses must embrace technological innovation, in our view. For investors, we believe the opportunity exists both in determining which businesses can adapt in this digital evolution, and in identifying the companies that offer products and services that can aid in this transition
  • Digital transformation refers to the adoption of technology and processes, such as cloud migration, to enable businesses to operate more effectively in the evolving digital landscape.According to the IDC, worldwide spending on digital transformation is expected to exceed $3 trillion by 2026, a projected compound annual growth rate (CAGR) of 16% from 2022.
  • In our view, digital transformation in areas such as back-office automation, security, supply chain management, research and development, and customer service may help businesses 1) increase efficiency, 2) improve decision-making, 3) increase speed to market, 4) enhance the customer experience and 5) reduce overall costs. For instance, Bank of America recently highlighted that over the past decade,the adoption of digital advancements in back-office automation and customer service enhancements has enabled the company to increase operational efficiency, allowing the company to reduce its workforce by tens of thousands of people even as it grew the business.1.
  • We believe companies that could potentially benefit from this trend include those assisting other enterprises with digital transformation, such as cloud service and application providers.Additionally, businesses that have extensive proprietary data, such as those involved in healthcare, logistics, consumer and professional services may be able to better monetize this information as their operations become more digital, in our view.
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    news-3502 Tue, 30 May 2023 11:12:00 +0200 La Française Real Estate Managers (REM) acquire a logistics warehouse in Pont-d'Ain (01) from Harbert Management /en/who-we-are/news/detail/la-francaise-real-estate-managers-rem-acquire-a-logistics-warehouse-in-pont-dain-01-from-harbet-management/ La Française Real Estate Managers (REM), a real estate asset management company with nearly €32 billion of assets under management (31/03/2023), has acquired off-market a logistics warehouse located at 360 rue de la Batie in Pont-d'Ain (01) from a fund managed by Harbert Management Corporation. This asset is strategically located, 50 km north-east of Lyon and 100 km from Geneva. The acquisition was made on behalf of ERAFP, a French institutional investor.

    Developed by PRD and delivered in February 2022, this Class A warehouse is located in the “Plaine de l'Ain” Industrial Park, in the Greater Lyon logistics market, the second largest logistics market in France. The site has excellent access to the A42, A40 and A6 motorways, covering a large catchment area. Fully leased to three tenants, the warehouse has a total surface area of 50 405m2, including 1 047m2 of office space, and offers 229 parking spaces, including 15 for heavy goods vehicles. As a new asset aiming for the BREEAM Very Good label, it meets the latest technical standards (Grade A). Additionally, the roof is entirely covered with solar panels.

    Leslie VILLATTE, Director of Institutional Investments and Real Estate Development – France of La Française Real Estate Managers – Institutional Division, said: "This acquisition was completed in the context of a renewed mandate. It constitutes the first logistics warehouse in the real estate portfolio that we manage on behalf of ERAFP, who we would like to thank for their renewed confidence. In Lyon, the logistics market is very competitive given the limited stock, well below take-up over the past five years. This scarcity of supply, together with the technical and environmental characteristics of the asset itself, should sustain the value of this prime logistics warehouse over time.”

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    news-3500 Tue, 30 May 2023 14:13:00 +0200 Despite gloomy Q1 2023, Germany is on track for modest growth in Q2 /en/who-we-are/news/detail/despite-gloomy-q1-2023-germany-is-on-track-for-modest-growth-in-q2/ The German economy officially entered a technical recession during the winter, with the revised Q1 GDP showing a contraction of -0.3% quarter-on-quarter. This decline can be attributed to the impact of inflation on household consumption and the phasing out of government-funded pandemic measures. However, it is anticipated that the German economy is on track for modest growth in Q2 2023. The revised GDP figures indicate a contraction in economic activity, with Q4 also experiencing a decline of -0.5% quarter-on-quarter. This contrasts with the positive trend observed in soft data indicators such as Purchasing Managers' Indexes (PMIs) since November. Despite the negative figures, there are signs pointing towards a resumption of growth in Q2.


    The breakdown of expenditure reveals weaknesses in both private and public consumption. In Q1 2023, household consumption contracted by 1.2% quarter-on-quarter, primarily due to the burden of high prices. Real household disposable income decreased in both Q4 2022 and Q1 2023. Consumers were reluctant to spend across various sectors, despite government support for energy costs.


    In Q1 2023, government consumption declined by 4.9% quarter-on-quarter, marking the largest drop since 1970. This decline reflects the normalization of public consumption as pandemic measures, such as vaccinations and testing, were phased out in Q1. However, this decrease in government spending is punctual in nature and will no longer weigh on GDP in Q2.


    On the other hand, fixed investment experienced a strong rebound, driven by private investments. This recovery suggests a sustainable improvement in business investment, particularly in machinery and equipment. Additionally, unusually warm weather in January boosted construction activity in Q1. However, these weather effects have reversed, resulting in a negative carryover for construction in Q2.


    Net exports made a positive contribution to overall growth, with exports rebounding by 0.4% quarter-on-quarter and imports declining by -0.9% quarter-on-quarter (Q1 2023 vs Q1 2022). The decrease in imports partly reflects lower energy imports.
    Production-side data deviates notably from expenditure-side data, with gross value-added expanding by 0.8% quarter-on-quarter compared to the contraction measured on the expenditure side. This positive gap between the measures is unprecedented.
    Construction and industry recorded the highest growth rates, likely supported by favorable weather conditions and lower wholesale energy prices. Private and public services experienced slower growth.


    Looking ahead to the end of the year and 2024, a period of renewed economic weakness is anticipated as higher interest rates, reduced savings and a slowdown in the United States begin to take effect. 


    Gradual fiscal tightening is expected, along with a continued focus on energy policy in the short term, as 2025 elections approach. The combination of higher energy prices and wage growth presents a significant challenge to Germany's export-oriented manufacturing sector, which may require increased investment and moderate wage growth to maintain competitiveness. Alternatively, failure to address these issues could result in a structural decline, inflationary pressures and a need for government support. The post-pandemic and changing geopolitical landscape suggest that Germany's traditional model, characterized by high current account surpluses, may undergo transformation.
     

     

    Source: Bloomberg

     

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    news-3489 Wed, 10 May 2023 17:31:46 +0200 One More Step for Nature /en/who-we-are/news/detail/one-more-step-for-nature/ By Guy Wilkinson, ESG Analyst, La Française AM On March 28th 2023, the Taskforce on Nature-related Financial Disclosures (TNFD) released v.0.4 of its beta framework. This is the last beta version, leading up to the first version of the guidance to be released later this year. Nature and biodiversity have been in the limelight for the last few years and the establishment of TNFD in 2021 heralded this surge in interest, along with the two-part COP15 in 2022. Over 190 countries committed to ambitious targets under the Global Biodiversity Framework in Montreal in December 2022, recognising the criticality of nature and biodiversity for the global economy. After all, more than 50% of the global economy is dependent on nature.(1) Although not designed to be mandatory, TNFD guidelines on disclosures are expected to provide a blueprint for nature-related disclosures and assessment frameworks. We can also expect TNFD disclosures to be ultimately made mandatory by regulators over the years, as has happened with TCFD (Taskforce on Climate-related Financial Disclosures) on climate.

     

    What is the TNFD?

    The TNFD is a global, market led initiative that seeks to develop a framework for the disclosure and risk management of developing nature-related risks, opportunities, impacts and dependencies. It was launched in 2021 with the goal of moving financial flows towards nature positive outcomes and away from nature-negative outcomes through standardised disclosures. The taskforce currently has over 40 members including corporates and financial institutions representing $20 trillion in Assets Under Management. There are also 1,000 organisations globally supporting the TNFD Forum, with 18 core knowledge partners representing global scientific, conservation and standards development organisations. (2)

     

    What has changed between v.0.3 and v.0.4?

    Whilst the main structure and components of the framework are similar to the previous release, there are now 14 TNFD recommendations, of which 11 are directly adapted to the commonly used TCFD framework for climate. The 3 new additions are on the Risk Management and Strategy pillars, with an emphasis on stakeholder engagement, value chain and location specificity – topics that are specifically important in the context of nature. This is a significant change from TCFD where these details are not as well specified.

    This is also the first release to include guidance on data & metrics and sector-specific guidance frameworks. TNFD has provided a first set of metrics that can be used for nature-related disclosures. These are divided into three tiers: core global metrics that apply to all sectors, core sector metrics that apply to certain sectors and additional disclosure metrics, which are recommended but not required. Examples of core global disclosure metrics include: extent of land/freshwater/ocean use changes by ecosystem type and business activity; total pollutants released into the soil split by type; and, total non-GHG air pollutants by type. In this version, TNFD has also provided sector-specific guidance for Food & Agriculture and Financial Institutions, which includes additional draft disclosure guidance, as well as additional guidance on biomes.
     

    What can still be improved?

    There are still areas of the draft disclosure which we believe can be improved. For example, there is potentially too much freedom with scoping. Given that the level of discretion allowed for organisations to determine materiality and scope of their analysis is broad, it is plausible that companies in the same sector have significantly different levels of disclosure.

    Although TNFD has provided a set of tools, such as ENCORE, which make disclosures a lot easier, we still believe the set of core metrics is still not applicable for all sectors. From a financial institution (FI) perspective, it is highly unlikely that an FI will be able to report and disclose on all 14 Core Global Disclosure Metrics, simply due to a lack of scope and reported data (for Scope 3). For example, soil pollution, to be disclosed as ‘Total pollutants to soil split by type’ is often not a readily available data point and companies in sectors which do have a high exposure to soil pollution will need time and resources to start reporting it. There is also the danger that FIs could be pigeon-holed into using one methodology or data source to comply with standards and regulations until there is consensus on the best way to describe impacts and dependencies.

    The final release will be issued in September 2023. Nevertheless, we believe that it is important for market participants to be proactive and to start integrating the TNFD framework now. There is increasing focus on a nature-positive transition, combined with the net-zero transition too, and where focus starts to tilt, regulation will likely follow.

    This commentary is provided for informational and educational purposes only. The opinions expressed by La Française Group. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

    1 www.weforum.org/press/2020/01/half-of-world-s-gdp-moderately-or-highly-dependent-on-nature-says-new-report/
    2 tnfd.global
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    news-3484 Wed, 03 May 2023 15:04:34 +0200 Pre ECB commentary, yes, more rate hikes, but more gradual ! /en/who-we-are/news/detail/pre-ecb-commentary-yes-more-rate-hikes-but-more-gradual/ We expect that the European Central Bank (ECB) will slow down hike rates from 50 basis points (bps) to 25 pbs at its May meeting and that the Governing Council (GC) will halt Asset Purchase Program (APP) reinvestments as of the end of June 2023. Please find below what we expect: 

    • The ECB to increase its key interest rates by 25 bps, bringing the deposit rate to 3.25% and the Refi rate (or refinancing rate) to 3.75%. The inflation figures published this week, still too high especially regarding "core" inflation, could have led the ECB to continue rate hikes by increments of 50 bps. However, we expect the ECB to opt for a less aggressive approach because of the latest "bank lending survey" which reports an already significant tightening of credit conditions.
    • The ECB to reaffirm the meeting-by-meeting approach dependent on the inflation outlook (next forecast in June), the dynamics of underlying inflation and the strength of monetary policy transmission. Christine Lagarde might also reaffirm that in the ECB’s base case, more rate hikes are to be expected. 
    • The ECB to announce the end of APP reinvestments from the end of June while continuing to reinvest the proceeds of Pandemic Emergency Purchase Program (PEPP) redemptions. 
    • Considering the still very high level of excess liquidity (more than €4 trillion), we do not expect any announcement on a new TLTRO, in replacement of the one expiring in June.

    In summary, we think Christine Lagarde will adopt a rather hawkish tone to offset the shift from 50 bps to 25 bps increases and not appear too accommodative given that inflation is still very far from the target. All other things being equal, it could push European short-term rates and the Euro higher. 

    This commentary is provided for informational and educational purposes only. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-3482 Tue, 02 May 2023 16:53:28 +0200 Fed preview, the last rate hike before a « conditional pause ». /en/who-we-are/news/detail/fed-preview-the-last-rate-hike-before-a-conditional-pause/ Commentary signed by François Rimeu concerning the upcoming FED meeting. It is widely expected that the Federal Open Market Committee (FOMC) will hike rates by 25 basis points (bps) at its May meeting; with rates peaking in the target range that Fed policymakers projected in December and March.
    Please find below what we expect:

    • The FOMC to hike rates by another 25 bps to a range of 5.00%-5.25%.
    • Chair Powell to indicate a pause in June in order to assess the cumulative effect of the tightening of monetary policy to date, while keeping the door open to more rate hikes. 
    • Chair Powell to signal that monetary policy is conditioned on the outlooks for both inflation and real economic activity. 
    • The statement will provide as much as flexibility as possible.
    • Jerome Powell to reiterate that the Fed needs to keep interest rates high for longer given the risk of persistently high underlying inflation, and that Fed policymakers do not anticipate rate cuts this year.  
    • The Fed to continue its quantitative tightening at a rate of $95bn per month.

    In summary, we expect that the FOMC will indicate a pause in June to gauge the extent of the tightening of lending standards. Nevertheless, Chair Powell is not expected to signal that the Fed tightening cycle is over: the statement language is important because the Fed does not want to prematurely ease financial conditions. We believe this committee will have limited impact on U.S. interest rates, even if we acknowledge that finding the right balance might prove to be difficult for Mr Powell.

     

    This commentary is provided for informational and educational purposes only. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.
     

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    news-3480 Wed, 03 May 2023 09:23:00 +0200 US & European banks: what matters and what does not /en/who-we-are/news/detail/flash-note/ Is the banking crisis over yet? We do not think so. Banks can die or feign their death in many ways, and it may not be as violent as it was for Credit Suisse, but we are not out of the woods yet. The stress stemming from US regional players should not be taken as a read of European banks, as we have explained in previous notes. However, this should maintain a floor on bank bond spreads across their capital structure for the next few weeks. 

    It is important to avoid clickbait headlines and misleading indicators. Let’s analyse the current batch of Q1 results, which is now over in the US, but still unfolding in Europe. We aim to give you simple answers to questions that may arise or have arisen in the last few days. It is all about “separating the wheat from the chaff”.

    1/ The results of European banks will not matter for bank bondholders.

    It may sound bold to make that claim as we are still in the middle of the Q1 results announcement season, but we already have enough evidence so far to state that nothing tremendous is happening in Europe. 

    Bank equity and bondholders and analysts are subject to passing fads when it comes to assessing balance sheet robustness. In the past few years, we were mostly looking out for solvency ratio and non-performing loans trends, which were improving dramatically. All eyes are now turning to customer deposit trends, liquidity ratios and exposures to commercial real estate. This too shall pass. 

    Santander unveiled its results on April 25 with quarter-on-quarter Spanish customer deposits dropping by 5.6% and its stock price largely underperformed other bank stocks on that day due to this headline (along with poorer profitability in Brazil). Could that be the sign of upcoming liquidity stress? No, definitely not.

    Here is why: (i) customer deposits on a group basis were down only 1% on a QoQ basis and were up by 4% YoY, (ii) customer deposits in Spain were up by 7.9% YoY, (iii) management stated that most of the QoQ Spanish deposit decline was driven by corporates and CIB in January mostly, before the onset of the banking crisis. Customer deposits can be and are volatile, are subject to seasonal adjustments and depend on both customer-type lending and geographical mixes, and it seems like investors have forgotten about that.

    Anecdotal evidence from other bank results in Europe has shown so far that there was nothing significant to see here. 

    As a conclusion, long-term trends on banks matter more than quarterly figures. Do not hold your breath on this season of results from European banks.

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    news-3475 Thu, 20 Apr 2023 11:52:00 +0200 La Française Real Estate Managers acquires a last-mile logistics warehouse in La Coruña (Spain) /en/who-we-are/news/detail/la-francaise-real-estate-managers-acquires-a-last-mile-logistics-warehouse-in-la-coruna-spain/ La Française Real Estate Managers (REM), acting on behalf of two collective real estate investment vehicles, announces the off-market acquisition of a last-mile logistics warehouse in La Coruña (Spain) from VECTURA, a company specialised in the acquisition and development of industrial and logistics property assets.

    Delivered last February, the warehouse is fully let to a key e-commerce player on a long-term lease. The asset has a total surface area of approximately 7,935 m², including approximately 5,756 m2 of warehouses and 2,179m2 of offices, as well as eight delivery bays and 571 parking spaces (of which 448 are for vans).

    Located in the Espirito Santo industrial zone, the warehouse has excellent motorway access (AP-9, AG-13, N-V1), enabling it to cover a very large catchment area. The asset meets the latest technical and environmental standards, with a BREEAM Very Good certification, thanks in particular to the inclusion of 400 m2 of roof-mounted solar panels. In addition, the property meets the main sustainability criteria of the new investment charter defined by La Française Real Estate Managers.

    Thierry MOLTON, Managing director of La Française Real Estate Managers - Retail Division, concluded: "Ideally located on the north-western coast of the Iberian Peninsula, this logistics warehouse provides rapid links to the main towns and cities in Galicia. The asset has attractive valuation prospects, particularly in view of the tenant's reputation, its strategic location and the scarcity of available land. This acquisition is a continuation of the partnership with VECTURA that has been developed by the institutional division of La Française Real Estate Managers, represented by Arthur Brizard, Deputy Investment Director." 

    La Française REM was advised by Ashurst, ETYO and BNP Paribas Real Estate over the course of this transaction. Vectura was advised by Cuatrecasas.

     

    About La Française

    The major changes linked to environmental and societal challenges are opportunities to consider the future. The new levers which have been identified will constitute the growth and the financial and real estate performance of tomorrow. La Française management group’s forward-looking investment strategy is built upon this conviction and mission.

    The group uses its capacity for innovation and its technology to serve its customers and to design its investment solutions that combine performance and sustainability.

    Organised around two business lines, "Financial Assets" and "Real Estate Assets", La Française is developing its business with institutional and heritage clients in France and abroad.

    La Française has over 49 billion euros in assets under management with operations in Paris, Frankfurt, Hamburg, London, Luxembourg, Madrid, Milan, Seoul and Singapore (as at 31/12/2022).

    La Française is a subsidiary of Caisse Régionale du Crédit Mutuel Nord Europe (CMNE), a member of Crédit Mutuel Alliance Fédérale (LT ratings A+/Aa3/AA- from S&P (12/2021) / Moody's (02/2022) / Fitch (05/2022). 


    About VECTURA
    Vectura is the holding company of the CHICHE family. Vectura includes:

    • A real estate activity specialised in the development and management of industrial and logistics assets (700,000 sqm in assets, €50 million in annual rents, 230 tenants);
    • A real estate development activity focused on the development and sale of industrial and logistics assets;
    • A logistics services business dedicated to industrialists, retailers and e-tailers who demand a quality turnkey logistics service.

    VECTURA (50 professionals) masters the entire logistics and real estate value chain: land acquisition, land development, new construction, major renovations, financing, leasing, rental management and logistics services.


    La Française contact persons
    La Française: 
    Pascale Cheynet: +33 1 43 12 64 25 | pcheynet@la-francaise.com
    Debbie Marty: +33 1 44 56 42 24 | debmarty@la-francaise.com

    Disclaimer: 
    Issued by La Française AM Finance Services, whose head office is located at 128 boulevard Raspail, 75006 Paris, France. It is regulated by the "Autorité de Contrôle Prudentiel" as an investment services provider under number 18673 X, an affiliate of La Française. 

    La Française Real Estate Managers, a company accredited by the Autorité des Marchés Financiers under number N GP07000038 on 26 June 2007, accreditation ("Professional Licence") issued by the Chamber of Commerce and Industry of Paris Île-de -France under the number CPI N 7501 2016000 006 443, authorised to carry out transactions on buildings and commercial assets as well as property management and AIFM approval under Directive 2011/61/EU 24 June 2014.

     

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    news-3474 Fri, 21 Apr 2023 09:49:00 +0200 Good things come to those who wait. But we can’t wait long ! /en/who-we-are/news/detail/good-things-come-to-those-who-wait-but-we-cant-wait-long/ By Océane BALBINOT-VIALE, Senior ESG Analyst, La Française AM It has been over one year since the technical screening criteria (TSC) that define which economic activities can be considered as contributing substantially to Climate Change Mitigation and Adaptation have been set out, namely in the EU Taxonomy’s first Climate Delegated Act. Given the interconnectedness of all six Environmental Objectives, the yet-to-be-defined screening criteria for the remaining four – i.e., Water and marine, Transition to a circular economy, Pollution prevention, and Protection & restoration of biodiversity & ecosystems (« Taxo4 ») – was understandably eagerly awaited by the market. 

    The Environmental Objectives are the backbone of the EU Taxonomy, the very foundation of an endeavour that seeks to build a common language around what can be considered « sustainable ». To be defined as such, an economic activity must first and foremost either significantly contribute to, or enable other activities to significantly contribute to, at least one of these 6 Objectives. Furthermore, an activity pursuing one or more of these Objectives must meet the Do No Significant Harm (DNSH) criteria relative to the remaining Objectives and Minimum Social Safeguards (MSS). On 5 April, the European Commission launched a four-week consultation period on a new set of EU Taxonomy criteria for economic activities making such a substantial contribution to one or more of the non-climate Environmental Objectives. The deadline for feedback is May 3rd and the Delegated Act could be adopted as soon as this year for implementation on 1 January 2024. 

    Taxo4 is the missing link to the Climate Delegated Act that will contribute to ensuring the speedy implementation of the European Green Deal. As with Climate Change and Mitigation criteria, the details of the remaining Objectives will undoubtedly spark heated debate across the market. Defining Taxo4 also comes with an additional layer of complexity: as opposed to climate-focused Environmental Objectives, Taxo4 cannot rely on already-established climate scenarios aligned with the Paris Agreement. Biodiversity protection and restoration in particular is a multi-faceted undertaking, encompassing issues of natural habitats, endemism, species coexistence and the ecosystem services ultimately derived from those. Apprehending the ambition of the substantial contribution criteria of Taxo4 – further complicated by the inevitable overlap of the Objectives – cannot be done via a single metric. That being said, the interconnection of the Environmental Objectives serves as a reminder that a holistic approach is the only realistic path to Net Zero – which is precisely the spirit of the EU Taxonomy. 

    Importantly, an early 2024 implementation of the Delegated Act would coincide with the coming into force of the Corporate Sustainability Reporting Directive (CSRD), which replaces the less ambitious Non-Financial Reporting Directive (NFRD). The synchronised application of the two has substantial positive implications for asset managers: companies will integrate a broader scope of activities into their sustainability reporting, which in turn, will allow investors to have more granularity and visibility regarding the impact of investment decisions on the real economy. 

    We acknowledge and welcome the significant work undertaken to complete this draft Delegated Act, including some of the much-needed granularity it includes on topics such as in-situ conservation and the associated ecological mapping and definition of progress indicators. The next two weeks of consultation promise to be weeks of both scrutiny and deliberation. 

    This commentary is provided for informational and educational purposes only. The opinions expressed by La Française Group. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-3473 Tue, 18 Apr 2023 16:50:48 +0200 La Française Carbon Impact 2026 Reaches Beyond €200 Million Mark /en/who-we-are/news/detail/la-francaise-carbon-impact-2026-reaches-beyond-eur200-million-mark/ April 18, 2023 – La Française is pleased to announce that its fixed maturity, climate-change oriented fund, La Française Carbon Impact 2026 has surpassed €200 million in assets under management (as at 06/04/2023). The credit fund is a diversified portfolio of approximately 150 global issuers with an average rating of BB (Source: La Française, as at 06/04/2023) and is co-managed by an experienced team of two: Marie LASSEGNORE, CFA, Head of Sustainable Investments & Investment Grade Portfolio Manager and Gabriel CRABOS, High Yield Portfolio Manager La Française AM. The overarching objective of the fund to direct capital towards financing the energy transition and reducing greenhouse gas emissions. Over the recommended investment period which runs until 31 December 2026, the fund aims to outperform (after fees) French government bonds with a 2026 maturity. The fund invests in a portfolio of issuers filtered primarily according to Environmental, Social and Governance criteria and analysed with regard to their compatibility with the energy transition on the basis of a proprietary methodology. The fund is committed to having a weighted average of the portfolio's greenhouse gas emissions per euro invested (scopes 1 and 2) at least 50% lower than that of a comparable investment universe that would be the composite 30% Bloomberg Global aggregate Corporate Index 70% ICE BofAML BB-B Global High Yield Index.

    La Française Carbon Impact 2026 (distinguished with the French SRI Label  and classified Art. 9 SFDR ) has a yield to worst  of 5.87% (gross of fees and net of hedging costs). 

    “In our view, La Française Carbon Impact 2026 is well positioned to navigate in the current market environment and even weather a deteriorating market outlook. The fund has a short duration and high convexity. A very defensive mix,” concluded Marie Lassegnore, La Française AM
     

    La Française Carbon Impact 2026

    Asset Class    International bonds and other debt securities
    Unit / ISIN code    I / FR0013431194
    Investment horizon                to maturity on 31/12/2026  
    Synthetic Risk Indicator (scale from 1 to 7)    3
    Main associated risks: 

    • Risk of capital loss,  ESG investment risk, sustainability risk, discretionary risk, exchange rate risk,  risk arising from techniques such as derivatives, equity risk associated with convertible bonds, interest rate risk, credit risk, default risk relating to issuers of debt securities, risk associated with investments in high yield securities, risk associated with investing in non-OECD countries, ounterparty risk, potential risk of conflict of interest, liquidity risk, risk associated with holding convertible bonds

    The SRI Label does not guarantee the Fund's performance.
    The French SRI label distinguishes “investments that aim to bring together economic performance with a social and environmental impact by financing companies and public entities that contribute to sustainable development regardless of their sector of activity”. (www.lelabelisr.fr)

     

    About La Française

    The major changes linked to environmental and societal challenges are opportunities to consider the future. The new levers which have been identified will constitute the growth and the financial and real estate performance of tomorrow. La Française management group’s forward-looking investment strategy is built upon this conviction and mission.

    The group uses its capacity for innovation and its technology to serve its customers and to design its investment solutions that combine performance and sustainability.

    Organised around two business lines, "Financial Assets" and "Real Estate Assets", La Française is developing its business with institutional and private clients in France and abroad.

    La Française manages over €49 billion in assets through its offices in Paris, Frankfurt, Hamburg, London, Luxembourg, Madrid, Milan, Seoul and Singapore (31/12/2022)

    La Française is a subsidiary of Caisse Régionale du Crédit Mutuel Nord Europe (CMNE), a member of Crédit Mutuel Alliance Fédérale (LT ratings A+/Aa3/AA- from S&P (12/2021) / Moody's (02/2022) / Fitch (05/2022). 
     

    Disclaimer:

    PROMOTIONAL DOCUMENT FOR PROFFESIONAL INVESTORS ONLY (domiciled in ES) AS DEFINED BY MIFID II

    Published by La Française AM Finance Services, with registered office at 128, boulevard Raspail, 75006 Paris, France, regulated by ACPR (“Autorité de contrôle prudentiel et de résolution”) as an investment services provider under no. 18673.
    La Française Asset Management is a management company approved by the AMF under number GP97076 on 01/07/1997. 

    For any complaints, please contact the Customer Service Department at the following address: reclamations-clients@la-francaise.com

    The La Française Group's policy for handling requests for information or customer complaints: Politique_de_traitement_des_reclamations.pdf (la-francaise.com)

    The marketing of the fund may be stopped at any time by the management company and/or the marketer.

    For more detailed information about the investment fund, please refer to the prospectus -Available in French and English) and to the Key Information Document (KID – available in Italian, German, Spanish, French, Dutch), which all interested parties should read before making any investment. The latest prospectus, the Key Information Document and the annual and semi-annual reports, which contain all the necessary information about the product including the costs and risks, are available free of charge upon request to La Française AM, 128 boulevard Raspail, 75006 Paris - France: contact-valeursmobilieres@la-française.com, at www.la-francaise.com or from:

    • Spain: Allfunds Bank SA, Calle de Los Padres Dominicos, 7 28050 Madrid, Spain
    ]]>
    news-3472 Tue, 18 Apr 2023 16:36:32 +0200 Growth Discounting a Large Opportunity? /en/who-we-are/news/detail/growth-discounting-a-large-opportunity/ Over the past two decades, small cap growth stocks have typically traded at a price-toearnings (P/E) premium relative to large cap stocks. But what are the implications when small cap growth is at a discount to large caps, as they are today ?

    • Historically, the small cap S&P 600 Growth Index has traded at an average premium of 12%, relative to the large cap S&P 500 Index as shown in the chart above. This makes sense given the faster growth that should be inherent in small cap growth fundamentals.
    • As of March 31, 2023, the small cap growth index presented a P/E discount of about -20%. Moreover, small cap growth stocks are currently trading at a P/E discount below February 2001 levels.
    • We believe investors may want to review their equity allocations to small cap growth stocks, considering what is a historically big discount to large cap stocks.

    La Française AM Finance Services, in accordance with the terms of an agreement signed with Alger Management, Ltd, is a distributor of the Alger SICAV in Europe.

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    news-3471 Tue, 18 Apr 2023 16:19:59 +0200 Democratizing DNA /en/who-we-are/news/detail/democratizing-dna/ by Alger, a La Française partner firm April 2023 marks the 20th anniversary of the completion of the Human Genome Project, which mapped the complete set of genetic instructions, or DNA, of humans. The human genome determines your eye and hair color and has a profound influence on your risk of developing certain diseases. As research within genomics has started to drive major medical breakthroughs, how might investors be positioned to potentially benefit?

    • All living things have a genetic blueprint (DNA) consisting of chemical building blocks called nucleotides. The order of these blocks determines the biological characteristics of living organisms. In the chart above, the cost to read or sequence the three billion bases of the human genome cost over $20 million in 2004, fell to $100,000 in 2009 and with recent new technology iterations is on track to be around $100-200 in the next year or two.1 The noticeable drop in sequencing costs after 2009 was the result of innovation in next-generation sequencing technologies, enabling high-throughput and parallel sequencing.2
    • Sequencing is not just about DNA but encompasses RNA (ribonucleic acid, the molecule tha ttranslates DNA code into proteins), proteomics (the study of proteins), and spatial genomics to understand how gene activity varies across different areas of a tissue. For example, by sequencing the COVID-19 virus’s genome, scientists were able to identify its unique characteristics and develop targeted vaccines in a much shorter time frame than traditional methods.
    • We believe there are many areas for potential investment opportunities that are tied to genomics. This includes corporations that make DNA sequencing tools and molecular diagnostic products, companies that provide reagents for other consumables, for research and development, DNA testing companies including those in the pre-natal space, select biotech drug development companies, and biologic transportation companies, in our view.

    La Française AM Finance Services, in accordance with the terms of an agreement signed with Alger Management, Ltd, is a distributor of the Alger SICAV in Europe.

     

     

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    news-3470 Thu, 20 Apr 2023 09:24:00 +0200 US Inflation: What if the surprise were to come from goods inflation? /en/who-we-are/news/detail/us-inflation-what-if-the-surprise-were-to-come-from-goods-inflation/ by François Rimeu, Senior Strategist, La Française AM For several months now, US anti-inflation policy measures have started to take effect. After peaking at 9.1%, US inflation has begun to drop, dipping to 5% in late March. However, a more detailed analysis is required to fully comprehend the current drivers of US inflation and any risks that may lie ahead.

    A general consensus has been reached on the energy front: if energy prices remain at current levels, the worst is behind us. Gas prices have returned to where they stood prior to the Russia-Ukraine war and have even reached record lows. The price of oil remains significantly higher than in 2020 or 2021, but far from the peaks of June 2022. The surprise decision by OPEC+  countries to cut production by more than one million barrels per day from the beginning of May could cause a price rally. However, in our opinion, a number of factors should mitigate this risk, i.e., weak global growth, highly resilient Russian production and US strategic oil reserves. Ultimately, energy price inflation in the US (or deflation in this case), which stands at -6.4% (compared to 41.6% in June), is not a major risk in our opinion even if the negative base effects will likely fade away gradually; based on current energy prices, we anticipate that energy inflation will turn positive again around the end of 2023.

    Food inflation, which dropped from 11.4% in August to 8.5% in March, is expected to continue its slow but gradual decline. Historically speaking, food prices have been closely linked to price changes in gas and fertilisers. Given that the latter have already fallen sharply, we believe that food prices are likely to continue to fall.

    Service sector inflation is much more complex and is where Federal Reserve Chairman Jerome Powell is focusing his attention. Services inflation remains close to record highs at 7.1% in March, mainly due to the importance of real estate and more specifically to one of its largest components, Owners’ equivalent rent (OER). OER inflation however moves relatively slowly, and it could be several months before we see a significant fall. The Federal Open Market Committee has communicated widely on the fact that it analyses inflation without taking the "OER" component into account precisely because of this lag. Beyond the residential services component, there are other sectors to monitor closely, i.e., the transport sector, which is being hit hard by inflation (airfare in particular). Nevertheless, we believe these risks should gradually diminish as wage pressures subside. On this crucial point, the future seems to be less concerning for a number of reasons:

    • Household purchasing power has stopped decreasing,
    • Inflation expectations have been revised downward,
    • According to the NFIB’s  monthly job report, there is a declining number of planned new hires (See chart below).

    Goods inflation, at 1.5% over 12 months, does not seem to be of particular concern, After a sharp hike in prices due to temporary supply chain disruptions (Covid, Ukraine), price increases are more moderate. However, negative base effects are coming to an end (much like with the oil market), which could lead to a more complicated path moving forward for the Fed. The car market for example is of particular interest for several reasons:

    • New car prices continue to rise at a rate of 6.1% over 12 months (to late March 2023). There are several reasons behind this: the ecological transition and the trend towards more expensive electric vehicles, tax incentives linked to the purchase of these vehicles, inventory issues persisting with certain models, etc. If we add to the equation excess household savings (which should be the case until the end of the year) and hence sustained demand, prices could remain high. Indeed, new car prices have been rising relative to wholesale prices for several months now, which is a sign of tension on this market.

     

    • The corollary of new car prices rising significantly (almost +50% since the pre-Covid period) is that used car prices are once again rising. New cars are unaffordable for many; hence inventories of used cars are down. It seems logical that we will see used car prices rising, and that this will be reflected in inflation figures in the coming months.

     

     

    This may seem trivial, but cars represent 7.6% of the inflation basket, so this is an important point.

    In the future, US inflation should experience disinflationary pressures coming from the services and food sectors and more inflationary pressures from energy commodities and goods. Goods inflation could therefore be the variable to watch during the 2nd half of the year, even though the current focus seems to be on services. 

     

    Data sources: Bureau of Labor Statistics

    The information contained in this document is provided for information purposes only. The specific information, opinions and figures that are provided are considered to be well-founded or accurate on the date when they were drawn up and they reflect the La Française Group's current opinions regarding the markets and market trends. The information has no contractual value, is subject to change and may differ from the opinions of other management professionals. Published by La Française AM Finance Services, with its registered office at 128, boulevard Raspail, 75006 Paris, France, licensed by the ACPR (“Autorité de contrôle prudentiel et de résolution”) is an investment services provider under no. 18673. La Française Asset Management is a management company licensed by the AMF under no. GP97076 on 1 July 1997.
     

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    news-3468 Fri, 14 Apr 2023 16:46:14 +0200 La Française is joining the Investor Initiative on Hazardous Chemicals (IIHC) to encourage issuers to be more transparent. It is also linking up with ShareAction to promote low-carbon initiatives in the chemical industry /en/who-we-are/news/detail/la-francaise-is-joining-the-investor-initiative-on-hazardous-chemicals-iihc-to-encourage-issuers-to-be-more-transparent-it-is-also-linking-up-with-shareaction-to-promote-low-carbon-initiatives-in-the-chemical-industry/ La Française is taking further action in line with its engagement policy. Striving for more sector-based transparency and supporting economic stakeholders in their transition is an integral part of its role as a responsible investor and in-keeping with its core principles. The chemical industry is the third highest emitter in the industrial sector, accounting for 925 MtCO2 in 2021. According to the International Energy Agency , the sector is not on track to meet the Paris Agreement. The emissions trajectory needs to be curbed with a 15% reduction in emissions by 2030, even though the industry increased its emissions by 5% in 2021 compared to 2020.

    The crucial aspect of this sector is that its CO2 emissions come not only from the energy used (accounting for a quarter of emissions), but above all from the raw materials used that are of fossil origin, such as oil, (accounting for half of all emissions). The remaining quarter of its CO2 emissions comes from the chemical reactions specific to the materials produced.

    Chemical pollution has also been identified by scientists, the European Environment Agency and the European Commission as one of the nine planetary boundaries  due to its impact on humans, ecosystems and climate change.

    With all this in mind, La Française, as a responsible investor, has decided to join a number of collective initiatives in order to foster rapid transformation within this sector.

    La Française AM, a financial asset management company and subsidiary of the La Française Group, has joined forces with 50 of the world's largest institutional investors representing more than $10,000 billion in assets by joining the Investor Initiative on Hazardous Chemicals (IIHC) . Launched last January, its goal is to call on the chemical industry to be more transparent and to achieve a more ethical chemical production process, especially in relation to long-lasting products known as "forever chemicals" (PFAS) because they stay in the environment and can have a detrimental effect on human health.

    La Française AM is responsible for participating in this collective action through dialogue with one or more issuers in order to obtain more quantitative and measurable information on the volume of hazardous chemicals manufactured and the pollution linked to PFAS in order to limit the exposure of its financial portfolios. In addition, La Française AM will support the company in its transition by encouraging it to develop more responsible production methods.

    Marie Lassegnore, CFA, Head of Sustainable Investment La Française AM: "We need to go further than EU regulations do. It is our responsibility to act to limit the risks associated with the chemical industry. Our objective is twofold: to have more transparent information available to allow for a better understanding of the exposure of financial positions in portfolios and to advocate for investment in R&D in order to develop safer alternatives".


    La Française group is also committed to low-carbon initiatives in the chemical sector by extending its collaboration with the NGO ShareAction . The chemical industry is a sector that has made little or no inroads into reducing its carbon emissions. This means that something needs to happen before it is too late. The sector needs to be pushed into being more proactive and addressing the issue to limit the current trajectory of global warming and to contribute to fulfilling the objectives of the Paris Agreement.

    This collective action will lead La Française AM to enter into active dialogue with numerous companies in order to support them in their transition. It aims to achieve this goal by encouraging them to set targets and implement more ambitious carbon reduction strategies.

    In the end summary of its sixth report, the IPCC highlighted: "The hottest years we have experienced so far will be among the coolest within a generation". 
    The time for talking is over. We need to take action.

    As a responsible stakeholder, La Française is convinced that long-term engagement contributes to improving the creation of value. Its investment teams focus on supporting issuers in their transitions through constructive dialogue to create investment solutions that combine performance and sustainability.
    In 2022, the group strengthened and extended its commitments, both collective - Finance for Biodiversity Pledge, 30% Club France Investor Group, etc. - and individual, with a particular focus on the following areas: climate change, natural capital, social capital and governance.

    To sum up, La Française Group has entered into active dialogue that has led to real action with 52 companies (vs. 17 in 2021) through direct action or in association with other organisations and/or investor groups.

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    news-3465 Tue, 04 Apr 2023 15:08:16 +0200 La Française Real Estate Managers acquires a clinic in the heart of Paris (11th arrondissement) /en/who-we-are/news/detail/la-francaise-real-estate-managers-acquires-a-clinic-in-the-heart-of-paris-11th-arrondissement/ La Française Real Estate Managers (REM), acting on behalf of a collective real estate investment fund, has acquired the premises of the Clinique Mont-Louis for close to €34 million. Located at 8-10 rue de la Folie-Regnault in the 11e arrondissement of Paris, the Clinique Mont-Louis is very close to public transport, near metro stations on both line 9 (Charonne) and line 2 (Philippe Auguste). The clinic (ground floor + 9 floors and 3 basement levels) has 159 beds (118 surgical beds, 21 full hospitalisation medical beds, 20 outpatient surgical places), 9 surgical theatres and 3 endoscopy units for a total surface area of 6,976 m², of which 2,729 m² are in the basement. 

    The asset, classified as a “public-access building” (category 3, U-type), is operated by the OC Santé group, the leading independent health group in Occitanie (region of southern France). Firmly committed to a quality approach in order to provide the best possible service to patients, more than a hundred doctors and surgeons work at the Clinique Mont-Louis, where some 19,000 operations are carried out each year. In order to improve the ESG (Environmental, Social and Governance) positioning of its asset, La Française REM intends to set in motion an action plan.

    Jérôme Valade, Head of healthcare assets at La Française REM, said, "Medical, surgical and obstetrics clinics are the backbone of the healthcare system in France, alongside university hospitals. They play an active role in the medical care of the entire population. On the real estate side, the Medical, Surgical and Obstetrics market is a niche market. With this transaction, La Française REM demonstrates its ability to be a key player on this market, normally reserved for specialists. Alongside this highly positive development, we are strengthening our teams and we would like to welcome Nicolas Monnier as Asset Manager, specialising in healthcare assets."

    For this acquisition, La Française REM was advised by ADAMA Conseil & Transactions (operational due-diligence), ALLEZ & ASSOCIES (notarial aspects), ARCHERS (legal) and ARTELIA (technical and ESG-related aspects).

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    news-3462 Wed, 29 Mar 2023 10:41:31 +0200 La Française Rendement Global 2028 surpassescritical €200million mark /en/who-we-are/news/detail/la-francaise-rendement-global-2028-surpassescritical-eur200million-mark/ March 29, 2023 –La Française is pleased to announce thatits global high yield fixed maturity compartment,La Française Rendement Global 2028(sub-compartment of French SICAVLa Française),has surpassed€200 million in assets under management (as at 24/03/2023). The fund is a diversified portfolio of approximately 150 global high yield issuers with an average rating of B+ (Source: La Française, as at 24/03/2023) and is co-managed by an experienced team of five, headed by Akram GHARBI, Head of High Yield Investment, La Française AM. The track record of the management team, which includes Akram GHARBI, Delphine CADROY, Gabriel CRABOS, Aurore LE CROM and Victoire DUBRUJEAUD, is attracting attention among European professional investors.

    The fund’s strategy1 involves a combination of “buy & hold” and “arbitrage” in the event of new market opportunities or an increased default risk of one of the issuers in the portfolio. The investment strategy therefore relies on in-depth knowledge ofselected companies' balance sheets and sovereign debt fundamentals. La Française Rendement Global 2028 (distinguished with the French SRI Label2 and classified Art. 8 SFDR3 ) has a yield to worst4 of 8.27% (gross of fees and net of hedging costs).

    Akram GHARBI remains positive on the outlook for high yield debt and commented, “Inflation risk is probably behind us, we believe the most important risk on the asset class in 2023 will be related to global growth. In the short to medium term, the High Yield risk premium should move within a range of between 450 and 550 bps. Default rates should increase compared to 2022 but should remain moderate given company fundamentals. And, the current yield (carry) on the high yield market should protect investor's medium-term performance.”

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    news-3461 Tue, 28 Mar 2023 12:00:25 +0200 Deutsche Bank, the future of CoCos and US Regional banks /en/who-we-are/news/detail/deutsche-bank-the-future-of-cocos-and-us-regional-banks/ In this note, we address the following topics:

    • Does the collapse of Credit Suisse’s AT1 CoCos cast a shadow over the whole asset class?
    • Will Deutsche Bank be the next domino to fall?
    • How can the situation of US regional banks be resolved?

    1/ Have AT1 CoCos become “uninvestable”?

    Following the collapse of CHF15.8bn of AT1 CoCos from Credit Suisse on Sunday 19th, March 2023, which represented c. 6.2% of the universe as at the end of 2022 (ICE BofaML CoCo index), several voices were quick to claim that AT1 CoCos were “dead” and that the segment had become “uninvestable”.

    a) The breach of “creditor hierarchy” could not have happened in Europe or in the United Kingdom.

    The handling of Credit Suisse’s takeover by UBS was particularly messy, as FINMA and the Swiss government had to change the law during the weekend in order for AT1 CoCos to be permanently written-down to zero without having to put first equity down to zero as well. This was a breach in what we call “creditor hierarchy”, and was used as an argument that AT1 CoCo bond prospectuses or regulations could not be relied upon.

    The ECB’s regulatory arm, along with the Bank of England, as well as Singaporean, Canadian and Hong-Kong regulators each published statements reminding investors that they would have handled a similar case differently. The ECB explicitly stated that “common equity instruments are the first ones to absorb losses, and only after their full use would Additional Tier 1 be required to be written down. This approach has been consistently applied in past cases and will continue to guide the actions of the SRB and ECB banking supervision in crisis interventions. Additional Tier 1 is and will remain an important component of the capital structure of European banks.”

    b)  AT1 CoCos are still necessary for banks.

    AT1 capital is a necessary layer of regulatory capital for banks from all over the world. In Europe & in the UK, AT1 capital forms a stack that usually has to stand between 1.5% to 2.5% of a bank’s risk-weighted assets.

    Should banks be required by regulators of forced by investors to forego this capital stack, then, they would have to replace it with common equity, whose cost of capital is currently estimated at c. 15-16%. This would not be an efficient, nor a cost effective, replacement.

    The AT1 CoCo format might evolve in the future, as the “CoCo” layer of complexity is made redundant by the fact that authorities can declare a bank as “non-viable” in order to trigger either the write-down of these instruments or their theoretical conversion to equity. We had written about this in April 2022 (“Does the ECB want to end CoCos?”). 

    c)  AT1 CoCo investors will not disappear.

    “Investors will never come back to the asset class or this issuer after such an event!” We have heard this several times on bond markets: after Greece’s debt restructuring in 2012, after the unequal treatment of bondholders from Banco Espirito Santo in 2015, after the nationalization of Banca Monte dei Paschi di Siena in 2016…

    Yes, the collapse of Credit Suisse’s AT1s is significant for the AT1 market, but we do not really see why investors would be willing to leave altogether the space on AT1s from other banks, whose fundamentals were nowhere near those of Credit Suisse. AT1 buyers are (or at least are supposed to be) aware that these instruments can jump to default with no hope for recovery if the issuing bank is regarded as no longer viable. This story is a reminder that defaults rarely happen, but when they do, they come in with a bang. Again, Banco Popular Español was a similar case in 2017 and was eventually seen as idiosyncratic, while on a much smaller scale.

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    news-3459 Tue, 28 Mar 2023 11:41:14 +0200 The Sustainable Development Goals as an investment driver /en/who-we-are/news/detail/the-sustainable-development-goals-as-an-investment-driver/ In the last 30 years, the world has experienced significant economic and social progress. However, many of the past drivers of change, such as the use of cheap fossil fuels and extensive consumption and production, are no longer sustainable with the current economic model. New challenges are threatening future social and financial stability, and urgent actions need to be taken. The increasing occurrences of natural disasters, including flooding and drought cause financial loss and jeopardize food security. In addition, fragile ecosystems with decreasing biodiversity exacerbates economic and financial shocks, nurturing insecurity and conflicts.

    To tackle these global challenges we face, the United Nations established 17 Sustainable Development Goals (SDG) with 169 sub targets, in 2015. These goals, which aimed to be reached by 2030, cover crucial matters, such as poverty, inequality, climate change and environmental degradation, as well as peace and justice. Concrete goals comprise eradicating malaria, development of solar panels or more accessible public transport. Initially, they were intended as government and intergovernmental initiatives, but it has become increasingly clear that businesses are a vital catalyst in achieving these objectives. These goals must be seen through the lens of business opportunity because “the Global Goals need business, and business needs the Global Goals”.

    The Business and Sustainable Development Commission estimates that these goals represent a market opportunity of at least $12 trillion by 2030 1 . With tighter regulations on sustainability, such as the Green Deal in Europe, and shifts in consumers’ preferences and awareness, this could be potentially 2 to 3 times more. Consumers have growing expectations for companies to contribute positively to society and the environment by adjusting their activities. As responsible investors, La Française seeks to invest in companies which are taking the lead and contributing to a better world.

    FROM A UNIVERSAL GOAL TO A MARKET OPPORTUNITY

    As previously mentioned, the 17 SDGs were initially adopted to apply to countries. It is therefore not surprising to see companies consider these goals out of their scope or difficult to integrate into their corporate strategy. In this paper, we will present the link between the SDGs and business by describing several identified megatrends of the future.

    DEMOGRAPHY

    Demography is a crucial megatrend: the world’s population is expected to increase by 2 billion in the next 30 years, reaching a total of 9.7 billion by 2050 2 . Although population growth isn’t itself an issue, it puts additional pressure on the health service and food system. Since the creation of the Millennium Development Goals, there have been historic achievements with respect to global health, such as reduced child mortality. However, the rate of improvement has slowed down.

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    news-3458 Tue, 28 Mar 2023 09:36:30 +0200 Decarbonising real estate: the need for multi-sector decarbonisation /en/who-we-are/news/detail/decarbonising-real-estate-the-need-for-multi-sector-decarbonisation/ By Guy Wilkinson, ESG Analyst & Claudia Ravat, ESG Analyst Given the real estate sector’s near 40% attribution to global GHG emissions, it is vital that this sector is tackled quickly and robustly. As a result, NGOs, corporates and regulators alike must come together to ensure the rapid and permanent decarbonisation of the sector. Clearly, in order for the real estate industry to reduce its emissions, so must cement and steel manufacturers. Whilst steel has a clearer pathway, it is difficult to see a similar path for cement without significant technological advancement, which must outpace the expected increase in overall demand.

    However, emphasis around the building ‘envelope’ is also a vital lever for emissions reduction, and we expect a reinvigoration of policies and incentives to improve building efficiency. This does however require additional buy-in from the building user, which is perhaps the most important stakeholder in the process of decarbonisation. Regulations, subsidies and taxes continue to come to the market in abundance. Regulations around disclosure are particularly important for ESG-oriented investors, and disclosure through the EU Taxonomy will allow investors to more accurately identify those companies in the best position to decarbonise in the future.

    Numerous initiatives, frameworks and certifications have been developed that will help support this and allow companies to set targets around industry specific frameworks. The percentage of buildings certified to LEED, BREEAM and other such standards should be a key determining factor when looking at listed real estate companies for decarbonisation progress. Not only will these initiatives drive climate mitigation efforts, but they also create an environment of significant financial opportunity.

    Those listed real estate companies that are able to decarbonise their portfolios will be able to charge ‘green’ premiums, and thus achieve a higher revenue stream. In terms of identifying which listed real estate companies are most ready to transition and decarbonise, the disparate tapestry of the market makes it difficult to compare companies. Their ability to decarbonise depends on a variety of factors, such as the mix of office, retail and residential buildings in their portfolio, as well as the locations (geography) of the assets. The publication of final deliverables of the Science Based Targets initiative’s(1) sector guidance for buildings will be a key catalyst for the real estate industry, but this is not due until October 2023.

    Overall, for the decarbonisation of the listed real estate sector to be a success, financial institutions must support their transition. Our framework is one example of a template for understanding those companies that are most ready to transition.

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    news-3456 Mon, 27 Mar 2023 10:03:20 +0200 SVB : could the conduct of one, dictate the fate of all? /en/who-we-are/news/detail/svb-could-the-conduct-of-one-dictate-the-fate-of-all/ By Deepshikha Singh, Deputy Head of La Française SIR & Head of Stewardship, La Française AM. The past few weeks have been marred by a flurry of panics in the banking sector, first in the US and then spreading to Europe. Initially, it was Silvergate, which announced its voluntarily liquidation on 8 March. That boiled over into a “bank run” on SVB, prompting the Federal Deposit Insurance Corporation (FDIC) to take over all its deposits on 10 March. Then, the banking panic spilled over to Signature which was shut down by regulators on 12 March. Last weekend (March 18/19), more fallout surfaced as we saw the fire sale of Credit Suisse to UBS in a government-brokered deal and shares of First Republic Bank suffer heavy losses due to its similarities with SVB.

    As SVB collapsed and contemplations began as to the why and how, a lot of ESG (Environmental, Social and Governance) critics took the opportunity to blame the bank’s collapse on its ESG focus and ‘wokenomics’. SVB’s Board was blamed for focusing on its Diversity and Inclusions (DEIs) policies rather than risk management.

    WAS SVB PUTTING TOO MUCH EFFORT AND FOCUS ON ESG AND DEI?

    The original thesis of ESG is to combine profit and purpose. In terms of purpose, SVB held a critical role in supporting the start-up ecosystem globally and served predominantly start-ups and pre IPO companies as clients. The bank enabled young companies, most of which were working on providing solutions to much needed social and environmental issues, to operate without hindrance. In terms of ESG strategy, SVB did have a focus on DEI, but it extended beyond gender or race and was implemented among employees and clients. According to its Corporate Responsibility Report, the Board of SVB took a multidimensional approach to diversity and considered a variety of skills and attributes:
     

    • Industry experience, particularly in banking and client industries
    • Functional, technical or other professional expertise
    • Gender, age or racial/ethnic diversity
    • Other important attributes, such as veteran status and geographical diversity

    It should be stated that banks, tech companies and especially the start-up community, which SVB served, are notorious for being non-diverse, and, in fact, have a long history of red-lining and systemic discrimination. According to the 2022 proxy filing, senior leadership of SVB was 38% female (globally) and 38% non-white (US). On its Board, 5 out of 11 Directors were women (45%). However, 10 out of these 11 Board Members were white and 7 were aged 60 and higher. Additionally, 11 out of 12 Executive Board members including the CEO, CFO and COO were male and all 12 were White. The bank has good targets to improve diversity but at the time, it was certainly not as diverse.

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    news-3453 Fri, 24 Mar 2023 17:04:18 +0100 AR6 Synthesis Report: Climate Change 2023 /en/who-we-are/news/detail/ar6-synthesis-report-climate-change-2023/ By Océane BALBINOT-VIALE, Senior ESG Analyst, La Française AM This week marked the publication of the final installment of the Intergovernmental Panel on Climate Change’s (IPCC) Sixth Assessment Report (AR6), an eight-year long endeavour by the highest authority on climate change science. Across its nearly 10,000 pages, the AR6 depicts the annihilating impacts of surging greenhouse gas (GHG) emissions globally – both already observable and likely to arise – as it concludes that global warming is now more likely than not to reach 1.5°C in the near to medium term. Like a beacon of hope however, AR6 does emphasise the courses of action to take to avert the growing risks we are expected to face – despite an increasingly narrow window of opportunity.


    TIME FOR CHOICES AND A SENSE OF RESPONSIBILITY

    With growing economic activities and GHG emissions, global surface temperature in 2020 was nearly 1.1°C above the pre-industrial level in 1900, thereby inducing unprecedented changes in recent human history to the earth’s climate: current concentrations of carbon dioxide are unmatched for at least the past 2 million years and oceans are warming faster than at any time since the end of the last ice age. Amidst these snowballing impacts, the AR6 Synthesis Report (SYR) reaffirms the inconvenient truth that communities which have historically contributed the least to current climate change are disproportionately affected, mainly Least Developed Countries, Small Island States and the Arctic. About half of the world’s population lives in geographic zones which are highly vulnerable to climate change, as higher temperatures are already fostering the proliferation of food-borne, water-borne and vector-borne diseases. Between 2010 and 2020, human mortality from floods, droughts and storms was fifteen times higher in highly vulnerable regions. Importantly, every additional 0.5°C of global temperature rise causes discernible increases in the frequency and severity of extreme weather events, further weakening the resiliency of the most vulnerable. Certain climate impacts are already so incredibly severe that they simply cannot be adapted to, leading to losses and damages.

     

    GREENHOUSE GAS EMISSIONS MUST BEGIN TO DECLINE NOW

    In order to limit global warming to 1.5°C with no or limited overshoot, the IPCC projects that GHG emissions need to peak immediately and before 2025 at the latest, and that reaching net zero CO2 emissions will need to happen in the early 2050s. In light of this forecast, a new interim target for 2035 (i.e., a 60% decrease in emissions) has been established, which we hope will shape COP28 Nationally Determined Contributions (NDCs). Global surface temperature rises by 0.45°C for every 1000 GtCO2 emitted by human activity. Furthermore, the IPCC finds that in 2019, approximately 79% of global GHG emissions came from energy, industry, transport and buildings together, implying that deep, system-wide shifts are needed urgently. This context is the underlying basis of La Francaise AM’s exclusion policies* and investments strategies towards the energy transition. Our funds no longer finance companies that are dedicating investments to coal expansion plans or ones that are still having electric capacity or production coming from coal for more than 10% or 20% depending on the funds’ strategy.

     

     

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    news-3450 Tue, 21 Mar 2023 15:46:58 +0100 Credit Suisse and EUROPEAN Banks /en/who-we-are/news/detail/credit-suisse-and-european-banks/ The collapse of three US banks last week has accelerated Credit Suisse liquidity crisis. But what about contagion to other European banks and the European and global banking system as a whole? This note is a summary of the analysis by Jérémie Boudinet, Head of Investment Grade Credit. BACKGROUND

    Over the past several years, Credit Suisse has been involved in several high-profile scandals raising questions about its corporate governance practices and overall corporate culture. Considering this situation, we excluded Credit Suisse from our open-end or dedicated funds due to its history of major operational incidents and business controversies, which revealed weaknesses in its risk management. While these incidents differ in nature and impact, their accumulation suggests that structural problems persist within the company.

    WHAT has happened since 19 March 2023?

    On 19 March, all of the above, as well as the stress experienced by the bank in recent days, particularly following the failure of the US regional banks, led FINMA to approve the acquisition of Credit Suisse by UBS. The deal resulted in the purchase of the bank for CHF 0.76 per share, or a total of CHF 3 billion. Unfortunately, AT1 holders were hit hard by this decision, as the value of their securities fell to zero.

    What is surprising and precedent-setting here is the failure of creditor hierarchy against shareholder. In contrast to the shareholders, the holders of Credit Suisse's AT1 CoCos (CHF 15.8 bn) will see their securities fully written-off. The T2 CoCos (CHF 1.5 bn) will be spared, as will the senior bonds of HoldCo and OpCo. 
    It should be noted that AT1 instruments with "permanent write-down" now offer less protection than "temporary write-down" or “equity conversion" notes.
     

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    news-3448 Tue, 21 Mar 2023 10:32:00 +0100 Pre FED commentary March 2023 /en/who-we-are/news/detail/pre-fed-commentary-march-2023/ Something broke, but it will probably not be enough to stop the hiking process We expect that the Federal Open Market Committee (FOMC) to hike rates by a second-consecutive 25 basis points (bps) at its March meeting. The Federal reserve will keep unchanged its new Summary of Economic Projections (SEP) compared with the December SEP, and the dot plot will show a quarter of a percentage point of additional tightening in 2023 given the persistence of underlying inflation. We do not believe the board will stop reducing the size of its balance sheet despite financial risk. 

    Please find below what we expect: 

    • The FOMC to hike rates by another 25 bps to a range of 4.75-5% to bring inflation down to its 2% target.
    • Chair Powell will reaffirm that monetary policy is data dependent.
    • Despite the failure of two U.S. regional banks and the risk of contagion in the banking industry (tighter financial conditions, credit supply, deposits flight), the Fed will continue its quantitative tightening at $95bn per month given their new backstop named Bank Term Funding Program (BTFP) to contain financial risks. The BTFP announced by the Fed on March 12 is an additional source of liquidity against high-quality securities marked at par, eliminating an institution's need to quickly sell those securities in times of stress.
    • Mr. Powell will signal that the board is ready to adjust the rate and balance sheet path if conditions warrant.
    • On the side of the dot plot, we expect to see the median dot up from 5.10% to 5.4% in 2023 and from 4.1% to 4.4% in 2024 but no change at 3.1% in 2025 with inflation declining.
    • On the new economic projections, we expect minimal change in growth and inflation (Personal Consumption Expenditure, PCE) for 2023 (at 0,5% and 3,1%), 2024 (at 1,6% and 2,5%) and 2025 (at 1,8% and 2,1%).

     

    As it was the case last week before the ECB meeting, the decision from the FED is highly uncertain. Our analysis is that the FED (like the ECB) is hoping that the mechanisms (BTFP, USD swap lines) put in place lately to contain risks will prove to be efficient. As of now, if we exclude US regional banks and the AT1 market in Europe, financial markets do not show a high level of stress. With the still very high level of inflation and a very low unemployment rate, the Fed will in our opinion choose to proceed with a 25bps hike.  


    This commentary is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997. 

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    news-3447 Tue, 21 Mar 2023 09:56:00 +0100 Thierry Molton and Guillaume Allard to be appointed to the Executive Board of La Française Real Estate Managers /en/who-we-are/news/detail/thierry-molton-and-guillaume-allard-to-be-appointed-to-the-executive-board-of-la-francaise-real-estate-managers/ Paris, 21 March 2023 – La Française Real Estate Managers (REM) announces the future appointment of Thierry MOLTON and Guillaume ALLARD to the executive board of the asset management company, effective from April 2023. They will be succeeding Marc-Olivier PENIN and will be entrusted with the co-management of La Française REM's “Retail” division, in charge of the real estate offer tailored to private clients, including collective real estate investment vehicles and unit linked vehicles for insurers. David RENDALL will continue to manage La Française REM's “Institutional - France and International” division. As part of this new governance framework, Philippe DEPOUX – CEO of La Française Real Estate Managers, will be supported by an experienced management team:

    • Retail Division
    • Thierry MOLTON, to be appointed Managing Director of La Française REM, in charge of Real Estate Assets for private clients, including investment, asset management and property disposal activities for all asset classes.
    • Guillaume ALLARD, to be appointed Deputy Managing Director of La Française REM, in charge of Funds and Finances for the retail division, including fund management, real estate financing, accounting (funds and assets), reporting and financial communication of real estate products.
    • Institutional – France & International Division   
    • David RENDALL, Deputy Managing Director of La Française Real Estate Managers and Managing Director of the International Division, in charge of the management of real estate mandates, thematic funds and club-deals for institutional clients on Core/Core+, value added and opportunist strategies.

    " Marc-Olivier PENIN has worked at La Française REM for more than 20 years and has been instrumental in the development of its real estate expertise, and I would like to thank him personally for his commitment throughout the years. From an operational trio – Thierry, Guillaume and Marc-Olivier, who have worked together for many years, particularly on innovative real estate solutions such as unit-linked vehicles – we will make the transition to a duo, with this new governance framework. Thierry and Guillaume will report directly to me and have my full confidence in ensuring continuity in the quality of the real estate offering for private investors," states Philippe DEPOUX, CEO of La Française Real Estate Managers.

    Their professional backgrounds

    • Thierry MOLTON, 55, to be appointed Managing Director, La Française Real Estate Managers, has 28 years’ experience in real estate.
      He started his career as an auditor in 1995 with the audit and accounting firm Vivian et Associé in the Real Estate Department before joining Foncière Bellecour as Financial Director.

      Three years later, with Management Business Property, Thierry became Director of Real Estate and Financial Operations. In 2008, he joined La Française Real Estate Managers, first as Director of Real Estate Operations and Financing and then as Director of Asset Management. Thierry is currently Director of Commercial Real Estate Assets at La Française Real Estate Managers, a position he has held since 2020.

      Thierry Molton holds a diploma in chartered accounting.
       
    • Guillaume ALLARD, 38 years old, to be appointed Deputy Managing Director, La Française Real Estate Managers, has 16 years' experience in real estate. 

      He started his career in 2007 with DTZ Eurexi as a Project Manager and then joined La Française Real Estate Managers in 2011, first as a real estate portfolio manager and then as a real estate fund manager. In 2017, he was promoted to Director of Fund Management SCPI. Guillaume is currently Director of Finance - Retail Funds, a position he has held since 2021.

      Guillaume is a graduate of the Ecole Spéciale des Travaux Publics, du Bâtiment et de l'Industrie.
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    news-3444 Tue, 14 Mar 2023 17:54:39 +0100 Flash Note - Bank bankruptcies in the USA /en/who-we-are/news/detail/falsh-note-bank-bankruptcies-in-the-usa/ 1/ What happened?

    a)    A story of shadow banking exposure and depositor concentration

    The US banking system is made up of more than 4,000 credit institutions, the overwhelming majority of which holds less than $10bn of assets. Regulatory oversight obviously differs whether you are JPMorgan Chase (more than $3,600bn of assets as at the end of 2022) or a small regional bank. Capital requirements are set at lower levels for smaller banks and they do not have to fulfill several liquidity constraints. Yet, this story is not about regulatory failure. 

    This is a story about fast growth and depositor concentration that ends badly for three banks:

    • Silvergate Bank (SI): assets grew from $2bn to $16bn between 2019 and 2021, then dwindled back to $11bn as at the end of 2022. This crypto-centric bank announced on Thursday that it was winding down its operations and liquidating the bank, which has been in financial turmoil since the collapse of crypto exchange FTX. Following a bank run in the fourth quarter, Silvergate leaned on the Federal Home Loan Bank of San Francisco for a $4.3 billion cash injection, which by the end of the quarter made up nearly all of its total assets.
    • Signature Bank (SBNY): its assets went from $50bn to $118bn between 2019 and 2021 and was much bigger than now-defunct Silvergate Bank. In the wake of the demise of SVB and SI, Signature Bank, the bank was closed on Sunday by its chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer.
    • Silicon Valley Bank (SIVB): assets went from $71bn to $211bn between 2019 and 2021 and were stable until the end of 2022. As its name suggests, SVB was lending to companies mostly based in the Silicon Valley, with a focus on lending to technology companies, providing services to venture capital and private equity firms. It rapidly grew to become the 18th largest bank holding company in the US. During the 2019-2021 phase, SVB received significant inflows of deposits from venture capital firms that it needed to cover from an asset standpoint. As such, management sought to chase yield by buying long-duration bonds (Treasuries, MBS…). The bank started to lose deposits as VCs pulled cash through operating capital, which pressured management to sell some of its long-term assets. It seems like these assets were not really properly hedged, but we lack sufficient information thus far.

    On March 9, 2023, shares of SVB Financial plunged more than 62% after the company proposed a share sale to shore up its balance sheet which had suffered fleeing deposits and a $1.8bn realized loss on the securities sale. According to a regulatory filing published on Friday, investors and depositors tried to pull $42bn from SVB on Thursday… A good old fashioned “bank run”. Despite being in sound financial condition prior to Thursday, the California watchdog said the run “caused the bank to be incapable of paying its obligations as they come due,” and it was now insolvent. The bank was then closed by the California Department of Financial Protection & Innovation and placed into FDIC receivership, marking the biggest failure of a US bank since the financial crisis.

    On Sunday evening, a joint statement by the US Treasury, the Fed and the FDIC announced that “no losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer”. In other words, all deposits (even those that are uninsured by the FDIC above $250k) will be guaranteed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks. Subordinated debtholders and equity holders will very likely be wiped out, while senior unsecured creditors may recover part of their holdings (bonds were trading at c. 40 cents on the dollar at Friday close, but this is not a trustworthy indication of their final recovery).

    In order to contain the fallout from these bank failures, the Fed said it would create a new lending program for banks: the Bank Term Funding Program, or BTFP. The facility will allow banks to take advances from the Fed for up to a year by pledging Treasuries, MBSs and other debt as collateral. By allowing banks to pledge their bonds, they can meet customer withdrawals without having to sell their bonds at a loss, which is what SVB did last week. Banks can borrow funds equal to the par value of the collateral they pledge, which means that the Fed will not be looking at the potential unrealized losses on the bonds. 

    This mechanism, along with the guarantee that all depositors will be made whole, are very significant steps to ensure the safety of the US banking system.
     

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    news-3442 Fri, 17 Mar 2023 10:28:00 +0100 Next AM Fund - notice to shareholders of the fund (EN) /en/who-we-are/news/detail/next-am-fund-notice-to-shareholders-of-the-fund-en/ Dear Shareholder, 
    The Fund’s board of directors (the "Board") would like to inform you about the contemplated changes in the prospectus of the Fund (the “Prospectus”). 

    A. Definition of “Business Day” and “Valuation Day” 

    “Business Day” is currently defined in the Prospectus as being any business day on which banks are normally open in Luxembourg. 
    The Board has decided to amend the definition of “Business Day” as follows: “any business day on which banks are normally open in Luxembourg and France” with effect as of the date of this notice. 
    As a result of this change, the definition of “Valuation Day” (currently being on every business day in Luxembourg) will also be amended as follows with effect as of the date of this notice: “every Business Day in Luxembourg and France”. Therefore, trading in the Fund will be possible only when banks are open for business in Luxembourg and France. 
    This change will not have an impact on the way the Fund is managed, the investment strategy, the asset allocation nor the risk profile. 

    B. Investments in term deposits, debt securities and money market instruments 

    The Prospectus has been updated in accordance with the provisions in relation to ancillary liquid assets of the CSSF FAQ concerning the Luxembourg Law of 17 December 2010 relating to undertakings for collective investments. As part of this update, it has been clarified that the Fund may invest up to 20% of its net assets in in term deposits, debt securities and money market instruments for treasury purposes or for achieving its investment goals. These changes are clarifications and will not have an impact on the way the Fund is managed, the investment strategy, the asset allocation nor the risk profile. 

    *** 
    The Prospectus will be updated to inter alia reflect the changes described in this notice. A copy of the updated Prospectus will be available free of charge upon request at the registered office of the Fund. The Board

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    news-3441 Tue, 14 Mar 2023 10:04:33 +0100 Strong underlying inflation momentum vs financial risk /en/who-we-are/news/detail/strong-underlying-inflation-momentum-vs-financial-risk/ Until now, it was widely expected that the European central bank (ECB) would raise its interest rates by 50 basis points (bps) at its next meeting; the question now is if the ongoing collapse of US regional banks could lead them to adopt a less restrictive approach. Updated staff projections are likely to show much lower headline inflation this year, but faster GDP growth and higher core inflation, with minimal adjustment to both over the medium-term horizon. Commentary signed by François Rimeu. Please find below what we expect: 

    • The ECB to increase its key interest rates by 50 bps, bringing the deposit rate to 3.0%, despite current turbulence coming from US regional banks.
    • President Christine Lagarde to repeat that the Governing Council’s (GC) priority is to return inflation to the 2% target.
    • The forward guidance will likely be as neutral as possible, keeping all options open, especially given the visible divisions within the Governing Council and the situation of US regional banks.
    • Mrs. Lagarde will emphasize that the board will adjust its policy trajectory according to incoming data on inflation, the evolving outlook and the transmission of its monetary policy. 
    • We do not expect the ECB to maintain its February assessment on the inflation outlook given the latest strong inflation data. - i.e., “the risks to the inflation outlook have also become more balanced”. 
    • We do not expect any news on the pace of Quantitative Tightening. 
    • On new ECB staff economic projections: 
    1. We expect them to indicate higher growth in 2023 (from 0.5% to 0.7%) but lower GDP in 2024 (from 1.9% to 1.5%). For 2025, we expect growth will stay close to potential growth at around 1.8%. 
    2. We anticipate the ECB’s global inflation projections to be revised lower over the  projection horizon given changes in technical assumptions (higher market rates, a stronger euro and lower energy prices) with 2,1% in 2025 (versus 2.3% in December projections). 
    3. We expect the ECB’s core inflation to be revised higher in 2023 (from 4.2% to 4.6%) and remain broadly unchanged over the next two years, at 2.8% in 2024 and 2.3% in 2025.

     

    At the time of writing, the market is no longer expecting a 50bps hike coming from the ECB (33bps priced). We think that the ECB will most likely “stick to the plan”, which means higher rates on the very short end of the curve.  

      

    This commentary is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-3438 Fri, 17 Mar 2023 17:00:00 +0100 Next AM - notice to shareholders of the fund (LU) /en/who-we-are/news/detail/next-am-notice-to-shareholders-of-the-fund-lu/ Luxembourg, March 17th 2023 Dear Shareholder, 
    The Fund’s board of directors (the "Board") would like to inform you about the contemplated changes in the prospectus of the Fund (the “Prospectus”). 

    A. Definition of “Business Day” and “Valuation Day” 

    “Business Day” is currently defined in the Prospectus as being any business day on which banks are normally open in Luxembourg. 
    The Board has decided to amend the definition of “Business Day” as follows: “any business day on which banks are normally open in Luxembourg and France” with effect as of the date of this notice. 
    As a result of this change, the definition of “Valuation Day” (currently being on every business day in Luxembourg) will also be amended as follows with effect as of the date of this notice: “every Business Day in Luxembourg and France”. Therefore, trading in the Fund will be possible only when banks are open for business in Luxembourg and France. 
    This change will not have an impact on the way the Fund is managed, the investment strategy, the asset allocation nor the risk profile. 

    B. Investments in term deposits, debt securities and money market instruments 

    The Prospectus has been updated in accordance with the provisions in relation to ancillary liquid assets of the CSSF FAQ concerning the Luxembourg Law of 17 December 2010 relating to undertakings for collective investments. As part of this update, it has been clarified that the Fund may invest up to 20% of its net assets in in term deposits, debt securities and money market instruments for treasury purposes or for achieving its investment goals. These changes are clarifications and will not have an impact on the way the Fund is managed, the investment strategy, the asset allocation nor the risk profile. 

    *** 
    The Prospectus will be updated to inter alia reflect the changes described in this notice. A copy of the updated Prospectus will be available free of charge upon request at the registered office of the Fund. The Board

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    news-3437 Mon, 13 Mar 2023 11:09:48 +0100 Alger On The Money - Waves of Reshoring /en/who-we-are/news/detail/alger-on-the-money-waves-of-reshoring/ Over the past few decades, U.S. companies enjoyed supply chain efficiencies and competitively lower prices by sourcing products overseas. However, the Covid-19 pandemic interrupted this dynamic. As a result, companies are now reconsidering the viability of their supply chain operations, with several companies already reshoring, or bringing manufacturing and production back to the U.S. How could reshoring impact U.S. companies over the next decade and how might investors be positioned to potentially benefit?
  • The reshoring wave has accelerated due to the Covid-19 pandemic, as well as heightened geopolitical tensions and trade wars. Consequently, U.S. companies are reconsidering the implicit costs of sourcing goods and services overseas, where shipment reliability remains paramount. As the chart indicates, annual job announcements of reshoring and foreign direct investment (FDI), or international companies operating within the U.S., have ramped up considerably over the last three years.
  • We believe that an influx in manufacturing jobs and advancements in automation will lead to greater productivity gains over the long-term, making U.S. manufacturers more cost competitive. Moreover, increases in automation can also address the difficulty of finding a skilled workforce while providing the ability to quickly respond to customer needs (see Chatting with the Future).
  • In our view, U.S. manufacturers will require significant investments in automation over the long-term as they strive to remain competitive on the global stage. Also, we believe that companies who enable automation and increases in productivity, such as industrial hardware, semiconductors, software, and energy exploration technology may offer a compelling opportunity for long-term investors. 
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    news-3436 Mon, 13 Mar 2023 11:05:59 +0100 Alger On The Money - Laggards to Leaders? /en/who-we-are/news/detail/alger-on-the-money-laggards-to-leaders/ Throughout 2022, market performance was quite bifurcated.As interest rates jumped in response to rising inflation, certain factors (e.g., Value and Shareholder Yield) dramatically outperformed, while others (e.g., Volatility and Growth) underperformed considerably.Are economic and market conditions changing such that laggards may turn into leaders and vice versa?
  • Long-duration securities are those whose cash flows are expected to be received further out in the future, such as long maturity bonds. Similarly, growth equities can also be thought of as longduration securities, focusing on expanding their business and market share, and less on near-term profitability (i.e., short-duration equities).
  • Over the past year, higher interest rates driven by elevated inflation, had compressed the valuations for long duration assets, as shown by the underperformance of the long-term growth factor above. On the other hand, short duration equities saw meaningful outperformance, as exhibited above by the shareholder yield factor, which incorporates companies with high dividends and share repurchases relative to their market capitalization. In fact, low price-toearnings stocks, which have more of their value based on near-term cash flows, had their best year of relative performance in more than two decades.1
  • In our view, the dynamic that drove last year’s performance divergence could potentially reverse if inflation and interest rates moderate this year. Moreover, we believe that stocks with stronger longterm growth potential could prove to have fundamentals that are more resilient to a weak economy.
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    news-3435 Mon, 13 Mar 2023 10:53:03 +0100 Alger On The Money - Beyond Moore’s Law /en/who-we-are/news/detail/alger-on-the-money-beyond-moores-law/ The topic of Artificial Intelligence (AI) has been exploding in popularity since the November 2022 release of ChatGPT. This chatbot prototype developed by OpenAI is giving us a glimpse of how AI could revolutionize the way we live and work in the future. How does AI compare to other technological feats and how might this impact the global economy going forward?
  • Moore’s Law states that the speed and ability of computers doubles every two years as the number of transistors on a microchip increases. When Gordon Moore wrote his revolutionary paper in 1965, there were only 64 transistors on an integrated circuit. Nearly six decades later, Apple’s M2 chip has approximately twenty billion transistors1, generating productivity that we could not fathom in the early days of integrated circuits. 
  • While the pace of Moore’s Law is impressive, this pales in comparison to the speed at which AI programs can “train” themselves (i.e., how much computation they can utilize) by doubling every four months, as indicated in the chart above. Over a ten-year period, AI training grew by more than 100,000,000x faster than Moore’s Law. 
  • In our view, the speed of AI innovation should continue to accelerate, with the potential to significantly change how we utilize software and improve our lives. We believe companies that are at the forefront of AI innovation, such as the major cloud platforms or leaders in the hardware that drives the cloud technology forward, may benefit as we enter the next frontier of technological advancement.
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    news-3434 Thu, 09 Mar 2023 11:46:39 +0100 European commercial real estate market – increased market polarisation /en/who-we-are/news/detail/european-commercial-real-estate-market-increased-market-polarisation/ By Virginie Wallut, Director of Real Estate Research and Sustainable Investment at La Française Real Estate Managers In a volatile financial environment, European and particularly French investment markets held up well with solid investment volumes. However, this annual volume masks a perceptible slowdown in the market towards the end of the year. The tightening of monetary policy by central banks to curb runaway inflation came alongside a rise in interest rates which has pushed up real estate yields. Faced with this new climate, investors have adopted a wait-and-see attitude and have been extremely selective in their positioning since the summer. However, the market has not experienced a significant generalised decompression of rates, but has instead experienced differentiated adjustments based on the quality of assets, their size, their rental occupation status and the type of asset in question.

    In 2023, rental yields are expected to be the main impetus behind real estate performance. Growth in rental income will be driven by (i) rental indices, mostly correlated with inflation, (ii) market segments where demand exceeds supply, (iii) improvements in the environmental, social and governance (ESG) factors of assets to meet new uses or the latest regulatory standards.
    Stakeholders who traditionally use leverage are likely to be particularly affected by the new financial climate, while equity-rich investors could take advantage of this scenario to seize fresh opportunities.

    In 2023, a key objective for investors should be to develop a resilient portfolio as they continue to diversify their portfolios in favour of alternative assets (healthcare, managed residential properties) and regional markets which have a more defensive profile.
     

    Investment volume down slightly year-on-year
     

    In Europe, the volume of commercial real estate investment in 2022 totalled nearly €245 billion at the end of December 2022, led by the United Kingdom, Germany and France with €58 billion, €52 billion and €29 billion respectively.  The investment volume is marginally down (-4%) year-on-year due to a particularly sluggish Q4. In fact, investors adopted a distinct wait-and-see approach, due to the lack of convergence between sellers and buyers on prices and specifically for asset classes where yields were at their lowest.

    As a consequence, the office and logistics segments showed a decrease in their respective investment volumes of -14% and -7% year-on-year. Diversification and retail assets posted increases of 23% and 2% respectively.

    The fall in the overall volume of investment in Europe conceals contrasting trends on a country-by-country basis: the significant drop in Germany (-17%) and the United Kingdom (-5%) masks a slight increase in volume in France (+2%) and more marked increases in Belgium (+115%), Spain (+35%) and Ireland (+20%). 
     

    A diverse decompression in office yields 
     

    The upward trend in real estate yields accelerated in Europe in Q4, driven by further increases in rates and financing costs. Germany provides a good illustration of this, with the cost of financing good quality assets moving from less than 1.25% in January 2022 to more than 4% at the end of 2022, which represents its highest level since 2011. 

    The decompression of yields varies by market. Office yields in Germany show the largest decompression, over 100 basis points (bps) across a period of one year (Hamburg +140 bps; Berlin +105 bps; Frankfurt +105 bps; Munich +105 bps), while Dublin recorded an increase of 35 bps, London 50 bps and Paris 65 bps. 

     

    Office rental markets continue to experience robust demand. Most European markets are experiencing a two-tier market with (i) low vacancy exerting upward pressure on rents in central locations and (ii) over-supplied markets in the periphery where rents are falling. Users are leaning towards quality assets, particularly in terms of energy criteria. They favour central locations that allow them to benefit from their new working arrangements, retain and attract their talent in a labour market that remains tense, while simultaneously improving their carbon footprint. 

    In total, 2022 saw take-up increase by 9%* year-on-year, reaching volumes above the ten-year average in markets such as Milan and Hamburg. However, some markets, such as Amsterdam, Brussels and Frankfurt, are witnessing a decline in demand.

    New ways of working and the subsequent rationalisation of office premises are resulting in an increase in vacancy rates, particularly in secondary assets, with users renting less new space than they free up. 

    Market polarisation
     

    2022 carried on the rising trend in building conversions with changes of use. In fact, the release of premises deemed obsolete for the latest generation of assets has increased the supply of second-hand office space. 

    Vacancy rates are increasing across all European markets, although the situation in each country varies a great deal. Germany continues to show a controlled or even low supply, while peripheral countries such as Spain, Ireland and Italy have average vacancy rates of over 10%.

    The concentration of demand on the latest generation assets, meeting new uses and energy consumption standards, continues to prop up the rental income for prime assets. At the same time, rents for secondary assets are under downward pressure, although assets with excellent accessibility and competitively priced rents are showing some resilience.

    User sustainability requirements are reflected in the levels of rent. Users now pay particular attention to energy costs and the concomitant increase in rental charges.

    Sources: CBRE, Knight Frank, MBE, La Française REM Research
    *demand in the 12 main European cities: Brussels, Lille, Lyon, Paris, Berlin, Frankfurt, Hamburg, Munich, Dublin, Milan, Amsterdam, Madrid

     

    The information contained in this document is believed to be accurate at the time of publication and reflects the current views of La Française Real Estate Managers. The content of this document has no contractual value and may differ from the opinions of other management professionals. Published by La Française AM FINANCE Services, whose registered office is located at 128, boulevard Raspail, 75006 Paris, France and authorised by the ACPR ("Autorité de contrôle prudentiel et de résolution") under no. 18673 as an investment service provider. The portfolio management company La Française Real Estate Managers received AMF accreditation No. GP-07000038 on 26 June 2007 and AIFM accreditation on 24 June 2014 under Directive 2011/61/EU (www.amf-france.org).

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    news-3433 Thu, 09 Mar 2023 09:36:05 +0100 The long road to gender equality /en/who-we-are/news/detail/the-long-road-to-gender-equality/ By Marie Lassegnore, CFA, Head of Sustainable Investments, La Française AM. A recent study (1) conducted on more than 3,700 listed companies across the globe, representing 102 million employees, provides a clear picture of where we stand and moreover where we stagnate with regards to gender equality in the workplace. “A minority of companies globally, just 6%, have a female CEO, 15% have a female CFO and 8% have a female chair of the board. Looking at representation from the top down, women represent 28% of board members, 20% of executives, 26% of senior management and 38% of the total workforce.”

    Why does it matter? Economic studies have shown that female education and representation in the workforce contribute to social and economic well-being while their underrepresentation in the labor market and in managerial positions has an impact on overall labor productivity. This partly explains why the United Nations established gender equality as one of its sustainable development goals (SDG number 5 of the 17 objectives for the environment and society, to be achieved by 2030).

    Closing the gap requires coordination at multiple levels, starting with access to equal education. Women must be empowered, given influence. Gender equality must be sought after in recruitment, compensation and career progression. And the list goes on.  As investors, one of our main tools is our influential capacity; through individual or collaborative engagement with companies we can make sure to raise the topics that are relevant to a company’s long-term sustainability profile.

    One of the ways we choose to address this gap is through female representation at the board level. This is an indicator we systematically track referencing our investee companies, whether through equity or corporate bond investments. We believe that female representation at the board level will lead to not only greater corporate performance from an economic and sustainable standpoint but will also help enable change throughout the other layers of the employee base (executives, management, and total workforce). Research has also shown that change in practices can be detected once female representation on a board reaches 3 seats. That is why we have also joined the “30% Club France Investor Group” which aims to boost gender diversity at board and senior management levels among SBF120 companies by at least 30% by 2025.

    Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997. The portfolio management company La Française Real Estate Managers received AMF accreditation No. GP-07000038 on 26 June 2007 and AIFM accreditation under Directive 2011/61/EU, dated 24/6/2014  (www.amf-france.org).
     

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    news-3431 Wed, 08 Mar 2023 10:29:49 +0100 Should we fear a wage/price spiral? /en/who-we-are/news/detail/should-we-fear-a-wage-price-spiral/ by Audrey Bismuth, Global Macro Researcher, La Française AM Developed by New Zealand economist William Phillips in 1958, the Philips curve illustrates a negative empirical relationship between the rate of unemployment and inflation. The negative correlation between unemployment and inflation is conveyed through wages, whose variations tend to run alongside consumer prices. The bargaining power of employees increases if the available labour force is limited, i.e., if unemployment is low and tensions in productive capacities are high.  However, this correlation has become more blurred in many countries since the 1990s. There are numerous reasons underpinning this trend. 

    After the major recession of 2008-2009, falling unemployment rates in the U.S. did not lead to a significant surge in wages. According to the Bureau of Labor Statistics (BLS), the unemployment rate fell from 10% to less than 4% before the Covid-19 pandemic, while the wage growth rate remained stable at around 2% over the 2009-2015 period before rising to 3% over the 2016-2019 period. This weaker negative relationship between unemployment and wages could point towards greater excesses in capacity than might be suggested by unemployment rates. In March 2018, in France, a study by the National Institute of Statistics and Economic Studies (Institut National de la Statistique et des Etudes Economiques, INSEE) indicated that the correlation coefficient between wage changes and unemployment in the United States was even positive between 2011 and 2015. This analysis concluded that “unemployment has an impact on wage fluctuations, but productivity remains a major long-term determinant”. Persistently weak output per hour worked may reduce corporate profitability and ultimately impact wage growth, as companies become less willing to grant wage increases in quick succession. In September 2017, research by the International Monetary Fund (IMF) also indicated that the increase in people frustrated with only working part time (i.e., people who would like to work more) and a higher use of temporary jobs were restricting wage growth. Other frequently cited reasons are increased automation, lower medium-term growth expectations, growth in the service sector and increased labour supply against a backdrop of globalization which has increased competition between companies, particularly following China's entry into the World Trade Organization (WTO) in the 2000s. 

    The Covid-19 pandemic has also altered the dynamics of employee relations within companies given the underlying developments in the global economy. The pandemic, alongside the subsequent massive stimulus packages, has accelerated the imbalance between supply and demand in the labour market. Currently, in the United States, there are 4.7 million more jobs available than there are people to fill them (Bureau of Labor Statistics, November 2022). This gap was 1 million people before 2019. The growing number of employers having recruitment difficulties stems from the ever-increasing mismatch between the skills, interests and experience of job seekers and the positions that employers want to fill. According to Lightcast (December 2022), the US workforce has fallen by 2 million due to declining immigration, the early retirement of baby boomers and an ageing population (according to the Census Bureau, Americans over the age of 65 will make up 21% of the workforce by 2035). It is therefore likely to take time to replace them or bring them back to the job market, all the more so if we consider the significant transfer of wealth from the baby-boomers to Generation Y (millennials) estimated at 68 trillion dollars by a study carried out in October 2019 by Coldwell Banker. However, the substantial decline in excess savings accumulated during the pandemic, two-thirds of which have already been used up (once adjusted for inflation) according to Alpine Macro strategists, should lead Americans to return to the labour market. Moreover, it is young people and jobs with the lowest qualifications that are the source of wage growth and of keeping the unemployment rate at historically low levels. The number of active 20–24-year-olds remains 1.7 points below its pre-pandemic level and wages among 16–24-year-olds have jumped more than 12% according to the Atlanta Fed's wage tracker (January 2023), while wages increased by 6.3% overall. Moreover, improvements in labour market conditions are more beneficial to the lowest paid workers. Hence, their bargaining power is becoming stronger. The Atlanta Fed's wage tracker shows that wages for the lowest-skilled employees rose by 6.6% in January compared to a year earlier, while wages for the highest-skilled employees rose by 6.1%.

    Although the negative correlation between unemployment and inflation is not necessarily clear all the time, the question remains over whether the aggressive increase in interest rates - the main tool of central banks in the fight against inflation - is entirely justified, as it could drag the global economy into recession and unnecessary job losses? Is a wage-price spiral, so feared by central bankers, likely to take hold? 

    In its October 2022 World Economic Outlook, the IMF's analysis of situations similar to 2021, when inflation was rising and wage growth was positive but real wages and the unemployment rate were stagnant or falling, was reassuring. The IMF showed that “given that inflationary shocks are originating outside the labour market, falling real wages are helping to slow inflation, and monetary policy is tightening more aggressively, the chances of persistent wage-price spirals emerging appear limited”. The latest report from the International Labour Organization (ILO) also noted that “in high-income countries, real wage growth has been lower than productivity growth since 2000. Whereas the sharp decline in labour productivity growth during 2020 momentarily reduced the gap, the erosion of real wages in the first half of 2022, combined with positive productivity growth, has once more increased the gap between productivity and wage growth”. This study states that in 2022, the gap between the growth in productivity and that of wages reached its highest point since the beginning of the 21st century, with productivity growth 12.6 percentage points above wage growth. It would therefore appear “to be scope in many countries for increasing wages without fear of generating a wage–price spiral”. Finally, economists point out that the decline in the working population will be a factor contributing to lower inflation over the long term. With lower income growth, consumer spending stands to fall, and the labour market should rebalance through a lower natural equilibrium unemployment rate (NAIRU, Non-Accelerating Inflation Rate of Unemployment, i.e., the lowest unemployment rate that can be sustained without causing inflation to rise). The NAIRU has declined gradually since the late 1980s, from 6.3% down to 4.4% as it currently stands. It should drop to 4.25% by 2032 according to the Congressional Budget Office. 

    The information contained in this document is provided for information purposes only and it does not under any circumstances constitute an offer or invitation to invest, investment advice, or a recommendation relating to any specific investments. The information, opinions and figures are considered to be well-founded or accurate on the date of their establishment. They are based on the economic, financial and stock market conditions at the time and reflect La Française Group's current view of the markets and market trends. They have no contractual value and are subject to change, and they may differ from the opinions of other management professionals. Please also note that past performance is no guarantee of future results and that the level of performance is not constant over time. Published by La Française AM Finance Services, with its registered office at 128, boulevard Raspail, 75006 Paris, France, licensed by the ACPR (“Autorité de contrôle prudentiel et de résolution”) is an investment services provider under no. 18673. La Française Asset Management is a management company licensed by the AMF under no. GP97076 on 1 July 1997.

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    news-3430 Wed, 08 Mar 2023 10:11:58 +0100 La Française Real Estate Managers invests in the healthcare centre of the “Bauer Box”, a new real estate complex “open to all” in Saint-Ouen, France (93) /en/who-we-are/news/detail/la-francaise-real-estate-managers-invests-in-the-healthcare-centre-of-the-bauer-box-a-new-real-estate-complex-open-to-all-in-saint-ouen-france-93/ La Française Real Estate Managers (REM), acting on behalf of a collective real estate investment vehicle, has acquired, as a sale before completion transaction, a healthcare centre with a total surface area of 1,937 sqm in the “Bauer Box", an urban development project in Saint-Ouen (93). Located in a fast developing urban area behind the north stand of the Bauer stadium, near the future university hospital Grand Paris-Nord in Saint-Ouen and 10 minutes from the Mairie de Saint-Ouen (Metro line 14) and Garibaldi (Metro line 13) metro stations, the "Bauer Box" is the epicentre of a project which aims to redevelop the neighbourhood around the Bauer stadium and to establish pedestrian zones open to the public in order to create a concentration of amenities and services. Developed by the REALITES Group, a winner of the “Imaginons la Métropole du Grand Paris” contest in June of 2019, the "Bauer Box" is a mixed programme of 30 000 sqm, including 7 000 sqm of office space, 5 000 sqm for a school, a coliving facility with 334 rooms, shops, a concert hall, restaurants and a multidisciplinary healthcare center.

    The premises covered by the sale, which also include a 101 sqm healthcare store at the foot of the building and four parking spaces equipped with charging stations for electric vehicles, will meet the latest environmental standards. The ground and first floors will be certified as "HQE Bâtiment Durable Tertiaire level Excellent" and "BREEAM International New Construction level Excellent", and the dedicated space in the basement certified "BREEAM level Very Good". The common areas of the real estate complex will include a bicycle room with showers and lockers, green roofs, wildlife-friendly facilities and 600 sqm of green space. Delivery is scheduled for 31 December 2025.

    The healthcare centre will offer a multidisciplinary medical centre (G+1) as well as a sports-health centre (G-2) offering professional physiotherapy, osteopathy and sports medicine sessions. The centre will be leased to Vista Santé, a trademark of the REALITES Group, under a 12-year fixed lease. Vista Santé organizes with healthcare professionals, such as sports doctors, cardiologists and physiotherapists, personalized sessions around prevention through adapted physical therapy, return-to-sport preparation, recovery after injury, etc. REALITES is a regional development group which has a strong focus on people and acts as a bridge between innovative concepts of use and real estate solutions.
     

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    news-3428 Mon, 06 Mar 2023 11:27:17 +0100 Groupe La Française appoints Guillaume Cadiou chief exectuvie officer and member of the executive board /en/who-we-are/news/detail/la-francaise-group-appoints-guillaume-cadiou-member-of-the-exectuvie-board-and-chief-executive-officer/ Paris, 6 March 2023 – La Française, a multi-expertise asset management group, has strengthened its governance structure and announces the arrival of Guillaume Cadiou as Chief Executive Officer and member of the Executive Board of Groupe La Française. Guillaume Cadiou is starting in his role today and will be based in Paris. He will assist Patrick Rivière, Chairman, in managing all of La Française group's activities and will work (side by side with Eric Charpentier, Deputy Chief Executive Officer of CIC and Chief Executive Officer of the Caisse Régionale de Crédit Mutuel Nord Europe) on the successful creation of the multi-boutique asset management business line, dedicated to third parties, of Crédit Mutuel Alliance Fédérale.

    This appointment confirms the ambitions of Crédit Mutuel Alliance Fédérale, announced in September 2022, to fast-track the creation of a powerful Asset Management business line, which along with the La Française group would bring all the management structures1 of the Bancassurance group under a multiboutique model. It would therefore become a major player in the French Asset Management landscape, representing €166 billion in assets under management (as at 31/12/2022), located throughout Europe, active in Asia and offering a wide range of expertise including listed assets, real assets and alternative management.

    Patrick Rivière, Chairman of Groupe La Française, stated: “I am very happy and proud to welcome Guillaume to the management team. He will bring a fresh and complementary perspective and will allow us to benefit from his rich experience in the public, industrial and financial sectors. In my mind, Guillaume has all the skills to support this formidable and ambitious project going forward".

    Guillaume Cadiou, Chief Executive Officer and member of the Executive Board of Groupe La Française, stated: “I am delighted to join La Française and ready to take up this new challenge within Crédit Mutuel Alliance Fédérale, a benefit corporation whose values are dear to me. My priority will be to help to cultivate the most efficient organisation and to ensure the rapid rise of this new French asset management champion, as well as to showcase the renowned expertise of the group's various management companies

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    news-3424 Tue, 28 Feb 2023 16:11:00 +0100 How europe’s aging population is shaping the healthcare real estate market /en/who-we-are/news/detail/how-europes-aging-population-is-shaping-the-healthcare-real-estate-market/ By Jérôme VALADE, Head of Healthcare Assets, LA FRANÇAISE REAL ESTATE MANAGERS As the European demographic landscape evolves, demand for healthcare assets continues to grow

    Healthcare is a niche segment of the real estate market and commonly comprises buildings, offices and campuses leased to medical service providers or institutions related to the healthcare sector. Until recently, healthcare assets required specific technical features and layouts. However, rising demand and new trends in healthcare have created opportunities for conversion projects, such as the repurposing of existing retail and office space. Increasingly, healthcare providers are opting for leasehold properties, owned and managed by third parties, thereby enabling them to preserve their capital for their core business development.  

    Adapting the real estate landscape to an aging population

    Population aging, coupled with a longer life-time expectancy, is a long-term trend observed across Europe. In European Union (EU) member states, the population aged 65 years and older is projected to reach 129.8 million by 2050 , a significant rise from 90.5 million in 2019. The segment aged 75 to 84 years old is projected to increase by 56.1%  and even more concerning is the number of people aged 85 years and more which is expected to more than double (12.5 million in 2019, versus 26.8 million in 2050 ). Alternatively, data suggests that there will be 13.5%  fewer people aged under 55 years by 2050 in EU member states, which implies a progressive shrinking of the active population. 

    With population aging coupled with an extended life expectancy, there will be new demand for serviced housing, an increase in the number of pathologies due to old age, an increase in the number of chronic diseases and overall, increased demand for healthcare. But where do European Union member states stand in terms of infrastructure, adapted to the needs of an aging population? Naturally, for an aging population faced with a greater risk of reduced mobility and greater healthcare needs, urban environments offer a number of advantages which can improve the lives of older people: better access to public transportation, a greater variety of housing options, more public and commercial services. At the international level, the World Health Organization on Age Friendly Cities (AFC) addresses the issue as do state initiatives such as France’s Plan Vieillissement et Solidarités (2003 to 2006) and Plan Solidarité grand âge (2007 to 2012) which spurred investment in the construction and renovation of nursing homes and the development of long-term care services.  However, governments alone will not be able to finance the galloping costs associated with healthcare, especially with a dwindling working-age population. Private capital is necessary to fill the divide between waning supply and increased healthcare services usage. 

    The defensive profile of healthcare assets

    Generally speaking, healthcare assets (senior housing units, care homes, clinics) offer the advantage of being non-cyclical. They have a more defensive profile, based on strong fundamentals and long-term trends, namely structural changes in demographics, alternative living arrangements and an overall undersupply of operational assets. The healthcare real estate market is still relatively modest in terms of investment volume. Supply remains an obstacle for investment volume to scale up and has pushed investors to look beyond their domestic markets for opportunities.

    Healthcare assets continue to offer a relatively competitive risk/return profile as well as portfolio diversification opportunities. 2022 was marked by a tightening of monetary policies. The rise in risk-free rates mechanically pushed up real estate yields, the extent of which varies across assets and markets. According to our experience, healthcare real estate yields are resisting better than other sub asset classes across core Europe; the limited and largely regulated supply supports the value of healthcare assets.  

    ESG investment strategies, a supporting factor of healthcare real estate

    As investment strategies are increasingly articulated around Environmental, Social and Governance criteria, investors are naturally seeking diversification opportunities in the alternative real estate segment. The growing emphasis on health, well-being and quality living for the elderly is a supporting factor for healthcare assets as is the structural shortage which is emphasized by an aging population. 
     

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    news-3409 Fri, 10 Feb 2023 15:58:00 +0100 Notice: modification of the " La Française Rendement Global 2025" (EN - UK) /en/who-we-are/news/detail/notice-modification-of-the-la-francaise-rendement-global-2025-en-uk/ Notice: modification of the " La Française Rendement Global 2025" sub-fund of the "La Française" SICAV Dear Sir/Madam,

    You are a shareholder in the " La Française Rendement Global 2025" sub-fund of the La Française SICAV (hereinafter, the "Funds"), and we thank you for the trust you have placed in us.

    We wish to inform you that La Française Asset Management, the Fund's management company, has decided to allow the fund to utilise up to 15% of its net assets in options on CDS.

    This change, which will take effect on 15 February 2023, is not subject to AMF approval and has no impact on the management method, the maximum exposure ranges in force, or the investment strategy and fees of the Funds, which remain unchanged.

    The prospectus and PRIIPs KID of the Funds will be modified accordingly. The other characteristics of the Fund remain unchanged.

    We would like to draw your attention to the need and importance of reading the key information document of the Fund. This document is available at www.la-francaise.com.

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    news-3397 Wed, 08 Feb 2023 14:23:26 +0100 Alger On the Money : At Your Service /en/who-we-are/news/detail/alger-on-the-money-at-your-service/ by Alger, a La Française partner firm At its core, Software-as-a-Service (SaaS) is a way of providing access to applications over the  internet. Further, SaaS has become an essential part of the software industry, with businesses  relying on SaaS applications to improve efficiency and operations. What are the key drivers that  have advanced SaaS adoption and how might investors be positioned to capitalize on future  industry growth? 

    Some of the most common SaaS applications include customer relationship management (CRM), enterprise resources planning and e-commerce. SaaS has many potential advantages including  flexibility, scalability, predictability, and affordability. Not only can SaaS providers give access to users anywhere in the world, but it is also a cheaper alternative for many businesses. This is because SaaS customers no longer need to invest in expensive on-premises software products up-front and can instead opt-into a recurring payment stream which can grow with their needs.

    As a result, this recuring revenue model has allowed SaaS companies to scale quickly thanks to the low incremental cost of servicing additional customers. Referencing the chart above, the overall SaaS market from 2015 through 2021 saw a compounded annual growth rate (CAGR) of 29%, according to Gartner. Moreover, the global SaaS market is projected to reach $702 billion by 2030 (or a 20% CAGR), according to Allied Market Research. 

    Innovative industries, such as SaaS, tend to experience growth during challenging economic environments, making them potentially less impacted by a recession (see our note on what is recession resistant). We believe SaaS, in particular, should be more impervious to economic weakness because once applications and workloads are implemented, customers are likely to avoid the headache of switching providers or paying the high cost of on-premises software deployment. With potential strong long-term growth and valuation multiples less expensive than they have been in years, SaaS companies appear attractive, in our view.

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    news-3395 Wed, 08 Feb 2023 09:50:00 +0100 LA FRANÇAISE REAL ESTATE MANAGERS ACQUIRES OFF-MARKET A SENIOR HOUSING UNIT IN AMIENS (80) /en/who-we-are/news/detail/la-francaise-real-estate-managers-acquires-off-market-a-senior-housing-unit-in-amiens-80/ La Française Real Estate Managers (REM), a real estate asset management company with €31 billion in assets under management (30/11/2022), has signed a forward purchase agreement for a senior housing unit of nearly 5,500 m2 , located at 4 rue Dejean in Amiens, also known as the “Little Venice of the North". This investment is part of a separate account mandate granted by a Danish institutional investor to La Française REM. The project, co-developed by Groupe Duval and Vinci Immobilier, involves a senior housing unit (ground floor + 5) composed of 123 apartments, ranging from studios to three-room apartments, and provides a common area of 831 m2 and bicycle storage. Delivery is scheduled for December 2024. The residence, which is built in a "U" shape around a green space, will offer – for a competitive monthly rent – a wide range of services, including 24-hour surveillance, fall detection systems, a daily activity programme, hairdresser, gym, fitness centre, etc. The residence will deliver good energy and environmental performance with the BIODIVERSITY and INTAIRIEUR labels as well as a connection to the district heating network.

    Ideally located a few minutes walk from all basic amenities and the train station, the residence has been 100% pre-let to Happy Senior (Groupe Duval) under a long-term lease.

    Leslie Villatte, Director of Institutional Real Estate Investments and Development – France of La Française Real Estate Managers – Institutional Division, concluded: “This new senior housing unit completes the portfolio of our long-standing institutional investor. The limited supply of senior housing units coupled with competitive pricing will support the occupancy rate of the residence and contribute to the valuation of the asset."

    For this operation, La Française REM was advised by Lexfair (Virginie Blanc), Reed Smith (Carole Steimlé) and Egis.
     

     

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    news-3394 Fri, 03 Feb 2023 09:07:01 +0100 Deepshikha Singh of La Française appointed to Advisory Group of Workforce Disclosure Initiative (WDI) /en/who-we-are/news/detail/deepshikha-singh-of-la-francaise-appointed-to-advisory-group-of-workforce-disclosure-initiative-wdi/ Deepshikha SINGH, Deputy Head of La Française Sustainable Investment Research & Head of Stewardship for La Française AM has been appointed to the Advisory Group of the Workforce Disclosure Initiative (WDI) Which seeks to mobilise investors to ensure companies disclose comparable and comprehensive data of their workforce practices and help increase the provision of good jobs worldwide. Driven by ShareAction, the WDI investor coalition is made up of 63 institutions, representing $10 trillion in assets under management.

    “As a signatory and enthusiastic supporter of the Workforce Disclosure Initiative, La Française AM seeks to engage with companies on key issues impacting their sector and workforce, thereby promoting transparency, and improving the quality of jobs. The data collected by the annual WDI survey aims to fill the gaps and lack of comparable data on the workforce disclosures and enables investors to address issues collectively and systematically. It is also vital in preparing companies and financial institutions for increasingly stringent regulations like the social taxonomy in EU. The WDI provides companies with key insights into their own practices and gives them the unique opportunity to benchmark themselves against peer organisations, allowing them to identify data gaps they have not considered before. This gap analysis and helpful iterative process is key preparation for any form of workforce legislation. I’m thrilled to take on a more active role regarding this initiative and thank WDI for their confidence,” concluded Deepshikha SINGH.
     

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    news-3391 Tue, 31 Jan 2023 17:35:30 +0100 PRE ECB Commentary February 2023 /en/who-we-are/news/detail/pre-ecb-commentary-february-2023/ For now, the ECB is determined to stay on course. Uncertainty lies beyond February meeting It is widely expected that the European Central Bank (ECB) will raise its interest rates by 50 basis points (bps) at the February meeting. 

    Please find below what we expect:

    • We expect the ECB to increase its interest rates by 50 bps, bringing the deposit rate to 2.5% and the Refi rate to 3.0%.
    • We expect the Governing Council (GC) to reaffirm that interest rates still need to reach a sufficiently restrictive level and remain elevated long enough to bring down inflation to its 2% target in a timely manner. 
    • We expect ECB President Christine Lagarde to reiterate the meeting-by-meeting approach to calibrate monetary policy. We believe she will indicate that the pace of policy tightening will be reassessed at the March meeting as economic projections will be updated.
    • We do not expect Christine Lagarde to reaffirm that “based on the information that we have available today, that predicates another 50-basis-point rate hike at our next meeting.”
    • We expect the ECB to announce the details of Quantitative Tightening (QT).

    In summary, the Governing Council will most likely try to maintain strong communication in order to avoid inflation expectations becoming de-anchored. However, with energy prices falling, the rising Euro and a worrying Bank Lending Survey, it is going to be difficult to keep this same message at the following meeting in March. We expect interest rates to decrease after this week’s meeting.
     

    This commentary is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-3390 Tue, 31 Jan 2023 09:36:32 +0100 Rewiring ‘ESG’ in 2023 /en/who-we-are/news/detail/rewiring-esg-in-2023/ La Française Sustainable Investment Research In 2022, ESG remained in the spotlight. Given economic turmoil, the war in Ukraine, stubbornly high inflation, shifting investor, political and regulatory sentiment across the globe, the ESG space has been marred with news, controversies, and debates. As sustainable investors, we are so to speak stuck between a ‘rock’ (fund performance & alpha generation) and a ‘hard place’ (evolving regulations and policies). In 2023, we expect the generic term ‘ESG’ to be completely rewired, taking on a whole new meaning well beyond traditional Environmental, Social and Governance criteria.

    E - for Evolution, Engagement and Environment The term ‘ESG’ came under scrutiny during 2022.

    While in the US, we saw a growing conservative backlash to ESG investing, rising energy and food prices will continue to raise the question of sustainability vs security across the world. But these developments need not be considered as headwinds to ESG investing. It is, on the contrary, the catalyst we need for change. ESG must evolve from a niche strategy to an overarching investment philosophy. In 2023, we expect asset managers, companies and regulators to broaden the scope of ESG and further enforce regulations.

    In 2023, we expect a growing focus on engagement and stewardship among investors. Investors need to act as partners with their investee companies in order to generate a meaningful impact on overall returns and portfolio value. A major obstacle to investors effectively deploying their influence as active owners and to delivering long-term value is the limited resources that the investment industry currently dedicates to stewardship. To address this, the Principles for Responsible Investing (PRI) have launched a ‘Resourcing for Stewardship project’ to research and assess the appropriate level of resources that institutional investors should be prepared to dedicate to stewardship activities and to address systemic sustainability issues. The increase in the number of collaborative initiatives being launched to address these issues – PRI Advance (human rights), Nature Action 100 (Biodiversity) – should continue.

    The concept of environmental sustainability is no longer synonymous with climate change. It is now commonly accepted that climate action is doomed to fail unless the negative externalities on biodiversity, water, and waste (circular economy) are addressed. The UN Biodiversity Conference in December brought nature into the limelight, while COP27 dedicated specific days to Biodiversity and Water issues. The second and third sessions of the Intergovernmental Negotiating Committee (INC) to develop an international legally binding instrument on plastic pollution will take place in 2023, with an ambition to deliver the document by the end of 2024. We expect more investments to be redirected to natural capital and circular economy strategies, and their interplay with climate transition.

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    news-3387 Fri, 27 Jan 2023 16:18:58 +0100 What to expect at the upcoming FOMC meeting: a deceleration in rate hikes to a more traditional pace of 25 bps. /en/who-we-are/news/detail/what-to-expect-at-the-upcoming-fomc-meeting-a-deceleration-in-rate-hikes-to-a-more-traditional-pace-of-25-bps/ We expect that the Federal Open Market Committee (FOMC) will slow down hike rates from 50 basis points (bps) to 25 bps at its February meeting. Please find below what we expect:

    • The FOMC to hike rates by 25 bps to a range of 4.50%-4.75%.
    • Fed Chair Powell will reiterate the Fed’s commitment to restore price stability despite the deceleration in the pace of rate increases. He will reaffirm that rates will probably need to go higher (i.e., for a peak within a range of 5.00%-5.25% by the end of 2023 according to the policymakers’ last median forecast). Chair Powell will also reiterate that the Fed will keep rates high until “the job is done” (i.e., bringing down inflation to the 2% target). 
    • We expect Jerome Powell to keep the door open for a pause in rate hikes at the March meeting subject to the outlooks on both inflation and real economic activity. He might underlign that over the last 3 months, the annualized inflation rate has been in line with their objective, which is obviously good news.  As Fed Vice Chair Lael Brainard recently said, “the FOMC moved policy into restrictive territory at a rapid pace, this will enable us to assess more data as we move the policy rate closer to a sufficiently restrictive level, taking into account the risks around our dual-mandate goals”. 
    • The Fed will continue its quantitative tightening ($95bn/month since September 2022). 


    In summary, we expect the Fed to try to keep flexibility and optionality open as monetary policy moves to a more restrictive stance. At this committee, we believe risks are on the dovish side with U.S. interest rates lower.

    Disclaimer
    This commentary is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-3381 Fri, 20 Jan 2023 14:28:02 +0100 How Cheap is Small Growth? /en/who-we-are/news/detail/how-cheap-is-small-growth/ Growth stock valuations have declined considerably over the past year, with small growth stocks seeing significant multiple compression. How do these valuations compare to history and what might they imply going forward?

    • The price-to-earnings (P/E) multiple of the S&P 600 SmallCap Growth index was one of the lowest that we have observed at the end of December 2022.
    • As the chart above suggests, there is a strong historical relationship between P/E and subsequent annualized returns. Historically, below-average P/E multiples in small cap growth, which we observe currently, have led to above-average returns.
    • We’ve also observed that small growth (S&P 600 SmallCap Growth) appears attractive on a relative basis to the S&P 500 (more than a 17% discount based on price-to-next 12 months consensus EPS estimates as of the end of December 2022). As a result, we believe that U.S. small cap growth may be an attractive area of the stock market for long-term investors. 
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    news-3377 Tue, 17 Jan 2023 16:31:06 +0100 La Française Real Estate Managers acquires grade a offices in prime manchester city centre location /en/who-we-are/news/detail/la-francaise-real-estate-managers-acquires-grade-a-offices-in-prime-manchester-city-centre-location/ The European real estate asset manager, La Française Real Estate Managers (REM), acting on behalf of two collective real estate investment vehicles, has acquired the iconic Manchester city centre office, 101 Barbirolli Square, from AEW for c. £47 million. The 87,000 sq ft Grade A office building (six upper floors) is fully let to multiple tenants. 

    The property recently underwent a comprehensive refurbishment programme to create best-in-class office accommodation in the city, with strong Environmental, Social and Governance (ESG) credentials. The refurbishment works included upgrading the building with LED lighting and the installation of air-source heat pumps and electric vehicle car charging points, with the property also boasting an Energy Performance Certificate (EPC) rating of B. 

    The project was overseen by award-winning architects, 5plus, and provided a new, remodelled arrival experience, improved the natural lighting on each floor and provided extensive, high-quality changing and shower facilities. 

    Conveniently located adjacent to St Peter’s Square, 101 Barbirolli Square provides access to some of the city centre’s most prestigious venues including Bridgewater Hall, Central Library and The Midland Hotel. 
    Peter Balfour, Head of Real Estate UK for La Française Real Estate Managers, said: “101 Barbirolli Square is a complementary addition to the expanding La Francaise REM UK portfolio. The high-quality refurbishment, with a particular focus on ESG, coupled with the property’s central location provides an attractive workplace for occupiers. Manchester has been a target market for some time, being a vibrant European City that is home to many successful national and international companies underpinned by a dynamic workforce." 
    JLL and Ashurst LLP advised La Française Real Estate Managers, while Savills and Pinsent Masons advised the seller.

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    news-3375 Tue, 17 Jan 2023 09:19:53 +0100 Chatting with the Future /en/who-we-are/news/detail/chatting-with-the-future/ On November 30th, 2022, OpenAI launched an artificial intelligence (AI) chatbot prototype called Chat GPT that has surged in popularity. In fact, the platform garnered more than one million users within the first week of launch. Is this really the next “big thing” and how might this impact investors and the global economy? What is Chat GPT?

    GPT, or Generative Pretrained Transformer, is a type of large language model developed by OpenAI. It is trained on a vast amount of text data and can generate human-like text in response to a given prompt. GPT-3 is the latest version of this model and is capable of generating highly realistic and coherent text on a wide range of topics. Some people use GPT models for tasks such as language translation, summarization, and text generation. However, it is important to note that GPT models are not perfect and may produce errors or nonsensical text at times.

    Why should businesses care about Chat GPT? 

    Chat GPT can help improve the efficiency and accuracy of natural language processing tasks, which can in turn improve a business’s bottom line. For example, a business could use GPT-3 to create a more accurate and efficient chatbot for customer service, which could handle more customer inquiries in less time and with fewer errors. Additionally, GPT-3’s ability to generate human-like text can be useful for creating more engaging and personalized experiences for customers, which can drive customer loyalty and potentially increase revenue.

    Chatting with the Future On November 30th, 2022, OpenAI launched an artificial intelligence (AI) chatbot prototype called Chat GPT that has surged in popularity. In fact, the platform garnered more than one million users within the first week of launch. Is this really the next “big thing” and how might this impact investors and the global economy? The responses to the questions above actually came from Chat GPT via natural language processing technology. Could you tell? Even more amazing, the program can actually write code as well. Imagine the implications when software is routinely writing software. As the chart indicates, Chat GPT is quickly becoming a popular AI innovation, thanks to its deep roots in a neural network combined with training on a huge amount of data (discussed in The Future Just Arrived). We believe AI innovations like Chat GPT may significantly change how we utilize software in the future and how we work and live, helping us all to become more productive.

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    news-3373 Thu, 12 Jan 2023 16:58:47 +0100 Alger on the Money Turning Trash into Treasure by Alger, a La Française partner firm /en/who-we-are/news/detail/alger-on-the-money/ When people think of landfills, they tend to imagine unsightly mountains of trash emitting foul odors. However, modern landfills have become civil engineering marvels, designed to protect human health and the environment. While investors might worry about current market uncertainty, they may look to one area that could provide a durable competitive advantage: trash.  Since the early 1990s, environmental and political pressures around waste management resulted in a dramatic reduction in landfills. This has created a supply-demand imbalance that favors the waste landfill network, notably in the northeast, where landfills in highly populated areas hold strong pricing power. Moreover, stringent waste management regulations have resulted in an added layer of cost to the industry, creating a sizable economic moat for larger companies.

    • In addition to regional landfill dominance, successful waste companies have gone through a technological revolution that has helped reduce operating costs and improve their environmental footprint. For example, investments in automation and collection software that optimizes trucking routes have significantly improved operational efficiencies and worker safety. Further, investments in the utilization of landfill gas – a natural byproduct of the decomposition of organic material in landfills – have the potential to convert waste into a viable fuel source for collection fleets and nearby communities.
    • In our view, municipal and local governments are likely to continue to outsource waste operations due to regulatory and environmental complexities, potentially safeguarding the competitive advantage for larger waste companies. We believe public waste companies with vertically integrated operations, innovative collection technology, and an established regional landfill dominance are well positioned for predictable, long-term growth. 
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    news-3368 Tue, 27 Dec 2022 15:39:34 +0100 COP15 – MOVING ON /en/who-we-are/news/detail/cop15-moving-on/ by: Deepshikha Singh, Deputy Head of La Française Sustainable Investment Research & Head of Stewardship The Fifteenth UN Biodiversity Conference is finally over. After a long hiatus of around two years, the ‘lesser known’ environment-focused Conference of Parties – COP15 – ended on Monday, the 19th of December 2022 in Montreal, Canada with the adoption of the ‘Kunming-Montreal Global Biodiversity Framework’ (GBF), including 4 goals and 23 targets to be achieved by 2030. It has been hailed as a ‘landmark’ moment in humanity’s attempt at reversing the nature loss to secure our own health and well-being alongside the planet. Representatives of 188 governments on site (95% of all 196 Parties to the UN CBD (Convention on Biological Diversity), as well as two non-Parties – the United States and The Vatican), finalized and approved measures to contain the ongoing loss of terrestrial and marine biodiversity. 


    Overarching goals have managed to cover the most pressing issues regarding nature and biodiversity loss.  It was encouraging to see the final text having much less ambiguity than what had been discussed over the past year in Open-Ended Working Groups. Targets are quantitative and measurable, incorporate the “whole-of-government and whole-of-society approach” and focus on making finance work for nature. The agreement also obligates countries to monitor and report every five years or less on a large set of "headline" and other indicators related to progress against the GBF's goals and targets. The CBD will combine national information submitted by late February 2026 and late June 2029 into global trend and progress reports.
     

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    news-3366 Mon, 19 Dec 2022 14:37:00 +0100 La Française Real Estate Managers finalises the acquisition of 100% of the shares of RDV Invest which owns “De Veldekens”, a quality care home in Antwerp (Belgium) /en/who-we-are/news/detail/la-francaise-real-estate-managers-finalises-the-acquisition-of-100-of-the-shares-of-rdv-invest-which-owns-de-veldekens-a-quality-care-home-in-antwerp-belgium/ La Française Real Estate Managers (REM), acting on behalf of a collective real estate investment vehicle, has acquired “off-market” from AG Real Estate 100% of the shares of RDV Invest, a company owning a quality care home property, “De Veldekens”, located in one of the most soughtafter residential districts of Antwerp, adjacent to a public park.

    The property is located at Grote Weide 2 in Berchem, in a mixed-use neighbourhood comprised predominantly of residential, educational and recreational facilities. Antwerp-Berchem train station is located 2.7 km from the property and is one of Belgium’s largest railway hubs providing convenient connection to all major Belgian cities as well as to Brussels Airport.

    Built in 2008, the property consists of a single “L” shaped building with 5 upper floors. The design of the property mirrors the traditional Flemish architectural style, but with modern features. The property offers 7 251 m2 and is currently operated with 160 licenced beds. The property is operated, under a long-term lease, by Vulpia, one of the Belgium’s largest independent care homeoperators with over 2 800 employees, operating 40 care homes, representing more than 4 000 beds.

    The property is well serviced with central social areas, balconies on each floor, a restaurant, pharmacy, hairdresser, lifts, gardens etc. The asset boats a good energy performance and is largely equipped with LED lighting. The asset is planned to undergo small renovation works including the installation of solar panels on the roof.

    Jérôme Valade, Head of Healthcare Real Estate at La Française REM concluded, “De Veldekens is one of the few privately operated care homes in the area and is widely considered a quality care home given the variety of amenities, the good property maintenance and the competitive financial offer. In addition to the quality of the operator and the asset itself, restrictions on new care-home openings which are subject to licenses in Flanders until 2025, is very positive from a market positioning perspective and should contribute to ensuring a sustainably highoccupancy rate over the long term.”

    For this acquisition, La Française REM was advised by the JLL BeLux Capital Markets team, Loyens & Loeff (legal), PwC (tax & financial aspects), Arcadis (technical due diligence) and Your Care Consult (operator due diligence). The seller was advised by the CBRE Brussels team.

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    news-3362 Mon, 19 Dec 2022 11:29:42 +0100 NOTICE TO SHAREHOLDERS OF THE SUB-FUND CARBON IMPACT INCOME (THE “SUB-FUND”) /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-carbon-impact-income-the-sub-fund/ Dear Shareholder,

    The Company’s board of directors (the "Board") hereby informs you that the classification of the SubFund under the disclosure regime of the article 8 of the Regulation 2019/2088 on sustainability-related disclosures in the financial services sector (the “SFDR”) will change as from 1st January 2023.

    The Sub-Fund currently pursues a sustainable investment objective and is consequently classifiedunder the disclosure regime of article 9 of the SFDR. The Commission Delegated Regulation (EU)2022/1288 supplementing the SFDR (the “CDR”), applicable as from 1st January 2023, now requires
    that funds under this disclosure regime should make sustainable investments only (with a few exceptions).

    The Sub-Fund will not be able to meet the characteristics required by the CDR to remain classified under the disclosure regime of article 9 of the SFDR, as from 1st January 2023. It has therefore been decided to reclassify the Sub-Fund under the disclosure regime of article 8 of the SFDR, which applies to funds promoting environmental, social and or governance (ESG) characteristics.

    The change will not have an impact on the way the Sub-Fund is managed, the investment strategy, the asset allocation and the risk profile.

    If you do not agree with the changes mentioned above, you may request the redemption of your share until 11:00 on 20 January 2023. Shareholders are reminded of the fact that in compliance with the prospectus of the Company no redemption fee is payable in case of redemption of shares.

    The updated version of the prospectus reflecting among others the above change will be available at the registered office of the Company as soon as visa-stamped by the Luxembourg supervisory authorityof the financial sector.

    Yours faithfully,

    On behalf of the Board 

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    news-3356 Tue, 13 Dec 2022 17:34:51 +0100 Pre-FED commentary /en/who-we-are/news/detail/pre-fed-commentary/ signed by François Rimeu, Senior Strategist, La Française AM. No victory lap yet, but some relief

    It is widely expected that the Federal Open Market Committee (FOMC) will slow down hike rates from 75 basis points (bps) to 50 bps at its December meeting. The Federal Reserve will update its Summary of Economic Projections (SEP) which will indicate lower growth and higher inflation for 2023. We expect the dot plot to show a higher terminal rate at 5.1% in 2023 which implies a range of 5%-5.25%.

    Please find below what we expect:

    • The FOMC to hike rates by 50 bps to a range of 4.25%-4.50%.
    • Mr. Powell will repeat that future policy rate decisions will continue to be dependent on incoming data. More specifically monetary policy should focus on the labor market dynamic and wage growth consequences on services inflation (less housing component). 
    • We do not expect Chair Powell to provide explicit guidance about the rate move in February, leaving options open for another 50-bps hike, a further downshift to 25 bps or even doing nothing at that meeting.
    • Jerome Powell to postpone the possible pivot on monetary policy to 2023. 
    • On the side of the dot plot, we expect to see the median dot up from 4.6% to 5.1% in 2023 given the resilience of the U.S. labour market. We do not exclude seeing one or two dots at 5.4%. By then, Fed policymaker projections will show the first rate cuts in 2024 with the median rate at 4.1% which will show dispersion in Fed members’ opinions.  The median dot will converge toward the median longer-term neutral rate (2.5%) at 2,9% in 2025. 
    • On new economic projections, we expect them to indicate higher growth in 2022 (from 0.2% to 0.5%) but lower GDP in 2023 (from 1.2% to 1,0%) and 2024 (from 1.7% to 1.6%). For 2025, we expect growth will stay close to potential growth at 1.8%. 
    • We anticipate the committee to revise upwards its 2022 inflation forecast (Personal Consumption Expenditure, PCE) from 5.3% to 5.6% in 2023. We expect median inflation expectations will be unchanged in the next two years, at 2.3% in 2024 and 2.0% in 2025. 

     

    All in all, the Fed will conclude its last meeting of the year by a slower pace of rate increases which is justified by cumulative tightening and lags. The November CPI which was lower than expected is good news for the Fed even if it does not mean that the inflation fight is over considering the high level of wage inflation in the services sector in the US. But it will allow Mr. Powell to indicate that policy tightening is already having positive effects on the economy and that there is no rush now to overtighten. Considering the strong market reaction following the Inflation print and the fact that Mr. Powell will in our opinion insist that the fight is not over, rates could be somewhat higher after the press conference. 

     

    Disclaimer
    This commentary is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-3354 Thu, 15 Dec 2022 09:00:00 +0100 2022, a year of solid growth for La Française Real Estate Managers /en/who-we-are/news/detail/2022-a-year-of-solid-growth-for-la-francaise-real-estate-managers/ Against a backdrop of geopolitical tensions with the war in Ukraine, a tense economic environment with rising inflation and commodity shortages, real estate continues to justify its place within an asset allocation. In this context, La Française Real Estate Managers (REM) has consolidated its position as a key player in the European real estate market in 2022 by pursuing its real estate strategy based around sustainability, services and location. The year 2022 also marks an important stage in the group's international development. Noting a significant increase in demand from Asian investors, especially for European real estate, La Française REM has opened a second office in Asia – this time in Singapore – to fuel this growth.

    According to Philippe DEPOUX, CEO of La Française Real Estate Managers, "La Française Real Estate Managers has distinguished itself in 2022 thanks to our strategy of retaining and acquiring new tenant clients. This has involved the anticipation of their needs for contractual flexibility, services, control of energy consumption and long-term support. With 345 000 m2 leased or re-leased in 2022, the quality of our expertise in asset management makes all the difference. It enables us to maintain a high occupancy rate in our real estate assets, thereby delivering a performance in line with our investors' expectations. This is clearly reflected through the renewal and extension of our main French institutional mandate. This also allows us to preserve the value of our real estate portfolio. We thank our investors for their renewed confidence in these unprecedented times."

    Dynamic collection

    La Française REM announces forecasted gross inflows of more than €2.1 billion from private and institutional investors in 2022, driven in particular by investor interest in collective real estate investment vehicles and real estate unit-linked products. At the end of 2022, assets under management will amount to close to €31 billion, an increase of nearly 5% compared to 2021. 

    As in 2021, La Française REM stands to achieve record gross inflows for its collective real estate investment vehicles with close to €1.5 billion of inflows in 2022, compared to €1.4 billion in 2021. More generally, the management company ranked in top place on the French market at the end of September in terms of net inflows for collective real estate investment vehicle(1).

     (1)IEIF net inflows SCPI (Société Civile de Placement Immobilier), IEIF, including SCPI managed by Euryale AM and distributed by La Française REM

     

    Real estate transactions

    La Française REM has taken on the challenge of geographical diversification through its real estate platform (presence in London, Frankfurt, Munich and Paris). At the end of November, almost 10% of assets under management were located outside of France: Germany, Belgium, Netherlands, United Kingdom, Luxembourg and Ireland. The asset manager has strengthened its local market investment and asset management teams in response to investor demand and to ensure better market coverage. 

    By 2022, La Française REM will have completed nearly €2.2 billion in real estate transactions. It has completed €1.4 billion in acquisitions, paying particular attention to the location and Environmental, Social and Governance (ESG) credentials of the assets, and disposed of the equivalent of almost €800 million in assets. The majority of acquisitions (58%) were in the office sector, followed by light industrial (12%) and residential (12%). 67% of assets are located in Paris and Ile-de-France, while almost 13% of the acquisitions are outside France, mainly in Germany but also in the UK, Ireland and Belgium. Particular mention should be made of healthcare assets, a new sector invested by La Française REM since the early part of the year: 4 healthcare assets in France (portfolio of three assets in Paris and one asset in Lyon), 1 in Ireland and 1 in Belgium. Among the most emblematic and representative acquisitions of its European investment strategy:

    • Bristol, UK, mixed use building,
    • Bordeaux city centre (33), retail,
    • Dublin, Ireland, healthcare asset,
    • “Campus Cyber”, La Défense (92), office building,
    • Nuremberg, Germany, light industrial property - 'life sciences',
    • Antwerp, Belgium, two adjacent office buildings,
    • "Alphabet", Bois-Colombes (92), office building (off-plan),
    • Quimper (29), last mile logistics warehouse.


    Sustainability & Services

    With regards to its existing real estate portfolio, the asset manager continued to pursue its real estate strategy in 2022, focusing in particular on sustainability and services, with initiatives such as:
    •    support for its tenants as part of the eco-energy scheme,
    •    the development of strategic partnerships for energy consumption and
    •    the launch of Wellcome by La Française, a new services offer with two major innovations: contractual flexibility (with the “Agile” lease – a flexible commercial lease with a six-month rolling notice period) and a programme of exclusive benefits for the occupier. 

    Prospects for 2023

    We still anticipate a period of high inflation in 2023. Even if inflation were to fall, it would probably still be too high to allow central banks to ease their monetary policies unless the Eurozone were to fall into a deep recession. In this context, real estate is defensive investment to the extent that rents are indexed to inflation. In this environment, fundraising and investments should remain dynamic. However, an analysis by asset type and sector of activity will be key in identifying those assets which offer the greater potential for protection. Bearing this in mind, La Française REM will continue to favour the acquisition of offices leased to users in growth sectors (luxury, energy, transport, etc.), healthcare assets or managed residential properties which are less impacted by economic cycles, as well as city centre retail properties with brands operating in growth sectors. All of this falls within the scope of an ambitious policy to limit the consumption of fossil fuels and reduce greenhouse gas emissions. The value of existing assets will be defended by vigorous asset management, geared towards the satisfaction of the tenant.

     

    About La Française

    The major changes linked to environmental and societal challenges are opportunities to consider the future. The new levers which have been identified will constitute the growth and the financial and real estate performance of tomorrow. La Française management group’s forward-looking investment strategy is built upon this conviction and mission.

    The group uses its capacity for innovation and its technology to serve its customers and to design its investment solutions that combine performance and sustainability.

    Organised around two business lines, "Financial Assets" and "Real Estate Assets", La Française is developing its business with institutional and heritage clients in France and abroad.

    La Française manages over €50 billion in assets through its offices in Paris, Frankfurt, Hamburg, London, Luxembourg, Madrid, Milan, Seoul and Singapore (30/06/2022)

    La Française is a subsidiary of Caisse Régionale du Crédit Mutuel Nord Europe (CMNE), a member of Crédit Mutuel Alliance Fédérale (LT ratings A+/Aa3/AA- from S&P (12/2021) / Moody's (02/2022) / Fitch (05/2022). 

     

    Press contact:

    La Française

    Pascale Cheynet +33 1 43 12 64 25 | pcheynet@la-francaise.com
    Debbie Marty: + 33 1 44 56 42 24 | debmarty@la-francaise.com

    Legal notes:
    Issued by La Française AM Finance Services, home office 128 boulevard Raspail, 75006 Paris, France, regulated by the “Autorité de Contrôle Prudentiel et de Résolution” as investment services provider under the number 18673. 

    The portfolio management company La Française Real Estate Managers received AMF accreditation No. GP-07000038 on 26 June 2007 and AIFM accreditation under Directive 2011/61/EU, dated 24/6/2014 (www.amf-france.org).
     

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    news-3350 Mon, 12 Dec 2022 16:51:54 +0100 PRE ECB Commentary /en/who-we-are/news/detail/pre-ecb-commentary-3/ below commentary signed by François Rimeu concerning the upcoming ECB meeting. Inflation uncertainty vs growth uncertainty.

    At the December meeting, we expect the European Central Bank (ECB) to slow down the pace of interest rate hikes with a 50 basis points (bps) increase despite some debate over a 50 or 75 pbs hike. The central bank will update its macro-economic projections, including inflation projections for 2025, published for the first time. 


    Please find below what we expect:

    • We expect the ECB to increase its interest rates by 50 bps, bringing the deposit rate to 2.0%.
    • We expect ECB President Christine Lagarde to reiterate a meeting-by-meeting approach. She will signal further rate hikes beyond December without providing guidance on the level of the terminal rate.
    • We expect Mrs. Lagarde to be very cautious about the downside surprise on the November headline inflation print, considering that at the core level, consumer prices were unchanged at 5.0%. 
    • As widely expected, we expect the Governing Council (GC) to announce the key principles regarding the reduction of their bond holdings related to the asset purchase program (APP). Quantitative tightening (QT) could in our opinion start in March 2023. QT will most probably be a gradual and passive process with partial reinvestment of the maturing bonds and not involve the active selling of bonds. The GC will reserve the right to adjust the timing and pace of QT over time.
    • We expect the ECB to pursue reinvestments under its pandemic emergency purchase programme (PEPP) “until at least the end of 2024” and to apply flexibility to its reinvestments as the first line of defense against Eurozone fragmentation risk.
    • We expect Mrs. Christine Lagarde to reiterate that fiscal policy support should be temporary and targeted at the most vulnerable households in order to avoid inflationary pressure. 
    • On the economic front, we expect the ECB’s inflation projections to be revised higher in 2022 (from 8.1% to 8.5%) and 2023 (from 5.5% to 6.1%). Inflation would then be converging to the 2% target at the end of the forecast horizon (2024 at 2.3% and 2025 at 2.0%). On growth, projections will indicate slightly higher growth in 2022 (from 3.1% to 3.2%) but lower GDP in 2023 (from 0.9% to 0.3%) and 2024 (from 1.9% to 1.5%). We expect the new 2025 projection will show a trend of 1.5%.

    In summary, we expect the ECB to confirm its intention to pursue interest rate hikes in 2023 but at a slower pace, as the central bank will move in restrictive territory. We do not expect this meeting to push interest rates higher although we expect the ECB to maintain its hawkish communication. We believe the Fed’s committee and the US inflation report could have a bigger impact on financial markets.

     

    Disclaimer
    This commentary is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.
     

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    news-3347 Fri, 09 Dec 2022 09:20:56 +0100 La Française Real Estate Managers leases out 30 000 m2 in SO OUEST office building, Levallois- Perret (92, Paris region) to SAP and Industrious /en/who-we-are/news/detail/la-francaise-real-estate-managers-leases-out-30-000-m2-in-so-ouest-office-building-levallois-perret-92-paris-region-to-sap-and-industrious/ La Française Real Estate Managers (REM), acting on behalf of a Korean institutional investor, has leased out ca. 30.000 m2 in its office property “So Ouest” at 35 rue d’Alsace in Levallois-Perret (92). The asset manager is pleased to announce the 12-year lease renewal for ca. 26 700 m2 signed with SAP, the market leader in enterprise application software and occupant since 2014, and a new 12-year lease for ca. 3 400 m2 with Industrious, the American premium serviced offices provider for its second address in the Paris area. SAP was advised by Colliers EMEA, Corporate Capital Solutions and Colliers France. The So Ouest office building is 100% occupied.

    Designed by Glaiman & Epstein and fully developed between 2009 and 2011, the office property has a total area of 33 252 m2 over 22 upper floors and is well serviced with a staff restaurant, cafeteria, conference room with 171 seats, meeting and reception rooms, accessible terrace and a concierge’s lodge. 

    The highly visible property is situated in the heart of the Eiffel district and close to the main Parisian economic hubs (Paris, La Défense, Neuilly-sur-Seine, Saint-Denis). The dynamic business environment has attracted numerous international and national companies. The property offers good access to public transport with the metro line 3, the SNCF train line L and the RER line C within walking distance. So Ouest features good ESG (Environmental, Social and Governance) credentials with an HQE certification and a Low Energy Building-Renovation Label.

    David Rendall, Managing Director of La Française Real Estate Managers - Institutional Division, said “We are pleased to have successfully negotiated a long-term lease extension with SAP, the major tenant of So Ouest, and welcome Industrious. In doing so, we have secured long term occupancy which will enhance the value of the asset. We thank both SAP and Industrious for their trust.”
     

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    news-3343 Mon, 05 Dec 2022 17:45:09 +0100 Natural Capital publication /en/who-we-are/news/detail/natural-capital-publication/ The what, why and how of our natural capital approach The International Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) was established a decade ago in recognition that “the Biodiversity crisis is probably a greater threat than global climate change to the stability and prosperous future of humankind on Earth”. The latest reports by the organization indicate how nature loss has accelerated ex ponentially during the last 5 decades and how human activity through our use of ecosystem services and climate change are major drivers of it.

    More than half of the world’s economic output – US$44tn of economic value generation (World Economic Forum) – is moderately or highly dependent on nature. Abundant Biodiversity is necessary for many components of life, including the provision of food, energy, water and health. On the other hand, we are facing a global Biodiversity funding gap of more than $800mn per annum, and the financial industry can play a key role through capital allocation and stewardship.

    2022 is a landmark year for blended nature-climate action. The 2022 UN Climate Change Conference - COP27 - closed in November with world leaders calling for a ‘Paris moment’ for nature. What is needed now, according to leaders and experts, is a concerted effort by governments and corporations to tackle both climate change and Biodiversity loss simultaneously. The second edition of UN Biodiversity Conference (COP15) is scheduled to take place from December 7th to 19th in Montreal, Canada - after being postponed for more than 2 years now – hopefully, giving greater clarity on a global framework for managing Biodiversity loss. The European and French regulations surrounding SFDR and Taxonomy require us to monitor and report on our nature related risks and impacts.In addition, asset managers around the world are increasingly being asked about nature-related risks and opportunities by their clients. With global Biodiversity in decline, we, as investors, need to reconsider traditional economics and factor in the burgeoning concept of Natural Capital, in our investment processes and strategies.

    This paper intends to demonstrate our understanding of Natural Capital and Biodiversity risks (and opportunities), the reasons why we believe tackling nature risks are both a financial and legal imperative, and our approach towards doing so. It is work in progress and we hope to provide more tangible and detailed progress reports on this topic in due course.

    Developing a Natural Capital strategy has been a priority at La Française Asset Management (AM) over the course of 2022. We recognise the planetary emergency we are living in, and aside from reporting requirements, we realise the financial risks and opportunities that changing policy developments (like EU Biodiversity Strategy 2030) and higher scrutiny surrounding nature and the finance sector (like the Dasgupta Review) bring forth. We see two main kinds of investment opportunities across our issuer universe – ‘Transitioners’ with high dependencies and/or high negative impacts on nature but financial ability and strategic willingness to mitigate these, and ‘Enablers’ with solutions that can have a positive impact on nature on their own or by helping other firms to manage/reduce their risks.

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    news-3340 Mon, 05 Dec 2022 09:29:44 +0100 European Commercial Real Estate Market – record investment volume /en/who-we-are/news/detail/european-commercial-real-estate-market-record-investment-volume-1/ In a high inflation environment, real estate continues to be favoured by investors as it offers a good hedge against inflation and constitutes a defensive long-term investment. The European commercial real estate investment volume reached a record high in Q3 2022, in large part due to transactions initiated six to twelve months earlier. However, the deteriorating macro-economic and geopolitical environment and the volatility of financial markets suggests a different picture for year end. 

    Inflation has led central banks to pursue more restrictive monetary policies and property yields have started to rise, the magnitude of the rise is largely dependent on the quality and size of the asset as well as market vacancy.

    Rental returns are expected to be the main driver of property performance. Greater selectivity is resulting in the polarisation of markets: strong demand for central locations and higher vacancy in peripheral locations. Alternative real estate assets (such as healthcare), uncorrelated with the economic cycle, continue to offer a relatively competitive risk/return profile and offer portfolio diversification opportunities. 

    European Real Estate Investment Market, record investment volume

    The volume of commercial real estate investment in Europe reached a twelve-month high of €283 billion (as at end-September 2022). The Retail sector recorded the largest growth (+23%), followed by logistics (+12%) and offices (+10%). The UK, Germany and France continued to attract the majority of investors with investment volumes of €66bn, €63bn and €34bn respectively over a rolling 12-month period.

    While the market remains predominantly invested in offices, it is tending to rebalance towards other asset classes, against a backdrop of hyper-selectivity on the part of investors, i.e., a concentration of buyers on a few well-established markets.
    Transaction periods are increasing because of the ongoing debate over the fair valuation of assets.

    Office yields are on the rise

    2022 has been marked by the tightening of monetary policies. The rise in risk-free rates, i.e., with 10-year German, French and UK bonds at 2.1%, 2.7% and 3.2% (as at 30 September 2022) respectively, has mechanically pushed up real estate yields. The extent of the rise varies across assets and markets. Paris, Brussels and Amsterdam experienced the highest year-on-year growth with +50 basis points (bps), followed by Hamburg, Berlin and Munch (+35 bps). The number of forced transactions remains limited but could increase as assets are refinanced. 

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    news-3338 Fri, 02 Dec 2022 14:06:05 +0100 Preliminary CPI commentary /en/who-we-are/news/detail/preliminary-cpi-commentary/ by Audrey Bismuth, Global Macro Researcher, La Française AM In Europe, after several months of positive news (figures exceeding expectations), the preliminary consumer price index (CPI) surprisingly fell in November. Held back by energy prices, the eurozone CPI fell to 10.0% as compared to 10.6% in October. This was below the year-on-year forecast of 10.4%. However, excluding volatile factors (food, energy, alcohol and tobacco), prices remained unchanged over the month at 5.0%, a figure that falls in line with expectations.


    Annual inflation rose in three eurozone countries (Slovenia, Slovakia and Finland) while dropping back in Germany (11.3%), Italy (12.5%), Spain (6.6%) and the Netherlands (11.2%). In France, prices remained stable at 7.1%. 


    These figures are similar to the US data for October (7.7% compared to 8.2% in September). This should confirm the slowdown in the pace of the Fed's rate hike at the next FOMC (Federal Open Market Committee) on 14 December with a hike of 50 basis points (bps), bringing key rates to between 4.25% and 4.50%.


    However, in Europe, will a single statistic lead the European Central Bank to slow down monetary tightening to 50 bps during the committee meeting on 15 December, following two consecutive increases of 75 bps? 


    Despite this encouraging sign, we are not completely ruling out a 75-bps hike at the next Governing Council. The members most strongly opposed to higher inflation rates are worried about the knock-on effects and wage dynamics supported by a favourable labour market as well as the risk of destabilising inflation expectations. Last week, Isabel Schnabel, a highly influential member of the ECB's executive board, declared that "Data suggest limited room to slow hike pace". Elsewhere, on Monday, ECB President Christine Lagarde said, “I would like to see inflation having peaked in October, but I’m afraid that I would not go as far as that. There is too much uncertainty, particularly in one component, that is the pass-through in high energy costs at wholesale level into retail level, to assume that inflation has actually reached its peak. It would surprise me.”
                

    The information contained in this document is provided for information purposes only and is considered to be accurate at the time of publication and reflects La Française Group's current view of the markets and their trends. The information has no contractual value, is subject to change and may differ from the opinions of other management professionals. Published by La Française AM Finance Services, with its registered office at 128, boulevard Raspail, 75006 Paris, France, licensed by the ACPR (“Autorité de contrôle prudentiel et de résolution”) is an investment services provider under no. 18673. La Française Asset Management is a management company licensed by the AMF under no. GP97076 on 1 July 1997.
     

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    news-3337 Fri, 02 Dec 2022 09:52:51 +0100 A look at the markets /en/who-we-are/news/detail/a-look-at-the-markets/ Govies sensitivity / Investment Grade* Credit => It's time to gradually come back with an MT horizon of 6-9 months. A strong sense of uncertainty still lingers in the financial markets as they approach the year's end, but certain events have led us to change our position on risk-free or low credit risk bond assets.

    *Investment grade securities are bonds issued by borrowers rated AAA to BBB- by the rating agencies.

    The macroeconomic cycle We can confidently state that it is on the growth front that the situation has changed the least. Growth forecasts had been on the decline for many months, and this is precisely what we are observing. The latest PMI1 figures show that the vast majority of major economies are now below the 50 mark, meaning that activity is shrinking. This is the case in the United States, in the eurozone (especially in Germany) and also in China. Diving into the detail, we see that the latest S&P Global reports show employment indicators correcting, new orders decreasing and pressure on prices also falling.

    According to the various leading indicators we follow, the PMIs and other coincidental indicators (ISM2 , ZEW3 , IFO4 , etc.) should continue to decline in the coming months, which should translate into further reductions in growth forecasts in both Europe and the United States.

    1 Purchasing Manager Index: an indicator of the economic state of a sector.
    2 Composite index showing the evolution of manufacturing conditions in the United States.
    3 This indicator measures the expectations of analysts and institutional investors regarding the development of the German economy.
    4 The index assesses the business climate in Germany.

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    news-3324 Wed, 27 Feb 2019 15:57:00 +0100 The energy transition is led by a combination of innovative engineering and digitalization /en/who-we-are/news/detail/the-energy-transition-is-led-by-a-combination-of-innovative-engineering-and-digitalization/ FROM ENERGY CONSUMER TO ENERGY PROSUMER
    The energy sector is in the midst of a major transition, with massive disruption occurring across the entire energy value chain. This transition is primarily fueled by efforts focused on decarbonizing the global economy and a shift toward an increasingly clean, intelligent, mobile, and distributed energy ecosystem. Linear value chains supporting one-way power flow from centralized generation to the end customer will give way to a more sustainable, highly digitized, and dynamic energy system. This system will support two-way energy flow in which customer choice (optionality), clean energy, innovation, and agility command a premium. At the same time, various energy carriers will become increasingly interconnected and integrated (including electricity, liquid and gas fuels, and heat).

    Cloud based systems allow energy managers to access information with greater flexibility. By utilizing a cloud based system, users can store information from many different data acquisition systems and access and analyze this information from different sites with one application. In fact, such a system allows for easier portfolio management as it is possible to view all managed sites at once. Because energy managers are able to access information remotely, this also reduces on-site maintenance to only when absolutely necessary, saving time and expenses associated with manual maintenance.

    Cost reduction proves to be one of the greatest benefits of cloud based energy management systems as it allows energy companies to curb costs for the development of local infrastructure. Software innovation however is crucial to remain competitive. Because these systems are generally sold as a service, the consumer does not need to take care of the maintenance and updating of the database and infrastructure which again reduces wasted time and money that could be spent on implementing energy and money saving practices based on the data received. Additionally, clients only need to pay for what they use thereby reducing excessive overhead costs. Cloud services not only do minimize costs of software development and maintenance but also direct monetary costs, the cost of time and resources on maintaining in-house IT professionals and infrastructure on gathering, storing and analyzing energy data. This proves most beneficial for sectors that do not or cannot prioritize in-house energy management software experts.

    ENERGY EFFICIENCY AND ELECTRIFICATION
    Energy efficiency improvements will remain an important objective for every company as it is a key option to reduce costs and emissions and increase productivity. Energy efficiency improvements can be incremental, like better insulation or more efficient equipment, or they can be based on novel technologies such as different separation principles that can reduce the steam used in distillation (or enzymatic processes reducing the demand for heat to arrive at high temperatures). With the increased penetration of renewables in electricity markets and the resulting
    decrease in electricity prices, electricitydriven options to improve energy efficiency should become more attractive

    FLEXIBILITY AND STORAGE
    Changes in the energy system will inevitably lead to a higher volatility in energy prices, and most notably in electricity prices. Companies flexible enough to make optimum use of this volatility in prices will be the winners. Flexibility can be generated in various forms. Sometimes, there is flexibility in part of the process, for instance, in pulp and paper mills where the intermediate product, pulp, can be stored in large volumes. The level of pulp production can then be determined based on the price of electricity. Other flexibility options are connected to cogeneration units that can be operated depending on natural gas and electricity prices.
    Cloud based systems allow for greater deployment flexibility, meaning that it is easy to either upgrade or downgrade resources which proves a great advantage for energy management systems compared to owned infrastructure. This allows the consumer to reduce or increase site data acquisition and maintenance much easier and in response to demand. For energy management specialists and consultants, this proves especially beneficial as clients evolve, i.e. more sites are easily implemented into the system for better facilitated management.
    Furthermore, with the decreasing prices of batteries, electricity storage may become an attractive option for manufacturing companies. This is even more the case if freight fleets turn to full or hybrid electric: controlled charging can then be applied. Demand side management programs making use of intelligent control systems in a digitized environment will help to harvest the benefits of flexible production. All these options have the potential to use electricity
    when it is cheapest and thus decrease operational costs, and even lead to a decisive competitive advantage in electricity intensive production processes.
    Renewable Electricity and Renewable Heat energy have become the energy sources of choice for many companies; this choice is supported by RE100, an initiative of well over 100 companies, who have chosen to use 100% renewable electricity.
    This can include local production, external sourcing via power purchasing agreements (PPAs), or buying guarantees of origin and renewable energy contracts. Renewable electricity is becoming increasingly available at prices competitive with conventional power generation. Renewable power procurement by industrial end-users has rocketed in recent years and will continue to grow as costs of renewable energy are competitive with fossil energy generation.
    An important driver for this activity is the emergence of innovative PPA concepts, which offer manufacturers the possibility to hedge against the volatility of fossil fuels. Moreover, turning to renewable energybased production provides the opportunity to produce green products, which are becoming increasingly important for many market segments.

    CYBERSECURITY IS KEY
    Every business possesses sensitive, important information that is crucial to business operations and must be protected. Cloud-based services are the simplest way to keep information backed up and safe. Specifically, it is cited that small businesses are twice as likely as larger companies to implement cloud-based backup and recovery solutions. This solution saves time and large up-front investments. With cloudbased energy management software, energy data and savings analyses ares securely maintained and updated without much work from the customer.

    Case study:
    As part of its global Climate Commitment, Ingersoll Rand committed to a 35 percent reduction of its greenhouse gas (GHG) footprint by 2020. To deliver on this goal, the company targeted a 10 percent increase in energy efficiency compared to a 2013 baseline – and has achieved the goal two years ahead of schedule. Ingersoll Rand conducted an energy audit of its own large facilities and upgraded air conditioning systems, building controls and lighting, and eliminated energy leakage from its compressed air systems while measuring, validating and reporting the results. It reduced energy use by 109,000 MM BTUs and electricity consumption by 22,000 MWh, which is the equivalent of 26 million pounds of coal and the powering of 1,750 homes for one year. The company announced investments in renewable Energy technologies, further illustrating its Climate Commitment. At three large manufacturing sites in the U.S. and China, Ingersoll Rand initiated or commissioned on-site solar installations to address 15 percent of the energy load at these locations. This is equivalent to saving 560,000 gallons of gasoline and taking 1,000 cars off the road. In addition to on-site renewable energy sources, Ingersoll Rand has signed a power purchase agreement (PPA) for approximately 100,000 MWh of wind power annually.
    The PPA replaces 32 percent of the company’s U.S. electricity consumption with green energy, and reduces U.S. Scope 2 GHG Emissions from Electricity by 32 percent.

     

    Disclaimer
    This document is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128
    boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997

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    news-3310 Thu, 06 Feb 2020 14:55:00 +0100 La Française is convinced that the finance industry will play an essential role to limit global warming. /en/who-we-are/news/detail/la-francaise-is-convinced-that-the-finance-industry-will-play-an-essential-role-to-limit-global-warming/ Climate risks can potentially severely disrupt economic activity and create opportunities for companies that deliver or enable solutions to the climate emergency. Climate risks are likely to unfold in a “non-linear” way, i.e. there will be sudden economic shocks like extreme weather events rather than a steady transition. If high emitting sectors like Oil & Gas, Steel or Cement will be challenged, the move to a low carbon economy will impact every sector with winners and losers. Our role, facilitated by our expert research center Inflection Point by La Française, is to analyze and assess companies and sectors in order to invest in those winners of the transition to a low carbon economy. Our methodology is designed to project companies’ carbon emissions into 2030. The Low Carbon Trajectory (LCT), is a key component of our inhouse Carbon Impact Analysis.
    The Carbon Impact Analysis is focused on the transition risks and opportunities that companies face due to climate change. It allows us to construct portfolios that are aligned with a low-carbon economy as envisaged by the Paris Agreement. It provides us with investment insights into the specific climate risks and opportunities of companies and how they are managed. This Carbon Impact Analysis has three distinct components:

    • The Carbon Impact Assessment is a deep dive into the climate change exposure of a company and its management of the respective risks and opportunities.
       
    •  The LCT Methodology is a modelling approach allowing us to determine whether a company in a high emitting sector is in line with a given climate scenario. This methodology requires the selection of appropriate climate scenarios. We are using those provided by the International Energy Agency (IEA),  which provides us with the sectoral and regional activity and carbon emissions data for the period from 2014 to 2060 for three reference scenarios (2°, beyond 2° and above 2°). This is a dynamic process. It allows to capture past performance, current behavior and – most importantly – our evidence-based trend analysis. This forward-looking approach is a major improvement of our capability as an asset manager to assess climate change-related risks and opportunities for a given portfolio (equity and fixed income).We have built our proprietary de-carbonisation pathway to control the model design and the necessary assumptions. This is crucial as we are using the results in our investment process. We model sector-specific pathways for each scenarios used up to 2030. We then model Low-carbon Trajectories for companies and determine a confidence corridor which describes an area of potential outcomes. Finally, we contrast the sector pathway with the company-specific trajectory. This allows us to determine which warming scenario a company is currently aligned with. To determine this scenario, we compare for the period 2019 to 2030 the company’s annual carbon intensity level with each scenario level. We then sum the differences to see whether the company beats each scenario.
       
    • Then, we are engaging with many of our portfolio companies to hold them accountable.
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    news-3309 Thu, 04 Jun 2020 14:50:00 +0200 From Carbon Footprinting to Climate Risk Management /en/who-we-are/news/detail/from-carbon-footprinting-to-climate-risk-management/ Carbon emissions are one of the most developed datasets to be used in investment analysis. They are crucial inputs for ESG data models, carbon footprinting and climate risk assessments. In this report we discuss the properties and quality of carbon emissions data – both reported and estimated. The challenges relating to ESG data are well rehearsed: disclosure levels, reporting standards, time consistency, time series, auditing, materiality and aggregation – to name a few. Indeed, from this perspective, carbon datasets can be considered more mature than others, as some of these challenges are already being addressed by established organisations like the WRI, CDP, SBTi and many others.

    Nevertheless, given the importance of carbon data in our investment process we decided not to use carbon estimates provided by third-party data vendors – not least on account of the significant discrepancies which exist between data from different providers. In this report we address some of the challenges relating to inconsistent and missing disclosure and present our solution: the creation of a broad-based time series of carbon emissions covering all our equity holdings and most of our bond holdings.

    As we continue to further integrate ESG information into our investment processes, we are going back to basics by looking at carbon emissions data as a key component of ESG datasets. Carbon footprinting is an established yet limited use case for carbon data. Therefore, we employ complementary analytical tools based on our carbon data and estimation model that allow us to look ahead and to assess climate-related risks and opportunities more comprehensively. Through this integration we can design investment solutions like our Carbon Impact strategies that help provide the capital to bring about the transition to a zero-carbon economy.

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    news-3305 Tue, 21 Sep 2021 14:25:00 +0200 By Virginie Wallut, Director of Real Estate Research and Sustainable Investment at La Française Real Estate Managers September 2021 /en/who-we-are/news/detail/by-virginie-wallut-director-of-real-estate-research-and-sustainable-investment-at-la-francaise-real-estate-managers-september-2021/ During the first half of 2021, we began to glimpse the first signs of a revival of the European office real estate market. In Q2, the economy of the eurozone rebounded as sanitary measures progressively lifted. Investment and rental markets logically bounced back, and recent activity may be indicative of the start of a new cycle against the backdrop of new ESG-related (environmental, social and governance) regulations and changing investor and user behavior. Promising investment volume figures

    The figures are promising. After four quarters of uninterrupted decline (2020), the volume of office real estate investments continued to rise over the first two quarters of 2021, due in large part to accommodative financing conditions and favorable valuation perspectives. Across the board and with the United Kingdom in lead position, all European countries, apart from France, registered an increase in investment volumes. A rebound in France is expected in Q3 2021. Naturally, demand was focused on prime assets, with strong ESG performance. However, investors continued to shy away from dated assets given the capital expenditures necessary for renovation.

    Diverging yields of Primary and Secondary assets

    Prime office assets in Europe, particularly resilient, continued to offer attractive yields, especially in the low-for-long interest rate environment. However, investors are now demanding a risk premium, subject to local market conditions, on secondary assets.

    The perceived risk on centrally located assets remained weak in markets with low vacancy rates or on assets with promising value-added perspectives in light of new user behavior. The context was however quite different for peripheral location assets!

    During S1 2021 and across most European markets, prime asset yields registered a slight decrease. Alternatively, in certain markets, such as Madrid and Amsterdam, with high vacancy rates (over-supply), yields increased. Prime assets located in Paris and the primary German cities offered yields below 3%.

    Rebound in take-up

    The second quarter of 2021 was marked by a general rebound in take-up across European real estate markets. Some projects, liberating space, were even cancelled. Total take-up over twelve months ending Q2 2021 was slightly higher than year-end 2020. However, the rebound was not homogeneous across all markets. On average, the vacancy rate of European office real estate assets increased by 140 bps over the twelve-month period, ending Q2 2021.  No surprise that obsolete second-hand assets made up the bulk of supply. Conversely, vacancy remained low for centrally located assets that satisfy new user work habits. For example, the level of supply at the end of Q2 2021 amounted to only five months of take-up (based on average take-up over the past five years) in the central business districts of Berlin and Munich and nine months in Paris central business district. Supply remained weak in the main German cities and Luxembourg; vacancy rates were below 4%.

    Supporting factors for prime asset rental values

    The heavy demand for prime office assets in Q2 2021 should continue to support prime rental values. Alternatively, assets located in the suburbs of large cities such as Madrid or Milan or in sub-markets with excessive supply could suffer a correction in rental values. Across all of Europe, significant lease incentives have continued to widen the gap between headline and economic rental values. In the long-term, increasing construction costs and ESG performance booster measures could put upward pressure on rents.

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    news-3302 Fri, 11 Mar 2022 11:44:00 +0100 At the current rate of emissions, we could reach 1.5⁰C within 15 years. /en/who-we-are/news/detail/at-the-current-rate-of-emissions-we-could-reach-150c-within-15-years/ In the wake of COP26, 118 countries have updated their Nationally Determined Contributions (NDCs). This is very much welcomed, as based on the assessment of Climate Action Tracker in April 2021, the NDCs as they stood at the time would only limit warming to around 2.4⁰C above pre industrial levels. On the positive side, the Sixth Assessment Report of the
    Intergovernmental Panel on Climate Change (IPCC) shows that limiting the global temperature rise to 1.5°C by the end of the century is still possible. It will require immediate, rapid, and economy-wide greenhouse gas (GHG)
    emissions reductions, as well as the development of carbon capture technologies.

    We know what to do. According to the International Energy Agency (IEA), to reach net zero emissions by 2050, the world must invest $4
    trillion in clean energy annually. In 2021, just $775 billion was invested in renewables technologies globally.2 

    A clean energy world cannot be achieved without a clean power sector to ensure production and distribution of it. Power producers together account for 40% of all fossil-related carbon emissions (Figure 1) and Electric Utilities in particular have a key role in the transition to net zero: the share of electricity in the global energy mix increases in every IEA scenario.

    According to the latest IEA energy outlook, in order to reach net zero by 2050, almost two-thirds of the energy consumed must be electric. In absolute terms, this means that electricity generation will grow from 26,762 TWh in 2020 to more than 71,000 TWh in 2050 (figure 2).

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    news-3292 Mon, 22 Feb 2021 17:18:00 +0100 The last twelve or so months have seen a flurry of corporate commitments and a huge ramp-up in ambition to reduce carbon emissions. /en/who-we-are/news/detail/the-last-twelve-or-so-months-have-seen-a-flurry-of-corporate-commitments-and-a-huge-ramp-up-in-ambition-to-reduce-carbon-emissions/ It has been estimated that almost one quarter of global CO2 emissions and more than half of global GDP were covered by Net Zero commitments by June 2020.1 However, the gap between ambition and reality can often be very significant, for example, due to a lack of standards.2

    Global warming and the role of GHG emissions is a well-established fact.3 In response, carbon reduction efforts in the private sector have been made for decades. Such carbon reductions were reported, for example, as part of energy efficiency programmes.4 The goalposts have shifted in recent years due to the urgency of the climate crisis. Global warming has gained worldwide attention not least due to the Paris Agreement in 2015. Countries are now strengthening their commitments through setting Net Zero targets. Six countries have enshrined Net Zero reduction in law, five countries and the EU have proposed legislation, fourteen countries have targets in policy documents, while many more are discussing Net Zero targets.5

    In the private sector, carbon reduction has since become a strategic objective for many businesses and has evolved well beyond the isolated environmental targets of the past. Today, carbon reduction is a priority for many companies and their stakeholders – including shareholders and creditors. Yet, the voluntary nature of most efforts means that targets can be set through arbitrary parameters. What is needed to solve the climate crisis are commitments to reduce GHG emissions that are aligned with scientific global warming scenarios. A study of companies with science-based targets shows that these companies reduce emissions at far greater rates relative to emissions trends in the wider global economy.6

    1. These estimates include targets set by cities, regions, universities, investors and companies under the ‘Race to Zero Campaign’. See UN Framework Convention on Climate Change (2020).
    2.  Financial Times (2020). The problem with zero carbon pledges.
    3.  William D. Nordhaus (1976). Economic Growth and Climate: The Carbon Dioxide Problem. Yale University.
    4. See, for instance, Unilever’s ‘Environmental Performance 2000’ report which shows CO2 reductions from 1995 due to energy saving measures.
    5. See Energy & Climate Intelligence Unit for a detailed breakdown of country Net Zero commitments
    6. See SBTi (2021). From Ambition to Impact: Science Based Targets Initiative Annual Progress Report 2020

     

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    news-3288 Tue, 13 Oct 2020 16:52:00 +0200 Sustainable Investment Strategy /en/who-we-are/news/detail/sustainable-investment-strategy/ Our Group has been driven for many years by the ambition to be a responsible investor, to offer our clients profitable solutions that are tailored to their needs and to act in the interest of living well together. From its inception in 2008, La Française Group recognised the link between the economic, political, social and environmental worlds; it realised that the winners of tomorrow would be those who are able to anticipate and innovate and that the integration of ESG criteria into investment decisions would be a source of long-term value.

    From the start we built up internal resources, a research centre and experts to deal with an holistic analysis to appreciate the impact that ESG factors have on economic performance. This influence continues to grow stronger and we firmly believe it is more essential than ever to integrate these factors into our decision-making processes.

    The climate crisis is a reality – we have already consumed a significant portion of our natural resources. On top of this, the COVID 19 pandemic has further strengthened our awareness of social and health issues. These issues represent significant changes that offer opportunities to re-imagine the future and to turn the act of saving into a means of action.

    In this report you will discover how, in a very concrete way, that we are committed to innovation and sustainability ; they drive our investment solutions and allow each one of us to act individually and collectively and to engage.

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    news-3278 Thu, 24 Nov 2022 14:46:28 +0100 Two La Française AM “climate transition” equity funds distinguished with FNG-Label, 3 stars /en/who-we-are/news/detail/two-la-francaise-am-climate-transition-equity-funds-distinguished-with-fng-label-3-stars/ La Française AM is proud to announce that two of its “climate transition” equities fund, La Française LUX-Inflection Point Carbon Impact Global and La Française LUX-Inflection Point Carbon Impact Euro, have received the Forum Nachhaltige Geldanlagen (FNG) three-star Label for sustainable investment funds, valid for the year 2023 This distinction recognizes the quality of the research carried out by the extra-financial financial research team as well as the funds’ strategies, which are grounded on a comprehensive thematic approach that focuses on climate change. Both funds are classified Article 9 under the Sustainable Finance Disclosure Regulation (SFDR).

    The FNG-Label is the quality standard for sustainable investments on German-speaking financial markets: Germany, Austria, Liechtenstein and Switzerland. It was launched in 2015 after a three-year development process involving key stakeholders. The sustainability certification must be renewed annually. Successfully certified funds pursue a stringent and transparent sustainability approach, the application of which has been checked by the University of Hamburg by means of an independent review and assessment.

    The quality standard comprises the following minimum requirements:

    • Transparent and easy-to-understand presentation of the fund’s sustainability strategy in the context of the European SRI Transparency Code and the FNG Sustainability Profile,
    • Exclusion of armaments and weapons,
    • Exclusion of nuclear power (including uranium mining),
    • Exclusion of coal (mining and low power generation),
    • Exclusion of fracking and oil sands,
    • Exclusion of tobacco (production),
    • Exclusion in cases of systematically and / or severe violation of the principles of the UN Global Compact,
    • The fund’s entire portfolio is checked against sustainability criteria (social and environmental responsibility, good corporate governance, United Nations Sustainable Development Goals or others).

    La Française LUX-Inflection Point Carbon Impact Global and La Française Lux-Inflection Point Carbon Impact Euro were each awarded three out of three possible stars for their particularly ambitious and comprehensive sustainability strategies, which gained them additional points in the areas of institutional credibility, product standards, and portfolio focus (stock selection, engagement and Key performance Indicators).

    Thomas DHAINAUT, Head of Equites – Small and Large Caps at La Française AM, concluded: "This year marks a milestone for La Française AM. Our inaugural “climate transition” strategy (La Française LUX-Inflection Point Carbon Impact Global), first launched in 2015, has acquired for the third consecutive year the FNG Label and for the first year, the 3-star stamp! The fund boasts three valid labels (FNG Label – 3 stars, Greenfin and French SRI Label). Both of our funds La Française LUX-Inflection Point Carbon Impact Global and La Française LUX-Inflection Point Carbon Impact Euro measure up to the stringent assessment criteria developed by the FNG Label. The 3-stars signify that they pursue even more ambitious sustainable investment strategies." 

    La Française LUX – Inflection Point Carbon Impact Global: The fund aims to contribute to the transition to a low carbon economy while achieving long-term capital growth.

    Asset Class            Global Equities
    ISIN                I EUR C : LU1523323605 / R EUR C : LU1744646933 /
    T EUR : LU1744646859
    Investment horizon        5 years
    SRRI / Associated risks    6 (Associated risks: capital loss, currency, investment fund, emerging markets, equity, management, market, liquidity, operational, ESG investments)

    La Française LUX – Inflection Point Carbon Impact Euro: The fund aims to contribute to the transition to a low carbon economy while achieving long-term capital growth.

    Asset Class            Euro zone Equities
    ISIN                I EUR C : LU0414216654
    Investment horizon        5 years
    SRRI / Associated risks    6 (Associated risks: capital loss, credit, equity, ESG investment, investment fund, management, market, liquidity, operational)
     

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    news-3272 Thu, 24 Nov 2022 11:36:48 +0100 Notice: "La Française Carbon Impact 2026" sub-fund of the "La Française" SICAV _EN /en/who-we-are/news/detail/notice-la-francaise-carbon-impact-2026-sub-fund-of-the-la-francaise-sicav-en/ We hereby inform shareholders of the sub-fund "La Française Carbon Impact 2026" that the management company, La Française Asset Management, has decided to implement a net asset adjustment mechanism linked to swing pricing, with a triggering threshold for this sub-fund. 

    This change will come into force on 30 November 2022.

    The other features of the sub-fund remain unchanged. 
    We would like to draw your attention to the necessity and importance of reading the key investor information document of the sub-fund "La Française Carbon Impact 2026" which is available at www.la-francaise.com.
     

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    news-3265 Thu, 24 Nov 2022 10:46:48 +0100 Notice: "La Française Carbon Impact Floating Rates" sub-fund of the "La Française" SICAV_EN /en/who-we-are/news/detail/notice-la-francaise-carbon-impact-floating-rates-sub-fund-of-the-la-francaise-sicav-en/ We hereby inform shareholders of the sub-fund "La Française Carbon Impact Floating Rates" that the management company, La Française Asset Management, has decided to implement a net asset adjustment mechanism linked to swing pricing, with a triggering threshold for this sub-fund. 
    This change will come into force on 30 November 2022.

    The other features of the sub-fund remain unchanged. 

    We would like to draw your attention to the necessity and importance of reading the key investor information document of the "La Française Carbon Impact Floating Rates" sub-fund, which is available at www.la-francaise.com.
     

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    news-3260 Thu, 24 Nov 2022 09:30:00 +0100 LA FRANÇAISE ACCELERATES PAN EUROPEAN REAL ESTATE DEVELOPMENT WITH NEW RECRUITS /en/who-we-are/news/detail/la-francaise-accelerates-pan-european-real-estate-development-with-new-recruits/ La Française, international asset management group with €50 billion euros in assets under management of which over €30 billion are real estate assets (30/06/2022), is pleased to announce the arrival of four new recruits to its pan-European real estate platform:
  • Jonathan MANSIE, Director, Pan-European Transactions, based in London and reporting to David Rendall, Head of Institutional and International Real Estate for La Française Real Estate Managers (REM);
  • James HARMER, Asset Manager, based in London and reporting to Peter Balfour, Head of Real Estate UK for La Française REM;
  • Adil MESTAN, Investment Manager, based in Frankfurt and reporting to Robin Steinberg, Head of Transactions for La Française REM in Germany;
  • Vanessa Mayer, Asset Manager, based in Frankfurt and reporting to Carolin Hoser, Head of Asset Management for La Française REM in Germany.
  • Since the opening of its London and Frankfurt offices in 2014 under the leadership of David Rendall, the group has successfully developed its pan-European real estate business. Over 24% of real estate assets are managed on behalf of international investors (excluding France) and 10% of assets are located outside of France (France, Germany, Belgium, Netherlands, Ireland, UK and Luxembourg). 
    David Rendall, Head of Institutional and International Real Estate, La Française Real Estate Managers said, “Given the current challenges in the global market, we believe that it is an opportune moment to strengthen our platform to enhance our capability to deliver real solutions to our clients both locally and internationally.   These new recruits will further boost our growth.”
    ►      Jonathan MANSIE, Director, Pan-European Transactions, La Française Real Estate Managers (London)

    Jonathan has twenty-eight years of pan-European real estate business experience. He began his career with Jones Lang Wootton / JLL, first in the UK and then in France, before joining Constantine Land in 2004 as Acquisitions Surveyor and shortly thereafter Dunedin Property / Industrious Asset Management as Regional Property Director. In 2009, Jonathan joined London & Regional Properties as Senior Asset Manager responsible for a substantial, mixed-use portfolio located throughout the UK, comprising Central London offices, residential, retail, leisure, healthcare and PFI (Private Finance Initiative) properties. Prior to joining La Française, Jonathan was Managing Director, Origination & Acquisitions for Europa Capital in London where he was responsible for the origination of real estate opportunities in France and Southern Europe. Jonathan holds a Bachelor of Science in Land Management from De Montfort University (UK). As Director, Pan-European Transactions, Jonathan will pursue investment opportunities across Europe.

    ►     James HARMER, Asset Manager, La Française Real Estate Managers (London)


    James has been working in the London real estate market since 2016. Having started out at GL Hearn, James moved to Knight Frank where he spent two and a half years within the Fund Valuation department prior to joining the firm’s Asset Management department. James acted as an Asset Manager on the Pollen Estate, who’s ownership comprised a significant portion of East Mayfair including Savile Row and New Bond Street with sector experience covering primarily Offices and High-end Retail. James holds a Master of Science from the Royal Agricultural University. As Asset Manager, James will work primarily on the UK and Ireland portfolio as well as assist the team with investment opportunities with a focus on the London West End and Industrial sectors. 


    ►   Adil MESTAN, Investment Manager, La Française Real Estate Managers (Germany)
    Prior to joining La Française, Adil was an Associate with Goldman Sachs where he gained extensive experience across a variety of asset classes including office, retail and residential across multiple strategies, i.e., opportunistic, value-add and core + strategies. Adil holds a Master of Science in Real Estate Management and Investment from Napier University, Edinburgh. As Investment Manager, Adil will source real estate investment opportunities across Germany and the Netherlands.

    ►    Vanessa Mayer, Asset Manager, La Française Real Estate Managers (Germany)

    Vanessa has six years of experience on the German real estate market beginning in 2017 with Knight Frank as an Investment Analyst, gaining extensive experience in transaction consulting. In 2019, Vanessa moved to Deutsche Immobilien Opportunitaten AG and was named Investment Asset Manager. Prior to joining La Française, Vanessa was an Asset Manager for publity AG. Vanessa holds of Bachelor of Arts from TH Aschaffenburg University of Applied Sciences. As Asset Manager, Vanessa will be responsible for the management of a German portfolio comprised of office, retail and mixed-use assets.


    About La Française
    Environmental and societal challenges are opportunities to consider the future. Identifying drivers of change and understanding how they will fashion global growth and ultimately influence the long-term performance of financial and real estate assets is at the heart of La Française’s mission. The asset manager’s forward-looking investment strategy is built upon this conviction.
    The group uses its capacity for innovation and its client centric technology to design investment solutions that bridge the gap between performance and sustainability.
    Organized around two business lines, financial and real estate assets, La Française serves institutional and retail clients in France and abroad.
    La Française manages over 50 billion euros in assets and has operations in Paris, Frankfurt, Hamburg, London, Luxembourg, Madrid, Milan, Seoul and Singapore. (30/06/2022)
    La Française is a subsidiary of Caisse Régionale de Crédit Mutuel Nord Europe (CMNE), a member bank of Crédit Mutuel Alliance Fédérale which has long term ratings of A+/Aa3/AA- from S&P/Moody’s/Fitch. 
     

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    news-3259 Mon, 21 Nov 2022 10:15:55 +0100 Inflation and Strategic Asset Allocation /en/who-we-are/news/detail/inflation-and-strategic-asset-allocation/ Co-authored by Virginie Wallut, François Rimeu and Pierre Schoeffler. A brief history of inflation 
     

    Beyond the fluctuations in economic growth that guide tactical asset allocation, the most fundamental question for strategic allocation is the inflation regime that the developed world stands to experience in the coming years. For a variety of reasons, we may currently be at a major crossroads and at a time of radical change.For almost 25 years, from 1960 to 1983, the world lived through the consequences of the monetary disorder that led to the end of the Bretton Woods Agreement in 1973, which established just after the Second World War a fixed exchange rate system with the dollar-based "gold-exchange" standard. This system could only function due to a permanent influx of dollars into the international economy, which led to very accommodating monetary policies –an essential condition to ignite inflation. The oil crises of 1974 and 1979 acted as the triggers for the period of Great Inflation, which raised consumer prices in the developed world from around 4 to 10%, with automatic wage indexation to prices further fuelling the fire.

    Then, for 40 years, from 1983 to the present, the developed countries changed their inflation regime to the Great Moderation, i.e., inflation between 0 and 3%. The man responsible was Federal Reserve System (FED) Chairman Paul Volcker, who raised the Fed's key interest rate to 20% in 1981 and adopted a strict policy of controlling the growth of the money supply, causing a severe recession. The lack of monetary fuel and the end of price-indexation schemes for wages have permanently broken inflationary expectations. Then came globalisation with the fall of the Berlin Wall in 1989 and China's entry into the World Trade Organisation (WTO) in 2001. The persistent deflationary pressures caused by the constant introduction of comparative advantages in the freetrade world have moderated wage demands while increasing household purchasing power. 

    But globalisation has experienced serious headwinds over the past 15 years: the Global Financial Crisis of 2008, the clash between the United States and China from 2018, the pandemic in 2020 and the war in Ukraine in 2022. The world economy remains globalised, but fragmentation and segmentation are its new watchwords, with fewer competitive advantages and less of a network effect.

    On the central bank side, it all started with the ultra-accommodating monetary policies put in place in 2009 in the United States and in 2015 in the eurozone to counter the effects of the global financial crisis, with the corollary of money supply growth of more than 20% at an annual rate over a long period. The fuel was in place. The onset of Covid then ignited inflation with a constraint impact on supply linked to containment and an overstimulation impact on demand linked to public support measures.

    Then, comes the pressure for climate transition. The price of the carbon externality, which until now has not been taken into account, but which is the only truly effective instrument for passing through climate transition safely, will weigh heavily on energy prices. After all, economic activity is nothing other than the transformation of energy. The price of carbon will rise inexorably, as it reflects the present value of climate damage that is largely expected to occur after 2050, a date that is looming large ahead of us but closing in fast.

    All this points to a rising trend in inflation. Other structural developments such as an ageing population could interfere with this trend in one direction or the other.

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    news-3248 Mon, 14 Nov 2022 09:00:00 +0100 La Française Real Estate Managers acquires two adjacent office buildings in the center of Antwerp /en/who-we-are/news/detail/la-francaise-real-estate-managers-acquires-two-adjacent-office-buildings-in-the-center-of-antwerp/ La Française Real Estate Managers (REM), acting on behalf of a collective real estate investment vehicle, has acquired from CORES Development 100% of the shares of Rocaille NV, a company owning two adjacent office buildings, C-Hive and Archimedes, in the centre of Antwerp, Belgium’s second largest city. The office buildings are ideally located at 176/180 Mechelsesteenweg, a tree-lined boulevard in the Harmonie district, a vibrant neighbourhood offering an abundance of shops, supermarkets, trendy cafés, restaurants and green spaces). Antwerp Central and Antwerp-Berchem railway stations, two of Belgium’s largest railway hubs, are just minutes away by tram or bicycle. 

    The investment comprises two contrasting and complementary office properties, C-Hive & Archimedes, located directly adjacent to one another:

    • C-Hive is a modern, fully renovated (2019), long-term let, multi-tenant office building with a total surface of 4,820 m² spanning 10 floors (GF + 9). The ground floor consists of a high-end lobby and meeting and seminar rooms. The ninth floor of the building has a surface of 154 m² and has a terrace on three sides of the property offering impressive views of the city.

    C-Hive offers regular, subdivisible floor plates of ca. 555 m² around a central core with good levels of natural light.

    In the underground of C-Hive, the building provides a fitness room, shower facilities and archive space. Additionally, there are bicycle parking spaces and 13 charging points for electric vehicles. At the entrance of the building, there is a Velo docking station (Antwerp bicycle hiring scheme).

    • Archimedes is a single tenant office building renovated in 2016 and 2020. The property has a total surface of 1,882 m² spanning 3 floors (GF + 2). Underground, the building provides 486 m² of mixed area including a fitness area, changing rooms, etc. 

    Archimedes offers floor plates ranging between 560 m² and 690 m² and is the HQ building of CORES Development.

    The building was fully redecorated by interior designer Living Projects. Every room has its own creative yet functional character. The facade of Archimedes was built in neo-rococo style and dates back to 1929.

    Peter Balfour, Head of Real Estate UK for La Française Real Estate Managers said, “Both properties, given their exceptional location, the quality of the renovations and the diversity of the tenant mix, are exceptional additions to our real estate portfolio and offer long-term income generation potential.”

    Alexander Vanheukelen, Business Developer for CORES Development, concluded, “We are very pleased with this transaction and look forward to our continued relationship with La Française as a tenant in one of Antwerp’s most beautiful office buildings.”

    La Française Real Estate Managers was advised by Linklaters on legal, Arcadis on technical and environmental due diligence and PwC on tax and financial issues. JLL advised La Française REM on the acquisition. The vendor was advised by CBRE and KPMG Law.  

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    news-3243 Wed, 02 Nov 2022 09:34:11 +0100 FOMC 02/11 -Establishing the right balance. /en/who-we-are/news/detail/fomc-02-11-establishing-the-right-balance/ Pre FED commentary signed by Francois Rimeu. It is widely expected that the Federal Open Market Committee (FOMC) will hike rates for a fourth consecutive time by 75 basis points (bps) at its November 2nd meeting.
     
    Please find below what we expect:
     

    • The FOMC to hike rates by 75 bps to a range of 3.75%-4.00%.
    • Chair Powell is not expected to provide any guidance on the size of the hike in December to keep all options open before the October U.S. inflation report. Decisions regarding the pace of hikes should continue to be dependent on the incoming data and the evolving outlook.
    • Mr. Powell is not expected to rule out higher terminal rates to fight against inflation. Nevertheless, given recent comments from Fed officials and as federal fund rates move into restrictive territory, the central bank could consider less aggressive rate hikes in the future in order to assess the effects of cumulative policy adjustments on economic activity and inflation.
    • Mr. Powell to discuss treasuries liquidity during the press conference given potential buyback program backed by Treasury Secretary Janet Yellen.

     
    All in all, the Fed is expected to maintain its restrictive policy until inflation pressures are clearly decelerating. However, we expect Fed Chair Powell to signal a more gradual tightening instead of frontloading rate hikes. This meeting may lead to a modest steepening of the US interest rate curve.
     
    Disclaimer
    This commentary is provided for informational and educational purposes only. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.
     

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    news-3241 Thu, 27 Oct 2022 11:15:00 +0200 COP27, we want to believe, “where there's a will, there’s a way” /en/who-we-are/news/detail/cop27-we-want-to-believe-where-theres-a-will-theres-a-way/ By Marie Lassegnore, CFA, Head of Sustainable Investments, La Française AM Adopted at the closing of COP26, the Glasgow Climate Pact urges parties to “revisit and strengthen the 2030 targets in their nationally determined contributions, as necessary to align with the Paris Agreement temperature goal by the end of 2022”. Approaching COP27, in a very tense geopolitical context punctuated by food shortages, an energy crisis, unbridled inflation and soaring recession probability, multilateral cooperation could be challenging. Where do we actually stand and what can we expect from COP27?

    Despite 2022’s challenging environment, we have seen more ambitious pledges from Australia (a revised emissions-reduction target, increasing from 27% to 43% by 2030 versus 2005 levels), India (a stepped-up emissions-reduction objective from 34% to 45% by 2030 vs 2005 levels and Net Zero by 2070) and the United States with the “Inflation Reduction Act”, the largest investment in climate and energy in American history ( a 50% emissions reduction target by 2030 vs 2005 levels and Net Zero by 2050).

    Out of the wave of sectoral decarbonization initiatives announced at COP26, some have made progress: 

    • the Industrial Deep Decarbonization Initiative (IDDI) whose members now account for 11% and 5% of global steel and cement consumption respectively.
    • the Global Methane Pledge which aimed to reduce 2020 methane emissions by 30% by 2030 has evolved into the Global Methane Pledge Energy Pathway which can now boast $59 million in dedicated funding and in-kind assistance for the implementation of the key objectives: to capture the maximum potential of cost-effective methane mitigation in the Oil and Gas sector and eliminate routine flaring as soon as possible, no later than 2030.

    After the chaotic management of the 2022 energy crisis across Europe, the elephant in the room is the feasibility and credibility of the Global Coal to Clean Power Transition Statement under which developed countries had pledged to eliminate coal power by the year 2030 and developing nations by 2040. 

    What would constitute a positive outcome for COP27? Progress on meeting the $100 billion a year target on climate finance is paramount, as well as the definition of a new post-2025 target. In 2020 and according to figures announced at the COP26, but $83 billion were mobilized for Climate Finance; 98% from public funding and only 2% from the private sector, leaving ample room for growth. The Glasgow Financial Alliance for Net Zero (GFANZ) was created with just that aim, to close the climate finance funding gap. It mobilized more than 450 parties, representing over $130 trillion in assets under management at launch in 2021. While we have seen many more commitments since then, the ESG bashing movement in US republican states in recent months has started raising concerns around the positioning of banks with regards to climate change mitigation. There is fear in the market that the alliance could be fractured if US banks were to pull out, on the basis that Net Zero commitments pose liability risks that could be considered too high today.

    This huge divide in the market is pushing financial actors in opposite directions and is counterproductive in mobilizing climate finance. Indeed, this is distracting the financial industry while we have a practical, more short-term challenge to address: how to ramp up spending on a pressing long-term issue, while acknowledging the weight of the looming economic recession. This question will not be answered the same way by corporates and governments

    In times of economic contraction, corporates react by shrinking capital expenditure plans, freezing new hires (perhaps even letting off employees), maintaining operations undisrupted and maximizing efficiency. However, CEOs have a mandate which extends beyond the recession cycle and must bring a vision of long-term sustainable viability, which cannot be envisaged today without taking into consideration social and environmental externalities. From our experience at looking at investment opportunities in our climate change mitigation approaches, great leadership and efficient corporate governance is reflected in an executive teams’ ability to see beyond short-term turmoil while continuing to invest in what the business will need when brighter days are here, i.e., retaining talent, business reorganization, product mix shifts, etc.

    On the other hand, governments of major economies are expected to provide support in difficult times: to design and pass new policies that can turn gloom into an opportunity. Moreover, governments cannot overlook what a short-term view would discard; social sustainability and meeting the basic social needs of citizens. With the mounting pressure on agriculture caused by extreme weather events, adaptation needs are front and center on the social agenda and could therefore gather more financial commitments. Adaptation finance as well as loss & damage provisions (for more vulnerable countries) are high on the list of priorities for this year’s COP.

    2022 marked the second most damaging and expensive hurricane in the US. Hurricane Ian caused estimated damages amounting to more than $100 billion. Flooding in Pakistan and Australia, unseen levels of drought (among the worst in 500 years), heatwaves and wildfires in the northern hemisphere are climate catastrophes which are now expected to become 15 to 30 times more frequent. The direct implications are not only construction related but include food security, i.e., a drop in crop yields (30% drop in rice harvest in northern Italy last summer) and consequently in feedstock. Longer term effects are also to be expected on biodiversity and ecosystems which will have even greater repercussions. 

    COP27 will convene against a very gloomy economic and geopolitical backdrop. While expectations may be low, positive surprises should not be excluded. We can only hope and advocate for our leaders to look beyond the looming recession and geopolitical tensions with Russia and promote more ambitious climate plans to protect our world.

     

    Disclaimer

    The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

    ]]>
    news-3239 Mon, 24 Oct 2022 14:52:56 +0200 A second consecutive increase of 75 bps leading to neutral territory. ECB balance sheet normalization intentions. /en/who-we-are/news/detail/a-second-consecutive-increase-of-75-bps-leading-to-neutral-territory-ecb-balance-sheet-normalization-intentions/ Pre-ECB commentary signed by François Rimeu, Senior Strategist, La Française AM. The European Central bank (ECB) is widely expected to raise its three key interest rates by 75 basis points (bps) at its 27 October meeting.

    Please find below what we expect:

    •    The ECB to increase its interest rates by 75 bps, bringing the deposit rate to 1.50%.
    •    The Governing Council (GC) to reiterate that inflation is far too high and inflation risks remain tilted to the upside. Hence, further rate hikes are coming despite recession risk. Nevertheless, ECB President Christine Lagarde will reiterate the meeting-by-meeting approach to calibrate policy rates.
    •    The central bank to announce changes to remuneration on excess liquidity (Targeted long-term financing operations -TLTRO - terms, reverse tiering) to encourage banks to repay TLTRO loans early.
    •    Christine Lagarde to indicate the GC’s intention to start quantitative tightening (QT) on asset purchase programme (APP) as the deposit rate moves into neutral territory. We expect the ECB to announce officially its plan for reducing APP bond holdings at the December meeting which should start in the first quarter of 2023. QT will be a gradual and passive process, not involving the active selling of bonds.
    •    The ECB to pursue reinvestments under its pandemic emergency purchase programme (PEPP) “until at least the end of 2024” and to apply flexibility to its reinvestments as the first line of defense against euro fragmentation risk. 
    •    Mrs. Christine Lagarde to reiterate that fiscal policy has to be compatible with monetary policy normalization.

    The ECB will continue to be hawkish in order to maintain credibility and bring inflation back to the 2% medium-term target. Although October Governing Council announcements will not come as a surprise, we believe this meeting may push European Economic and Monetary Union (EMU) sovereign bond yield spreads to widen.



    Disclaimer
    This commentary is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-3238 Mon, 24 Oct 2022 09:19:27 +0200 For now, FED tightening is not enough! /en/who-we-are/news/detail/for-now-fed-tightening-is-not-enough/ Completed October 17, 2022. By Audrey Bismuth, Global Macro Researcher, La Française AM The U.S. September inflation report was disappointing despite aggressive action taken by the Federal Reserve System (Fed) since March, i.e., hiking rates by 300 basis points (bps) from near zero to a target range of 3% to 3.25%. Overall, consumer pricing was above expectations, increasing 0.4% month on month (MoM), while core prices, which exclude food and energy, increased by 0.6%, also above consensus. Annual inflation eased slightly from 8.3% in August to 8.2% in September, while underlying inflation accelerated from 6.3% to 6.6%, the highest reading in 40 years.

    As long as inflation risk persists, the Fed will continue to adopt an aggressive stance. We believe it is premature to entertain discussions regarding a change to monetary policy. Inflation is too high and the labor market is too tight. Since the July committee, Fed policymakers are weary of sending what could be perceived by the market as a dovish message. The Fed is pushing back expectation regarding rate cuts. Currently, investors expect the central bank to loosen monetary policy in Q4 of 2023 by dropping rates by 40 bps.  Markets are betting on a soft-landing. 

    The Fed wants to avoid inflation expectations becoming unanchored because expectations impact wage negotiations and fuel the ‘wage-price spiral’. Highly sensitive to gasoline prices, consumer inflation expectations rose in October for the first time since March. The University of Michigan's preliminary survey showed that one-year inflation expectations rose to 5.1% in October, up from 4.7% in September. 

    Macroeconomic indicators are showing the first signs of progress following Fed monetary policy tightening. However, the effects of rate hikes can take up to 12 months to be felt in the real economy. As Fed Vice Chair Lael Brainard indicated recently “the moderation in demand due to monetary policy tightening is only partly realized so far”.  In the housing market for example, home sales have fallen as mortgage rates have climbed to a 16-year high of 6.9%. In the labor market, the number of job openings declined by more than one million in August to just under 10.1 million. Wage growth has also slowed; the Atlanta Fed Wage Growth Tracker, which is a measure of the nominal wage growth of people, was at 6.3% in September after 6.7% in August. 

    Nevertheless, these figures are still high by historical standards. In addition, the latest US inflation surprise and solid employment data raise questions about the Fed’s interest rate hikes. 

    • Firstly, could economic data push the Fed to take rates higher, causing more pain on the U.S. economy and foreign markets given the strength of the dollar? It is likely. According to the September “dot plot”, six of the Fed’s nineteen policymakers signaled 5% next year for their upper target boundary while the median range projection was at 4.75%. If the Fed increases rates by another 75 bps in December, markets could anticipate a terminal rate above 5%.  
    • Secondly, could more rate hikes resolve inflation which is currently driven by supply shocks, rising energy costs and corporate margins? Probably not. As Fed Vice Chair Lael Brainard underlined recently: “The return of retail margins to more normal levels could meaningfully help reduce inflationary pressures in some consumer goods, considering that gross retail margins are about 30 percent of total sales dollars overall”. Additionally, the U.S central bank needs to significantly shrink its balance sheet to reduce inflation. 
    • Thirdly, could a central bank act alone in the fight against inflation, i.e., without government support? The answer is no. Look for example at the UK’s attempt to boost its economy with fiscal stimulus which backfired and triggered a bond sell off this month. Fiscal and monetary policy need to converge towards less stimulus in order to win the battle against inflation.

    Until the Fed ends its tightening cycle, which according to market anticipations will not happen before March 2023 at best, the rise in real yields will continue to weigh on risky assets and bonds. A slowdown in the pace of monetary tightening will offer but temporary relief for most asset classes. Given the real risk of a recession, we believe that investors will search mainly for duration.

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    news-3231 Thu, 13 Oct 2022 14:35:10 +0200 Subordinated debt Monthly commentary /en/who-we-are/news/detail/subordinated-debt-monthly-commentary/ PROMOTIONAL DOCUMENT 1/ Market environment

    It has been quite a turbulent autumn and the subordinated debt markets have come under increasing pressure as fears of high inflation and global recession continue to grow. Indeed, the month was strongly affected by a very hawkish tone from global central banks, leading to increased volatility in sovereign rates. Firstly, the European Central Bank announced a 75bp interest rate hike, bringing its benchmark deposit rate to 0.75% and revised its inflation expectations upwards to an average of 8.1% in 2022. The FED raised rates by 75bps and announced that it expects a further tightening of 1.25% before the end of the year and reduced its growth forecasts. The biggest surprise came from the Bank of England, which decided to raise rates by 50bps, but more importantly from the UK government, which proposed a radical £161bn fiscal stimulus package, including tax cuts, a corporate tax freeze and a subsidy for energy bills. These steps taken by the UK government have led to increased volatility in the Gilt (with variations of 100bps on one day for the 30-year Gilt, for example). The focus this month has again been on the macroeconomics that drive all global markets. Over the month of September, the AT1 CoCos € debt index posted a negative performance of -7.29%. Its equivalent in dollars is much the same, with a performance of -5.52% over August. The other subordinated debt classes also ended the month in negative territory: The iBoxx Tier 2 debt index fell by 3.62%, the iBoxx Subordinated Insurance Debt index by 5.50% and the iBoxx Corporate Hybrids by 4.02%.

    The primary market was active at the beginning of the month and fell silent as volatility increased. In the Tier 2 market, Raiffeisen Bank International issued a €500m Tier 2 with a coupon of 7.375% (10.25NC5.25). Nykredit also issued a Tier 2 of €500m with a coupon of 5.5%. For its part, BPER Banca launched a Tier 2 of €400m with a coupon of 8.625%. On the Insurers' side, Coface announced the launch of a Tier 2 bullet 2032 with a coupon of 6%. After a long silence on the Corporate Hybrids market, two issuers have returned to the market. Indeed, Telia (a Swedish telecoms company) reopened the market with a €600m hybrid at 4.65% (60.25NC5.25). In addition, KPN (a Dutch telecom operator) issued a €500m green hybrid with a Perpetual Non-Call 5.25 structure with a coupon of 6%. At the same time, the month of August was once again marked by the theme of calls and non-calls on AT1s and Tier 2 bank debt. Bank of Nova Scotia (Canadian bank) decided not to exercise the call on its $AT1 4.65% (US064159KJ44). This is the second AT1 extension this year after Aareal Bank did not recall its AT1 for the third time (the bond is redeemable every year). On the Tier 2 side, Banco BPM recalled its €500m bond with a coupon of 4.375% on the last day of the call window.

    September was an eventful month for Credit Suisse. First, the Financial Times reported on a possible split of their business into three parts – the group's advisory assets, a "bad bank" to be wound up, and the rest of the business. In addition, Reuters reported that the bank had canvassed investors for a possible capital increase and suggested that Credit Suisse was considering leaving the US market, which the bank "categorically denied". Credit Suisse issued a statement and said the bank was "on track with its comprehensive strategic review, including potential divestments and asset sales". This was without counting the outpouring of rumours about the bank's financial health on Twitter at the end of the month. Indeed, there has been a lot of speculation following the movements in CDS spreads (despite the fact that Credit Suisse is trading at the same level as the Italian banks) and the share valuation (remember: bank stock valuations are a very poor indicator of potential bankruptcy).

    ]]>
    news-3228 Mon, 10 Oct 2022 15:08:14 +0200 Macro flash oct. 2022 - Fighting inflation, no matter what it takes ? /en/who-we-are/news/detail/macro-flash-oct-2022-fighting-inflation-no-matter-what-it-takes/ By François RIMEU, La Française Asset Management's Strategist September is for the moment the high point of an already historic year 2022. Although the fall in the equity markets was significant, it was small compared to the movements seen in
    the bond markets.

    Some examples of these movements:

    • UK 10-year rates jump 121bps
    • Real US 10-year rates rise by 87bps
    • European real rates close 90bps higher

    To find movements of similar magnitude, we need to refer to the most volatile periods of the last decades, such as October 2008. While there are many explanatory factors, three events seem to have had a greater impact than others.
     

    ]]>
    news-3222 Thu, 29 Sep 2022 14:43:24 +0200 NOTICE TO SHAREHOLDERS OF THE COMPANY > LU (source) /en/who-we-are/news/detail/notice-to-shareholders-of-the-company-lu-source-1/ Luxembourg, 28.09 2022 Dear Shareholder, The Company’s board of directors (the "Board") would like to inform you about the contemplated merger of BNP Paribas Securities Services S.C.A. ("BP2S") and BNP Paribas S.A. ("BNPP") (the "Merger").

    BP2S will be absorbed by BNPP. As a result of the Merger, all of the assets, liabilities and activities of BP2S will transfer to BNPP by way of universal succession of title, and BNPP will assume all the functions and services entrusted to BP2S and its branches. In the Grand Duchy of Luxembourg, the Merger will be materialized by the absorption of BP2S – Luxembourg Branch by BNPP – Luxembourg Branch.

    From a practical point of view, this Merger will have no impact on the operational, organisational and commercial flows currently in place and will not cause any additional costs to you. It does not affect the commitments between BP2S and its clients as they are fully taken over by BNPP. However, this Merger has some practical consequences, which we would like to share with you:

    1. As from 1 October 2022, BNPP - Luxembourg Branch will take over BP2S - Luxembourg Branch’s role as depositary of the funds you invested in;
    2. 2. As from 1 October 2022, BNPP - Luxembourg Branch will take over BP2S - Luxembourg Branch’s role as central administrator, including the role as transfer agent of the funds you invested in, to the extent applicable.

    The prospectus of the Company will be updated to inter alia reflect the change described in this notice. A copy of each updated prospectus will be available free of charge upon request at the registered office of the Company. The Board

    ]]>
    news-3220 Thu, 29 Sep 2022 14:17:19 +0200 NOTICE TO SHAREHOLDERS OF THE COMPANY > LU (source) /en/who-we-are/news/detail/notice-to-shareholders-of-the-company-lu-source/ Luxembourg, 28.09 2022 Dear Shareholder, 

    The Company’s board of directors (the "Board") would like to inform you about the contemplated merger of BNP Paribas Securities Services S.C.A. ("BP2S") and BNP Paribas S.A. ("BNPP") (the "Merger"). BP2S will be absorbed by BNPP. As a result of the Merger, all of the assets, liabilities and activities of BP2S will transfer to BNPP by way of universal succession of title, and BNPP will assume all the functions and services entrusted to BP2S and its branches. In the Grand Duchy of Luxembourg, the Merger will be materialized by the absorption of BP2S – Luxembourg Branch by BNPP – Luxembourg Branch. 

    From a practical point of view, this Merger will have no impact on the operational, organisational and commercial flows currently in place and will not cause any additional costs to you. It does not affect the commitments between BP2S and its clients as they are fully taken over by BNPP. However, this Merger has some practical consequences, which we would like to share with you: 

    1. As from 1 October 2022, BNPP - Luxembourg Branch will take over BP2S - Luxembourg Branch’s role as depositary of the funds you invested in; 
    2. As from 1 October 2022, BNPP - Luxembourg Branch will take over BP2S - Luxembourg 

    Branch’s role as central administrator, including the role as transfer agent of the funds you invested in, to the extent applicable. 

    The prospectus of the Company will be updated to inter alia reflect the change described in this notice. A copy of each updated prospectus will be available free of charge upon request at the registered office of the Company. 

    ]]>
    news-3210 Wed, 28 Sep 2022 09:00:00 +0200 Web announcement: Change of custodian and of the appointed accounts manager following the intra-group merger between BNP Paribas Securities Services and BNP Paribas SA EN > UK /en/who-we-are/news/detail/web-announcement-change-of-custodian-and-of-the-appointed-accounts-manager-following-the-intra-group-merger-between-bnp-paribas-securities-services-and-bnp-paribas-sa-en-uk/ 28 September 2022 La Française Asset Management (hereinafter the "Company") hereby informs you that BNP Paribas Securities Services, which acts as custodian and registrar bank for undertakings for collective investment and as appointed accounts manager, will merge with its parent company BNP Paribas SA. The effective date of the merger is scheduled for 1 October 2022, subject to ongoing local consultations with social partners in some countries.

    As a result of the merger, BNP Paribas SA, in its capacity as universal successor to BNP Paribas Securities Services, will, as of the date of the merger, become the custodian and registrar bank for undertakings for collective investment and the appointed accounts manager for the funds listed in Annex 1 of this document.

    The merger will not affect the functions and operations set up by the Company and performed by BNP Paribas SA. The operating and service model used by BNP Paribas SA will remain unchanged, as will the contact details of the custodian in France.
    When it comes into force, the updated prospectuses of the funds listed in Annex 1 will be available on the La Française website: www.la-francaise.com

    ]]>
    news-3208 Wed, 28 Sep 2022 09:00:00 +0200 Web announcement: Change of custodian and of the appointed accounts manager following the intra-group merger between BNP Paribas Securities Services and BNP Paribas SA EN > SG /en/who-we-are/news/detail/web-announcement-change-of-custodian-and-of-the-appointed-accounts-manager-following-the-intra-group-merger-between-bnp-paribas-securities-services-and-bnp-paribas-sa-en-sg/ 28 September 2022 La Française Asset Management (hereinafter the "Company") hereby informs you that BNP Paribas Securities Services, which acts as custodian and registrar bank for undertakings for collective investment and as appointed accounts manager, will merge with its parent company BNP Paribas SA.The effective date of the merger is scheduled for 1 October 2022, subject to ongoing local consultations ith social partners in some countries.

    As a result of the merger, BNP Paribas SA, in its capacity as universal successor to BNP Paribas Securities Services, will, as of the date of the merger, become the custodian and registrar bank for undertakings for collective investment and the appointed accounts manager for the funds listed in Annex 1 of this document.

    The merger will not affect the functions and operations set up by the Company and performed by BNP Paribas SA. The operating and service model used by BNP Paribas SA will remain unchanged, as will the contact details of the custodian in France.
    When it comes into force, the updated prospectuses of the funds listed in Annex 1 will be available on the La Française website: www.la-francaise.com.
     

    ]]>
    news-3207 Wed, 28 Sep 2022 09:19:00 +0200 Web announcement: Change of custodian and of the appointed accounts manager following the intra-group merger between BNP Paribas Securities Services and BNP Paribas SA EN > FI /en/who-we-are/news/detail/web-announcement-change-of-custodian-and-of-the-appointed-accounts-manager-following-the-intra-group-merger-between-bnp-paribas-securities-services-and-bnp-paribas-sa-en-fi/ 28 September 2022 La Française Asset Management (hereinafter the "Company") hereby informs you that BNP Paribas Securities Services, which acts as custodian and registrar bank for undertakings for collective investment and as appointed accounts manager, will merge with its parent company BNP Paribas SA. The effective date of the merger is scheduled for 1 October 2022, subject to ongoing local consultations with social partners in some countries.

    As a result of the merger, BNP Paribas SA, in its capacity as universal successor to BNP Paribas Securities Services, will, as of the date of the merger, become the custodian and registrar bank for undertakings for collective investment and the appointed accounts manager for the funds listed in Annex 1 of this document.

    The merger will not affect the functions and operations set up by the Company and performed by BNP Paribas SA. The operating and service model used by BNP Paribas SA will remain unchanged, as will the contact details of the custodian in France.
    When it comes into force, the updated prospectuses of the funds listed in Annex 1 will be available on the La Française website: www.la-francaise.com.
     

    ]]>
    news-3206 Wed, 28 Sep 2022 09:00:00 +0200 NOTICE TO SHAREHOLDERS OF THE COMPANY (LA FRANCAISE LUX) > CH - en /en/who-we-are/news/detail/notice-to-shareholders-of-the-company-la-francaise-lux-ch-en/ Dear Shareholder, The Company’s board of directors (the "Board") would like to inform you about the contemplated merger of BNP Paribas Securities Services S.C.A. ("BP2S") and BNP Paribas S.A. ("BNPP") (the "Merger"). BP2S will be absorbed by BNPP. As a result of the Merger, all of the assets, liabilities and activities of BP2S will transfer to BNPP by way of universal succession of title, and BNPP will assume all the functions and services entrusted to BP2S and its branches. In the Grand Duchy of Luxembourg, the Merger will be materialized by the absorption of BP2S – Luxembourg Branch by BNPP – Luxembourg Branch.

    From a practical point of view, this Merger will have no impact on the operational, organisational and commercial flows currently in place and will not cause any additional costs to you. It does not affect the commitments between BP2S and its clients as they are fully taken over by BNPP. However, this Merger has some practical consequences, which we would like to share with you:

    1. As from 1 October 2022, BNPP - Luxembourg Branch will take over BP2S - Luxembourg Branch’s role as depositary of the funds you invested in;
    2. As from 1 October 2022, BNPP - Luxembourg Branch will take over BP2S - Luxembourg Branch’s role as central administrator, including the role as transfer agent of the funds you invested in, to the extent applicable.

    ***

    The prospectus of the Company will be updated to inter alia reflect the change described in this notice. A copy of each updated prospectus will be available free of charge upon request at the registered office of the Company. 


    The Board


    The prospectus, the key information documents or the key investor information documents, the articles of association as well as the annual and semi-annual reports may be obtained free of charge from the representative. 

    Representative in Switzerland 
    ACOLIN Fund Services AG, Leutschenbachstrasse 50, 8050 Zurich 

    Paying agent in Switzerland 
    NPB Neue Privat Bank AG, Limmatquai 1/am Bellevue, P.O. Box, 8024 Zurich
     

    ]]>
    news-3205 Wed, 28 Sep 2022 09:00:00 +0200 Web announcement: Change of custodian and of the appointed accounts manager following the intra-group merger between BNP Paribas Securities Services and BNP Paribas SA EN > AE /en/who-we-are/news/detail/web-announcement-change-of-custodian-and-of-the-appointed-accounts-manager-following-the-intra-group-merger-between-bnp-paribas-securities-services-and-bnp-paribas-sa-en-ae/ 28 September 2022 La Française Asset Management (hereinafter the "Company") hereby informs you that BNP Paribas Securities Services, which acts as custodian and registrar bank for undertakings for collective investment and as appointed accounts manager, will merge with its parent company BNP Paribas SA.The effective date of the merger is scheduled for 1 October 2022, subject to ongoing local consultations with social partners in some countries.As a result of the merger, BNP Paribas SA, in its capacity as universal successor to BNP Paribas Securities Services, will, as of the date of the merger, become the custodian and registrar bank for undertakings for collective investment and the appointed accounts manager for the funds listed in Annex 1 of this document.

    The merger will not affect the functions and operations set up by the Company and performed by BNP Paribas SA. The operating and service model used by BNP Paribas SA will remain unchanged, as will the contact details of the custodian in France.
    When it comes into force, the updated prospectuses of the funds listed in Annex 1 will be available on the La Française website: www.la-francaise.com.
     

    ]]>
    news-3203 Thu, 29 Sep 2022 09:00:00 +0200 NOTICE TO SHAREHOLDERS OF THE COMPANY (JKC Fund) > CH - en /en/who-we-are/news/detail/notice-to-shareholders-of-the-company-jkc-fund-ch-en/ Dear Shareholder, The Company’s board of directors (the "Board") would like to inform you about the contemplated merger of BNP Paribas Securities Services S.C.A. ("BP2S") and BNP Paribas S.A. ("BNPP") (the "Merger"). BP2S will be absorbed by BNPP. As a result of the Merger, all of the assets, liabilities and activities of BP2S will transfer to BNPP by way of universal succession of title, and BNPP will assume all the functions and services entrusted to BP2S and its branches. In the Grand Duchy of Luxembourg, the Merger will be materialized by the absorption of BP2S – Luxembourg Branch by BNPP – Luxembourg Branch.

    From a practical point of view, this Merger will have no impact on the operational, organisational and commercial flows currently in place and will not cause any additional costs to you. It does not affect the commitments between BP2S and its clients as they are fully taken over by BNPP. However, this Merger has some practical consequences, which we would like to share with you:

    1. As from 1 October 2022, BNPP - Luxembourg Branch will take over BP2S - Luxembourg Branch’s role as depositary of the funds you invested in;
    2. As from 1 October 2022, BNPP - Luxembourg Branch will take over BP2S - Luxembourg Branch’s role as central administrator, including the role as transfer agent of the funds you invested in, to the extent applicable.

    ***

    The prospectus of the Company will be updated to inter alia reflect the change described in this notice. A copy of each updated prospectus will be available free of charge upon request at the registered office of the Company. 

    The Board

    ]]>
    news-3200 Tue, 27 Sep 2022 10:56:55 +0200 Crédit Mutuel Alliance Fédérale announces its ambitions for its Asset Management business line /en/who-we-are/news/detail/credit-mutuel-alliance-federale-announces-its-ambitions-for-its-asset-management-business-line/ In preparation for its new Medium-Term Plan, Crédit Mutuel Alliance Fédérale has initiated a review in order to create a leading asset management division. The objective is to gather all the third-party asset management structures within a multiboutique business model and to build a client-centric organization. The new organization would draw on the strengths of each structure and require the pooling of support functions around a single framework and a common holding company.
    Distribution would be carried out by two distinct structures with distribution support teams covering all the products of the Group's asset management companies: 

    • Crédit Mutuel Investment Managers would focus on internal clients of the group's network banks as well as corporate clients and employment/pension savings plans, 
    • whereas La Française Finance Services would focus on external clients in France, namely institutional investors, and international clients.

    Crédit Mutuel Alliance Fédérale intends to continue to rely on the reputation of the “La Française” brand which, in this context, would evolve to further reflect its affiliation with the Crédit Mutuel group.

    In terms of asset management expertise, the objective is to strive for the greater specialisation of each asset management structure by drawing on the predominant and complementary expertise of each. This business-development oriented approach shouldallow the Group to maximise cross-selling, strengthen visibility and optimize the resources allocated to each expertise.

    This specialisation would include a responsible and sustainable investment strategy common to all asset management companies. This strategy, which is the Group’s priority in terms of investment and development, would be in perfect harmony with the values of Crédit Mutuel Alliance Fédérale, the first banking group to have opted for the status of “benefit corporation”.

    The objective is thus to become a major player in the French Asset Management landscape: the 6th largest French player with €160 billion under management, locations across Europe, a presence in Asia and a wide range of expertise covering listed assets, real assets and alternative management.

    ]]>
    news-3190 Wed, 28 Sep 2022 09:00:00 +0200 NOTICE TO SHAREHOLDERS OF THE COMPANY (Next AM)> LU /en/who-we-are/news/detail/notice-to-shareholders-of-the-company-next-am-lu/ Luxembourg, 28.09 2022 Dear Shareholder,

    The Company’s board of directors (the "Board") would like to inform you about the contemplated merger of BNP Paribas Securities Services S.C.A. ("BP2S") and BNP Paribas S.A. ("BNPP") (the "Merger").

    BP2S will be absorbed by BNPP. As a result of the Merger, all of the assets, liabilities and activities of BP2S will transfer to BNPP by way of universal succession of title, and BNPP will assume all the functions and services entrusted to BP2S and its branches. In the Grand Duchy of Luxembourg, the Merger will be materialized by the absorption of BP2S – Luxembourg Branch by BNPP – Luxembourg Branch.

    From a practical point of view, this Merger will have no impact on the operational, organisational and commercial flows currently in place and will not cause any additional costs to you. It does not affect the commitments between BP2S and its clients as they are fully taken over by BNPP. However, this Merger has some practical consequences, which we would like to share with you:

    1. As from 1 October 2022, BNPP - Luxembourg Branch will take over BP2S - Luxembourg Branch’s role as depositary of the funds you invested in;
    2. As from 1 October 2022, BNPP - Luxembourg Branch will take over BP2S - Luxembourg Branch’s role as central administrator, including the role as transfer agent of the funds you invested in, to the extent applicable.

    ***

    The prospectus of the Company will be updated to inter alia reflect the change described in this notice. A copy of each updated prospectus will be available free of charge upon request at the registered office of the Company. 

    The Board

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    news-3179 Fri, 23 Sep 2022 14:42:00 +0200 The BoJ sticks to its ultra-dovish monetary policy. Dilemma of yen volatility /en/who-we-are/news/detail/the-boj-sticks-to-its-ultra-dovish-monetary-policy-dilemma-of-yen-volatility/ By Audrey Bismuth, Global Macro Researcher, La Française AM As widely expected, the Bank of Japan (BoJ) maintained its ultra-loose monetary policy stance at the September 21-22 meeting despite Japan's inflation above the 2% target and the hawkish stance of other major central banks. Core inflation (excluding food) in Japan climbed to 2.8% in August due primarily to the supply shock as opposed to domestic demand. Economists and the central bank expect that inflation will stay under upward pressure through 2022, reaching 3% by the end of this year, but that it should remain moderate next year. The BoJ currently forecasts inflation to fall below 2% next year.


    The BoJ ‘s decision came just after the Federal Reserve System (Fed) hiked rates for a third time by 75 basis points (bps). The Bank of Japan continues to maintain its forward guidance, short-term rates target at -0.1% and yield curve control (YCC) policy which caps 10-year Japanese government bond yields at around 0%. In the past week, the BoJ has spent around 2.9 trillion yen ($20 billion) to defend its 0.25% cap. 


    Since the beginning of the year, the greenback has appreciated 16% against major developed currencies while the Japanese currency has dropped about 26% year-to-date against the U.S. dollar which hit a 24-year high of 145.82 yen this month.


    Various factors have caused the yen to go into a free fall including the widening rate differential between the Fed’s aggressive interest rate hikes and the Bank of Japan's resolve to keep accommodative monetary policy. The current account balance is another factor. It totaled 229 billion yen ($1.6 billion) in July, down from a surplus of 1 715 billion yen ($15,6 billion) a year earlier, driven by the rise in import costs. Moreover, the U.S. dollar is widely considered a safe haven in a context of economic and geopolitical uncertainty. 


    Consequently, the weakening yen is becoming a focus for Japanese officials. A currency intervention can only be decided by the Ministry of Finance (MoF) and carried out by the Bank of Japan.  Several times in 1991-1992 and in 1997-1998, the MoF has intervened on the currency market to defend the Japanese currency versus the U.S. dollar.  Since the beginning of September, Japanese authorities have become increasingly vocal to protect their currency. Officials from the Ministry of Finance have warned that Japan is ready to take action to halt the yen’s depreciation. The Bank of Japan reportedly conducted a foreign exchange check, a move seen as a precursor to a formal intervention to protect the yen. On September 22, just after the end of Governor Haruhiko Kuroda’s press conference, against all odds, the Japanese government announced that it had taken decisive action, supported by the U.S. administration, to counter speculators. The Japanese currency strengthened to 142.48 from 145.83 against the U.S. currency just after Kuroda’s briefing ended. 


    Nevertheless, yen-buying intervention could give way to temporary market reaction. History shows that yen-buying intervention does not halt yen depreciation. In August 1998, the Japanese currency reached nearly 148 per dollar even after U.S. authorities joined the BoJ to buy yen. Also, in a context of economic, monetary and geopolitical uncertainty, the greenback dominates. Yen-buying intervention coupled with a normalization of the BoJ’s monetary policy could stop yen depreciation against the dollar. However, at the September 21-22 meeting, Governor Kuroda indicated that the central bank has “no need to change guidance for 2 or 3 years”. Consequently, the likelihood that Governor Kuroda changes significantly the BoJ’s monetary policy during his tenure which will end in April 2023 is low. Wage growth with this winter’s bonuses and next spring’s annual wage negotiation will be key for a stable and sustainable rise in inflation and by consequence, a normalization of monetary policy. At least initially, we expect the BoJ to tweak its yield curve control (YCC) from the 10-year yield to the 5-year yield in the first semester of 2023, before returning to conventional monetary policy (i.e., dropping its forward guidance and lifting its negative interest rate policy).  


    The Fed’s dovish pivot is key to prevent further yen depreciation, but it seems highly premature at this stage. In addition, a major step will be for Prime Minister Kishida to show that his policy priority has diverged from late Prime Minister Shinzo Abe’s legacy and economic policies (Abenomics). Yesterday’s yen-buying intervention could be a first sign. 


    By the end of the year, we expect the yen to depreciate further against the U.S. dollar as the Fed maintains its highly hawkish stance and the BoJ keeps unchanged its soft monetary policy. Moreover, keeping the yen weak is positive for the economy since it boosts exports. Over a longer horizon (end of 2023), we believe that the yen will appreciate thanks to a less hawkish Fed and BoJ monetary policy normalization. 

     

    Disclaimer

    The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.
     

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    news-3176 Thu, 22 Sep 2022 09:00:00 +0200 La Française Real Estate Managers acquires office asset in Nuremberg /en/who-we-are/news/detail/la-francaise-real-estate-managers-acquires-office-asset-in-nuremberg/ La Française Real Estate Managers (REM), acting on behalf of a collective real estate investment vehicle, has acquired an office building with a surface area of ca. 4 800 m2 in Nuremberg from property developer “te management GmbH”. The office building is located at Hansastraße 33 in Hohe Marter, a business district in southwestern Nuremberg and is easily accessible via public transportation with Nuremberg’s main train station only tent minutes away by subway line 2.

    The building was completed in 2020 and boasts good energy performance credentials with a DGNB Gold certification. The property also features an innovative and sustainable energy concept with an ice-storage system for cooling and heating.

    The 6-story office building (R+5) is fully leased under a long-term lease to a single tenant, Küchen Quelle Holding GmbH, a kitchen design company.

    Mark Wolter, Managing Director of La Française Real Estate Managers Germany, commented, “We are pleased to have acquired our first office building in Nuremberg; our second acquisition in Nuremberg in under a month. This acquisition is perfectly in line with our strategy to diversify our German real estate portfolio with properties that score very well on environmental, social and governance criteria. We are convinced of the property's long-term attractiveness and innovative energy concept.”

    La Française Real Estate Managers was advised by Görg on the legal aspects, TA Europe GmbH on the technical due diligence and CBRE GmbH on ESG issues. Stonedeal GmbH advised the vendor.  

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    news-3171 Mon, 19 Sep 2022 15:05:20 +0200 Inflation battle: Higher rates to restore price stability /en/who-we-are/news/detail/inflation-battle-higher-rates-to-restore-price-stability/ The Federal Open Market Committee (FOMC) will in our opinion hike rates for a third time by 75 basis points (bps) at its 20-21 September meeting. It will release its new set of economic forecasts (lower growth, higher unemployment) and rate projections extending through 2025. We expect the new dot plot to indicate a higher Fed funds rate, above 4% for this year. Please find below what we expect:

    • We expect the FOMC to hike rates by 75 bps to a range of 3.00%-3.25%. We do not expect a 100 bps move despite the very strong August Consumer Price Index.
    • We expect Chair Powell to reiterate that the Fed’s primary focus remains bringing inflation down to its 2% objective. He is unlikely to provide any indication about the terminal rates. The Fed needs to pursue rate hiking into restrictive territory despite the negative impact on the economy. The labor market is too tight with a risk of a wage-price spiral.
    • We expect Mr. Powell to reaffirm that future policy rate decisions will continue to depend on incoming data and the economic outlook. He will no doubt remind markets that “history cautions strongly against prematurely loosening policy”.
    • We expect the FOMC’s median dot for this year to move up from 3.375% to 4.125%, which reflects a 100 bps hike between the September meeting and year-end. The committee wants to mitigate risks of un-anchoring inflation expectations. For 2023, we expect to see the median dot up to 4.375% (early in 2023). The median rate projection will be at 3.625% in 2024 and at 2.875% in 2025. We do not expect a change in the terminal rate at 2.5%.
    • We expect the Summary of Economic Projections (SEP) to indicate lower growth in 2022 and 2023 from 1.7% to 1% and from 1.7% to 1.3% respectively.  For 2024 and 2025, we expect growth to stay close to the potential growth at around 1.8%. 
    • We expect the committee to revise its forecast for higher inflation figures (Personal Consumption Expenditure, PCE) with projections moving up from 5.2% to 5.4% in 2022 and from 2.6% to 2.7% in 2023. We expect median inflation expectations to be unchanged in 2024 at 2.2%, followed by decline in 2025 to 2.0%. 
    • Chair Powell will likely confirm the doubling of the pace of quantitative tightening in September to $95bn/month as described in May ($60bn in Treasuries and $35bn in Mortgaged-backed securities).

    In summary, we expect FED Chair Powell to reaffirm the Fed’s hawkish message. This meeting will in our opinion push interest rates higher and flatten the US yield curve.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-3167 Thu, 15 Sep 2022 10:49:55 +0200 Will the September hike in the deposit facility rate impact the European banking space? Maybe, maybe not… /en/who-we-are/news/detail/will-the-september-hike-in-the-deposit-facility-rate-impact-the-european-banking-space-maybe-maybe-not/ By Jérémie Boudinet, Head of Investment Grade Credit, La Française AM The deposit facility rate is one of the three interest rates the European central bank (ECB) sets every six weeks as part of its monetary policy. The rate defines the interest banks receive for depositing money with the central bank overnight. Since June 2014 and until July 2022, this rate was negative and weighed on banks’ profitability. A so-called “two-tier system” was introduced in September 2019, which exempts part of credit institutions’ excess liquidity holdings from negative remuneration at the rate applicable on the deposit facility. The purpose of this system was to alleviate the impact on their profitability. Following the hike of the deposit facility rate to 0.75% in September 2022, the two-tier system for the remuneration of excess reserves was removed. With the ECB set to pursue further rate hikes in its coming meetings, could we expect further positive profitability impacts on European banks and repercussions on the bank subordinated debt space?

    In short: not really in our opinion. Yes, higher rates usually translate into higher net interest revenues, as banks can increase their margins. Higher profitability metrics for banks would however not necessarily translate into thicker solvency capital ratios, as banks may be tempted to increase shareholder remuneration instead. Solvency buffers kept by banks are influenced by regulators and are unlikely to evolve much in the coming quarters, in our opinion, and should stay elevated in any case to avoid any systemic risk arising in Europe. It is worth noting that several national regulators (among which are French and Swedish regulatory bodies) are set to increase capital requirements next year for their local banks via the “countercyclical buffer” component. This buffer is intended to protect the banking sector from periods of excess aggregate credit growth but is currently being hijacked by regulators to deter banks from returning significantly more capital to their shareholders.

    Higher rates are only a fraction of the profitability/solvency equation for European banks, because theyoperate in an over-regulated sector; over-regulation being good news for bondholders, but less so for shareholders. Moreover, the banking sector is very prone to government meddling, with several recent examples: (i) The French government forcing local banks not to raise fees by more than 2% in 2023, (ii) a new bank tax approved in Spain, (iii) Polish ruling party leader Kaczynski wanting Polish state banks to raise interest on deposits to “at least 7-8%”. Banks are an easy target for politicians, and the benefits of higher rates can easily be wiped out by non-recurring caps, taxes and regulatory impediments.

    Higher rates are positive for profitability only as long as the other metrics remain consistent, which is not a given amid such macroeconomic uncertainty. Bank profitability is dependent on the bank’s ability to produce new loans, on the level of loan loss provisions required to protect its balance sheet against a recession and on the cost of its wholesale funding, which has increased in 2022. The banking sector is and will remain cyclical and a proxy for macroeconomic sentiment. Higher interest rates are positive in the long run for the European banking sector, but profitability and solvency metrics will stay geared to regulatory, political and macroeconomic decisions. As such, we do not expect any impact on subordinated bonds from higher rates.


    The information provided is considered well-founded and accurate on the date of publication. The information reflects the opinions of La Française AM. This publication has no contractual value, and its contents are subject to change. The opinions may differ from those of other management professionals. Published by La Française AM FINANCE Services, whose registered office is at 128, boulevard Raspail, 75006 Paris, France, and which is regulated as an investment services provider by ACPR (“Autorité de contrôle prudentiel et de résolution”) under no. 18673. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.
     

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    news-3163 Tue, 06 Sep 2022 10:06:15 +0200 The ECB will need to act ‘forcefully’ with an aggressive move of 75 bps to tame inflation. /en/who-we-are/news/detail/the-ecb-will-need-to-act-forcefully-with-an-aggressive-move-of-75-bps-to-tame-inflation/ At the September meeting, we expect the European Central Bank (ECB) to raise interest rates by 75 basis points (bps). Please find below what we expect:

    • The ECB will most likely increase interest rates by 75 bps, bringing its deposit rate to 0.75%. The inflation picture has deteriorated further since the July meeting with core inflation rising to 4.3% YOY, a further broadening of underlying price pressures and slightly higher inflation expectations.  
    • We expect ECB officials to retain their meeting-by-meeting approach and refrain from explicit forward guidance on the pace of future hiking. 
    • We do not expect ECB President Lagarde to provide guidance on the level of the neutral or terminal rate.
    • We do not expect an announcement on the end of Asset Purchase Programme reinvestments, but ECB President Lagarde could indicate that discussions will start soon.
    • The ECB will most likely announce some changes to remuneration on excess liquidity given positive real rates. 
    • New ECB staff projections will likely cut ECB growth projections sharply considering the slowing momentum and the ongoing energy crisis. 2022 projections will likely remain unchanged or include small changes (Q2 growth was strong), but we expect significant revisions on 2023 projections. 
    • We expect the ECB’s inflation projections to be revised higher in 2022 (from 6.8% to 8%) and 2023 (from 3.5% to 4.5%) and then to decline close to the 2% target in 2024. 

    We believe the ECB will deliver a hawkish message this week, reflecting its commitment to bring inflation back to its 2% target. At this stage, the Governing Council will in our opinion opt for a restrictive stance despite economic slowdown. It will likely push rates slightly higher and lead to a flattening of the yield curve.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-3161 Mon, 05 Sep 2022 17:31:00 +0200 Back to Business 2022 /en/who-we-are/news/detail/back-to-business-2022/ Can the markets withstand the constant downward revision of growth, soaring inflation close to 10% and tightening of monetary policies orchestrated by central banks around the world?  

    MARKET UPDATE

    The summer period had ultimately been positive overall for the financial markets thus far, despite a still difficult macroeconomic situation, for several reasons. First, the perception by financial players of a lower inflation risk linked to a drop in commodities prices, particularly the price of the barrel of oil. This logically resulted in a widespread drop in sovereign rates, both on nominal rates, but also, and especially, for real rates. In our view, this played a key role in the risky assets’ good performance until recently. Moreover, the market positioning, which was very pessimistic in June, and a good earnings season that was deemed satisfactory also undoubtedly contributed to renewed investors’ risk appetite.

    However, the macroeconomic situation remains at least difficult, especially in Europe. Consumer confidence is close to bottom in almost all Eurozone countries, in connection with the sharp rise in energy prices since the beginning of the year. In Europe, although the price of the barrel of oil fell back over the summer, this has not been the case for gas prices, which have jumped by more than 200% since the beginning of June. As a corollary, electricity prices continue to rise, with consequences for individuals and businesses that are currently difficult to assess due to the various government support plans in place. But is this fiscal support sustainable? The latest announcements suggest that, although this support will not disappear, it will at least be reduced, resulting in a potentially significant rise in energy costs for all economic players. A reform of the electricity market in Europe could also limit the shock.

    Thanks to US energy independence, the same risks do not weigh on US consumers. While the latter are also affected by high inflation, they are also supported by higher wage growth than in Europe and a still buoyant labour market, although some signs of weakness are beginning to appear. 

    China does not have inflation-related problems, but this does not make its situation more reassuring. The policies implemented in 2021 to rebalance certain segments of its economy continue to have a profound impact on the economy in general, and particularly on real estate. At the same time, the economy is also suffering from the government’s zero-Covid policy. 

    In this context of continual downwards revisions of the global growth forecasts for 2022 (4.40% at the beginning of the year, 2.90% as of 19 August), the central banks nevertheless have no possibility of easing financial conditions. While the latest US inflation figure, which came out at zero month-on-month for July, was reassuring in the short term, we believe it is far too early for central banks to be satisfied with the current situation. The latter reaffirmed in Jackson Hole their desire to fight inflation by being less accommodating and by raising real rates.

    Beyond the geopolitical risks, for which the future is uncertain by nature, it is undoubtedly the last point that makes us the most cautious for the coming months. It will be hard for the upcoming tightening of financial conditions to go smoothly in a context of deteriorating growth. We believe it is important to remain cautious in our allocations to risky assets, especially in Europe.


    To end on a hopeful note, however, it is possible that the end of the year will bring some good news with a gradually lower inflation in the United States and a positive impact of the various Chinese stimulus plans.

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    news-3159 Tue, 06 Sep 2022 09:00:00 +0200 La Française Real Estate Managers (REM) has acquired "Campus Cyber", an office building in Puteaux (92), from Altarea Entreprise /en/who-we-are/news/detail/la-francaise-real-estate-managers-rem-has-acquired-campus-cyber-an-office-building-in-puteaux-92-from-altarea-entreprise/ La Française Real Estate Managers (REM) has acquired "Campus Cyber" from Altarea Entreprise. "Campus Cyber" is an office building with a surface area of 26,500 m² in Puteaux (92), located at 5/7 rue Bellini, in the heart of La Défense, a leading European business district. Close to the Esplanade de La Défense (Metro Line 1) and the Parvis de La Défense (RER A, Transilien L and U, Metro Line 1, Tramway T2), the tower boasts exceptional accessibility. Delivered in 2021 and designed by Christian de Portzamparc, "Campus Cyber" is part of the State's cybersecurity acceleration strategy. The building is made up of 5 basement levels and 13 superstructure floors, along with a rooftop and cutting-edge service areas: sky bar, showroom, catering concept. 
    Soft mobility is encouraged with the inclusion of a number of cycle parking areas and charging stations for electric vehicles.

    The building is highly efficient from an environmental standpoint and was built to the latest environmental standards. It has top-level labels and certifications: NF HQE Exceptional, Effinergie +, Wiredscore Platinium, BREEAM level “Excellent”, Well Silver and its energy performance will be equivalent to RT 2012 minus 40%. 

    The "Campus Cyber" is fully leased for a period of 10 years to a single lessee, 45% of which is comprised of the French state and 55% of large private groups.
     
    This acquisition was made on behalf of investment vehicles managed by La Française REM. 

    Philippe Depoux, Chairman of La Française Real Estate Managers said, "In the wake of the record inflows of the SCPI market recorded in the first half of 2022, La Française REM has signed its largest acquisition for collective real estate investment vehicles with the "Campus Cyber". We are proud to be investing in a building that can truly be said to be iconic in many different ways: in terms of its architecture, its sustainability credentials – it is one of the very rare assets aligned with the Taxonomy – in terms of technology and services, as well as cybersecurity, which is in line with our group's commitment to sustainability." 

    Adrien Blanc, Chairman of Altarea Entreprise noted, "We are very proud to have closed this deal with La Française Real Estate Managers, a move that consolidates Altarea Entreprise's ability to carry out large-scale projects for leading players on the market. This building offers everything needed by the office of the future: an exceptional location, flexible and convertible spaces with services tailored to individual company needs, and an environmental performance that fulfils the highest-level international standards. We are also delighted that a French company will be taking over Campus Cyber."  

    La Française REM was advised by notarial firm Allez & Associés, Cabinet Mayer Brown on the leasing aspects and Cabinet Fairway on the financing aspects. 

    Part of the acquisition was financed by Banque Européenne du Crédit Mutuel, advised by the notarial office Victoires Notaires and the Cabinet Archers. 

    Altarea Entreprise was advised by Thibierge Notaires.

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    news-3157 Tue, 06 Sep 2022 09:00:00 +0200 La Française AM lands sri pioneer to head its equity fund management team: Thomas Dhainaut /en/who-we-are/news/detail/la-francaise-am-lands-sri-pioneer-to-head-its-equity-fund-management-team-thomas-dhainaut/ Paris, 6 September 2022: La Française AM, the management company of La Française Group, has appointed Thomas DHAINAUT as Head of Equities – Small & Large Caps, reporting directly to the Chairman and Chief Investment Officer of the management company, Jean-Luc HIVERT. This comes as part of ongoing efforts on the part of La Française AM to develop its “climate transition” expertise first introduced on its equity range in 2015, before being extended to bonds and diversified products. As at 30 June 2022, more than 97% of the assets under management of sustainable equity funds open to subscription were compliant with “Article 9” of the Sustainable Finance Disclosure Regulation.

    Thomas DHAINAUT brings twenty-four years of experience in asset management and stock picking to La Française. He began his career at Banque du Louvre in 1998 as Head of Financial Products Intermediation before moving on to become European Equities Fund Manager at HSBC Private Bank France in 2001. In 2005, he joined the equity management team of Sycomore Asset Management where he spent fifteen years as Partner and Fund Manager, developing solid expertise in extra-financial analysis and thematic equity strategies relating to ecological and energy transition. Before joining La Française AM, Thomas was Partner and Fund Manager at Nahua Capital (2020 to 2022). 

    Thomas DHAINAUT holds a master's degree in finance from ESCP (1996) and has been a member of SFAF since 2002.

    Jean-Luc HIVERT, Chairman of La Française AM concluded, “Extra-financial analysis lies at the heart of La Française AM's fund management philosophy. We have recently restructured our organisation and the recruitment of Thomas marks the last step in this transition towards a more holistic style of management. His mastery of extra-financial analysis, coupled with solid experience in conviction-based management, will strengthen the quality of management we are able to offer our investors and enable us to innovate in terms of thematic investment strategies.”

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    news-3152 Thu, 08 Sep 2022 09:00:00 +0200 La Française Real Estate Managers acquires its first German light industrial property from Crescendo /en/who-we-are/news/detail/la-francaise-real-estate-managers-acquires-its-first-german-light-industrial-property-from-crescendo/ La Française Real Estate Managers, acting on behalf of two collective real estate investment vehicles, has acquired its first German light industrial property from a fund managed by Crescendo Real Estate Advisors LLP. The property is located in the EUROCOM Business Park, in southeastern Nuremberg close to the Nuremberg Exhibition Centre and 11 minutes from the city centre via the Subway line U1. 

    Fully renovated in 2019/2020, the asset is let to two tenants and houses the headquarters of Ziehm Imaging GmbH, a medical technology company that manufactures state-of-the-art X-ray equipment and operates under an Environmental, Social and Governance (ESG) charter. The property has green roofs, provides bike storage, is close to public transportation and boasts a good energy performance. 

    Mark Wolter, Managing Director of La Française Real Estate Managers Germany, commented: “We are pleased to announce the acquisition of our first light industrial property with a tenant operating within the life sciences sector in Germany. This acquisition is perfectly in line with our strategy to diversify our German real estate portfolio regionally as well as by type of use, always paying special attention to ESG criteria. We are positive about the long-term attractiveness of the property itself, the asset class, and the location.”

    Thomas Reckers, Portfolio Manager at Crescendo Real Estate, commented: “It has been a pleasure working with La Française Real Estate Managers’ local team. As the final investment of our fund, the sale allows us to settle and distribute the net proceeds to our investors.”

    La Française Real Estate Managers was advised by Baker Tilly Rechtsanwaltsgesellschaft mbH on the legal aspects and by CBRE GmbH on the technical due diligence and ESG valuation. JLL handled the marketing of the property on behalf of the seller. Gleeds (technical), CTP Asset Management (property management) and KNH Rechtsanwälte (legal) supported the seller.

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    news-3151 Wed, 31 Aug 2022 16:42:23 +0200 Jackson Hole Economic Symposium, higher rates for some time /en/who-we-are/news/detail/jackson-hole-economic-symposium-higher-rates-for-some-time/ By Audrey Bismuth, Global Macro Researcher, La Française AM At the Jackson Hole Economic Symposium, the Federal Reserve (Fed) and other major central banks remained focus on their principal mandate, delivering low and stable inflation of around 2%, despite higher unemployment and recession risk. Reducing inflation is their top priority at this stage in the normalization of monetary policy. Central banks want to restore public confidence and regain their credibility after describing inflation as “transitory” last year and waiting too long to react to the surge in prices induced by fiscal and monetary policy responses to the pandemic. However, the main risk, namely for the Bank of England and the European Central Bank (ECB), is the cost of “overreacting” given the impact of the energy crisis and supply shocks, both of which are out of their control, on inflation.

    Fed Chair Powell’s speech was perfectly clear and hawkish. He delivered the same inflation-fighting message and matched aggressive market expectations. The Federal Reserve needs to keep rates restrictive for some time to ensure that inflation does not become further entrenched. Fed Chair Powell underlined that “a failure to restore price stability would mean far greater pain”. He also said that as the stance of monetary policy tightens further, it likely will "become appropriate to slow the pace of rate increases". The FED members need to see “clear and compelling evidence” of falling inflation to stop hiking rates. Despite the encouraging July inflation print, inflation remains far too high (Consumer Price Index at 8.5% down from 9.1% in June). Wage growth has accelerated (6.7% according to the Atlanta Fed wage tracker). The labor market is still very tight. And on the political front, the Biden administration is supporting household spending with its student loan relief plan. According to Bloomberg, this new stimulus package could increase inflation in 2023 by around 0.2 percentage points. Chair Powell did not provide an exact figure for the terminal rate or allude to when the Fed might stop hiking rates. He reminded financial markets of the Committee’s June rate projection which showed that the median federal funds rate would run slightly below 4% through the end of 2023 in order for inflation to move closer to 2% by the end of 2024. After raising rates “expeditiously”, the Federal Reserve will hold them there “higher for longer”. Most Fed members expected to keep the federal funds rate at a restrictive level for at least two years according to the June summary of economic projections. Jerome Powell wanted to push back against rate cut expectations next year. However, the Fed’s comments did not discourage future markets bets that the Fed would cut rates next year.

    The annual Jackson Hole Conference was not the “dovish pivot” risky assets were looking for. Since the July FOMC, financial markets expected a more balanced tone from the Fed. In the July meeting, the Committee increased rates close to the neutral rate which is considered to be 2.5% by many policymakers. Jerome Powell also indicated “as the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation”. The Fed’s July minutes suggested the central bank may pause to allow the hikes to take effect, given the lag between tightening and the consequences on economy. Furthermore, since June, the Fed has been reducing its balance sheets by running off maturing securities. According to the central bank, quantitative tightening is equivalent to a 0.50 percentage point increase in the federal funds rate. The peak in the federal funds rate might be lower in the current cycle because of quantitative tightening.

    Therefore, on Friday, U.S. stocks plunged (S&P 500 -3.3%, Nasdaq -3.9%) while treasury market reaction was relatively muted (2-year T-Notes +0.03% at 3.39%, 10-year T-Notes +0.015% at 3.04%). 2-year T-notes traded 15 basis points below the highest June level. On rate-hike expectations, futures markets priced 4% by the end of 2022 with three remaining meetings for 2022. Source: Bloomberg

    A Fed pivot does not seem imminent despite hints in the Fed’s July minutes. For the next policy meeting on September 21, Chair Powell did not provide any guidance on whether the FOMC would raise rates by 50 or 75 basis point. He reiterated that the Fed is dependent on incoming economic data. Traders largely predict a third consecutive increase of 75 basis points rather than a smaller basis point hike.

    At the Jackson Hole symposium, top central bankers, except for the bank of Japan, delivered a unified hawkish message to tame high inflation. They will pursue tightening even in a recession. In an environment punctuated by tightening financial conditions and a deteriorating global economic outlook, we remain cautious on risky assets and believe that the US yield curve will continue to flatten. The dollar should remain strong because of higher US real yield expectations, soft growth momentum abroad and geopolitical risk.

    The information provided is considered well-founded and accurate on the date of publication. The information reflects the opinions of La Française AM. This publication has no contractual value, and its contents are subject to change. The opinions may differ from those of other management professionals. Published by La Française AM FINANCE Services, whose registered office is at 128, boulevard Raspail, 75006 Paris, France, and which is regulated as an investment services provider by ACPR (“Autorité de contrôle prudentiel et de résolution”) under no. 18673. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-3149 Wed, 31 Aug 2022 09:39:14 +0200 European Commercial Real Estate Market – record investment volume /en/who-we-are/news/detail/european-commercial-real-estate-market-record-investment-volume/ By Virginie Wallut, Director of Real Estate Research and Sustainable Investment at La Française Real Estate Managers The European economy resisted well and continued to grow, namely due to the services sector and the gradual lifting of Covid restrictions, during the first half of 2022. Real Estate investors were confronted with a variety of challenges including higher inflation, increasing long-term interest rates and tightening financing conditions. Rising interest rates mechanically caused a compression of real estate risk premiums, which have begun to readjust. Nevertheless, real estate, and especially prime assets, should remain attractive given the indexation of rents on inflation. The shortage of building materials and limited stock, particularly of sustainable and energy efficient buildings, should continue to support prime rental values and asset valuations. Demand remains focused on central locations, and vacancy further develops in peripheries.
    Alternative asset classes, uncorrelated with economic cycles, and particularly healthcare assets, continue to offer a relatively competitive risk/return profile and offer portfolio diversification opportunities.

    European Real Estate Investment Market, record investment volume

    The volume of commercial real estate investment in Europe reached a twelve-month high of €280 billion (as at end-June 2022). However, Q2 activity, particularly in southern Europe, slowed due to rising interest rates and stricter financing conditions. Investor demand has been focused on quality assets, in terms of ESG and technical credentials, whereas the soaring costs of refurbishment have weighed heavily on the demand for older and less energy efficient assets.

    The office sector posted a twelve-month rolling investment volume up 9% as at end of June 2022 versus December 2021. The logistics and light industrial sectors performed well with a record investment volume of over €67 billion. Demand for this asset class is driven by anticipated increases in rental values given low vacancy and strong user demand.

    Retail investment volumes have returned to pre-crisis levels, driven by higher yields.

    Office yields have started to adjust 

    Q2 2022 was marked by a rapid rise in long-term interest rates, which mechanically caused a compression of the real estate risk premium. Real estate yields have since started to readjust. The French and German markets, where yields were the lowest, were the first to experience a rapid but moderate correction in their yields. At the end of June 2022, prime office yields were however still below 3% in Paris and the main German cities. The rise in yields is expected to be more pronounced and probably to last longer for secondary assets, especially in Southern Europe 

    Office take-up trends

    Despite headwinds, take-up* across Europe continued on its positive trajectory and rose by 46% year-on-year (as at end-June 2022), exceeding its ten-year average by 3%. All the main European cities posted positive growth in take-up over a twelve-month period with the exception of Amsterdam which saw a slight drop in demand (-3%). Dublin, London and Lille have seen their take-up more than double over the last twelve months (as at end-June 2022). 

    Immediate office supply in major European cities remains stable over the past year, albeit at a relatively high level. However, rapidly rising construction and financing costs should limit future supply and may contribute to a decline in vacancy in the medium term.

    Beware of rental value trends, submarkets behave differently

    The health crisis and the development of teleworking have altered the dynamics of the real estate market. Previously and broadly speaking, an overall increase in vacancy led to an overall decrease in rental values. Today, it is important to recognize that submarkets can behave differently, and centrality is a determining factor of rental value.  

    Incentives on secondary assets, across all markets, continue to reach new records. Demand is more and more focused on centrally located, serviced and energy efficient assets. The demand for quality assets is further fueled by rising energy costs.

    Low supply in Germany has continued to put upward pressure on German rental values. At the end of June 2022, prime rents stood at €510/m²/year in Berlin, €522/m²/year in Munich and €546/m²/year in Frankfurt, representing year-on-year increases of between 3% and 10%. London shows the strongest year-on-year increase (+13%) with rental values at €1,626/m²/year for the best assets at the end of June 2022.

    Sources: CBRE, MBE, La Française REM Research

    *take-up in the 12 main European cities: Brussels, Lille, Lyon, Paris, Berlin, Frankfurt, Hamburg, Munich, Dublin, Milan, Amsterdam, Madrid


    The information provided is considered well-founded and accurate on the date of publication. The information reflects the opinions of La Française Real Estate Managers. This publication has no contractual value, and its contents are subject to change. The opinions may differ from those of other management professionals. Published by La Française AM FINANCE Services, whose registered office is at 128, boulevard Raspail, 75006 Paris, France, and which is regulated as an investment services provider by ACPR (“Autorité de contrôle prudentiel et de résolution”) under no. 18673. The portfolio management company La Française Real Estate Managers received AMF accreditation No. GP-07000038 on 26 June 2007 and AIFM accreditation under Directive 2011/61/EU, dated 24/6/2014  (www.amf-france.org).

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    news-3141 Mon, 25 Jul 2022 14:56:56 +0200 50 or 75 or 100 bps rate hike? /en/who-we-are/news/detail/50-or-75-or-100-bps-rate-hike/ Please find below what we expect at the July meeting:
  • We expect the Federal Open Market Committee (FOMC) to hike rates by 75 bps to a range of 2.25%-2.5%, the FED long-term neutral rate estimate, at its July 26-27 meeting.  We do not expect a 100 bps hike despite the strong June CPI (Consumer Price Index), because inflation expectations have dropped.
  • Chair Powell will most likely repeat the committee’s need to see ‘clear and convincing’ evidence that inflation is coming down before moving to a slower pace. 
  • He probably will not provide too much information on the size of the hike in September in order to keep all options open.
  • Chair Powell will likely confirm the doubling of the pace of quantitative tightening in September to $95bn/month ($60 bn in Treasuries and $35bn in Mortgaged-backed securities).
  • This meeting is expected be a confirmation of Fed data-dependency and should be without a meaningful impact on financial market. We expect the FED to remain hawkish in order to restore price stability with a slightly more balanced tone given weak incoming data. <

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-3138 Mon, 25 Jul 2022 09:47:41 +0200 A lack of consensus on risky assets /en/who-we-are/news/detail/a-lack-of-consensus-on-risky-assets/ by François Rimeu, Senior Strategist, La Française AM Equity and credit markets have suffered greatly since the beginning of the year. Following this type of correction, it is natural to consider whether or not to increase the allocation to risky assets as a whole.

    Inflation

    These days, getting a grasp on Inflation is not easy. A year ago, the market expected average inflation in 2022 to be 1.6% in the eurozone and 2.9% in the US, reaching a peak at the end of 2021, and in 2023 a return at around 1.5% in Europe and 2% in the US. (Bloomberg) Today, these same markets are forecasting inflation of 8.2% in the eurozone and the US for 2022 and a relative decline in inflationary pressures for 2023, with price rises still around 4-5%. Naturally, the war in Ukraine and the enormous consequences on the commodity markets only go so far in explaining these errors in estimation. We should bear in mind that if inflation estimates were revised upwards by more than 5% (see Chart 1) over the last twelve months, it is easy to imagine these estimation errors recurring, in either direction.

    Chart 1 (Bloomberg):

    In the short term, this leaves central banks with little choice as to what monetary policy to pursue. They want to avoid a de-anchoring of inflation expectations and will therefore continue to tighten their monetary policies with the generally assumed objective of reducing demand.

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    news-3133 Tue, 19 Jul 2022 17:05:20 +0200 Are we at the end of an oil super cycle? /en/who-we-are/news/detail/are-we-at-the-end-of-an-oil-super-cycle/ by Audrey Bismuth, Global Macro Researcher, La Française AM On two occasions in July, the WTI (West Texas Intermediate) dipped below $100 a barrel for the first time since April as fears of deep recession grow, the dollar strengthens and the number of covid cases rises in China, the world’s second largest oil consumer. In its July monthly report, the US Energy Information Administration emphasized 2022 would be the first year since 1999 that growth in oil consumption in OECD countries outpaces growth in non-OECD countries. Around the world, central banks will have to hike rates aggressively to fight against persistent, broader and highly elevated inflation. They must “cool” demand until inflationary pressures ease. Consequently, oil traders have cut their net long positions since June.

    However, fundamentals remain strong: OPEC+ supply shortfalls, low inventories, dwindling spare capacity, elevated refining margins driven by seasonal demand and disruption in Russian exports. The forward futures stay heavily in backwardation (futures price is lower than sport price) which is theoretically bullish for the spot price. On July 18, the brent spot price recovered at around $106 and brent crude futures for December 2022 settled slightly lower at $96 a barrel. Prices for physical Brent crude have soared to their highest since 2008 according to Bloomberg.

    The global oil demand is still growing. Analysts at the International Energy Agency and at the US Energy Information Administration expect global oil demand to increase by at least 2 million barrels a day (b/d) in 2023, to 101,3 million b/d and 101,6 million b/d respectively, bringing it back above the 2019 level. OPEC is more optimistic and expects an increase in global oil demand of 2.7 million b/d. Global oil demand growth will be led by a strong growth trajectory in non-OECD countries namely Asia, where growth is driven by a rebound in the demand for kerosene. Obviously, the decelerating economic activity could lead to some downside revision in the future. However, historically, oil demand has only contracted in the worst of global recessions. According to J.P.Morgan, with the exception of the COVID-driven recession of 2020, annual oil demand has never contracted by more than 3.0 million b/d in a year. Among all the years when oil demand fell year over year, 60% of the time the drop in demand was limited to under 1.0 million b/d, and 20% of the time demand fell by 1.5-2.0 million b/d. 

    On the supply side, analysts anticipate range-bound production from OPEC countries and larger supplies from non-OPEC producers, fueled by the United States. OPEC+ countries continue to deliver lower supply increases than the monthly production quotas despite oil prices which have steadied at around $105 since the beginning of the year. The 10 producers in the OPEC+ agreement produced 24.8 million b/d, which was 1 million b/d below OPEC’s target for June. The inability to boost production is likely to continue given aging infrastructure and years of low investments. Only Saudi Arabia and the United Arab Emirates have enough spare capacity to pump more. According to the International Energy Agency, their combined buffer could fall to just 2.2 million b/d in August with the full phase out of record OPEC+ cuts. Saudi Arabia currently produces around 11 million b/d and reported maximum sustainable capacity of 12 million b/d. It has achieved 11.5 million b/d one time in April 2020. In addition, despite talks, the United States and Iran failed to restore the Iran nuclear deal. In the United States, output remains at about 1.0 million b/d below the pre-pandemic high. Investor pressure to maintain capital discipline is the primary reason why publicly traded oil producers are restraining growth despite high oil prices. The world’s five largest oil companies plan to invest $81.7 billion this year, half of what they spent in 2013. Inflation, supply chain issues, labor shortages and less operator activity have also limited production growth. After 11.6 million b/d in the first semester of 2022, the US Energy Information Administration expects U.S. crude oil production will rise to an average of 12.2 million b/d in the current semester and to 12.8 million b/d in 2023, which would surpass the previous annual record set in 2019. The increased production of associated natural gas from the Permian basin, the largest petroleum-producing basin in the United States, also poses a downside risk to its crude oil production over the next months.

    Global oil inventories remain extremely low. OECD industry stocks have recovered somewhat thanks to sizeable government stock releases (which are schedule to end in October) but remain nearly 300 million barrels below their five-year average. Furthermore, tightening supply will be challenging as the European Union’s embargo on Russian oil is set to come into full force at the end of the year. According to the International Energy Agency, Russian oil exports in June fell by 250 000 b/d to 7.4 million b/d, the lowest since August 2021. 
    Overall, volatility in crude oil prices is likely to continue until inflation pressure eases, but the dynamic remains supportive of oil prices, i.e., futures curves remain in “backwardation”. 


    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-3130 Mon, 18 Jul 2022 16:22:36 +0200 Organic Growth? /en/who-we-are/news/detail/organic-growth/ One of the hardest hit areas in the markets has been biotechnology. These stocks have materially underperformed the broad market over the past year, but how appealing have their valuations become? Attractive Biotech Valuations?

    • Over the past year, many investors shunned companies lacking relatively high current earnings that may have strong growth potential. As a result, those types of stocks experienced the largest declines during the past year’s market selloff. Biotechnology stocks as measured by the NYSE Arca Biotechnology Index (BTK) were notable laggards relative to the S&P 500 Index as these companies tend to have either no earnings or relatively low current cash flows. 
    • Since biotech companies generally tend to lack current profits, looking at the ratio of the past eight years of R&D spending relative to equity prices sheds light on how many investors are valuing drugs in the pipeline that have potential for government approvals. We believe, the higher the ratio, the less value the market is putting on drug development efforts.
    • As shown in the chart above, among the largest 750 companies, R&D spending as a percentage of market capitalization for biotech companies relative to large caps is the highest in at least a quarter century, which we believe makes the stocks potentially attractive for investors looking to profit from the advances being made in harnessing organic materials to improve our lives.
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    news-3129 Mon, 18 Jul 2022 15:16:12 +0200 A cautious rate hike, the first in 11 years, and the firepower of the new anti-fragmentation tool /en/who-we-are/news/detail/a-cautious-rate-hike-the-first-in-11-years-and-the-firepower-of-the-new-anti-fragmentation-tool/ At the July meeting, the European Central Bank (ECB) will confirm its policy sequencing. The main focus will be the anti-fragmentation scheme named “Transmission Protection Mechanism”. Please find below what we expect:

    • As preannounced, the ECB will increase its three key interest rates by 25 bps after having ended its Asset Purchase Programme (APP) on 1 July; we do not expect the ECB to surprise markets with a 50-bps move. 
    • The overall tone will in our view remain very hawkish considering the latest inflation figures and the downward pressure on the exchange rate.
    • We also expect President Lagarde to reiterate that the pace of policy tightening will be guided by optionality, data-dependence, gradualism, and flexibility. She will confirm that the key ECB interest rates will rise again in September, with the calibration of this rate increase depending on the updated medium-term inflation outlook.  
    • She will likely reaffirm the ECB’s very strong commitment to act against unwarranted fragmentation. The ECB will also provide more details about the so called “Transmission Protection Mechanism”, its new bond-buying program. We expect this plan to be unlimited, with light conditionalities and 100% sterilized. It will be a difficult exercise in communications for the ECB, with a lot of questions around this new plan: what does “light conditionality mean exactly? What are the “right” circumstances under which the tool could be deployed? Is the ECB going to favor specific parts of the curve?
    • We also expect the ECB to confirm discussions to modify TLTRO (Targeted longer-term refinancing operations) III eligibility requirements given the accelerated pace of monetary policy normalization. 

    All in all, the main risk would be to see the ECB fall short of market expectations regarding the new plan. The ECB has a difficult exercise in communications, especially given new political turmoil in Italy. Ahead of this meeting, we remain cautious on peripheral bond spreads, and we still see a potential for more flattening across European curves 


    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-3128 Tue, 19 Jul 2022 09:00:00 +0200 La Française continues expansion in Asia-Pacific through office opening in Singapore /en/who-we-are/news/detail/la-francaise-continues-expansion-in-asia-pacific-through-office-opening-in-singapore/ La Française, international asset management group with €55 billion euros in assets under management, is pleased to announce the opening of a new office in Singapore located together with Crédit Industriel et Commercial (CIC) Singapore Branch at 182 Cecil Street, #33-01 Frasers Tower. Both La Francaise and CIC are members of Crédit Mutuel Alliance Fédérale. Since the opening of its first office in Seoul, South Korea, in 2016, which coincided with the hiring of Shawna YANG as Investor Relations Director for Asia, La Française has seen a significant increase in demand from Asian investors, especially for European real estate. Consequently, La Française will open a second office (pending approval by relevant authorities) in Singapore to fuel this growth. 

    In just over five years, La Française has become a reference among Asian institutional investors seeking to invest in the European real estate market, in the office sector and more recently in logistics and has executed over €3bn of transactions. La Française manages on behalf of Asian investors €2.3 billion of AUM (as at 30/04/2022), mainly in real estate, and has established a number of sourcing partnerships with Asian blue-chip investors.

    Asia-Pacific is a priority market for La Française and being located in Singapore will further boost its growth in this region with the Singapore office spearheading this development. 

    “As a leader in the European office real estate space , we recognize the importance of a strong presence in Asia-Pacific. International business development is all about creating proximity. Our aim is to assist Asian investors in the geographic diversification of their real estate portfolios. This is an important milestone in our business development strategy, and we are thrilled to take this new step in Singapore.” explained Philippe LECOMTE, CEO of La Française AM Finance Services.

    Julia TAN, Chief Executive of CIC Asia Pacific concluded, “This new development is a perfect illustration of the synergies we aim to achieve as members of Crédit Mutuel Alliance Fédérale. We look forward to welcoming our colleagues from La Française in Singapore.”

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    news-3124 Mon, 11 Jul 2022 09:34:49 +0200 La Francaise closes one of the largest real estate office transactions in Brussels for 2022 /en/who-we-are/news/detail/la-francaise-closes-one-of-the-largest-real-estate-office-transactions-in-brussels-for-2022/ La Française Real Estate Managers (REM), assisting its client Hyundai Investments, contracted to sell 100% of the shares of Anvers Luxco SARL to an investment fund, managed by Whitewood. Anvers Luxco SARL indirectly owns a majority share in the Belgian headquarters of ENGIE in Brussels.

    The asset comprises two buildings, North Light and Pole Star, located in the North Station area of Brussels. Together, the properties make up a high quality “modern” office complex of 77,000 m² constructed in 2011 and 2014. The asset is fully leased to ENGIE and has a number of sustainability features, including optimized geothermal energy, geothermal heating and cooling, solar panels, and a sophisticated climate control system.

    Brussels North district is currently undergoing a number of urban planning and mixed-used developments, contributing to the revitalization of this part of the Central Business District with an influx of new public and private occupiers. Real estate investment capital is also flowing into the area with recent significant transactions such as North Galaxy Towers and Môbius II.
    La Française Real Estate Managers was advised by PwC (exit, tax and financing) and by Linklaters on legal. 

    The buyer was advised by Clifford Chance (Tax & Legal), Deloitte (Tax) and Cushman & Wakefield (real estate advice).  

    The deal stands as one of the largest office deals in Brussels for 2022.

    David Rendall, Managing Director, La Française Real Estate Managers – Institutional Division, said, “La Française is delighted to have secured the sale of North Light and Pole Star to Whitewood, as this completes a successful investment made on behalf of Korean investors, in conjunction with Hyundai Investments. The investment has performed in-line with its business plan and the disposition to a local manager provided an opportunity to return capital to our investors, as part of our active asset management approach.”

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    news-3123 Fri, 08 Jul 2022 14:03:07 +0200 Do rising rates reduce the call risk ? /en/who-we-are/news/detail/do-rising-rates-reduce-the-call-risk/ In the current rising rates environment, early redemptions, or "calls", which were a significant risk factor in the past years for high-yield target maturity strategies, appear less risky today and we explain why. CONTEXT REMINDER

    Until late 2021, interest rates sharp decline in Europe and in the United States (thanks to very accommodating monetary policies) coupled with the significant credit risk premium compression have clearly accelerated High Yield and private issuers bonds early redemptions (« calls »).                       Many of these companies have benefited from this exceptional situation to optimize their balance sheet and refinance their bonds with attractive financial conditions (lower coupons and longer maturities). As a reminder, European High Yield average coupon has been divided by 2 over the last decade from 7% at the end of 2013 to 3.5% at the end of 2021 . This is especially due to the heavy interest rate fall (see graph 1).

    BONDS’ EARLY REDEMPTION MECANISM (« CALLS »)

    The High Yield universe is mainly (75%) made of bonds that have an early redemption option (“call”) at the issuer’s discretion. The latter will be encouraged to exercise this early redemption if the rate that it can obtain on the bond markets is lower than the coupon of its initial debt (like a household that refinances its mortgage).

    By doing so, early redemptions increase (decrease):

    • When interest rates decrease (increase) 
    • And/or when credit risk premiums tighten (spread). 

    The graph below  compares the average coupon on outstanding debt (blue curve) for High Yield issuers to the yield at which these same issuers can refinance on the secondary market (orange curve).

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    news-3121 Thu, 07 Jul 2022 09:00:00 +0200 La Française acquires first medico-social asset in Belgium /en/who-we-are/news/detail/la-francaise-acquires-first-medico-social-asset-in-belgium/ Paris, 7 July 2022: La Française Real Estate Managers (REM), acting on behalf of a collective real estate investment vehicles, recently entered into a sales and purchase agreement for the development of a real estate project located on rue de la Caracole in Namur, Belgium. The transaction will be concluded no later than the end of 2024. The real estate complex is located south of Namur (the capital of the Wallonia region), a city of approximately 110,000 inhabitants. Namur is close to a river port and a major motorway junction, which makes it a crucial part of the province's economy. Namur ranked second in Agoria's 2015 "Smart Cities" benchmark performance rating system.

    The development project involves a housing complex specifically intended for caring for people with disabilities. It will be made up of five buildings, accommodating a total of 80 residents. Four separate buildings will each provide bedrooms and shared leisure and common facilities for 20 residents. Another building will house the administration offices, an area for group activities, a shared dining room, kitchens, laundry facilities, etc. Outside, the residents will be able to take advantage of relaxation and activity facilities such as: a games area, a vegetable garden, an apiary, an urban farm, etc. 

    The building will meet the latest standards both from a "medical" standpoint as well as in terms of energy consumption. The building complex will have photovoltaic panels on the roof and electricity will be provided from renewable energy resources. It will also have charging stations for electric vehicles and include plenty of green spaces. 

    The building has been pre-let, under an eighteen-year fixed-lease agreement to Namur Santé, a member of the MG Health Care group, working in the care sector for people with disabilities in Belgium.

    Jérôme Valade, Head of the healthcare real estate division concluded, "This development project will help to redress the balance for the shocking lack of facilities for people with disabilities. The guiding idea, namely, to offer a real home to residents, fits perfectly with our investment philosophy, which aims to build a portfolio of assets across Europe that satisfy the need for medico-social facilities in central urban areas".For the legal aspects surrounding the acquisition, La Française REM used the consultancy services of Cabinet Schoups, while Theop provided consultancy services regarding the technical and SRI aspects of the acquisition.

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    news-3116 Mon, 04 Jul 2022 16:18:50 +0200 Carbon Impact Quarterly : How to assess the impact of climate change for countries? /en/who-we-are/news/detail/how-to-assess-the-impact-of-climate-change-for-countries/ All countries, from high-Income to low-income, are impacted by climate change risks, but the burden is not equally shared. Some countries are more exposed to climate risks, while others are less so. Climate change is one of the most important challenges the world is facing today. Green House Gas (GHG) emissions continue to increase for many countries and regions. Our planet is getting warmer.

    Extreme weather events happen with higher frequency and incur higher damage costs. Urgent actions are required to mitigate the negative impacts of climate change on the global economy.

    Countries and governments alike must take more ambitious actions to tackle climate change and to reach the goal of the Paris Agreement, which limits global warming to well below 2°C. We need to accelerate the transition to a low-carbon economy before it is too late.

    Climate change is expected to have a significant impact on the global economy. This is the reason why we have decided at La Française to develop a climate-transition investment methodology for all assets classes. We consider that climate change is an investment risk but also a source of opportunities that will impact the value of investments in the coming years.

    Until now, investors have focused primarily on climate change at the corporate level (i.e., for equities and credit) but not at the sovereign level. Countries are directly exposed to climate change risks and government bond investors can no longer ignore these risks.

    In this document, we introduce our climate-transition approach to sovereign debt.

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    news-3114 Wed, 15 Jun 2022 09:00:00 +0200 June 15th extraordinary meeting of ECB /en/who-we-are/news/detail/june-15th-extraordinary-meeting-of-ecb/ The European Central Bank (ECB) held an extraordinary meeting today after three consecutive very volatile sessions in European Fixed Income markets. The spread between the 10-year Italian and German Bund moved from 200 basis points (bps) to 242 bps, and we saw similar movements across the board (2-year BTP spread, Greek spread, etc.). We did not expect a reaction from the ECB at such levels of spread considering that overall, spreads are not showing significant stress, as highlighted by Ms Schnabel yesterday.

    The question that everyone is asking is the following: what are the ECB’s options?

    The ECB must find a solution to achieve its three main objectives:

    1. Halt the fall of the Euro,
    2. Maintain intra EU spreads at reasonable levels, 
    3. Fight inflation. 

    Markets participants have been speculating on this for months now, and we are yet to see any convincing solution. See hereafter what they have indicated today.

    • The ECB will apply flexibility in reinvesting PEPP (Pandemic emergency purchase program) redemptions. That was already the case before, so nothing new here. However, the ECB could increase the use of “flexibility” moving forward. They have been reluctant in the past to deviate significantly from the capital key (except during the Covid crisis for a short period of time), but they could decide to do so. Doing so may prove difficult over the long term (the ECB has to respect the capital key by the end of any calendar year, see www.ecb.europa.eu/mopo/implement/pepp/html/pepp-qa.en.html ), but it could help to stabilize markets over the short term.
    • The ECB told staff to prepare new anti-crisis tools for approval. We do not have any details yet, but this is what markets were hoping for last week before the ECB meeting. It is too soon to formulate an opinion on the plan, and it is still not clear how much support the plan will have among ECB members.

    The fact that the ECB is stepping in should calm markets over the short term, especially given the reduced exposure to peripheral countries. However, they must now deliver on their new anti-crisis tools. If it means a new Quantitative Easing (QE) program, dedicated to peripherals countries, we are hesitant. We do not think it would be possible without conditionality. It could be a new plan similar to the Outright Monetary Transactions (OMT) program, but with more flexibility and light conditionality. For now, this seems to be the most plausible outcome. Will it be enough to keep peripheral spreads from widening? We are not sure about that, at least not until inflation comes down. 

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    news-3111 Mon, 04 Jul 2022 09:55:04 +0200 Highly-pressured financial markets /en/who-we-are/news/detail/highly-pressured-financial-markets/ The inflationary crisis that we face is changing the very structure of financial equilibriums that we have known for about 20 years. This increase in prices has several causes : Covid crisis, supply chains disruptions, war in Ukraine, lack of fossil fuels investments, etc. with repercussions on all financial assets. As a direct consequence, central bankers all have (or almost all) drastically changed their tone in recent months : 

    • United States : the Fed increased its key rate by 150 basis points. They have signaled their will to continue their restrictive monetary policy to arrive at a key rate of around 3-3.5%, while reducing its balance sheet 
    • Europe : the ECB abandons its asset purchase program and announced its first rate hikes in July.
    • Switzerland : the national bank has started to raise its rates and will possibly be joined shortly by the Japanese central bank who is not satisfied with the hurtful depreciation of the yen.

    This global monetary policy tightening logically leads to less accommodating financial conditions with real rates rising sharply in recent months (see real 10-year Euro and US rates opposite).

    Since 2008 we have lived with an inflationary risk close to zero and very accommodating central banks. This has allowed real rates to fall and favorised financial assets’ high valorisations (real estate, credit, shares, etc..). This trend is now behind us, and this should remain the case if inflation continues to be the main problem for central bankers. 

    Soaring inflation, skyrocketing energy prices for the consumer and increasingly restrictive credit conditions all have a negative impact on growth across all sectors and more specifically on the consumer. Consumption levels remain strong in most developed economies, led by the United States, thanks to the savings accumulated following the various support plans. It is very likely however that it will gradually decrease in the coming months. Although the inflation’s source is mainly linked to supply issues, central bankers want demand to crumble in order to curb inflationary pressures.

    This is especially true in Europe, with demand already showing tangible signs of a strong slowdown. Having no means of acting on supply, central banks will therefore try to achieve a difficult objective: slowing the economy without causing a recession; a historically difficult balance to achieve.

    In light of all this, we believe that growth forecasts will continue to decline over the medium term, which should lead to lower earnings estimates for companies. These companies will find it difficult to counter more expensive financing, margins pressure and reduced consumption, whose price elasticity should increase. The decline in risky assets now reflects the tightening of financial conditions but are not pricing earnings’ drop yet. In our opinion, it seems too early to turn positive on bonds or equities, despite already pronounced declines. Diminishing inflationary pressures  appears to us to be the main condition for the financial markets to stabilize. It is currently extremely difficult to get an informed opinion given the determinants of this inflation.

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    news-3108 Wed, 15 Jun 2022 18:29:00 +0200 La Française boosts business development team in Spain and welcomes new Sales Manager /en/who-we-are/news/detail/la-francaise-boosts-business-development-team-in-spain-and-welcomes-new-sales-manager/ La Française, international asset management group with €55 billion in assets under management (as at 31/12/2021), is pleased to announce and welcome Julián De la Cuesta as Sales Manager Iberia, reporting to Reyes Garcia-Reol, Country Head – Iberia. Julián De la Cuesta has close to fifteen years of international experience in the asset management industry, beginning in 2008 with Schroder Investment Management North America. For seven years, Julián worked out of New York as an Internal Sales Director, supporting offshore business development throughout the United States, Canada and the Caribbean. In 2015, Julián was promoted to Offshore Sales Director, responsible for retail distribution networks and product placement. After four years, Julián joined AON in Madrid as a Senior Consultant, with the task of building the OCIO (Outsourced Chief Investment Officer) business for the Spanish, Andorran and Portuguese structures of the firm. Prior to joining La Française, Julián was a Senior Product Specialist for Allfunds Bank in Spain, responsible for product management and business development for Allfunds’ investment consultancy services in Iberia and the Americas.
     
    Julián De la Cuesta holds a Bachelor of Sciences in Management from Saint John’s University in New York.

    Reyes Garcia-Reol, Country Head – Iberia, said, “Spain was La Française’s first foreign market and since founding the local office some twelve years ago, we have developed considerably. Today, we have a wide palette of investment solutions, covering all asset classes and representative of La Française’s high alpha management expertise, registered for distribution. Naturally, we have high standards and strong ambitions for the Iberian market. Julián, given his extensive experience and knowledge of cross border fund distribution, will be an asset to our team.”

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    news-3107 Thu, 23 Jun 2022 18:13:00 +0200 La Française sources Mastern Premier REIT 1 /en/who-we-are/news/detail/la-francaise-sources-mastern-premier-reit-1/ La Française Real Estate Managers, European market expert with €30bn in real estate assets under management (30/04/2022), is a partner of Mastern Investment Management Co. Ltd. La Française Real Estate Managers, European market expert with €30bn in real estate assets under management (30/04/2022), is a partner of Mastern Investment Management Co. Ltd.
    The Seoul-based property investor recently completed the Initial Public Offering (IPO) of its first Real Estate Investment Trust (REIT), Mastern Premier REIT 1, for which La Française Real Estate Managers sourced three of the five assets included in the portfolio.

    • Crystal Parc, a 7 storey/39.000 m2 multi-let office building in Neuilly-Sur-Seine (92), a prime business location in close vicinity to the Paris Central Business District and La Défense (France). 
    • two “last-mile” logistic platforms, ranging from 5,000 to 10,000 m2, fully let to blue-chip tenants in France.

    Philippe Depoux, CEO of La Française Real Estate Managers commented, “The oversubscription of the IPO is a reflection of Mastern’s excellent reputation and the quality of the real estate portfolio. We respectfully thank Mastern for their confidence and look forward to building upon this success in the future.”
     

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    news-3106 Wed, 29 Jun 2022 10:00:00 +0200 La Francaise unit-linked real estate vehicles available on IZNES /en/who-we-are/news/detail/la-francaise-unit-linked-real-estate-vehicles-available-on-iznes/ Paris, 29 June 2022: La Française, a multi-expertise management group with €55 billion in assets (31/12/2021), has expanded its range of investment vehicles available on IZNES to include unit-linked "real estate" investment vehicles (Civil Holding Companies and Civil Real Estate Companies), referenced by insurance companies including Generali, an international insurance and asset management group. IZNES is the pan-European marketplace for investing in fund shares on the Blockchain. La Française now offers its insurance partners the possibility of accessing its range of “real estate” vehicles while adopting a new simplified customer process. All subscription and redemption transactions can be carried out in real time. The IZNES offers a variety of advantages to La Française's institutional investors:

    • Access to a comprehensive product database, with all the features and documents relating to the funds;
    • Ability to view subscriptions and redemptions in real time, with prospectus cut-off times;
    • Access to the blockchain register updated in real time, guaranteeing immutability and traceability and building reference data shared between the investor and the management company

    Thierry Gortzounian, Chief Operating Officer of La Française AM Finance Services said "An active innovator and stakeholder since the launch of the project in 2017, La Française is relentlessly pursuing the deployment of the IZNES solution across its range in order to best serve its investor base. By the end of July 2022, La Française aims to have more than thirty vehicles available on the marketplace and is already working on listing an undertaking for collective investment in real estate (Organisme de Placement Collectif en Immobilier – OPCI). We are offering our insurance partners access to vehicles that are representative of our two areas of expertise, real estate and financial assets. Through IZNES, insurers benefit from a user-friendly subscription channel which enables them to control operational risk." 

    IZNES is proud of La Française’s renewed confidence and delighted to see IZNES increasingly adopted by the market. Christophe Lepitre stated, "Our solution grants institutional investors and in particular unit-linked insurers fully automated subscriptions from the same order book, in UCITS or AIF funds domiciled in the European Union including real asset funds. This is a major asset, particularly in terms of operational security”. 

    For Generali, being able to invest in La Française’s real estate vehicles via IZNES is not only a matter of optimising procedures, but also of enhancing the value of the teams by eliminating tasks which do not add any value. “The growing number of real asset unit-linked vehicles reinforces the imperative of eliminating manual and paper-based processing which not only presents an operational risk but is of no benefit to the teams. Who is still interested these days in printing out a subscription form, filling it out, signing it and so on? IZNES makes it possible to instruct subscription operations directly from our order book to the fund register on the blockchain. The confirmation and position elements are automatically fed back to our accounting tools. Security, speed, digitalization and innovation – it's got everything! Blockchain is becoming the preferred operating model for unit-linked vehicles", said Rémi Cuinat, Director of Unit-Linked Assets at Generali France.
     

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    news-3101 Tue, 28 Jun 2022 10:28:49 +0200 Notice to shareholders of the sub-fund Multistrategies Obligataires /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-multistrategies-obligataires/ The Company’s board of directors (the "Board") hereby informs you that the investment policy of the Sub-Fund has been updated in order to clarify that exposure to equities may also be obtained through coco bonds and that the credit default swaps the Sub-Fund may invest in may be single name and index swaps. The investment policy will read as follows: 
    "(…) The sub-fund may invest in, or be exposed to, the following investments up to the 
    percentage of net assets indicated: 

    • convertible bonds: 100% 
    • assets in non-OECD countries: 25% 
    • cash and cash equivalents: 20%. These may include monetary UCIs or UCIs whose investments’ overall weighted maturity or rate reset frequency does not exceed 12 months 
    • contingent convertible bonds (coco bonds): 20% 
    • mortgage- or asset-backed securities: 20% 
    • other UCITS/UCIs: 10% 
    • equities (through exposure from convertible bonds and coco bonds): 5%"
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    news-3093 Tue, 28 Jun 2022 14:58:00 +0200 Notice to shareholders of the sub-fund Inflection Point Carbon Impact Euro /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-inflection-point-carbon-impact-euro/ The Company’s board of directors (the "Board") hereby informs you of the clarification of the Sub-Fund’s investment policy in order to (i) describe how the initial investment universe is constructed when applying the ESG filter and (ii) insert the description of the environmental, social and governance (ESG) criteria applied by the investment manager for the Sub-Fund, which were previously disclosed in the general part of the prospectus, directly in the sub-fund appendix and so to read as follows: 

    "(…) The sub-fund may invest in, or be exposed to, the following investments up to the percentage of net assets indicated: 

    • Eurozone equities (including exposure from derivatives): 85% to 105% 
    • Equities from anywhere in the world, including emerging markets: 10% 
    • Investment grade bonds: 10% 
    • Other UCITS/UCIs: 10% 

    The sub- fund has specific sustainable investment objectives (SFDR Article 9). The Management Company relies on the analysis of the research center "La Française Sustainable Investment Research" (the “Research Center”) of the entity "La Française Group UK Limited" specialised in determining responsible investment criteria. It is specified that there is a risk of conflicts of interest with respect to the provision of ESG scores by the Research Center. 

    The investment process is based on Integration with significant engagement in the management and thematic. 
    The initial investment universes are constructed from Eurostoxx TMI (Total Market Index). The possibility of selecting securities outside the initial investment universe is limited to 10%. In selecting securities, the investment manager uses a 3-step investment process: 

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    news-3091 Mon, 27 Jun 2022 11:27:56 +0200 Climate aware startegic asset allocation /en/who-we-are/news/detail/climate-aware-startegic-asset-allocation/ The need to take climate change into account as a structural factor of performance Academic research, as well as the lessons of experience, demonstrate that long-term asset allocation is the main source of performance, far ahead of tactical allocation or investment selection. However, with the problem of global warming linked to greenhouse gas emissions, the concept of “Tragedy of the horizon” has highlighted the necessary consideration in the construction of portfolio of a very long duration event, of the order of 80 years, time necessary for the associated damage to materialize fully. Simultaneously, the community of central banks acknowledges that climate change poses potentially systemic risks to financial stability that could materialize in “green swan” events.

    Consequently, traditional backward-looking probabilistic approaches would not be able to assess climate-related risks properly. Historical data are certainly not sufficient to define a long-term asset allocation. They are even partially counterproductive, because they are supported by irrelevant economic and monetary fundamentals. Alternative approaches based on a green taxonomy may also prove insufficient as they only offer a static view of the reality they depict. New forward-looking approaches are therefore needed. Such scenario-based methodologies seek to set up plausible hypotheses for the future without attributing a probability of occurrence to each of them.

    Strategic asset allocation must take into account the transition of economies to a decarbonized economy, the only scenario capable of avoiding devastating global warming, by positioning itself on investments that generate performance and lower risk. But other, less positive, scenarios have to be considered too. This is the subject that the Climate Aware Strategic Allocation aims to cover. In addition, this transition may be induced and accelerated by promoting the financing of traditional industries, the development of transitional facilitating activities or of disruptive innovations. This is the subject of Investing in Climate by selecting ad-hoc investments within each asset class once the allocation has been completed.

    In more details, Climate Aware Strategic Allocation is based on three pillars: expected returns derived from a consistent economic scenario, risk measures, volatility and correlations, and an algorithm for optimizing risk-adjusted returns. The idea is to use an essentially forward-looking scenario-based approach to implement the strategic asset allocation.

    The scenarios translate the more or less intense efforts of the global economy to mitigate carbon emissions and adapt economic structures to warming while taking into consideration productivity, demographic trends, the relative energy intensity of the economy and the carbon content of energy production. The economic and scientific community agrees on five so-called Shared Socioeconomic Pathways (SSP), determined by the degree of mitigation and adaptation. They range from a virtuous scenario corresponding to the compliance with the United Nations Sustainable Development Goals in the context of enhanced international cooperation to an extreme scenario of regional rivalries abandoning any ambition in the field of climate. The purpose of this study is to deduce what strategic asset allocation is optimal for each SSP.

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    news-3085 Fri, 24 Jun 2022 17:26:53 +0200 Notice to shareholders of the sub-fund Inflection Point Carbon Impact Global /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-inflection-point-carbon-impact-global/ The Company’s board of directors (the "Board") hereby informs you of the following changes to be made to the characteristics of the Sub-Fund. 1) Change of the investment objective 
    The investment objective of the Sub-Fund will be amended in order to add an objective of 
    outperformance of the benchmark MSCI All Country World Index (MSCI ACWI Daily Net Total Return) to the current investment objective. As from 20 of July 2022, the investment objective will read as follows :

    Objective To contribute to the transition to a low carbon economy while achieving long-term capital growth. Specifically, the sub-fund seeks to outperform (net of fees) the reference benchmark MSCI All Country World Index ((MSCI ACWI Daily Net Total Return) over any given 5-year minimum. 

    Reference benchmark 

    • EUR-denominated shares: MSCI AC World Daily Net Total Return in EUR (NDEEWNR) 
    • USD-denominated shares: MSCI AC World Daily Net Total Return in USD ( M1WD) 

    The sub-fund is actively and discretionarily managed. The index is used to define the eligible investment universe with the objective of reducing carbon footprint. The management strategy includes tracking the difference in the risk level of the portfolio relative to that of the index. A moderate deviation from the risk level of the benchmark index is anticipated.” 

     

    2) Clarification of the investment policy and strategy

    The investment policy of the Sub-Fund will be clarified in order to (i) describe how the initial investment universe is constructed when applying the ESG filter and (ii) insert the description of the environmental, social and governance (ESG) criteria applied by the investment manager for the SubFund, which were previously disclosed in the general part of the prospectus, directly in the sub-fund appendix and so to read as follows...

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    news-3079 Fri, 24 Jun 2022 15:06:21 +0200 Notice to shareholders of the sub-fund JKC Asia Bond 2023 /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-jkc-asia-bond-2023/ The Company’s board of directors (the "Board") hereby informs you of the following changes to be made to the characteristics of the Sub-Fund 1) Change of the investment objective and other related changes 

    The investment objective of the Sub-Fund will be amended in order to reflect the extension of the maturity date of its investment. As of 20 of July 2022 (the “Effective Date”), the investment objective will read as follows :  

    “Objective To achieve high income until 31 December 2025”. 

    As a consequence of this change, the denomination of the Sub-Fund will change into JKC Asia Bond 2025, the subscription period has been extended until 30 April 2024 and the deadline until which certain investments will be valued using the ask price has been extended to 30 April 2024. 

    2) Change of the investment policy 

    The investment policy of the Sub-Fund will be changed in order to (i) foresee investment in bonds with an estimated maturity of December 2025 at the latest and/or bonds with a longer maturity, but which have a call option before 31 December 2025, (ii) foresee the increase of the exposure to equities from 10% to 20%, (iii) foresee exposure to NOK and SEK currencies and (iv) foresee the possibility to invest in index credit default swaps. 

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    news-3076 Fri, 24 Jun 2022 13:07:54 +0200 Notice to shareholders of the sub-fund jkc asia bond 2023 (The Sub-Fund) /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-jkc-asia-bond-2023-the-sub-fund/ The Company’s board of directors (the "Board") hereby informs you of the following changes to be made to the characteristics of the Sub-Fund 1) Change of the investment objective and other related changes

    The investment objective of the Sub-Fund will be amended in order to reflect the extension of the maturity date of its investment. As of 20 of July 2022 (the “Effective Date”), the investment objective will read as follows.

    "Objective To achieve high income until 31 December 2025”.

    As a consequence of this change, the denomination of the Sub-Fund will change into JKC Asia Bond 2025, the subscription period has been extended until 30 April 2024 and the deadline until which certain investments will be valued using the ask price has been extended to 30 April 2024.

    2) Change of the investment policy

    The investment policy of the Sub-Fund will be changed in order to (i) foresee investment in bonds with an estimated maturity of December 2025 at the latest and/or bonds with a longer maturity, but which have a call option before 31 December 2025, (ii) foresee the increase of the exposure to equities from 10% to 20%, (iii) foresee exposure to NOK and SEK currencies and (iv) foresee the possibility to invest in index credit default swaps.

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    news-3075 Fri, 24 Jun 2022 12:51:32 +0200 Notice to shareholders of the sub-fund carbon impact income /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-carbon-impact-income/ The Company’s board of directors (the "Board") hereby informs you of the following updates to be made to the characteristics of the Sub-Fund 1) Update of the investment policy and strategy 

    The investment policy of the Sub-Fund will be updated in order to (i) clarify that the management company will rely on the analysis of the research center “La Française Sustainable Investment Research” of the entity “La Française Group UK Limited” with respect to the determination of ESG criteria and (ii) reflect the increase in the net exposure rate (after hedging) to currencies other than the euro from 10% to 50% as from 20 of July 2022 (the “Effective Date”). 

    As from the Effective Date, the investment policy will therefore read : 
    The sub-fund invests in government and corporate bonds, equities in OECD countries and/or emerging markets. 
    Specifically, the sub-fund may invest in equities, floating rate or fixed rate debt securities and money market instruments. The sub-fund may invest up to 100% in fixed income securities that are rated lower than BBB- by Standard & Poor’s or judged equivalent by the investment manager at the time of the 
    purchase or in unrated bonds. The sub- fund may invest in sustainability bonds (such as green bonds and social bonds) and sustainability-linked bonds (SLB). 

    The sub-fund may invest in, or be exposed to, the following investments up to the percentage of net assets indicated: 

    • bonds and money market instruments: 100%, including government bonds: 50% 
    • government and corporate bonds issued in non-OECD countries: 70% 
    • equities: 50% 
    • contingent convertible bonds (coco bonds): 10% 
    • convertible bonds: 10% 
    • other UCITS/UCIs: 10%, including monetary UCIs or UCIs with an overall weighted maturity or rate reset frequency not exceeding 12 months 
    • real estate investment trusts (REITs) that qualify as transferable securities under the 2010 Law and related regulations, publicly traded real estate preferred equities and debt securities, and 
    • equity-related securities of real estate operating companies: 10%
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    news-3072 Tue, 21 Jun 2022 09:54:32 +0200 La Francaise AM appoints Marie Lassegnore, CFA Head of Sustainable Investments /en/who-we-are/news/detail/la-francaise-am-appoints-marie-lassegnore-cfa-head-of-sustainable-investments/ La Française is developing a multi-expertise model based on a firm conviction: "A profitable investment solution includes a sustainable dimension". Today, the management company La Française AM has strengthened its commitment to ESG (Environmental, Social and Governance) and is pleased to announce the appointment of Marie Lassegnore as Head of Sustainable Investments. Marie Lassegnore joined La Française AM in 2018 to implement the "climate transition" strategy on credit expertise and actively participated in the development of the proprietary "Low Carbon Trajectory" methodology. Moving forward, as Head of Sustainable Investments, Marie will coordinate all of the management company's ESG initiatives (all asset classes combined) and will be responsible for the extra-financial fundamental research team. La Française AM firmly believes that sustainability is synonymous with long-term performance. As such, the challenge for the management company is to ensure the seamless integration of ESG research within management teams in order to develop relevant analyses that generate alpha. With this objective in mind, La Française AM has entrusted Marie Lassegnore with these new responsibilities. She will operate under the management of Jean-Luc Hivert, Chairman of La Française AM.

    Marie Lassegnore began her career in 2012 at Crédit Mutuel CIC AM as a quantitative fund of funds analyst. In 2013, she joined Aberdeen Asset Management in London. She held the position of bond analyst for almost two years before becoming a portfolio analyst within the global credit team. In this role, she developed low carbon strategies and became a leading research expert on Green and Sustainability Linked Bonds. Marie joined La Française AM in September 2018 as Credit Portfolio Manager.
    Marie Lassegnore holds a degree in applied mathematics in social sciences from the University of Paris 1 Panthéon Sorbonne and a master's degree in Management from the EM Lyon Business School. She is a CFA charterholder and holds a certificate in Investment management (IMC).

    Marie Lassegnore, Head of Sustainable Investments, La Française AM stated, "To maintain our competitive advantage in terms of sustainable investment, the challenge is to continuously blend extra-financial research into management processes, so these criteria gain more and more influence in the final selection of securities. By integrating the research division into the investment division, we aim to foster our strategy, develop the interconnection of investment skills in the interests of our investors and consolidate our position as a committed investor.” 

    Jean-Luc Hivert, Chairman of La Française AM concluded, "The creation of alpha depends on the prospective integration of ESG criteria in the valuation of our assets. Marie's role will be key to this approach, as she will ensure the transition to a more holistic style of management.”
     

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    news-3069 Fri, 10 Jun 2022 09:45:57 +0200 principal adverse impact meeting the green finance challenges /en/who-we-are/news/detail/principal-adverse-impact-meeting-the-green-finance-challenges/ In one of our previous newsletters, we explained how the European Union is progressively implementing the Sustainable Finance Disclosure Regulation (SFDR). This regulation aims at providing greater transparency on the degree of sustainability of financial products in order to channel private investment towards sustainable investments. Under this regulation, the Principal Adverse Impacts (PAI) are intended to measure and avoid the potential negative impacts of an investment. WHAT ARE THE PAI? 

    Principle Adverse Impact (PAI) have been defined by the EU as “negative effects, material or likely to be material on sustainability factors that are caused, aggravated by or directly linked to investment decisions and advice performed by the legal entity”. In short, PAIs are the negative consequences of investment decisions on the Environment, Social or Governance (ESG).

    PAI are a practical application of the "Do Not Significant Harm" principle (DNSH). They are intended to avoid significant adverse effects on the environmental Taxonomy objectives such as the sustainable investments goals of the SFDR regulation.
    These sustainability factors are mainly, as of today, focused on climate and more broadly on environmental issues but without forgetting the social dimension: employee and human rights or fight against corruption. 

    Since March 2021 financial markets’ participants, are required to provide a statement as part of a narrative disclosure on how they will incorporate PAI into its investment decision process. From June 2023, they will also be required to report on the Principal Adverse Impact Indicators. 

    WHAT ARE THE PAI INDICATORS?

    The PAI are a set of indicators and metrics of which financial market participants are required to report at the management entity/group level across their investments, as well as at funds level when they are submitted to PAI. There are 16 mandatory indicators in total: 14 are applicable to corporate assets, 2 of which are specific to sovereigns and supranational assets, and the last 2 apply real estate assets. In addition to these mandatory indicators, market participants must opt for two optional indicators. 

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    news-3066 Wed, 08 Jun 2022 09:33:56 +0200 Food security or sustainability – is it really a choice? /en/who-we-are/news/detail/food-security-or-sustainability-is-it-really-a-choice/ As the Ukrainian war rages on, Europe and the world is facing food security challenges of crisis levels. Sustainability critics demand watered down policy to aid food security. In March, incumbent French President, Emmanuel Macron changed his narrative for the agricultural sector refocusing on ‘agricultural independence’ - prioritising productivity over sustainable farming goals in the EU’s Green Deal to cope with a post-Ukraine war Europe. Macron challenged EU’s Farm to Fork strategy stating that ‘Europe cannot afford to produce less’. Macron’s view reflects the strong negative impact that increasing prices of soft commodities like soy, wheat and corn have had on affordability and food security. And these threaten to put a halt on the momentum that has been built over the last decade on Europe’s sustainability trajectory.

    But is this necessary?

    Do we have a food security issue?

    Combined Ukraine and Russia are responsible for 30% of world’s wheat exports. According to the European Commission, the loss of grain exports from Ukraine means that up to 25 million tonnes of wheat must be substituted in the current and the next season. Given that most exports of wheat are heavily weighted towards the second half of the year, this supply crunch is going to just increase over the next several years, as Ukrainian agricultural fields and livestock continue to be ravaged by the Russian attacks. 
    Apart from cereals, Europe also imports oil seeds from Ukraine and fertilisers and natural gas (needed to make fertilisers) from Russia. The increasing deficit has led to a strong price increase in markets affecting food security around the world. Farmers feel the impact from the increase in input prices, livestock sector is affected by the increase in feedstock prices and the consumers are facing food becoming unaffordable, and sometimes unavailable, around the world. Food inflation in Europe reached 5.6%, compared to February 2021.

    In practice, however, Europe and the West have a problem with price and not security. Although the material food inflation, compounded with an already prominent energy crisis, makes things difficult, developed countries still have enough food to feed the population. However, we still need to think about the lower income and vulnerable families which will be affected by the increasing prices.

    What solutions do we have? 

    There are multiple alternatives to tackle food security and affordability for both the vulnerable populations in Europe and wider world. European Commission recommends using social policies like reduced rates of VAT and using the Fund for European Aid for the Most Deprived. It also plans to use exceptional support funds for vulnerable farmers and the livestock and fishing sector. But these measures are temporary, and do not ensure food security in the medium to longer term. That is why we see the political will in most states (like France) moving towards increasing self-sufficiency in terms of higher production and higher productivity through use of fertilisers.

    Do sustainable and green practices have a place in ensuring food security?

    Improving food security does not need to be done at the cost of sustainability. One of the biggest debates has been on whether the EU Farm to Fork targets of a 20% fertiliser and 50% pesticide cut by 2030 should be scrapped. But fertilisers are imported from Russia as is natural gas – so continuing this reduction plan can aid in increasing our independence. Investment in agricultural technology and biological fertilisers can fill the gap in increasing production without harmful affects on environment. Biologics – made from living or naturally occurring materials – have long been touted as an alternative to synthetic agrochemicals. Europe lags US in terms of agri-tech adoption and CAP funding can help bridge the financial gap. These along with a potential adoption of GMO crops can reduce need for agrochemicals significantly.

    Food security in Europe and different countries/regions around the world can also be promoted by increasing the diversity on our plates. According to FAO, Of the 6,000 plant species cultivated for food, just 9 account for two-thirds of all crop production. A quarter of livestock breeds are at risk of extinction, and only a handful provide most of the meat, dairy, and eggs. More than half of fish stocks are at risk of extinction. Reorganising these industries and farmlands to promote production of alternative food crops, and livestock can reduce our dependence on a few crops and species. Plant-based diets can reduce our reliance on meat, thus decreasing our need for associated industries and feedstock like soy. Alternative proteins like lab-grown meat also provide reasonable solutions.

    As consumers, our choices are no less important. It’s incredibly vital for us to have knowledge about the produce we consume and where it comes from. We can create the demand for variety, for organic produces, and shift away from meat. We should also consciously opt for bio-friendly and sustainable products and boycott those which are harmful to the environment. Now is the time for everyone to join the fight to both conserve nature and to ensure affordability for everyone. Security and sustainability can be two sides of the same coin. 
     
    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. The opinions expressed by La Française Group are based on current market conditions. These opinions may differ from those of other professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. 

    author : Deepshikha SINGH

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    news-3065 Wed, 08 Jun 2022 09:29:58 +0200 Inflation at an all-time high. The ECB has no choice but to secure medium-term price stability. /en/who-we-are/news/detail/inflation-at-an-all-time-high-the-ecb-has-no-choice-but-to-secure-medium-term-price-stability/ The European Central Bank (ECB) will hold its quarterly press conference on June 9. ECB Chair Lagarde has built a consensus for a gradual approach to policy normalization. The Committee will update its macro-economic projections with substantial inflation pressure and a deterioration of the growth outlook. Please find below what we expect:

    • As preannounced by Christine Lagarde, because of intensification of inflation pressures, the ECB is expected to announce the end of the asset purchase program (APP) at its June Governing Council meeting and a first-rate hike in the Deposit Facility rate (-0.50%) at its July meeting. The three conditions for hiking rates are met. It is also expected that Lagarde pre-signal the exit of negative rates by September.
    • Chair Lagarde should underline that the pace of policy tightening will be data-dependent (i.e., domestic demand, underlying inflation, and financial conditions). We believe that the Governing Council will not exclude 50 basis points (bps) steps to move quickly nor rising the deposit rate significantly above neutral (1%-2%) as higher inflation is threatening to de-anchor inflation expectations.
    • Regarding quantitative tightening, Chair Lagarde will most likely reiterate that it is premature. Interest rate hiking is the main monetary policy tool at this stage. But we believe that reducing the size of balance sheet will be the topic of debate moving forward, namely after the TLTRO (targeted longer-term refinancing operations) pay back announcement in mid-June. 
    • Lastly, Chair Lagarde is expected to reaffirm that the central bank could act swiftly to deploy new instruments to prevent market fragmentation that could be triggered by a tightening of the monetary stance. However, current spreads do not yet justify an announcement. We do not believe that the Governing Council will launch a new bond-buying program without offsetting any purchases by taking an equivalent amount of money out of circulation. Chair Lagarde will reinforce the importance of flexibility as normalization proceeds.
    • On the economic front, we expect the ECB’s inflation projections to be revised significantly higher in 2022 (from 5.1% to 6.9%) and moderately in 2023 (from 2.1% to 2.3%). Inflation would then decline towards the 2% target at the end of the forecast horizon but with a high level of uncertainty. Regarding growth, projections should indicate lower figures in 2022 (from 3.7% to 2.8%) and 2023 (from 2.8% to 2.5%). A technical recession in the coming quarters should not be ruled out. For 2024, the upward revision will be marginal, from 1.6% to 1.7%.

    In summary, maintaining credibility by defending its inflation target from high inflation is key for the ECB. Although the June Governing Council announcements will not come as a surprise given the ECB’s proactive communication, we believe risks are from the hawkish side (i.e., possibility for 50 bps rate hikes at the upcoming meetings, pushing rates into restrictive territory, early discussion around quantitative tightening).  Therefore, we expect some flattening on the euro swap curve.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-3063 Wed, 01 Jun 2022 14:15:29 +0200 La Francaise Real Estate Managers (REM), acquires first Healthcare asset in Ireland. /en/who-we-are/news/detail/la-francaise-real-estate-managers-rem-acquires-first-healthcare-asset-in-ireland/ Colliers acted for La Francaise REM on the acquisition of Ballintaggart House, Clonskeagh, Dublin 14. The three-storey building provides 19,558 sq.ft of refurbished, high quality accommodation in Medical clinic use and 57 car parking spaces in the affluent south Dublin suburb. The property also offers good Environmental, Social and Governance (ESG) credentials with a Building Energy Rating of B3, LED lighting and clean renewable energy for electricity.  The property sits on a substantial site, just under 1 acre. 

    Ballintaggart House enjoys a superb location in Clonskeagh, being only 5km from the city centre and a 10-minute drive from the M50 and directly opposite University College Dublin. Furthermore, the property sits in a predominantly residential area close to a number of established office parks including: Richview Office Park, Beech Hill and Belfield Office Park. 
    The building is single let, under a long-term lease, to Sims IVF who are one of Ireland’s leading fertility clinics with two other main locations in Swords and Cork and a further three satellites in Carlow, Dundalk and Limerick. Virtus Health, the parent company of Sims IVF, are one of the top five providers of fertility treatment in the world with a significant presence in Australia, Singapore, the UK and Denmark. It has over 140 employees in Ireland.  

    Michele McGarry of Colliers advised La Francaise REM, acting on behalf of a collective real estate investment vehicle, on the acquisition and Brian Shields of JLL advised the vendor.  La Française REM was also advised by Matheson and Hollis on legal and technical issues respectively.

    Peter Balfour, Head of Real Estate UK for La Française Real Estate Managers said, “We are looking to diversify our European real estate strategy, adding alternative sectors such as healthcare. Ballintaggart House is our first acquisition in the healthcare sector outside of France. Despite the limited supply, we are confident in our sourcing capabilities and the quality of our partners.”

    Michele McGarry, Colliers, said “We are delighted to have concluded on the acquisition of Ballintaggart House.  The acquisition demonstrates growing investor appetite for the Medical Sector, where we are seeing new entrants to the market and limited opportunities available. The investment proposition was underpinned by the quality of the asset, the location, the reversionary potential and long unexpired term.” 
    -- End --

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    news-3061 Tue, 31 May 2022 09:00:00 +0200 Collectively, contributing more /en/who-we-are/news/detail/collectively-contributing-more/ By Marie Lassegnore, CFA, Credit Portfolio Manager & ESG Director for Fixed Income and Cross Asset, La Française AM World Environment Day was born 50 years ago and is based on the understanding that collectively we can and should protect the environment we deeply depend on. To do so action must be taken. Collectively, individual actions can give way to deep-rooted structural transformation of how our society produces and consumes, and hence how we use natural resources: air, land and water.

    Major corporations are deeply encouraged to step up but individual action and shifts in consumer behavior are the keys to a successful, orderly and just transition.
    As asset managers we have a dual role to play, offer financial products to investors that are directing financial flows towards companies which are active in reducing their carbon emissions and adverse effects on biodiversity (amongst others) but also to use the indirect collective power of our asset owners to engage with companies, governments, and regulators on topics such as environmental preservation.

    The development of the European Sustainable Finance Disclosure Regulation (SFDR) aims to clarify the sustainable objective behind investment funds, allowing each investor to differentiate between the strategies adopted and specifically target the sustainable objectives he/she wants to achieve through his/her investment portfolio. We are still a long way from a fully comparable level of information among asset managers, but the strengthening of the regulatory supervision should normalize the landscape of sustainable investments products in the coming months/ years. Furthermore, as of 2024, large companies will be required by the Corporate Sustainability Reporting Directive (CSRD) to report on 2023 Environmental and Social impact activities. This initiative will provide greater transparency and help in the evaluation of the non-financial performance of companies.

    Our industry could run the race against global warming and rising social inequalities faster, but it can’t run it alone and needs the support of its investors without whom it loses any ability to promote change. We would suggest that investors, of any profile, consider the positive and negative externalities of any investment decision. For this, asset managers must give investors the tools to quantify those externalities so that any investment decision goes beyond a risk/return profile but takes into consideration the known positive/negative impacts of investments on social and environmental factors.

    We have chosen to address this objective by developing a climate transition investment approach, which includes specific selection processes, depending on the relevant asset class, i.e., government bonds, corporate credit, equities, cross asset. Having developed that approach well ahead of new regulations, we had already set a high standard by ‘quantifying’ the emissions reduction impact we target (between 30% and 50% reduction of carbon intensity and/or footprint vs comparable market benchmarks). 

    We have a fiduciary duty to our clients to integrate all relevant risk factors into our investment process. Mounting environmental and social risks are now integrated beyond the simple awareness of their longer time horizons (than short-term financial potential returns). The power of attorney that delegates our clients’ voting rights to us, allows us to weight our recommendations and votes to a meaningful extent when you combine our assets under management. This influential capacity goes further than our equity holdings and extends to our bond holdings of private companies where we can have a large share of their financial markets’ source of funding. 

    Where we have the most substantial power is through industry initiatives and collaboration. Asset managers can become active participants in collaborative engagement initiatives and tailor actions to specific themes. For illustration purposes, two industry initiatives in which La Française has taken part.

    We participated in the Carbon Disclosure Project (CDP) Non-Disclosure Campaign for the third consecutive year in 2021, calling on high-impact companies to use the CDP questionnaires to report information on climate change. CDP provides the financial sector with the most comprehensive collection of self-reported corporate environmental data in the world, in a uniform and comparable manner, and one that is fully aligned with the Task Force on Climate-Related Financial Disclosures (TCFD). We increasingly view CDP reporting as a minimum requirement for any company demonstrating its commitment to measuring and managing its climate-related impact. 

    According to CDP, the 2021 NDC (Non-Disclosure Campaign) saw a 56% rise in the number of financial institutions signing up for the campaign compared to 2020, leading to a total of 168 Financial Institutions representing over US$17 trillion AUM. This year the campaign targeted 1317 distinct companies representing over US$29 trillion in market capitalization and over 4.9 billion tCO2e in combined scope 1 & 2 emissions. The disclosure rate for companies targeted by participants rose from 21% in last year’s campaign to 25% this year.

    We are also part of the Climate Action 100+ initiative, launched in December 2017 and which is the largest investor engagement initiative on climate change (USD $68tn of AUMs through 700 signatories) that coordinates engagement with 167 of the world’s biggest listed corporate emitters. Thanks to net-zero company benchmarks, it provides a way of measuring companies’ progress on carbon emissions reduction, governance, and disclosure. 

    Over the last decade, we have supported various multilateral groups and organizations in developing and improving methodologies, implementation of new rules, and creating more awareness on activities related to sustainable investing. For instance, we have been part of the Science based targets initiative (SBTi) working group to develop guidance for institutional investors and test the methodology. We have also been part of the PRI EU taxonomy Practitioners Groups – Case Study to test the implementation of the EU taxonomy for sustainable activities.

    This collaborative mindset is relatively recent in such an industry historically driven by financial returns maximization in a highly competitive market. This mentality shift proves that more and more asset managers want to take part in shaping sustainable finance over the decade to come. However, COP26 highlighted the glaring financing gap to meet the objectives behind the sustainable development goals which were estimated at around $100bn a year by 2020 at the Paris agreement. We need more capital flows directed towards climate change mitigation and adaptation. This can, once again, be encouraged by a faster shift in banking and asset management consumer preferences by clearly highlighting this aspect as being fundamental in final decision making.

    The key take-away of World Environment Day is that we can’t keep waiting for everyone else to deal with our environmental deterioration, but we can individually own the responsibility of our actions and our choices.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-3056 Mon, 30 May 2022 09:26:12 +0200 Q1 2022 – strong start for European commercial real estate market /en/who-we-are/news/detail/q1-2022-strong-start-for-european-commercial-real-estate-market/ By Virginie Wallut, Director of Real Estate Research and Sustainable Investment at La Française Real Estate Managers The European commercial real estate market continued to rebound during the first quarter of 2022 with €65 bn in investment, an increase of 53% compared to Q1 2021. Real estate as a hedge against inflation largely explains the appetite of investors for the asset class. Across the board, investors are very attentive to tenant solvability; a factor which is increasingly important given inflation and its consequences on the affordability ratio. It is difficult to anticipate how renewed Covid outbreaks in Q4 2021, the Ukrainian war and associated supply chain disruptions will weigh on 2022 commercial real estate activity. The bottlenecks in supply are expected to slow down completions and push up development pricing. As observed in 2021, Environmental, Social and Governance (ESG) considerations should increasingly come into focus. New ESG regulations coming into application should make it economically inconceivable to hold obsolete real estate.

    European Real Estate Investment Market, liftoff

    The volume of commercial real estate investment in Europe reached a new twelve-month high of €281 billion (as at end-March 2022). The office sector, which accounts for €125 billion (+30% above its long-term average) and where investors remain focused on next generation, centrally located, flexible, serviced and energy efficient assets, is by far the preferred asset class. Fuelled by the rampant expansion of e-commerce and forecasted rental growth, logistics and light industrial space recorded a record high investment volume of €67 billion. Retail and leisure assets also rebounded with increases of respectively 63% and 3% over twelve months. France and Norway recorded record volumes for a first quarter in retail assets. With the lifting of travel restrictions, Spain too experienced a good start in the leisure segment. Investment in alternative sectors such as operated residential and healthcare is down in Q1 2022 compared 
    to Q1 2021, due mainly to a lack of supply.

    Prime asset yields still at their floor 

    Prime yields have remained generally stable across Europe over the past year despite an increase of respectively 1% and 1.5% in the risk-free rate and the cost of financing. Given the 
    rise in risk free interest rates, the average property risk premium of most European real estate markets has declined to its long-term average. New hikes in interest rates could however put 
    upward pressure on real estate yields, the effects of which could be partially compensated for by the indexation of rents on inflation. The overall performance of real estate will be driven by 
    rent growth as opposed to capital gains.

    Take-up trends in a two-tier real estate market

    Fueled by improving unemployment figures, take-up across Europe continued on its positive trajectory. Overall, European office market take-up* rose by 52% over the past twelve months. Cities such as Dublin, Lille and London saw increases of more than 100% in take-up in Q1 2022. As take-up increases, and completions decrease, stock has stabilized. A same trend 
    can be observed in most prime European real estate markets: high demand in central locations and subdued demand in peripheries

    Beware of vacancy rates, submarkets can behave differently

    Average vacancy rates continue to mask significant discrepancies between primary and secondary markets. Vacancy rates of centrally located assets in prime real estate markets, where demand is focused on next generation assets, remains low and supports rental values. In Q1 2022, Berlin, London, Edinburgh and Paris registered increases in rental values of more than 10% compared to pre-COVID. In Q1 2022, Germany experienced the greatest increase in rental values while Spain and Italy suffered due to excessive or obsolete stock. Incentives on secondary assets, across all markets, have reached new records. Demand is more and more focused on assets that meet ESG standards. Indeed, companies are migrating to more energy efficient office space in order to decrease their overall carbon footprint.

     

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    news-3055 Wed, 25 May 2022 09:49:25 +0200 MARKET FLASH /en/who-we-are/news/detail/market-flash-2/ Completed on 18 | 05 | 2022 MARKET CONTEXT

    The pace of growth in the major developed economies is currently showing signs of slowing down compared to 2021, without collapsing. The factors behind this recent change in momentum are mainly (i) the zero-covid policy in China which is penalising local consumption, supply chains and global trade more generally, and (ii) the Russian-Ukrainian conflict, which is intensifying tensions on commodities, especially on food, as well as on the supply chains linked to Ukrainian and Russian production. Simultaneously, inflation, which has been rising month after month, continues to reach record levels and is now spreading to sectors further away from energy prices. The structural nature of this inflation has now been acknowledged by central banks, and prompt intervention by them is, in our view, necessary to curb the rise in prices.

    Chart 1: Breakdown of inflation in the euro area (Source: CACIB Forecast, Bloomberg, May 2022)

    In that respect, investors are very cautious on risky assets, anticipating a rapid withdrawal of monetary support policies and a quick rise in key interest rates in the coming months. In the chart below, we can see that the market is now expecting a total of 100 basis points rate hike by the ECB as early as 2022, and another 100 basis points in 2023, even though the APP purchases are not yet complete. It should be noted that the APP should be interrupted in July, just before the first rate hike.


    Chart 2: Market forecasts of interest rate hike in the Eurozone (Source Bloomberg, May 2022)

    The size and pace of these rate hikes will certainly depend on the path of future inflation and its impact on the economy, which are very difficult to predict at the moment. As a result, rate volatility has reached historically high levels, the likes of which have not been seen for more than 10 years except for the March 2020 peak, as shown in the following graph of the implied volatility of the German Bund (blue curve) and US Treasuries (red curve).

    Chart 3: Implied volatility, in % (Source Bloomberg, May 2022)

    As we have seen, taking a directional view on interest rates is particularly perilous given the uncertainties about the path of inflation. And while we haven't seen rates on this high level since 2014 in the eurozone, inflation is breaking decades-old records, when nominal rates were near 10%.... 

    In this unusual macroeconomic context, what about the impact on company fundamentals and on the evolution of credit margins?

    CORPORATE FUNDAMENTALS

    While we can reasonably expect a deterioration in issuers' credit fundamentals in today’s environment (slowing revenue growth, deteriorating operating margins and cash generation), in an environment where growth is slowing, it is worth noting that issuers are entering this period of "turbulence" with extremely strong credit fundamentals, including healthy credit ratios, high level of cash on balance sheet (see chart below), and relatively low short-term maturity wall. As a result, we believe that issuers will be able to absorb this deterioration in credit fundamentals without causing a significant increase in default rates.

     

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    news-3054 Wed, 25 May 2022 09:17:00 +0200 Inflation too high, central bank policy tightening, aggravating factors for risky assets. /en/who-we-are/news/detail/inflation-too-high-central-bank-policy-tightening-aggravating-factors-for-risky-assets/ By Audrey Bismuth, Global Macro Researcher, La Française AM In April, US inflation exceeded market expectations at 8.3% YoY. The rise was driven by increasing food prices and core CPI (Consumer Price Index) while energy prices declined. The Core CPI spiked at 6.3% YoY (Source: Bloomberg). It was driven by a surge in airfares, a volatile category, strong prints for Shelter, the most important of the eight components of the index, and new vehicle inflation; used-car deflation slowed.

    Just a few days after April CPI data were published, Fed Chair Powell said, “Inflation is just way too high. I’m gonna go with what I really am thinking is, get inflation back under control.” 
    Since March, the Fed has already raised interest rates by 75 basis points (bps) to 0,75%-1% (Source: Bloomberg). The Federal Open Market Committee (FOMC) is signaling for at least two rate hikes by half a percentage point at each of its next policy meetings in June and July.  Fed officials have indicated that additional rate hikes are likely beyond the long-term nominal neutral rate (2.40%) without a pause. During the FOMC press conference on May 4, Chair Powell downplayed the importance of the neutral rate, noting, “So it's a concept really. It's not something we can identify with any precision. So, we estimate it within broad bands of uncertainty.” 

    The Fed’s policy stance will depend on how the US economy is able to withstand tighter financial conditions. In the near term, we expect Fed rhetoric to remain very hawkish.  The central bank chief recently told the Wall Street Journal, “We need to see inflation coming down in a convincing way. Until we do, we’ll keep going. If that involves moving past broadly understood levels of neutral, we won’t hesitate to do that.” 

    Inflation may now have passed the peak. The April print fell below the March high of 8.5% YoY and the softer-than expected Producer Price Index (PPI) reinforces this view. The Dallas Trimmed Mean PCE (Personal Consumption Expenditures) Inflation Rate, which excludes the wildest price swings each month and averages the remaining price changes, is encouraging. One-month Trimmed Mean PCE Inflation slowed to a 3.1% annual pace from the 4.0% jump witnessed in February. The measure suggests inflation peaked in January, when the Trimmed Mean PCE Inflation Rate hit a one-month annual rate of 6.3%.  (Source: Bloomberg)

    Regardless, the Fed’s message to financial markets is very explicit for now.  The central bank will continue to prioritize the fight against high inflation over future growth concerns.
    At the start of the second quarter, harder economic data paints a more optimistic picture than the soft economic indicators. In April, manufacturing production posted solid gains for three consecutive months. In addition, the rising capacity utilization rate might be indicating that supply chain disruptions are declining. Despite the erosion in purchasing power from higher inflation and recent softening in consumer sentiment, retail sales rose strongly in April, increasing for the fourth consecutive month. 

    What are the consequences for financial markets? 

    Overall, markets are still digesting the tightening of financial conditions. The US expected real inflation rate over a five-year period, beginning five years from now has increased considerably since January 2022; up by almost 100 bps, from around -0.40% to 0.37%. However, the 5-year, 5-year forward inflation expectation rate it is still 70 bps below its 2018 peak. (Source: Bloomberg)
    Fears of hawkish central banks in developed markets (i.e., interest rates hikes into restrictive territory) and elevated recession risk in 2023-2024 are indicative of a very negative environment for risky asset. 
    How are markets pricing a recession risk? According to J.P. Morgan Research, US and Euro area equity markets are pricing in a 70% probability of a near-term recession, compared to a 50% probability in Investment Grade credit, a 30% probability in High Yield and a 10%-20% probability in money markets. We would be more cautious than J.P. Morgan. Inflation will strongly impact consumer demand, especially in Europe, and central banks will continue to tighten monetary policies as long as inflation is not showing signs of cooling off. This is not the best environment for risky assets over the medium term even If there is some short-term relief.  

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-3051 Thu, 19 May 2022 09:00:00 +0200 La Française Real Estate Managers (REM) acquires a residential real estate complex in Courbevoie (92) on behalf of PFA /en/who-we-are/news/detail/la-francaise-real-estate-managers-rem-acquires-a-residential-real-estate-complex-in-courbevoie-92-on-behalf-of-pfa-1/ La Française Real Estate Managers (REM), acting on behalf of PFA, a Danish pension fund, has signed a forward purchase agreement with Interconstruction and BNP Paribas Immobilier, for a residential real estate complex located rue Paul Bert in Courbevoie, in the Hauts-de-Seine (92). This investment is part of a separate account mandate granted by PFA to La Française Real Estate Managers. The real estate complex is located in the "Village Delage" in Courbevoie, an EcoDistrict in the process of being redeveloped. By 2030, this new district will be home to a large number of green spaces and housing units as well as offices, shops and community services (school, gymnasium, day-care facility). “Village Delage” is targeting several labels and certifications, in particular: NF Habitat, EcoQuartier, Effinergie + and Biodivercity. 

    The acquisition covers three residential buildings offering more than 90 housing units (5,800 m2of living space), ranging from studios to five-room flats. The asset benefits from very good accessibility by public transport. In 2030, a new metro line 15 station will open 600 meters from the complex. 

    Completion is scheduled for the third quarter of 2024. 

    David Rendall, Managing Director of La Française Real Estate Managers - Institutional Division stated “Courbevoie is one of the most dynamic neighbouring towns of Paris with a growing population. Many companies and families settle there, in particular to benefit from its proximity to the capital and the business centre of La Défense. In an increasingly competitive environment, the residential sector remains essential to PFA's investment strategy. We are pleased to start this mandate with a high-quality programme, which meets the latest energy standards and benefits from an exceptional location." 

    La Française REM was advised by Virginie Blanc of Lexfair Notaires and by Egis and Ginger Burgeap on respectively the technical aspects and the environmental audit. 

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    news-3049 Fri, 13 May 2022 14:19:42 +0200 Navigating Inflation /en/who-we-are/news/detail/navigating-inflation/ Inflation hits some areas of the economy harder than others. For investors, it may be important to understand where stress from higher inflation may be the most acute. Below we provide insights to help navigate this challenging environment. Inflation Impacts Lower Income Consumers Much More

    • Lower income consumers are more adversely impacted by higher inflation because many of the spending categories with the highest inflation make up larger portions of their budgets as compared to higher income consumers.
    • The lowest income quintile of U.S. consumers spend 10.1% of their total annual expenditures on food at home compared to the highest quintile spending only 6.1% of their budgets on food at home (see above). That means the 10% inflation in food impacts lower income consumers more. Lower income consumers also spend a larger portion of their incomes on other areas with high inflation such as utilities, gasoline and to a lesser extent, used automobiles. 
    • We believe certain retailers with exposure to low-end consumers may face some of the most significant challenges from higher inflation. On the other hand, certain luxury goods companies whose consumers are less impacted by higher inflation may be less challenged by the current economic environment
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    news-3048 Fri, 13 May 2022 10:20:46 +0200 La Française boosts business development team in Germany /en/who-we-are/news/detail/la-francaise-boosts-business-development-team-in-germany/ La Française, international asset management group with €55 billion in assets under management (as at 31 December 2021) and offices across Europe and in South Korea, is pleased to announce the addition of Simon GUELKE, Sales Director, to the German business development team. Simon GUELKE will be responsible for investor relations with network banks and further expanding La Française's financial assets investment expertise across the German market.  Simon will report to Kay SCHERF, Managing Direction of Sales and Marketing of La Française Systematic Asset Management.

    Simon GUELKE has 27 years of experience beginning in 1995 as a private banker with Dresdner Bank (Commerzbank). After a series of promotions, he was appointed Branch Office Head in 2008. After two years, Simon returned to Commerzbank´s regional headquarters in Hanover and was named Head of Securities Advisory Services. Later, he was appointed Allianz Global Investors fund specialist, responsible for advising sixty regional Commerzbank branch banks on Allianz Global Investors products (all asset classes). In 2016, Simon joined a family-owned private bank, Bankhaus Metzler, as an Advisor and developed an investment platform dedicated to brokers and asset management firms. Prior to joining La Française Systematic Asset management in Germany, Simon was a Business Development Manager, covering Northern and Western Germany for Degroof Petercam AM.  

    Kay SCHERF said, “Simon is a great addition to our team. His extensive experience as a Financial Advisor to retail and wholesale client segments makes him a great asset. His relationship skills and knowledge of banking institutions and their functioning are critical to our development strategy for Germany.”

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    news-3047 Fri, 13 May 2022 10:02:29 +0200 Conflict in Ukraine, supply-chain shortages and soaring prices - accelerators of sustainable development /en/who-we-are/news/detail/conflict-in-ukraine-supply-chain-shortages-and-soaring-prices-accelerators-of-sustainable-development/ By Patrick Rivière, Executive Chairman of La Française Group May 2022 In the aftermath of a global health crisis that disrupted production chains, Russia's invasion of Ukraine, the first cross-border conflict in Europe since World War II, marks a major tipping point not only in a geopolitical sense, but also from an economic and financial perspective. Europe's inability to effectively sanction this invasion painfully demonstrates its quasi-total dependence on Russian fossil fuel imports; a dependency which, placed in the context of “global warming” and economics, advocates for a swifter transition to a sustainable economy.

    Key issue of inflation

    War is always inflationary, especially when it involves one of the main producers of energy, and industrial and agricultural commodities in the world. The general rise in prices across a number of key economic sectors serves as yet another reminder that in order to guarantee Europe's sovereignty and avoid serious consequences for the European economy, there must be a transition to energy sources that do not emit CO2. 

    Before the war, the main consensus was that inflation would be tamed in 2022 and start stabilising in 2023, in line with the average level of 2001 2008 – i.e., 1% above the period of low inflation in 2008-2020. We must now add at least 1% more to the trend – i.e., 3% in the euro area and 4% in the USA. But, whatever the outcome of the current direction of monetary policy, the medium-term inflation reality is expected to be higher than in the past, both because the decline in globalisation reduces the benefit of comparative advantages in international trade and the necessary energy transition will increase production costs. 

    Accelerated trajectory for climate transition…

    In tandem with the objectives of the Paris Agreement, Europe can only achieve its energy sovereignty by significantly increasing its investments in low-carbon energies and improving its energy efficiency. The scenario requires a level of investments on par with those made after World War II. 

    The strengthening of the welfare state and of “whatever it takes” provides a response –if only a partial one – to the question of financing this transition. But what about the new economic reality, namely negative real rates? In the more inflationary environment at present, zero interest rate policies adopted in the aftermath of the global financial crisis have resulted in conditions of strongly negative real interest rates. And given the scale of the investments to be made, real interest rates will need to be kept very low for States to finance these investments.

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    news-3037 Tue, 10 May 2022 09:00:00 +0200 Announcement via the Internet: La Française Rendement Global 2028 Plus (hereinafter the “Sub-fund”) EN > EN /en/who-we-are/news/detail/announcement-via-the-internet-la-francaise-rendement-global-2028-plus-hereinafter-the-sub-fund-en-en/ In order to address the risk of early redemptions and to ensure the sustainability of the Sub-fund's management, the La Française Asset Management Management Company has decided to adjust the maturity of the securities in the Sub-fund's portfolio as follows: the sub-fund will invest in bonds that mature in December 2028 at the latest and/or bonds with a longer maturity, but which have a call option before December 2028.

    Furthermore, the Management Company has decided to extend the sub-fund's subscription period to 30 June 2024 instead of 31 March 2023.

    Please note, the Management Company reserves the right to reduce this period depending on market conditions.

    This change will be effective as of 13 May 2022. 

    The other features of the Sub-fund remain unchanged.

    We would like to draw your attention to the need and importance of reading the key investor information document of the Sub-fund which is available at www.la-francaise.com.

    Potential investors should read all key investor information documents before making any decision to invest.

     

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    news-3030 Tue, 10 May 2022 09:00:00 +0200 Announcement via the Internet: La Française Rendement Global 2028 (hereinafter the “Sub-fund”) EN > EN /en/who-we-are/news/detail/announcement-via-the-internet-la-francaise-rendement-global-2028-hereinafter-the-sub-fund-en-en/ The Management Company has decided to extend the sub-fund's subscription period to 30 June 2024 instead of 31 March 2023. Please note, the Management Company reserves the right to reduce this period depending on market conditions. This change will be effective as of 13 May 2022. 

    The other features of the Sub-fund remain unchanged.

    We would like to draw your attention to the need and importance of reading the key investor information document of the Sub-fund which is available at www.la-francaise.com.

    Potential investors should read all key investor information documents before making any decision to invest.

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    news-3023 Tue, 10 May 2022 09:00:00 +0200 Notice: Modification of the "La Française Carbon Impact 2026 " sub-fund of the La Française SICAV EN > EN /en/who-we-are/news/detail/notice-modification-of-the-la-francaise-carbon-impact-2026-sub-fund-of-the-la-francaise-sicav-en-en/ The management company La Française Asset Management has decided to modify the regulatory documentation of the “La Française Carbon Impact 2026” sub-fund in order to change the time of centralisation of subscriptions and redemptions of the sub-fund. Thus, subscription and redemption requests will henceforth be centralised with La Française AM Finance Services each day the net asset value is calculated (D) at 12:00 instead of 11:00 currently.

    This modification the sub-fund does not require the approval of the Autorité des marchés financiers and will be effective from 13 May 2022.

    The other features of the sub-fund remain unchanged.We would like to draw your attention to the need and importance of reading the key investor information document of the La Française Carbon Impact 2026 sub-fund which is available at www.lafrancaise.com.

    Potential investors should read all key investor information documents before making any decision to invest.

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    news-3021 Fri, 06 May 2022 14:16:14 +0200 A Tale of Two Curves /en/who-we-are/news/detail/a-tale-of-two-curves/ Trying times of inflation, heightened geopolitical conflicts and other challenges can drive equity investors to focus on the yield curve as a potential indicator of the economy’s future health. Many market observers, it appears, believe even a brief yield curve inversion is an indication that a recession is likely. Which curve should investors be focused on today? Traditional Yield Curve vs. New Yield Curve

    • The power of the yield curve in forecasting recessions rests on the bond market’s forecast of interest rates. When bond investors believe the economy is in trouble, they anticipate a decline in interest rates, which lowers the longer end of the curve, potentially below the near-term part of the curve, resulting in inversion.
    • The traditional 10-year bond yield less the 2-year yield is somewhat of a crude approximation of interest rates in the future versus more near-term rates. This indicator recently pointed to potential recession as illustrated by the teal line above.
    • A more exact forecast, the Federal Reserve (The Fed) argues, can be gleaned by comparing the forward 3-month yield 18 months in the future as compared to the current 3-month yield. As illustrated by the blue line, it turns out that this curve is very steep and is indicating the potential for growth ahead.
    • The fact that the bond market believes the Fed will be able to raise short-term interest rates significantly over the next 18 months implies the potential for a healthy economy, which is a very different and more optimistic picture than the more traditional yield curve.
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    news-3017 Fri, 29 Apr 2022 15:57:08 +0200 Are We in for a Soft Landing? /en/who-we-are/news/detail/are-we-in-for-a-soft-landing/ The Federal Reserve (the Fed) has undoubtedly caused many U.S. recessions over time when attempting to fight inflation through tighter monetary policy. However, sometimes it has engineered so-called “soft landings” whereby inflation slows and real growth continues. How likely is a soft landing in this cycle? The Federal Funds Rate and Recessions

    • As shown above, most of the times when the Federal Funds rate rises, a recession follows – “hard landings.” However, the circled areas show when the Federal Reserve raised interest rates, but a recession did not follow – “soft landings.”
    • In all three cases, the Fed tightened 300 basis points or more, but economic growth continued. That amount of tightening is about what is anticipated by the Fed’s own projections released in March. Note that the Fed also tightened materially from 2015 to 2018 with the economy growing solidly in 2019, only to be upended by the pandemic.
    • At a time when the Fed appears to be increasingly hawkish on inflation, it may be comforting to know that monetary tightening doesn’t always lead to recession and that soft landings have been kind to investors in recent history. Indeed, in the 12-months following the end of Fed tightening in 1985 and 1995 as well as after the Fed relented in 2018, equities generated double-digit returns.
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    news-3015 Fri, 29 Apr 2022 09:35:04 +0200 Does the ECB want to end CoCos? /en/who-we-are/news/detail/does-the-ecb-want-to-end-cocos/ CoCos: “If we want things to stay as they are, things will have to change.” (The Leopard) The ECB published in March a response to the Call for advice by the European Commission on the macroprudential framework for European banks (link here), which makes several proposals that could affect the Additional Tier 1 (AT1) CoCo segment in Europe… or will it really?

    First, let’s provide some context regarding this text and more specifically how it could eventually be translated into law. The Commission’s review is broad and encompasses several topics, among which the way AT1 CoCos are being used by banks. The ECB acts as an advisor on these matters, and though other regulatory bodies will also make recommendations (EBA, ESRB), we cannot deny that the ECB has a strong say in these macroprudential adjustments. The Commission should publish its review by end-June 2022. Possible legislative proposals by end-December (or later) would be followed by the Parliament’s and Council’s versions, before rule changes are finalized, potentially in 2024 or 2025. It is important to stress that (i) not all changes proposed here will be implemented, as they will be most certainly watered down or suppressed by the miscellaneous stakeholders drafting up and voting the law (including bank lobbies), (ii) the timing for any change is highly uncertain, but we do not expect anything before at least 2024… for an application at least one year later. Our view is that most of what is proposed here will be implemented rationally and slowly to avoid any market disruption, as is often the case with regulatory proposals.
     

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    news-3011 Tue, 26 Apr 2022 09:10:56 +0200 China’s Zero COVID Policy fuels inflation /en/who-we-are/news/detail/chinas-zero-covid-policy-fuels-inflation/ By Gilles Seurat, Fixed Income and Cross Asset Portfolio Manager, La Française AM China’s year-on-year GDP growth rose from +4% in Q4 2021 to +4.8% in Q1 2022 (Source: Bloomberg). But the outlook is significantly bleaker for the end of 2022 given namely the rise in the number of COVID cases which has jumped from just a few cases to close to 25 000 cases per day over the past two months. In response to this rise, the Chinese administration continues to pursue its Zero COVID Policy and has implemented new lockdowns. For illustration purposes, Nomura estimates that ca. 356.5 million Chinese, which represents 25.3% of the population and 38.4% of Chinese GDP, are in lockdown. Consequently, mobility indicators are down 50% on average, with a much bigger drop in Shanghai, where lockdown measures are the most severe. (Source: Baidu, YoY as at 17/04/2022)

    The severity of the situation is causing unprecedented congestion. Due to strict anti-COVID measures, a significant proportion of port workers and truck drivers are absent, causing congestion and backlog. In Shanghai, more than 300 ships are waiting to unload compared to a mere 50 in February. The situation has escalated and is even worse now than in 2020 and 2021!

    What are the implications for the global economy? Firstly, oil consumption is dropping in China as private car travel has been restricted. Air travel is collapsing too with only one out of four domestic flights scheduled. All of these factors naturally weigh on oil demand which is expected to decline by 9% in April 2022 (the equivalent of 1.2 million barrels per day) compared to April 2021 (source: Bloomberg).

    The long-term effect of this drop on crude oil prices will largely depend on the Chinese administration’s ability to contain the spread of COVID over the coming months and the duration of lockdown.

    However, in the short to mid term, congestion at China’s ports should have a more dramatic impact on inflation. Indeed, world demand for consumer goods currently exceeds supply, and Chinese supply chain disruption will only exaggerate this imbalance, hence leading to additional inflation. Shortages have run rampant, from semiconductors in 2020 to paper, glass, automobile parts and so on today.

    Successive lockdowns have shifted the balance of consumption between goods and services. In the US for example, goods consumption is 15% higher than before the pandemic (Source: Bloomberg), and across the globe, demand for household appliances and IT hardware (made in China) has surged. Furthermore, the US labor market is still recovering following its collapse in 2020 and 1.6 million workers are still missing. US Business Roundtable CEO Survey reveals six-month hiring plans at all-time highs. Therefore, aggregate income should continue to rise and further support US demand.

    Theoretically, the supply and demand imbalance can only be resolved by higher prices.  A good example is the German automobile industry, which has both increased delivery delays to sometimes more than a year and hiked prices. 

    The surge in inflation has several consequences on financial markets and portfolio allocations. Central banks across the globe have initiated tightening policies and should continue to take measures given pressure to act against what has been labeled the worst of evils, inflation. This means that the front-end portion of the fixed income curve should remain under pressure. Markets should continue to price rate hikes for the months to come. Hence, we believe that yields on short to mid-term maturity bonds have a higher probability to rise than to fall. The same is less true for long-term maturity bonds as demand from some investors has started to pick up. Long-term disinflationary drivers such as slower population growth mean that long-term maturity bond yields are more likely to be capped. We therefore anticipate flatter yield curves in Europe and the lockdowns in China are adding fuel to this strategy.

    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-3008 Tue, 03 May 2022 09:00:00 +0200 La Française Real Estate Managers REM acquires a senior housing unit in Alfortville (94) on behalf of PFA /en/who-we-are/news/detail/la-francaise-real-estate-managers-rem-acquires-a-senior-housing-unit-in-alfortville-94-on-behalf-of-pfa/ La Française Real Estate Managers (REM), acting on behalf of PFA, a Danish pension fund, has signed a forward purchase agreement with Sekoia and the Groupe Réside Etudes for a senior housing unit in Alfortville, at 35 rue du Président Kennedy. This investment is part of a separate account mandate granted by PFA to La Française Real Estate Managers. The acquisition covers the development of a senior housing unit of approximately 4,000 m2, spread over 6 floors (ground floor + 5) and includes many terraces. The programme will include 85 flats, ranging from studios to three-room flats, and provides parking spaces and numerous services, including a concierge service, a library, a private lounge, a leisure lounge, a fitness and massage centre and a restaurant, etc. 

    The residence is located in the city centre of Alfortville, near the capital and close to public transport links (RER D, metro line 8 and bus). All essential shops are within walking distance, including a bakery, a pharmacy, a bank, a hairdresser and a supermarket.
     
    Completion is scheduled for the second quarter of 2024. The asset is pre-let to the Groupe Réside Etudes, a French specialist in urban residences with services, under a fixed twelve-year forward lease. This is the third residence operated by Réside Etudes on behalf of PFA.

    David Rendall, Managing Director of La Française Real Estate Managers - Institutional Division, stated "In addition to the location, the services provided and the quality of the operator Réside Etudes, the demographic trends in Alfortville are a factor supporting the value of the asset. We thank PFA for the trust they have placed in us".

    La Française REM was advised by Reed Smith, Lexfair Notaires, ICF Environmental Consulting & Due Diligence and Egis. 

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    news-3003 Wed, 13 Apr 2022 11:51:59 +0200 European Regulation of 12/4/22 - Russia/Belarus /en/who-we-are/news/detail/european-regulation-of-12-4-22-russia-belarus/ In the context of the Ukrainian conflict, the European Commission has taken new measures against Russia and Belarus.

    Pursuant to that regulation, La Française Group now prohibits any subscription of units/shares of its funds to any Russian or Belarusian national, not established in a country of the European Union, in accordance with EU Regulation No. 833/2014.

    It is of immediate application as of April 12, 2022.
     

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    news-2998 Thu, 14 Apr 2022 09:00:00 +0200 La Française Real Estate Managers (REM), PFA and Groupe Réside Etudes, out to conquer the managed residential market in Bruges /en/who-we-are/news/detail/la-francaise-real-estate-managers-rem-pfa-and-groupe-reside-etudes-out-to-conquer-the-managed-residential-market-in-bruges/ La Française Real Estate Managers (REM), acting on behalf of PFA, a Danish pension fund, has signed a forward purchase agreement for its first senior housing unit in Bruges, Belgium, at 457 Baron Ruzettelaan. This investment is part of a separate account mandate granted by PFA to La Française Real Estate Managers. The acquisition covers the development of a senior housing unit of approximately 5,000 m2, spread over 4 floors (ground floor + 3) and includes many terraces. The programme will include more than 80 flats, ranging from 42 m2 to 70 m2, and provides parking spaces and numerous  services, including a 24-hour concierge service, a restaurant, creative leisure workshops, a hairdresser, a fitness centre, a balneotherapy centre, a landscaped garden, etc. 

    The residence is located in Steenbrugge, a residential area less than 20 minutes from the centre of Bruges and which benefits from a full transport service (4 bus lines) at the foot of the residence. All essential shops are within walking distance, including a bakery, a butcher and a supermarket. 

    Completion is scheduled for the second quarter of 2023. The asset is pre-let to the Groupe Réside Etudes, a French specialist in urban residences with services, under a fixed fifteen-year forward lease. 

    David Rendall, Managing Director of La Française Real Estate Managers - Institutional Division, said, "La Française has positioned itself as a major player in the senior housing sector with more than 500 million euros under management on behalf of third parties (as at 12/2021). Extending our reach to the Belgian market is a turning point in the development of this expertise and a first step in building a pan-European portfolio on behalf of PFA. The quality of the operator, Groupe Réside Etudes, as well as the demographics of the Bruges region, are factors supporting the valuation of this future senior housing unit."

    La Française REM was advised by Loyens & Loef on the legal and tax aspects. 

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    news-2995 Tue, 12 Apr 2022 09:13:34 +0200 A hawkish ECB is a real possibility /en/who-we-are/news/detail/a-hawkish-ecb-is-a-real-possibility/ The European Central Bank (ECB) Governing Council meets this week. There will be no update to their macroeconomic forecasts but stay tuned: soaring inflation has changed the political pressure from a relaxed stance to fighting inflation. Previous commitments are no longer deemed valid. Our expectations:

    • Rates should remain unchanged for the time being and the Governing Council should keep the sequencing:  by first ending the Asset Purchase Programme (APP) and then by hiking rates.
    • Sources said that during the previous meeting the board was divided, with 10 hawks calling for immediate action and 15 doves voting for status quo. The 5-year breakeven inflation rate in 5 years’ time has risen by 27bps since March 10 to 2.36%, above the ECB’s target rate. Therefore, we could witness more hawkish pressure this time.
    • The APP is set to reach EUR20bn for the month of June. The Governing Council should provide some insight about its pace in the following months. Given that inflation is so high – and should stay around current levels until September, the ECB could announce that it intends to end purchases at the end of June. This would open the possibility of a rate hike as early as in July. September is however a more credible option. Governor Makhlouf said that the ECB wanted to “maintain optionality” so the governing council might want to keep all options open.

    Overall, a hawkish ECB is a real possibility. Inflationary pressures are very strong, and the labor market is extremely tight, with the unemployment rate at an all-time low. The missing piece remains wages, for which recent data is unfortunately missing.


    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2992 Tue, 05 Apr 2022 14:27:36 +0200 IPCC What the latest report says /en/who-we-are/news/detail/ipcc-what-the-latest-report-says/ Completed on 30 | 03 | 2022 For three decades, the Intergovernmental Panel on Climate Change (IPCC) has been an  intergovernmental body responsible for assessing the state of knowledge, causes and  consequences of climate chance. The IPCC publishes reports that serve to alert politicians  and the public. With more than a hundred researchers around the world, the IPCC’s reports  are a synthesis of all studies carried out by the scientific community and are a reference on  climate issues. The IPCC reports are validated every year or two by the 195 UN member  countries. 

    In its latest report, released on 28 February 2022, the IPCC sets out five warning points concerning the climate:

    I.

    First of all, the IPCC states for the first time that man’s responsibility for global warming is certain. Thanks to the progress in climatology and the available date, the IPCC can affirm human responsibility. Natural factors have hardly contributed to global warming. The increase of about  +1.1°C since 1850 is attributed to human activities. According to the IPCC we are very close to 
    reaching a point of no return. 
     

    II.

    Global warming is set to reach +1.5°C. In its latest report, the IPCC presents a panel of five  different socio-economic scenarios (SSPSs). Thus, apart from the most optimistic scenario (SSP1), 
    the global warming threshold could be reached by 2030, 10 years earlier than the IPCC’s  previous estimate. An increase of 1.5°C, even temporarily, would have significant impacts on  ecosystems such as glaciers and coral reefs. 
     

    III.

    Sea levels are rising as a result of climate change, including the melting of ice caps. By 2050,  one billion people could be living in coastal areas at risk. This figure could double by 2100 under 
    the worst-case scenario, which suggests a rise of more than one metre. Since 1900, sea levels  have risen by 20 cm and could continue to rise by a further 20 cm by 2050. About 900 million
    people now live less than 10 metres above sea level. 
     

    IV.

    Methane emissions are increasing alarmingly and are one of the main sources of environmental  warming along with carbon dioxide (CO2). However, the harmful potential of methane emissions 
    is 84 times greater than that of CO2. The report shows a 6% increase in methane emissions over  the past 10 years. Furthermore, at COP26, an agreement was reached to reduce methane  emissions by 30% between 2020 and 2030. Currently, 111 countries are signatories. Unfortunately,  China and India are absent. The main sources of methane emissions are landfills and incinerators,  oil and gas extraction and transport, agricultural activities, coal mines, etc. 
     

    V.

    The IPCC warns of the catastrophic impacts on humans. Experts estimate that half of the world's  population, between 3.3 and 3.6 billion people, are already "highly vulnerable" to the  consequences of climate change. It is one of the ten important figures of the second part of the  IPCC's 6th assessment report. Reduced efficiency of carbon sinks, extinction of species,  increased disease, agricultural losses are, among others, examples of the consequences that  will result from a warming climate. The IPCC calls for adaptation to meet the urgency of the  situation and for everyone - governments, the private sector, civil society - to work together to achieve it.

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    news-2986 Fri, 01 Apr 2022 10:40:43 +0200 NOTICE TO SHAREHOLDERS OF THE SUB-FUND NEXT AM FUND – TENDANCE FINANCE LU > LU /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-next-am-fund-tendance-finance-lu-lu/ Dear shareholder,

    In compliance with the ESMA guidelines on performance fees in UCITS and certain types of AIFs published on 3 April 2020 (the “ESMA Guidelines”), the Company’s board of directors informs you that the prospectus of the Company (the “Prospectus”) has been updated in order to take into account the requirements of the ESMA Guidelines.

    The paragraphs describing the performance fee in the Prospectus have been redrafted as follows:

    “In addition, the Investment Manager is entitled to receive an annual performance fee equal to:

    Class A: 20% of the performance with high-water mark
    Class B: 20% of the performance over 5% with high-water mark
    Class C: 20% of the performance with high-water mark
    Class P: None


    There is a performance of the Net Asset Value per Share of a considered Class of the Sub-Fund if and only if there is an increase of the Net Asset Value per Share of this Class of the Sub-Fund compared to its reference Net Asset Value at the beginning of the calculation period which is the highest Net Asset Value end of period ever registered ("Reference Net Asset Value").The first Reference Net Asset Value of the Sub-Fund was on the last Net Asset Value in December 2013.

    The reference period for the performance of the Fund is from the 1st trading day of January to the last trading day of December, for each calendar year. Sampling frequency: The performance fee is collected for the benefit of the Investment Manager at each calendar year. Under no circumstances, may the reference period of the Sub-Fund can be less than one year.

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    news-2985 Fri, 01 Apr 2022 10:37:24 +0200 NOTICE TO SHAREHOLDERS OF THE SUB-FUND NEXT AM FUND – TENDANCE FINANCE UK > UK /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-next-am-fund-tendance-finance-uk-uk/ Dear shareholder,

    In compliance with the ESMA guidelines on performance fees in UCITS and certain types of AIFs published on 3 April 2020 (the “ESMA Guidelines”), the Company’s board of directors informs you that the prospectus of the Company (the “Prospectus”) has been updated in order to take into account the requirements of the ESMA Guidelines.

    The paragraphs describing the performance fee in the Prospectus have been redrafted as follows:

    “In addition, the Investment Manager is entitled to receive an annual performance fee equal to:

    Class A: 20% of the performance with high-water mark
    Class B* : 20% of the performance over 5% with high-water mark
    Class C: 20% of the performance with high-water mark
    Class P* : None

    * The share class is not registered in UK

    There is a performance of the Net Asset Value per Share of a considered Class of the Sub-Fund if and only if there is an increase of the Net Asset Value per Share of this Class of the Sub-Fund compared to its reference Net Asset Value at the beginning of the calculation period which is the highest Net Asset Value end of period ever registered ("Reference Net Asset Value").The first Reference Net Asset Value of the Sub-Fund was on the last Net Asset Value in December 2013.

    The reference period for the performance of the Fund is from the 1st trading day of January to the last trading day of December, for each calendar year.

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    news-2982 Fri, 01 Apr 2022 10:14:24 +0200 NOTICE TO SHAREHOLDERS OF THE COMPANY LU > SGD /en/who-we-are/news/detail/notice-to-shareholders-of-the-company-lu-sgd/ Dear shareholder,

    In compliance with the ESMA guidelines on performance fees in UCITS and certain types of AIFs published on 3 April 2020 (the “ESMA Guidelines”), the Company’s board of directors informs you that the prospectus of the Company (the “Prospectus”) has been updated in order to take into account the requirements of the ESMA Guidelines.

    The following clarifications have been added to the description of performance fee currently contained in the Prospectus.

    “The performance reference period is throughout the life of the relevant Class from the 1st trading day in January to the last trading day in December of each calendar year.

    Sampling frequency:

    The performance fee is collected for the benefit of the Investment Manager within ten Business Days following the last Business Day of each calendar year. Under no circumstances may the reference period of the fund be less than one year unless the fund is liquidated prior to the end of a calendar year

    Performance fee calculation method: 

    • During the reference period:
    • If the Sub-Fund's Net Asset Value is greater than the Reference Net Asset Value, the variable portion of performance fees will represent 15% of the performance of the Net Asset Value per Share for [the Classes as defined for the relevant sub-fund in the current prospectus].
    • The performance fee will be calculated net of all costs. - This difference will be the subject of a provision for performance fees when calculating the Net Asset Value.

    In the event of redemption, the portion of the provision made, corresponding to the number of units redeemed, is definitively acquired by the Investment Manager.

    ]]>
    news-2978 Fri, 01 Apr 2022 10:01:14 +0200 NOTICE TO SHAREHOLDERS OF THE COMPANY EN > FI /en/who-we-are/news/detail/notice-to-shareholders-of-the-company-en-fi/ Dear shareholder,

    In compliance with the ESMA guidelines on performance fees in UCITS and certain types of AIFs published on 3 April 2020 (the “ESMA Guidelines”), the Company’s board of directors informs you that the prospectus of the Company (the “Prospectus”) has been updated in order to take into account the requirements of the ESMA Guidelines.

    The following clarifications have been added to the description of performance fee currently contained in the Prospectus.

    “The performance reference period is throughout the life of the relevant Class from the 1st trading day in January to the last trading day in December of each calendar year.

    Sampling frequency:

    The performance fee is collected for the benefit of the Investment Manager within ten Business Days following the last Business Day of each calendar year. Under no circumstances may the reference period of the fund be less than one year unless the fund is liquidated prior to the end of a calendar year

    Performance fee calculation method:
     

    • During the reference period:
    • If the Sub-Fund's Net Asset Value is greater than the Reference Net Asset Value, the variable portion of performance fees will represent 15% of the performance of the Net Asset Value per Share for [the Classes as defined for the relevant sub-fund in the current prospectus].
    • The performance fee will be calculated net of all costs.
    • This difference will be the subject of a provision for performance fees when calculating the Net Asset Value. In the event of redemption, the portion of the provision made, corresponding to the number of units redeemed, is definitively acquired by the Investment Manager.
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    news-2975 Tue, 29 Mar 2022 12:00:32 +0200 Central bank actions, an obstacle for battered financial markets /en/who-we-are/news/detail/central-bank-actions-an-obstacle-for-battered-financial-markets/ By Gilles SEURAT, Fixed Income and Cross Asset Fund Manager, La Française AM For investors, 2022 began on a very bitter note with most asset classes in the red. Equities suffered, with European indexes at -10%. The only equity sectors that have stayed afloat are basic resources and energy, which have both benefited from the drastic rise in commodity prices.

    However, the biggest loser is the fixed income market which continues to suffer due to rising core bond yields (German 10y bund +76bps, 10y US Treasury Note +96bps) and widening spreads (Euro Investment Grade +42bps, Euro High Yield +92bps, Italian BTPS +17bps, Emerging Market debt + 9bps, etc.). Consequently, the Euro Aggregate index is -5.42% YTD. For equity investors who are used to double-digit drawdowns, these losses might seem contained. But for fixed income investors, 2022 marks the worst year ever. (Source: Bloomberg, as at 25/03/2022)

    The two culprits of the poor performance of fixed income markets are Vladimir Putin, whose war in Ukraine has sunk investor sentiment, and central banks, namely the Federal Reserve (Fed) and the European Central Bank (ECB) which have adopted a hawkish path in their war against inflation. Concerns associated with the Russia/Ukraine war have soured investor sentiment as markets anticipate downward growth revisions and that investment projects will be put on hold. We can already witness the negative impacts on consumer loan demand as well as on homebuyer activity in France.

    The primary objective of central bank policy has and will continue to be price stability. To some extent however, the Fed is an exception as it has an implicit dual mandate which includes maintaining a low unemployment rate. Nevertheless, this second objective is clearly secondary relative to price stability. Though the ECB and Fed do not have the same tolerance regarding price pressures, both take action when the organizations deemed necessary, even vigorous action, i.e. Fed Paul Volcker in the early 1980s or ECB Jean-Claude Trichet in the 2000s.

    However, over the past ten years, inflation has been very low and central banks have had no reason to implement restrictive measures. Quite the contrary! There was heavy political pressure to ease monetary policy. Remember former President Trump’s demands for rate cuts back in 2019.

    But now, with inflation soaring to a 40-year high, political pressure has shifted dramatically. Governments have declared inflation the worst of evils, and central banks are weary of not tightening monetary policy enough. Therefore, central banks are rushing to exit quantitative easing programs and to begin a hiking cycle that should have begun sooner. For benchmark purposes, the Taylor rule prescribes a current value for the Federal funds rate of around 10%, the highest estimate since the 1980s and far from today’s value! Keep in mind that the Taylor rule considers economic fundamentals, such as the unemployment rate and core inflation, which today are at historical extremes. The same tool (Taylor rule) can be used for the Eurozone, in which case the forecasted interest rate is 7%. All in all, the path of least resistance remains higher rates.

    Unfortunately, the war in Ukraine has accelerated the macro trend of higher inflation. As a matter of fact, Russia is a major oil exporter (10% of world production, Reuters), and the war has sent prices through the roof. The same can be said for many other commodities such as wheat, for which both Ukraine and Russia are major producers (respectively, 8% and 18% of world exports, source UN Comtrade). The war is forecasted to slow growth in Europe by 1.4% and in OECD member countries by 1%, not material enough to warrant a policy U-turn.

    Against this backdrop, central bank actions are an obstacle for battered financial markets rather than a support.

    For investors, the well-known “Fed Put”, which refers to Federal Reserve easing policy when fears of recession send equity markets south – is no longer a real possibility; or at least not until markets start pricing a strong decrease in demand with a recession, in which case, the “Fed Put” strike price would be much lower.

    How does this context bode for financial markets? What does it mean for asset performance in the coming months? We believe markets will continue to price a significant number of hikes during the next twelve months. That being said, we do not expect the long end of the yield curve to increase significantly as long-term trends continue to prevail: high debt, low population growth and digitalization have a negative impact on long-term nominal growth and hence long-term yields. This explains why yield curves should continue to flatten in the developed world. In terms of regions, we consider Eurozone bond yields to be more vulnerable to an increase in interest rates than US bond yields. Indeed, Eurozone inflation is more sensitive to Russia because of its dependance on the Russian natural gas supply. Therefore, inflation upside surprises are more plausible than in the US. If, as we expect, yields rise more in the Eurozone than in the US, the Euro should appreciate against the dollar. Moreover, investor sentiment on the Euro is very pessimistic so the unwinding of short positions should help the parity to rise as well.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2974 Tue, 29 Mar 2022 11:52:35 +0200 Is Russia in danger of default? /en/who-we-are/news/detail/is-russia-in-danger-of-default/ By Gaël Binot, Emerging Markets Fixed Income Manager, La Française AM At a time when war is raging in Ukraine and Western sanctions against Russia are increasing day by day, in particular with the sanctions targeting the Russian financial sector, an important question arises: is there a risk of the country defaulting on its sovereign debt? The three main rating agencies (S&P, Moody's and Fitch) downgraded the country's rating to close to default level. On 17 March, S&P declared: "At this point, we consider Russia's debt to be highly vulnerable to non-payment". For the financial markets, the probability of a default over a five-year horizon is also very high and currently stands at 88%. (Source: Bloomberg, 23/3/2022)

    Two questions come to mind: can Russia meet the payments due on its loans (interest and principal) and does it want to?

    Russian public debt stands at 18% of the country's GDP (Source: IMF WEO October 2021), which makes it one of the least indebted countries in the world. The country is in budget surplus. Moreover, Russia has accumulated significant foreign exchange reserves since the annexation of Crimea in 2014 and holds $643 billion in foreign exchange reserves (Source: Bank of Russia, as at 18/2/2022) and a National Wealth Fund which has accumulated $174.9 bn. Source: Russian Ministry of Finance, 01/02/2022)

    Imports from Russia in 2021 stood at $293 bn (Source: Trade Map). In the third quarter of 2021, the needs over a two-year horizon for the refinancing of all of Russia's foreign currency debt (public and private) were $129 bn (Source: JP Morgan). With regard to its main foreign exchange needs, Russia's foreign exchange reserves are largely sufficient to cover them.

    However, sanctions have proven to be a game-changer for Russia. In response to the invasion of Ukraine, the West has implemented sanctions to suffocate the Russian economy. 

    The Russian financial sector has been affected by a wide range of sanctions with restrictions on access to international financial markets, the removal of access to the Swift system for international payments and the freezing of part of the Central Bank of Russia's reserves, amounting to approximately $300 bn according to Reuters. The US will allow the receipt of interest payments from the Russian Central and State Bank until 25 May. However, from that date onwards, US nationals will need to obtain a specific licence to continue receiving such payments.

    Russian exports ($491 billion in 2021, Trade Map) have also been affected, notably with the suspension of oil and gas imports by the United States. But the energy sector, which represents the largest share of Russian exports (43% in 2021 according to Trade Map) has so far been relatively untouched by the restrictions. Europeans are heavily dependent on Russian fossil fuels (EUR 99 bn of imports by the EU, source: Eurostat) and they are, at present, reluctant to penalise their key supplier in this field.

    In response to the shortage of foreign capital and the collapse of the rouble, the Russian Central Bank intervened to stabilise the currency. More recently, it also suspended the sale of foreign currency until 9 September.
    Under these conditions, Russia still seems to be able to meet its short-term payment obligations. However, the longer the sanctions endure and continue to limit access to capital inflows and foreign exchange, the greater the risk of default for Russia.  

    On 5 March, Vladimir Putin signed a decree threatening to reimburse, in roubles, the creditors of hostile countries holding debts issued in foreign currency, which can be considered as a default for this type of debt. Nevertheless, there are a number of foreign currency issues in circulation that offer the possibility of repaying creditors in roubles under certain conditions, which would not trigger a default on the Russian debt. It is therefore difficult to know which loans the Russian government is referring to. On the other hand, any change in the repayment currency, if not stated in the issue prospectus, will lead to a default for the country. 
    Russia is demonstrating that it intends to honour its debt payments...for now. On 16 March, Russia met its coupon redemption obligations in dollars, for $117 M on two issues maturing in 2023 and 2045, thus avoiding an immediate payment default. But there are still around twenty maturities coming to term in 2022, including $2 bn on 4 April.

    Given the extreme level of tension, it is difficult to second guess the future intentions of the Kremlin on a voluntary default. If this event were to take place, the country's reputation would be damaged and the default would have a lasting impact on the Russian State's future financing costs from international investors. A voluntary default would mark a renunciation on the part of the Russian State of a short-term normalisation of relations with the West.

    DOCUMENT FOR INFORMATION PURPOSES. THIS DOCUMENT IS INTENDED FOR NON-PROFESSIONAL INVESTORS AS DEFINED BY MiFID. The information contained in this document is provided for information purposes only and it does not under any circumstances constitute an offer or invitation to invest, investment advice, or a recommendation relating to any specific investments. The specific information, opinions and figures that are provided are considered to be well-founded or accurate on the date when they were drawn up based on current economic, financial and stock market conditions, and they reflect the La Française Group's current opinions regarding the markets and market trends. They have no contractual value and are subject to change, and they may differ from the opinions of other management professionals. Please note, past performance is no guarantee of future results and that the level of performance is not constant over time. Published by La Française AM FINANCE Services, whose registered office is at 128, boulevard Raspail, 75006 Paris, France, and which is licensed as an investment services provider by ACPR under no. 18673. La Française Asset Management is a management company licensed by the AMF under no. GP97076 on 1 July 1997.

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    news-2973 Wed, 30 Mar 2022 11:45:00 +0200 SUISSE : NOTICE TO SHAREHOLDERS OF THE SUB-FUND LA FRANCAISE LUX – SUSTAINABLE REAL ESTATE SECURITIES (THE "SUB-FUND") 30/03/3033 /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-la-francaise-lux-sustainable-real-estate-securities-the-sub-fund-30-03-3033/ Dear Shareholder,
    The board of directors of the Company (the "Board") would like to inform you of its decision to put the  Sub-Fund in liquidation with effect as of 30 of March 2022 (the “Effective Date”). In accordance with the articles of incorporation and the prospectus of the Company, the Board may  decide to close a sub-fund in case the assets of such sub-fund fall below a threshold considered by the  Board as being the minimum level of assets for such sub-fund to be operated efficiently.

    The assets under management of the Sub-Fund currently amount to approximately EUR 13 million,  which does not allow for an efficient management (diversification, risk management etc.) of the SubFund. Therefore, the Board considers it in the best interests of the shareholders to put the Sub-Fund  in liquidation as of the Effective Date.

    Subscriptions in the Sub-Fund have been suspended with effect from 28 of February 2022.

    Costs
    La Française Systematic Asset Management GmbH will bear the cost of the expenses incurred in the  liquidation, including legal and regulatory charges associated with the disposal of the Sub-Fund’s investments.

    Tax status


    This liquidation might affect the tax status of your investment and may give rise to a tax liability on any  chargeable gains. We therefore recommend that you seek independent professional advice in these  matters.

    Your shares at liquidation

    Any holding that you retain in the Sub-Fund on the Effective Date will be redeemed and cancelled on  that date and the liquidation proceeds will be paid and sent to you in accordance with the payment  instructions, which we hold on file for your account.

    Additional information
    The Sub-Fund will cease to exist after the liquidation.

    Any liquidation proceeds which cannot be distributed to shareholders after the close of the liquidation  will be deposited in escrow on their behalf with the Caisse de Consignation in Luxembourg, from where  you can claim them at any time within 30 years, after which they will become the property ofthe state. Should you require further information as to the action you should take, please contact your financial  advisor.

    On behalf of the Board

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    news-2969 Tue, 22 Mar 2022 10:36:00 +0100 Measure in order to understand, understand in order to act effectively and act to preserve value /en/who-we-are/news/detail/measure-in-order-to-understand-understand-in-order-to-act-effectively-and-act-to-preserve-value/ By Virginie Wallut, Director of Real Estate Research and Sustainable Investment at La Française Real Estate Managers The building sector is responsible for one-third of greenhouse gas emissions in the European Union. Action must be taken. Under pressure from investors, users and new regulations, the decarbonisation of real estate portfolios must be accelerated. To fight against global warming, fund managers must put in place the necessary tools which will allow them to measure carbon emissions in order to better understand, act effectively and preserve the value of their assets.

    MEASURE IN ORDER TO BETTER UNDERSTAND

    Theoretical energy consumption can be estimated through an analysis of the technical specifications of buildings. The accuracy of estimates then need to be validated by monitoring the actual consumption of real estate assets. Lowering energy consumption and CO2 emissions is in everyone's interest and can only be achieved by asset owners and tenants working together. 

    Carrying out an energy audit coupled with the monitoring of actual energy consumption is a prerequisite for effective energy management. This makes it possible to identify energy consumption improvement actions and to measure the subsequent positive effects of those actions on consumption and clearly highlights, from a long-term cost perspective, the necessity of defining emissions reduction targets. 

    During the selection phase and prior to investment, La Française Real Estate Managers (REM) audits the sustainable features of its deal flow, paying particular attention to energy and environmental performance. An ESG audit is systematically completed prior to signing a promise to purchase. The bid price and business plan must take into account capital expenditures, required to improve the sustainable features of assets. Therefore, our bidding prices naturally reflect a green premium or a brown discount  For the asset management phase, La Française uses a variety of monitoring tools and has signed partnership agreements with operators to analyse invoice data. This type of solution makes it possible to identify the buildings that consume the most energy and to prioritise actions moving forward. For larger buildings or those that consume more energy, and for which consumption is unjustified given the building's characteristics, La Française REM installs instrumentation systems in order to monitor real time consumption and generate alerts during peaks in consumption and drifts.

    By cross-referencing different energy and building data, La Française is able to define realistic and objective-oriented action plans. Obviously, emissions reduction targets must be realistic and clear in order to avoid “greenwashing”.

    ACT EFFECTIVELY

    La Française REM partakes in the fight against global warming by setting CO2 emissions reduction targets compatible with the Paris Agreement for most of its real estate portfolios. To achieve this goal, La Française REM uses the decarbonisation pathway developed by CRREM (Carbon Risk Real Estate Monitor) to limit global warming below 1.5°C. 

    The global "carbon budgets" used by CRREM were selected in line with the COP21 objectives, i.e., the scenario of Rockström et al. (2017) for the 1.5°C objective (669 GtCO2e for 2019-2050). In this carbon scenario, reduction targets were determined following the framework of the Sectoral Decarbonisation Approach (SDA) developed by the SBT initiative.

    In order, this firstly involves a reduction target for the European building sector, followed by a target for each EU country and finally a target for each building based on its type. The efforts required to achieve the 1.5°C objective therefore vary depending on the country and the type of asset. The more carbon-intensive the country's current energy mix and the more energy-intensive the asset type, the greater the effort required. For example, offices in Germany will have to reduce their average emissions from 86.3 kgeqCO2/m2/year in 2020 to 2.8 kgeqCO2/m2/year in 2050, whereas logistics assets in France will have to reduce their average CO2 emissions from 12.8 kgeqCO2/m2/year in 2020 to 1.2 kgeqCO2/m2/year by 2050.
     

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    news-2967 Tue, 22 Mar 2022 10:20:00 +0100 Amidst the turmoil, are central bank policies diverging? And what fixed income investment opportunities are emerging? /en/who-we-are/news/detail/amidst-the-turmoil-are-central-bank-policies-diverging-and-what-fixed-income-investment-opportunities-are-emerging/ By François Rimeu, Senior Strategist, La Française AM Facing higher inflation risk than they initially thought, central bankers have decided to tighten their policy stance both in the US and in Europe, albeit at different speeds. The Federal Reserve (Fed) is clearly behind the curve right now with headline inflation at 7.9% (highest since January 1982), core inflation at 6.4% (highest since August 1982) and the unemployment rate at 3.8% (close to the all-time low at 3.5%) whereas Federal funds are still very low at 0.25-0.5% (Source: Bloomberg 22/03/2022). Given that inflation expectations are above target for the foreseeable future, the US Federal Reserve has no reason to stop its hiking cycle in the near future. Fed members have indeed been very vocal lately, signalling their will to remove accommodation quickly and to tighten the policy rate, if necessary, above neutral, which has led to financial markets pricing Fed funds at 3% in June 2023. 

    The situation is both similar and different in the Eurozone. Similar because soaring energy costs have already pushed Eurozone inflation to a record high of 5.9% last month and inflation could hit 7% in the months ahead, well above the ECB’s 2% target. It is also quite different with a European economy, more reliant than the United States on commodity imports and which has experienced no clear wage inflation to date.
    European Central Bank’s Lagarde has emphasized those differences recently, underlining, “Our two economies are in a different place in the economic cycle, even before the war in Ukraine” or “Our monetary policies won't be running on exactly the same rhythm”. We can assume a more gradual normalization in the Eurozone than in the US going forward, which is exactly what financial markets are currently pricing.

    From now on, the directions of both the US and Eurozone bond markets going forward are likely to be determined by the overall thrust of the fiscal / monetary policy mix. If fiscal support proves to be disappointing, macro-economic indicators could also start to disappoint, especially with higher commodity prices overall hitting consumer demand. This is already what leading indicators are starting to show (OECD diffusion index, credit impulse...), but it could take months before we see any material negative impacts. The Covid crisis has led to unprecedented budget support from governments which in turn has led to very high saving rates for US and Eurozone consumers meaning that the negative effect coming from tighter monetary conditions and higher commodity prices could be delayed.

    This environment is clearly not the most favourable for fixed income markets. Higher yields on governments bonds have a negative impact on the whole fixed income spectrum, meaning that investment grade bonds, high yield bonds and emerging market bonds are all suffering from this massive repricing. One of the few options has been the TIPS market (Treasury Inflation-Protected Securities) but even there, the total return is negative YTD (22/03/2022, Bloomberg).

    Going forward, we expect central banks to keep on accelerating their hiking plans, which should lead to flatter yield curves (or inverted yield curves, depending on the market), especially in the US but also in Europe. A flat yield curve is often associated with a high probability of recession, which makes sense on a theoretical basis as it signals the intention of central bankers to tighten rates above neutral, which would hurt demand over time. The question here is how long would it take? Normally a Fed tightening cycle is at the early stages quite risk-on. Later, markets worry about policy tightening driving a growth slowdown. But at present, policy tightening is urgent and investors are already preoccupied by growth slowdown prospects.
    In the short term, and as long as the Fed continues to push for tighter monetary conditions, we find it difficult to have a very constructive view on credit markets and emerging markets. We prefer the longer part of the yield curve vs the shorter part. Lastly, we are also negative on long-term inflation expectations as the ultimate goal of the Fed is to push them lower. 

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2964 Mon, 28 Mar 2022 09:50:30 +0200 Water risk in our portfolios /en/who-we-are/news/detail/water-risk-in-our-portfolios/ By Deepshikha SINGH, Deputy Head of La Française Sustainable Investment Research Water is the ultimate renewable resource – yet it is scarce, and has been burdened with our overconsumption, pollution, and the effects of climate change. Global water use has more than doubled in the last 40 years. It is estimated that we will need 50% more food (and 40% more freshwater) by 2030. According to the UN, 45% of the global gross domestic product (GDP), 52% of the world’s population and 40% of global grain production is expected to be at risk due to water stress by 2050 if business-as-usual persists. Companies are already experiencing financially-material stresses related to water scarcity and the associated degradation of ecosystems.

    Groundwater - our main freshwater resource is scarce and fast depleting

    22nd March was celebrated as the World Water Day and the theme of this year was ‘Groundwater – making the invisible visible’. Our Blue Planet is named for the abundance of the blue liquid on its surface, yet less than 1% of it is usable is its natural form. For most of our uses – domestic and industrial – we pump water from under the ground. Groundwater is the most abundant form in which freshwater can be used, but it is fast disappearing. We are pumping non-renewable groundwater reserves at unsustainable rates to counter droughts across the world without even knowing how much we have left. 

    As data from NASA suggests, globally, one-third of our largest groundwater basins are under distress – being rapidly depleted by human consumption. In US alone, almost half of the water supply needs are met by pumping from underground aquifers. Add to these, the enormous amounts of pumping that is done by bottling companies, other industries and the groundwater reserves have been depleted beyond repair. NASA estimates that the likelihood of mega droughts (lasting more than 30 years) in US Southwest and Central plains is going to increase to 60%, even if we achieve net zero by 2050 (which the IPCC’s latest reports claim we will not). 

    Industries face multiple forms of risk from the growing water scarcity

    Industries and agriculture use 90% of global freshwater resources – with agriculture accounting for the lion’s share. Global water demand (in terms of water withdrawals) is projected to increase by 30% by 2050 (despite the increasing scarcity), mainly due to increasing demand from manufacturing and electricity sectors (OECD). A growing and increasingly wealthy global population needs more food, materials and energy – placing intense pressure on water resources. Water-related risks, from physical to reputational, can potentially damage companies’ financial performance. 

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    news-2962 Wed, 30 Mar 2022 09:27:00 +0200 NOTICE TO SHAREHOLDERS OF THE SUB-FUND LA FRANCAISE LUX – SUSTAINABLE REAL ESTATE SECURITIES (THE "SUB-FUND") /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-la-francaise-lux-sustainable-real-estate-securities-the-sub-fund/ The board of directors of the Company (the "Board") would like to inform you of its decision to put the Sub-Fund in liquidation with effect as of 30 of March 2022 (the “Effective Date”). Dear Shareholder,

    In accordance with the articles of incorporation and the prospectus of the Company, the Board may decide to close a sub-fund in case the assets of such sub-fund fall below a threshold considered by the Board as being the minimum level of assets for such sub-fund to be operated efficiently. 

    The assets under management of the Sub-Fund currently amount to approximately EUR 13 million, which does not allow for an efficient management (diversification, risk management etc.) of the SubFund. Therefore, the Board considers it in the best interests of the shareholders to put the Sub-Fund in liquidation as of the Effective Date. 

    Subscriptions in the Sub-Fund have been suspended with effect from 28 of February 2022.

    Costs
    La Française Systematic Asset Management GmbH will bear the cost of the expenses incurred in the liquidation, including legal and regulatory charges associated with the disposal of the Sub-Fund’s investments. 

    Tax status
    This liquidation might affect the tax status of your investment and may give rise to a tax liability on any chargeable gains. We therefore recommend that you seek independent professional advice in these matters.

    Your shares at liquidation
    Any holding that you retain in the Sub-Fund on the Effective Date will be redeemed and cancelled on that date and the liquidation proceeds will be paid and sent to you in accordance with the payment instructions, which we hold on file for your account. 

    Additional information
    The Sub-Fund will cease to exist after the liquidation.
    Any liquidation proceeds which cannot be distributed to shareholders after the close of the liquidation will be deposited in escrow on their behalf with the Caisse de Consignation in Luxembourg, from where you can claim them at any time within 30 years, after which they will become the property of the state. Should you require further information as to the action you should take, please contact your financial advisor.

    On behalf of the Board 

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    news-2961 Tue, 22 Mar 2022 09:28:00 +0100 La Française signs the Finance for Biodiversity Pledge /en/who-we-are/news/detail/la-francaise-signs-the-finance-for-biodiversity-pledge/ La Française commits and signs the Finance for Biodiversity Pledge! La Française, a €55 billion multi-asset class investment manager (as at 31/12/2021), is one of the five new signatories of the Finance for Biodiversity Pledge, whereby signatories commit to protecting and restoring biodiversity through their finance activities and investments by:

    • Collaborating and sharing knowledge
    • Engaging with companies
    • Assessing impact
    • Setting targets
    • Reporting publicly on the above before 2025

    Laurent Jacquier-Laforge, Global Head of Sustainable Investing of La Française Group concluded, “La Française is proud to be among the group of 89 leading financial institutions to formally commit to protect, restore and sustainably manage natural resources through a responsible investment strategy based on engagement and which prioritizes biodiversity. As a responsible investor, our goal is to design and manage investment solutions that reconcile performance and sustainability.”
     

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    news-2959 Thu, 24 Mar 2022 09:00:00 +0100 Learning to live with CoCo non-calls /en/who-we-are/news/detail/learning-to-live-with-coco-non-calls/ Completed on 15| 03 | 2022 We have been asked lately whether there would be some non-calls on Additional Tier 1 CoCos for the months to come and whether higher rates/yields were an obstacle to the refinancing of AT1 CoCos. Our short answers to these questions are respectively: 1/ yes, non-calls are to be expected, and it is quite a non-event actually; and 2/ No, what matters is the spread on CoCos, not their yield or the level of core rates. Let’s focus on these matters to demonstrate why non-calls are set to become more and more common and why it is not an impediment to the performance of the bonds, nor is it to their carry.

    1/ How do AT1 CoCo calls work?

    a/ The economics of calling a CoCo bond

    AT1 CoCos are regulatory instruments that count as Tier 1 capital (hence their name!) and that need an approval from the bank’s regulator in order to be called. Basically, bonds can be called only as long as they have been refinanced already at a lower or similar cost or if the bank has replaced them with an equivalent amount of higher quality capital (i.e., common equity). As such, there is no direct incentive for the issuer to call the bond if it has not been replaced by a similar capital instrument. 

    Issuers usually strive to refinance their CoCos whenever they can, sometimes as much as 6 to 12 months before an upcoming call date. Their idea is to secure the funding on a new bond at a similar or lower cost than the existing instrument while assuaging investors about the exercise of the call on their existing CoCo. Santander had failed to refinance one of their CoCos back in Q1 19 and therefore had to extend it (they eventually called it afterwards when they could refinance it at a lower cost). Non-calls usually happen some time after or during a period of market stress, when issuers cannot properly access primary markets at a decent cost. That is what happened during the Covid-19 crisis, when Deutsche Bank, Aareal Bank and Lloyds Banking Group decided to not call their respective AT1 CoCos in Q2 2020. In order to avoid the potential price friction on an upcoming call, several issuers have included within their documentation the possibility to call the bonds during a 6-month call window rather than on a specific day. This is a welcome documentation adjustment, but that will solely apply to issues whose call dates are far from now since it was first introduced back in 2019.

    Breakdown of calls and non-calls on AT1s from European banks1

      2018 2019 2020 2021 2022
    Number of bonds 4 13 22 18 22
    - called 4 12 19 18 9
    - not called 0 1 2 0 0
    % called 100% 92% 100% 41%  
    Total amount of AT1s called ($bn) 6.475 15.2 23.8 24.3 7.7

     1Sources: Bloomberg, La Française. Data as of 15/03/2022.

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    news-2952 Mon, 14 Mar 2022 15:34:23 +0100 Controlling inflation is the top priority. The FED will act. /en/who-we-are/news/detail/controlling-inflation-is-the-top-priority-the-fed-will-act-1/ As widely expected, at the Federal Reserve’s next policy meeting, on March 15-16, the FOMC will start hiking with a quarter-point increase in interest rates to get prices under control. Geopolitical and economic risk should not change Chair Powell’s hawkish message. Please find below what we expect:

    • The FOMC will raise the federal funds target range to 0.25-0.50% (25 bps increase), the first increase since 2018. Considering the risk of persistent high inflation and strong labor markets, Chair Powell is expected to signal more hikes to come with the possibility of 50 bp moves if needed, depending on the data. 
    • On the side of the “dot plot”, we expect the Committee to show a median of six hikes for 2022 (1.625%) and three additional hikes next year (2.375%). There is a chance that 2024 dots will show higher rates than the terminal rate (2.5%).
    • We do not expect change on the terminal rates (2.5%), but the question could come during the Q&A with the terminal rate potentially below 2024 dots.
    • On the summary of economic projections (SEP), we expect them to indicate lower growth in 2022 (from 4.0% to 3.7%) and in 2023 (from 2.2% to 2.1%). For 2024, we expect growth to stay close to the potential growth (1,8%).
    • We anticipate that the committee will revise its forecast for higher inflation figures with projections moving up from 2.6% to 4.0% in 2022 (This is the average Q4 2022 inflation, not the 2022 average) and from 2.3% to 2.5% in 2023. We expect median inflation expectations to remain at 2.1% for 2024.
    • On quantitative tightening (QT), we expect some details (on caps) on the balance sheet runoff as the reduction should begin after rate hikes are initiated. 
    • The post-meeting statement will likely be amended to note that the implications of Russia’s invasion of Ukraine on the US economy of are highly uncertain.

    All in all, the Fed’s hike will not come as a surprise for market participants. But we expect the global tone to stay hawkish, with some flattening on the US curve.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2946 Fri, 11 Mar 2022 09:58:59 +0100 Carbon Capture, Utilisation & Storage /en/who-we-are/news/detail/carbon-capture-utilisation-storage/ Carbon Capture, Utilisation & Storage is the process of capturing CO2 from fuel or industrial processes, the transport of this CO2 via pipeline or ship, and its use either as a resource to create valuable products or services, or its permanent storage in deep underground geological formations1. Technologies

    CO2 is used in a number of technologies, from refrigeration to carbonated beverages. However, by far the largest use case of captured carbon is for enhanced oil recovery. This is a process whereby CO2 captured from the combustion process in power plants is then injected back into the ground to enable further extraction of fossil fuels. This raises a number of questions around long-term sustainability and net zero goals, as although this in theory lowers the GHG emissions derived from power generation, it does so to then facilitate additional high emitting activity. In terms of the capture technology itself, there are a plethora of methods used; from physical separation using a liquid solvent such as Selexol, to membrane separation based on inorganic devices that have high CO2 selectivity.

    A few interesting projects

    Contrary to popular belief, CCUS has been around for a long time. For example, Enid Fertiliser Plant in Oklahoma has been capturing CO2 from its operations since 1982, and then piping that CO2 off to nearby oil wells for enhanced oil recovery2.

    However, CCUS being used to permanently store CO2 is less common and has been met with mixed success:

    Gorgon LNG, Australia

    Perhaps the largest scale CCUS project currently in operation is the Gordon LNG Project in Australia. This joint venture between Chevron (47%), Shell (25%) and ExxonMobil (25%) has invested over $3 billion in the scheme that has captured 5.5Mt of CO2 since August 2019. Despite this success, it has fallen short of its overall target of capturing 80% of CO2, hitting just 68%. This has triggered the compulsory surrender of 5.3 million carbon credits to the Western Australian government3. Indeed, the GHG emissions from extracting, processing and use of the natural gas from Gorgon LNG, means that the CCUS project captures just 2% of the overall emissions of the project altogether.

    Drax Bio Energy Carbon Capture and Storage (BECCS)

    Drax has a different approach when it comes to lowering emissions. Instead of retrofitting existing coal plants with CCUS technology, they have converted old coal plants into fully functioning bioenergy power plants. These are then fitted with CCUS technology in order to capture emissions from burning biomass. Drax aims to capture 8 million metric tons of carbon dioxide from the atmosphere annually.

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    news-2945 Fri, 11 Mar 2022 09:48:46 +0100 Carbon Impact Quarterly: Power producer, the keystone to a successful climate transition /en/who-we-are/news/detail/power-producers-the-keystone-to-a-successful-climate-transition/ We are running out of time. According to a temperature analysis run by NASA (the National Aeronautics and Space Administration), the average global temperature has increased by a little more than 1⁰C since 1880. At the current rate of emissions, we could reach 1.5⁰C within 15 years.

    In the wake of COP26, 118 countries have updated their Nationally Determined Contributions (NDCs). This is very much welcomed, as based on the assessment of Climate Action Tracker in April 2021, the NDCs as they stood at the time would only limit warming to around 2.4⁰C above pre industrial levels. On the positive side, the Sixth Assessment Report of the
    Intergovernmental Panel on Climate Change (IPCC) shows that limiting the global temperature rise to 1.5°C by the end of the century is still possible. It will require immediate, rapid, and economy-wide greenhouse gas (GHG)
    emissions reductions, as well as the development of carbon capture technologies.

    We know what to do. According to the International Energy Agency (IEA), to reach net zero emissions by 2050, the world must invest $4
    trillion in clean energy annually. In 2021, just $775 billion was invested in renewables technologies globally.

    A clean energy world cannot be achieved without a clean power sector to ensure production and distribution of it. Power producers together account for 40% of all fossil-related carbon emissions (Figure 1) and Electric Utilities in particular have a key role in the transition to net zero: the share of electricity in the global energy mix increases in every IEA scenario.

    According to the latest IEA energy outlook, in order to reach net zero by 2050, almost two-thirds of the energy consumed must be electric. In absolute terms, this means that electricity generation will grow from 26,762 TWh in 2020 to more than 71,000 TWh in 2050 (figure 2).

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    news-2944 Wed, 09 Mar 2022 18:35:44 +0100 Banking stress tests /en/who-we-are/news/detail/banking-stress-tests/ Written on the 09 | 03 | 2022 BANKING STRESS TESTS UKRAINE/RUSSIA

    The year 2022 was supposed to mark the beginning of a new era for European banks: that of the first-rate hikes with fruitful revenue prospects. This was without considering the invasion of Ukraine by Russia. 

    Indeed, the conflict in Ukraine may have broad implications for European banks, including higher loan loss provisions, commercial losses, and a delayed rate hike cycle. Shareholders will be affected in 2022, especially if European banks hit by the Ukraine crisis decide to reduce and stop their dividend payments. At this stage and in the absence of information regarding the duration of the war and its final magnitude, it is difficult to estimate the total impact.

    However, the main European banks exposed to Russia, Ukraine, and Belarus issue press releases to inform investors of their exposures or not, with varying degrees of detail. The European banks with the highest exposure to Russia and Ukraine are Raiffeisen Bank International with an exposure of 13.7% (% of loan exposure), UniCredit with 1.9%, Société Générale with 1.8%, Intesa Sanpaolo with 1.2% and ING Groep with 0.6%. 

    In order to get an idea of the potential loss on their Russian/Ukrainian subsidiary, we assessed the above-mentioned banks in much more severe stress scenarios than the so-called expropriation scenarios that have been published by some banks. 

    Double stress test with strict assumptions Russia/Ukraine/Belarus:  

    We assume in a first stress test (i) a 10% drop in group revenues, (ii) loan loss provisions of 10% of Russian/Ukrainian/Belarusian loans, (iii) nationalisation of the local entity with subsequent loss of equity, (iv) loss of intra-group funding, (v) 80% drop in risk-weighted assets of Russian/Ukrainian/Belarusian subsidiaries. We still add a 20% tax shield on items (ii), (iii), (iv). 

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    news-2943 Wed, 09 Mar 2022 16:05:20 +0100 Sustainability linked Bonds, fuelling the growth of the ESG debt market /en/who-we-are/news/detail/sustainability-linked-bonds-fuelling-the-growth-of-the-esg-debt-market/ By Marie Lassegnore, Credit Portfolio Manager & ESG Director for Fixed Income and Cross Asset, La Française AM WHAT ARE SUSTAINABILITY-LINKED BONDS (SLBs)?

    Sustainability-linked formats are relatively new. ENEL Finance issued the first SLB in late 2019. The real innovation in the format was to look beyond the green or social aspects of the projects financed with the ‘proceeds’ of the bond issue. Indeed, the issuer’s commitment is at the corporate level. The issuer incorporates mandatory strategic targets. Otherwise, the issuer will be subject to a financial penalty (called a coupon step-up or premium; the increase is predefined). In practice, prior to issuing an SLB, the company will define environmental or social objectives (Sustainable Performance Targets - SPT), that will be measured using credible Key Performance Indicators (KPIs). If the company fails to meet its objectives by the target date, it will pay a premium for the remaining life of the bond.

    For illustration purposes, consider a bond with a 1% coupon and a maturity date of 31/12/2028.

    • Sustainable Performance Targets - SPT: “Reach carbon neutrality by 2050 with an intermediate 25% reduction in overall emissions by 2025”
      • KPI1: “Reduce Scope 1 and 2 carbon emissions by 30% by 2025 vs 2021 level”
    • Target date: 31/12/2025
    • Coupon step-up: 0.15%
      • KPI2: “Reduce scope 3 emissions by 20% by 2025 vs 2021 level”
    • Target date: 31/12/2025
    • Coupon step-up: 0.10%
    • Therefore, if at the 31/12/2025 target date, the issuer falls short of the first KPI, it will have to pay a 1.15% coupon for the annual payments of 2026, 2027 and 2028. The coupon further increases to 1.25% if the issuer misses both targets (KPI1 & KPI2).

    HOW DO SLBs SHAPE THE ESG DEBT MARKET?

    The SLB format remained unused the year following ENEL’s inaugural issuance. Thereafter, it was widely adopted in late 2020 and almost mainstream in 2021. The widespread adoption was facilitated by the ECB, when it declared SLBs as eligible collateral if the Sustainability Targets were linked to environmental objectives.

    The most interesting aspect of the emergence of the SLB format relates to how it quickly influenced the ESG debt market, which was dominated by green bond issuances until 2020. By the end of 2020 and excluding sovereign and government related bonds, the ESG corporate debt market was comprised of 81% of green bonds, 7% of social bonds and 10% of sustainable bonds. In one year’s time, this landscape changed substantially with the explosion of SLBs, making up 23% of 2021 primary issuance. As of January 2022, green bonds represent 70% of the mix and SLBs went from 0.1% a year ago to 10.7% of the ESG corporate debt market. (Source: Bloomberg and La Francaise AM)

    HOW CAN THIS TREND BE EXPLAINED? THE GREATER FLEXIBILITY OF SLBs BONDS VERSUS GREEN BONDS

    • The minimum issuance size of green bonds: The benchmark-size USD300m-500m green bond format only fits companies with sizeable balance sheets/operating cashflows and annual funding programs of several billion USD. The green bond format does not however fit the funding needs of smaller companies that seek only to raise USD500m every five years, for CAPEX funding or alternative corporate purposes.
       
    • The limited eligibility of green projects: To be eligible for Green bond proceeds, green projects are subject to the Green Bond Principles and/or the Climate Bonds Initiative (CBI) as well as the future EU Green bond framework. Green bonds are more suited to certain types of sectors as the current industry breakdown demonstrates. The green bond market is dominated by governments (37%) and focusing on the corporate segment, financials occupy a large share (32%), followed by European Utilities (17%). Other sectors account for only 14% of the green bond market. (Source: Bloomberg and La Francaise AM)

    SLBs, given their added flexibility, constitute an interesting alternative. The issuer of an SLB can use the proceeds for green or non-green projects or even for general purposes such as traditional operating expenses etc. It is no longer a question of size of eligible projects relative to total funding needs. The Green bond market scrutinizes, and rightly so, the projects, but also the companies that try to access this form of funding. There is a pronounced risk of ‘greenwashing’, which obviously could lead to reputational risk for a company operating in a highly polluting industry which would opt to come to the Green bond market. From our discussions with issuers from the cement and energy sector, the Green bond market presented more risks than opportunities. By looking beyond, the projects themselves, SLBs, which focus rather on the long-term commitment of the company (emission or social inequality reductions), underline the firm’s efforts, and provide transparency with regards to transition pathway without running the risk of “greenwashing”. Greenwashing remains a risk if those ambitions are judged insufficient, but it is minimized as investors in SLBs might be less committed to the format of the bond.

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    news-2938 Tue, 08 Mar 2022 15:48:39 +0100 Pre ECB commentary /en/who-we-are/news/detail/pre-ecb-commentary-2/ The European Central Bank (ECB) will hold its quarterly press conference on March 10. The Governing Council (GC) will update their macro-economic projections with more inflation pressure but downside risks to growth. The ECB may pursue the gradual normalizing of its monetary policy despite uncertainties coming from Russia’s invasion of Ukraine. Please find below what we expect:

    • We expect the ECB to keep as much optionality as possible (Philip Lane: “The ECB won’t have final answer on war impact this week.”)
    • We expect the ECB to delay the point at which it provides the market with more concrete guidance as to the future of the asset purchase programme (APP) but we see the central bank continuing to talk about its intentions to gradually dial back policy accommodation.
    • We expect the ECB to emphasize that the purchases could be stepped up again or resumed if required (i.e., in the event of renewed market fragmentation).
    • On the economic front, we expect the ECB’s inflation projections to be revised significantly higher in 2022 (from 3.2% to 5.7%), showing inflation above 2% in 2023 (from 1.8% to 2.1%) and at 2% at the end of the forecast horizon. On the growth side, projections will indicate lower growth in 2022 (from 4.2% to 3.8%) and in 2023 (from 2.9% to 2.5%) and unchanged in 2024 (1.6%).
    • We do not expect any announcement on the new series of targeted longer-term refinancing operations (TLTRO) or on tiering increases.

    All in all, we expect very little from the ECB this week. The situation is too uncertain and the negative impact on economic growth is impossible to assess right now. The same is true regarding medium-term inflation expectations. It does not mean a dovish meeting as we expect President Lagarde to reiterate the ECB’s will to reduce its accommodative stance over the course of 2022.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2937 Tue, 08 Mar 2022 09:28:33 +0100 It's new! "Wellcome by La Française" /en/who-we-are/news/detail/its-new-wellcome-by-la-francaise/ La Française Real Estate Managers (REM), an international real estate asset manager with close to €30 billion in Assets under Management (31/12/20221), is committed to building tenant loyalty through positive tenant-user experience. Ultimately, positive user experience will contribute to reducing vacancy risk and consequently to optimizing the financial performance of the asset manager’s real estate parc. La Française REM aims to “do more and better” for its tenant base with Wellcome by la Française.

    La Française Real Estate Managers and its newly created Transformation Unit headed by Jean-Marie Célérier tested and developed, during the sanitary crisis, a new services offer designed to suit its tenants’ business requirements and needs for flexibility. Wellcome by La Française features:

    • a traditional commercial lease with an optional restructuring-work expense advance. The tenant can request an advance on expenses, capped at the equivalent of six months’ rent. Only 90% of the advance is reimbursed in exchange for a slight extension of the lease term. Certain conditions apply and no interest is charged.
    • a flexible commercial lease with a six-month rolling notice period, designed especially for tenants which require business agility. Additionally, tenants can opt for rent-free periods in exchange for an extension of the notice period. Certain conditions apply, without surcharge.
    • a variety of “à la carte” services for which La Française REM has negotiated preferential rates and or conditions for its tenants:
      • a range of ready-to-use or customizable office layouts;
      • service options to improve employee wellbeing;
      • subletting of unoccupied office space.

    Wellcome by La Française is for La Française REM tenants only. The service is already operational for twelve office assets, located in France and will be extended to the asset manager’s European office real estate portfolio.

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    news-2933 Fri, 04 Mar 2022 11:08:55 +0100 High Yield Market Flash /en/who-we-are/news/detail/high-yield-market-flash/ The objective of this flash is to assess the potential impact of the current conflict in Ukraine on the High Yield market and its implications on the La Française Rendement Global 2025 (LF RG 2025) and La Française Rendement Global 2028 (LF RG 2028) portfolios. In order to achieve this, as it was the case during the Covid crisis, we will try to:

    1. Perform different scenarios and their impacts on the High Yield market (spreads and market default rates)
    2. Transpose (in a second step) these scenarios to our portfolios in order to assess their impact on the performance of the LF RG 2025 and LF RG 2028 funds (in particular on the funds' NAVs at maturity).

    THE DIFFERENT SCENARIOS AND THEIR IMPACT ON THE HIGH YIELD MARKET

    At this stage and on the basis of the information available to us, we can envisage 3 scenarios.

    The “Worst case" scenario, that of a stalemate in the ongoing conflict with an increase in human casualties. In this case, European countries and their allies will impose new economic sanctions on Russia and continue to support the Ukrainian army. President Putin reacts by deploying larger military forces and threatening other neighbouring countries. It is not excluded that President Putin will attack European countries economically, even interrupting the supply of gas and other raw materials to key partners (e.g. Germany).

    The economic and financial impacts of this scenario would be as follows:

    • A significant rise in commodity prices (oil, gas, agricultural products, etc.) for a prolonged period
    • A default of Russia and the vast majority of Russian private or quasi-state companies with potentially significant contagion effects on the (global) banking and financial system.
    • Risk of contagion to other neighbouring emerging countries (Turkey and others)
    • Increase in High Yield spreads by +150-250bps from the current level (@ 415bps) to reflect the deterioration of the macroeconomic context. A stagflation scenario cannot be excluded in this case.
    • Significant increase in global HY default rates to 6.5% by the end of 2022 and 6% in 2023 vs 2% at the end of 2021
    • From a sectoral point of view, the most negatively impacted sectors would be industry (automotive, chemicals, etc.), consumer cyclicals, food, the financial sector (banks, insurance, and other financial services, etc.); the least exposed sectors would be TMT, healthcare, services, energy, and commodities.
    • From a geographical point of view, the US and LATAM High Yield markets would be the main beneficiaries given the weight of the energy and commodities sectors in the indices (up to 70% in the LATAM HY indices). The European market would be much more affected than the US market given its geographical proximity to the ongoing conflict and given the negative impact of rising commodity prices on European economies. Finally, the European and Central Asian high yield markets would be the most damaged with a massive increase in defaults (remember that Russia, Turkey, and Ukraine are respectively the 1st, 3rd and 4th largest contributors to the high yield index in this area with a cumulative weight of around 50%).
    • The only positive point that would result from this scenario would be the intervention of central banks (ECB and BOE) as a priority to limit contagion and a massive rise in default rates (our forecast of a default rate of 6.5% by the end of the year and 6% in 2023 takes into consideration this implicit "put" by central banks). Remember that the average default rate on the HY market over the last 10 years is 2%.

    The « Best case » scenario is that of a rapid end to the conflict by diplomatic means, which could satisfy the various parties, at least in the short term, pending a more sustainable solution. In return, the sanctions against Russia would be reduced or even completely lifted.

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    news-2931 Tue, 01 Mar 2022 17:46:43 +0100 Market flash /en/who-we-are/news/detail/market-flash-1/ This weekend showed important developments in the geopolitical crisis currently shaking up the world. The European sanctions that were thought to be moderate, despite the voluntarist declarations, turned out to be much more severe and beyond that, real geopolitical upheavals appeared in Europe. The psychological and political shockwave of this crisis can be seen in the historical change in Germany, which decided on a massive rearmament programme and a clear involvement in the conflict by sending equipment to Ukraine. But the European reaction was global and not limited to Germany. The escalation becomes obvious with the nuclear threat brandished by Moscow against this European commitment. 

    On the economic front, it is worth noting the massive sanctions decided against Russia and its leaders, particularly by Europe. The Russian banking system will be largely impacted, and the Russian economy as a whole, is under pressure. 

    Beyond the emotion we all feel about this crisis, the economic impacts are worrying. They are naturally negative for the world economy and, in particular, for the European economy. The issue of commodities and gas is more important than ever, as we can expect a Russian reaction to this package of sanctions and to the European involvement in Ukraine. We can now imagine that the European Central Bank (ECB) will have to change its position and quickly reconsider its priority objective of price stability. Indeed, inflation will eventually have a recessionary effect and the scenario of a price-wage loop is likely to become more distant. 

    Regarding our portfolios, we were not directly exposed to Ukraine and Russia. We see visibility as still very limited, and the latest developments call for increased caution in the markets. Even if central banks were to make further efforts to improve financial conditions, this will only have a stabilising effect on the markets at best. 

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    news-2923 Fri, 25 Feb 2022 16:28:28 +0100 Equity Leadership May Shift /en/who-we-are/news/detail/equity-leadership-may-shift/ Growth equities trounced the performance of value stocks over the 10-year period ended December 31, 2021, but last year and in the beginning of this year, many investors rotated out of higher growth companies. We believe the resulting value equity rally, however, may be heading for what has historically catapulted growth equities into a leadership role—Federal Reserve monetary tightening. Rate Hikes Have Historically Supported Growth Equities

    • For the 10-year period ended December 31, 2021, the Russell 3000 Growth Index generated a 19.4% annualized return compared to the 12.9% return of the Russell 3000 Value Index. During 2021, investors rotated out of higher growth companies as interest rates rose and optimism about economic growth strengthened. With the exception of large cap, value equities substantially outperformed growth.
    • The Federal Reserve is expected to raise the Fed Funds rate several times this year. As illustrated above, value equities have historically outperformed from six months prior to the start of tightening to only three months afterward. As tightening continues, concerns that higher rates will weigh upon the economy prompt investors to favor less economically sensitive, secular growth companies, especially businesses that can potentially increase their sales and earnings with innovative products.
    • History is no guarantee of the future, but if this pattern repeats, growth equity relative outperformance could potentially accompany barbecuing, picnics and trips to vacation destinations this summer.

     

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    news-2912 Fri, 25 Feb 2022 14:33:50 +0100 Russia / Ukraine conflict: potential impact on growth, central bank policy and financial markets /en/who-we-are/news/detail/russia-ukraine-conflict-potential-impact-on-growth-central-bank-policy-and-financial-markets/ By François Rimeu, Senior Strategist, La Française AM At the time of writing, Russia has initiated military operations in Ukraine, not only in the separatist areas in the east, but also in other regions close to Kiev. Until Thursday, Feb.25, there was hope that the conflict could be managed with light sanctions on Russia: This is no longer the case.

    We are not experts in geopolitical insights or forecasts and therefore will not speculate on the likely outcome of the conflict.  Rather, we will focus on what we know about the current situation, and formulate assumptions, in order to consider the potential consequences of the conflict on financial markets.

    The Russia-Ukraine conflict raises major risks, including namely a long-term and escalating energy crisis in Europe. Rising tensions could affect the European economy via energy markets, especially natural gas. Russia is Europe’s largest provider of natural gas, supplying 30 to 40% of Europe’s annual demand. However, more recently, the share of natural gas supplied by Russian has decreased significantly, because European countries have shifted their consumption from natural gas to liquefied natural gas, supplied by the USA and Qatar. Rising natural gas prices should affect overall demand in Europe, even if government support schemes will likely cushion the negative effect.

    Other commodity markets could also be impacted, especially those for which Russia is amongst the largest producers: i.e. Nickel, Palladium, Uranium and fertilizers. In this case, inflation would be under even more pressure with higher food prices, higher semiconductor prices and so on.  However, it does not mean that all basic trade between Russia and Europe would come to a halt. For example, since WWII, and even during the Cold War, trade relations have always existed.  Nevertheless, it is likely that the Russia-Ukraine conflict leads to a commodity risk premium.

    Centrals banks will be faced with a dilemma and forced to choose between two options, which could each have negative economic effects. The first option would be to respect their mandates, hence maintaining their credibility and continuing the tightening of monetary policy in order to fight against rising inflation. With consumer demand potentially under pressure, this could prove to be a difficult option which could have negative growth effects. The second option would be to delay rate hikes until the situation settles down, which implies running the risk of inflation becoming entrenched. 

    In our opinion, as of now, we do not expect geopolitical risk to stop the Federal Open Market Committee from hiking rates steadily by 25bp at each its upcoming meetings. Additionally, we believe that geopolitical uncertainty lowers the odds of a 50bp hike in March. 

    The European Central Bank (ECB) might be in a different position. The crisis could have a stronger negative effect on European growth than on US growth, and inflation is not as broad based as it in the US. More specifically, the job market does not seem as tight as in Europe with wages inflation at only 1.5% YoY during Q4 2021 whereas in the US, the Atlanta wages growth tracker was at 5.1%. Yesterday, ECB policymaker Robert Holzmann declared that the “Ukraine conflict may delay stimulus exit” which is an indication that the ECB is willing to adopt a less restrictive stance if necessary. 

    Consequences on financials markets are obviously dependant on the evolution on the conflict, so we have made some assumptions: Heavy sanctions on Russia and a major long-term energy crisis in Europe will be avoided. We will assume that the situation remains very stressed, with a fragile equilibrium between Russia and NATO, at least for the time being. 

    We must also consider what history has taught us. There have been several geopolitical events in the past which provide valuable insight as to how to navigate in this environment. In terms of market timing, empirical evidence shows that military invasions almost always constitute buying opportunities, as opposed to selling, for equities. This observation could be less valid in the case of a conflict which leads to higher energy prices. 

    Taking into consideration all of the above, we would argue against massive risk reduction. Equity markets will probably experience major volatility. A violent reversal, up or down, could occur in the coming days, making investment decisions difficult.

    This should not be interpreted as a very positive view on risky assets over the medium term.  Inflation is still trending higher, pushing central banks to adopt more restrictive policies. We believe there is a possibility that demand could disappoint over the medium term. That being said and against the backdrop of high commodity prices, we have a positive medium-term stance on energy and basic materials stocks and maintain a flattening bias in our fixed income portfolios. 

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2911 Fri, 25 Feb 2022 11:00:53 +0100 NOTICE TO SHAREHOLDERS OF LA FRANCAISE LUX – Multistratégies Obligataires (THE “SUB-FUND”) /en/who-we-are/news/detail/notice-to-shareholders-of-la-francaise-lux-multistrategies-obligataires-the-sub-fund-2/ Dear Shareholder,

    We are writing to inform you of the decision of the board of directors of the Company (the “Board”) to apply, in accordance with the provisions of the prospectus of the Company, a higher swing pricing factor to the Sub-Fund with effect as from the 25 February 2022 (the “Effective Date”) and until further notice.

    1. Reasons for the application of the Swing Pricing

    The current market environment due to the conflict between Russia and the Ukraine, severely impacts liquidity and pricing of instruments traded by the Sub-Fund, which results in an important gap between the real prices and those displayed by suppliers. Under these exceptional circumstances, and for the purpose of preserving the best interests of the shareholders of the Sub-Fund and ensuring their equitable treatment, the Board has resolved to increase swing pricing factor for the Sub-Fund as further detailed below.

    2. Practical information

    Swing pricing aims to protect existing or remaining shareholders of the Sub-Fund from the dilution's effects they may suffer as a result of subscriptions, redemptions and/or conversions of shares in or out of the Sub-Fund. Further details on the swing pricing mechanism can be found in section “SHARE PRICING” of the Prospectus. The maximum swing factor (expressed as percentage of the net asset value) will be increased to up 5%. The swing pricing threshold is set at 1%.

    The maximum swing factor will be continuously reviewed and will be reduced as soon as it is no longer required, taking into account the best interests of shareholders of the Sub-Fund. Shareholders will be
    informed about the reduction of the maximum swing factor via separate website notice. If you require further information, please do not hesitate to contact La Française Asset Management or your financial adviser.

    Yours faithfully,

    On behalf of the Board

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    news-2910 Fri, 25 Feb 2022 10:56:41 +0100 NOTICE TO SHAREHOLDERS OF LA FRANCAISE LUX – Euro Inflation (THE “SUB-FUND”) /en/who-we-are/news/detail/notice-to-shareholders-of-la-francaise-lux-euro-inflation-the-sub-fund-1/ Dear Shareholder,

    We are writing to inform you of the decision of the board of directors of the Company (the “Board”) to apply, in accordance with the provisions of the prospectus of the Company, a higher swing pricing factor to the Sub-Fund with effect as from the 25 February 2022 (the “Effective Date”) and until further notice.

    1. Reasons for the application of the Swing Pricing

    The current market environment due to the conflict between Russia and the Ukraine, severely impacts liquidity and pricing of instruments traded by the Sub-Fund, which results in an important gap between the real prices and those displayed by suppliers. Under these exceptional circumstances, and for the purpose of preserving the best interests of the shareholders of the Sub-Fund and ensuring their equitable treatment, the Board has resolved to increase swing pricing factor for the Sub-Fund as further detailed below.

    2. Practical information

    Swing pricing aims to protect existing or remaining shareholders of the Sub-Fund from the dilution's effects they may suffer as a result of subscriptions, redemptions and/or conversions of shares in or out of the Sub-Fund. Further details on the swing pricing mechanism can be found in section “SHARE PRICING” of the Prospectus. The maximum swing factor (expressed as percentage of the net asset value) will be increased to up 2%. The swing pricing threshold is set at 5%. The maximum swing factor will be continuously reviewed and will be reduced as soon as it is no longer required, taking into account the best interests of shareholders of the Sub-Fund. Shareholders will be informed about the reduction of the maximum swing factor via separate website notice.

    If you require further information, please do not hesitate to contact La Française Asset Management or your financial adviser.

    Yours faithfully,

    On behalf of the Board

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    news-2909 Fri, 25 Feb 2022 10:49:00 +0100 NOTICE TO SHAREHOLDERS OF LA FRANCAISE LUX – Carbon Impact Income (THE “SUB-FUND”) /en/who-we-are/news/detail/notice-to-shareholders-of-la-francaise-lux-carbon-impact-income-the-sub-fund/ Luxembourg, 25 February 2022 Dear Shareholder, 

    We are writing to inform you of the decision of the board of directors of the Company (the “Board”) to apply, in accordance with the provisions of the prospectus of the Company, a higher swing pricing factor to the Sub-Fund with effect as from the 25 February 2022 (the “Effective Date”) and until further notice.

    1. Reasons for the application of the Swing Pricing

    The current market environment due to the conflict between Russia and the Ukraine, severely impacts liquidity and pricing of instruments traded by the Sub-Fund, which results in an important gap between the real prices and those displayed by suppliers. Under these exceptional circumstances, and for the purpose of preserving the best interests of the shareholders of the Sub-Fund and ensuring their equitable treatment, the Board has resolved to increase swing pricing factor for the Sub-Fund as further detailed below.

    2. Practical information

    Swing pricing aims to protect existing or remaining shareholders of the Sub-Fund from the dilution's effects they may suffer as a result of subscriptions, redemptions and/or conversions of shares in or out of the Sub-Fund. Further details on the swing pricing mechanism can be found in section “SHARE PRICING” of the Prospectus.

    The maximum swing factor (expressed as percentage of the net asset value) will be increased to up 5%. The swing pricing threshold is set at 1%. The maximum swing factor will be continuously reviewed and will be reduced as soon as it is no longer
    required, taking into account the best interests of shareholders of the Sub-Fund. Shareholders will be informed about the reduction of the maximum swing factor via separate website notice.

    If you require further information, please do not hesitate to contact La Française Asset Management or your financial adviser. Yours faithfully, On behalf of the Board

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    news-2907 Wed, 23 Feb 2022 16:10:22 +0100 INTERNET NOTICE TO SHAREHOLDERS OF LA FRANCAISE LUX > LU /en/who-we-are/news/detail/internet-notice-to-shareholders-of-la-francaise-lux-lu/ In compliance with the ESMA guidelines on performance fees in UCITS and certain types of AIFs published on 3 April 2020 (the “ESMA Guidelines”), the Company’s board of directors informs you that the prospectus of the Company (the “Prospectus”) has been updated in order to take into account the requirements of the ESMA Guidelines. The paragraphs describing the performance fee in the Prospectus have been redrafted as follows:

    “The Investment Manager will receive, where applicable, an outperformance fee when the performance of a sub-fund exceeds that of the benchmark index indicated below, whether it has recorded a positive or negative performance. The outperformance commission, applicable to a given share class is based on the comparison between the sub-fund's valued assets and the reference assets.

    The “valued assets” refer to the assets of a sub-fund corresponding to a share class, valued according to the valuation rules applicable to the assets of the sub- fund and after taking into account the operation and management costs corresponding to said share class. The “reference assets” refer to the assets of a hypothetical sub-fund, whose investment performance is that of the relevant benchmark and from which subscription and redemption amounts are deducted as of each valuation day.

    The benchmark used to calculate the outperformance commission is disclosed in the relevant subfund sheet and in section “List of Available Share Classes”. The performance reference period corresponds to the 1st trading day in January to the last trading day in December of the same year.

    Payment frequency The outperformance fee is paid to the investment manager in the month following the end of the reference period. Under no circumstances may the reference period for the fund be less than one year.

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    news-2901 Wed, 23 Feb 2022 15:44:19 +0100 INTERNET NOTICE TO SHAREHOLDERS OF LA FRANCAISE LUX EN > SE /en/who-we-are/news/detail/internet-notice-to-shareholders-of-la-francaise-lux-en-se/ In compliance with the ESMA guidelines on performance fees in UCITS and certain types of AIFs published on 3 April 2020 (the “ESMA Guidelines”), the Company’s board of directors informs you that the prospectus of the Company (the “Prospectus”) has been updated in order to take into account the requirements of the ESMA Guidelines. The paragraphs describing the performance fee in the Prospectus have been redrafted as follows: “The Investment Manager will receive, where applicable, an outperformance fee when the performance of a sub-fund exceeds that of the benchmark index indicated below, whether it has recorded a positive or negative performance.

    The outperformance commission, applicable to a given share class is based on the comparison between the sub-fund's valued assets and the reference assets. The “valued assets” refer to the assets of a sub-fund corresponding to a share class, valued according to the valuation rules applicable to the assets of the sub- fund and after taking into account the operation and management costs corresponding to said share class. The “reference assets” refer to the assets of a hypothetical sub-fund, whose investment performance is that of the relevant benchmark and from which subscription and redemption amounts are deducted as of each valuation day.

    The benchmark used to calculate the outperformance commission is disclosed in the relevant subfund sheet and in section “List of Available Share Classes”. The performance reference period corresponds to the 1st trading day in January to the last trading day in December of the same year.

    Payment frequency The outperformance fee is paid to the investment manager in the month following the end of the reference period. Under no circumstances may the reference period for the fund be less than one year.

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    news-2896 Mon, 21 Feb 2022 09:57:40 +0100 Market flash /en/who-we-are/news/detail/market-flash/ Last December, we pointed out that the inflation trajectory would be the element capable of derailing the markets and this is the scenario that is currently materializing. We must go back to the summer of 2008 to observe comparable conditions. Jean-Claude Trichet, former ECB president, was then faced with a 4% rise in consumer prices and had therefore raised rates from 4% to 4.25%.

    Today, the increase in consumer prices continues to accelerate and is now over 5% in the Eurozone while it still displays negative key rates.

    Central banks, in particular the ECB, were ultimately unable to maintain their position of conducting their monetary policy by looking beyond the peak of inflation and the markets were shaken by this turnaround.

    Beyond the current focus on inflation, we must look at the subject of growth, which could soon be added to our concerns. Indeed, the post-pandemic rebound is decelerating and the rising prices will accentuate this slowdown, affecting purchasing power. The economic pattern showing too much inflation and not enough growth is an adverse markets scenario, and despite not being the central scenario today, it is nevertheless likely to be mentioned soon.

    Of course, it is also a complex scheme for central banks to manage. Remember that in 2008, Mr. Trichet had been criticized for his rate hike when growth was already showing signs of running out of steam.

     

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    news-2892 Tue, 15 Feb 2022 09:00:00 +0100 La Française Real Estate Managers signs €300 million real estate mandate with PFA /en/who-we-are/news/detail/la-francaise-real-estate-managers-signs-eur300-million-real-estate-mandate-with-pfa/ PFA, a leading Danish pension fund, has awarded a second mandate to La Française Real Estate Managers (REM) for the acquisition and management of senior housing and residential properties in Europe with a focus on France and Belgium. The newly signed mandate stipulates an initial equity investment of €300 million to be invested over the coming years:

    • €200 million to be invested in seniors housing complexes in Europe focusing on France and Belgium.
    • €100 million in Private Rental Sector (PRS) properties located in major cities in France and Belgium.

    La Française REM has a long-standing expertise in managed residences and residential investments, with respectively €1,183 and €1,775 million in assets under management (31/12/2021).
    David Rendall, Managing Director of La Française Real Estate Managers - Institutional Division, said, “La Française and PFA have been working successfully together for over two years. PFA awarded us an initial €100 million mandate in October 2019 for the acquisition and management of a French senior housing portfolio. Having successfully deployed this capital, we are delighted to be further developing our partnership and expanding our geographic focus to other European countries and our strategy to the PRS sector. We will certainly be able to leverage to PFA’s advantage our international real estate investment platform which includes investment teams across Europe. On behalf of La Française REM, I would like to thank PFA for their confidence.”

    “We have successfully worked with La Francaise for a few years and are now expanding our relationship to further grow our residential and managed residential strategies in Europe.” says Michael Bruhn, Managing Director of PFA.

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    news-2889 Fri, 11 Feb 2022 10:45:25 +0100 European real estate market: healthy rebound in 2021 /en/who-we-are/news/detail/european-real-estate-market-healthy-rebound-in-2021/ By Virginie Wallut, Director of Real Estate Research and Sustainable Investment at La Française Real Estate Managers The European real estate market rebounded strongly in 2021, with year-end figures closer to pre-crisis levels. Two asset classes clearly stand apart: office real estate, especially in France and Germany, and logistics, with investment volumes progressing significantly. Despite an acceleration at the end of the year and €11 billion euros in investments in Q4, the French real estate investment market is still lagging by 8% compared to 2020; the main reason being that investors have become more selective. Investors and tenants alike favor next-generation, centrally located, flexible, serviced and energy-efficient assets. This trend is going to intensify the polarization of the real estate market, and we should expect higher vacancies in suburban locations. Another trend is observed. Investors are looking to diversify their real estate portfolios through investment in defensive property segments such as residential, managed housing (student and senior) and centrally located healthcare facilities. However, given the structural imbalance between demand and supply, they are confronted with a limited stock.

    European Real Estate Investment Market, liftoff

    The volume of commercial real estate investment in Europe increased by 19%, reaching €256 billion in 2021. Office real estate, namely in France and Germany, is the big winner with €111 billion in investment volume. Logistics account for 24% of investments in 2021 and for the first time, follow closely behind office real estate in the UK. Alternative segments, including healthcare, managed residential etc. suffered from the lack of supply. Interesting to note that
    investment volumes across European countries are widely heterogeneous. The UK and Swedish markets register significant increases whereas France and Belgium are lagging relative to 2020 volumes. Foreign capital, namely US, continues to feed the European market and represents 50% of invested capital in 2021.

    Yield compression for prime assets

    Against the backdrop of favorable financing conditions and low risk-free interest rates, real estate maintained its status as a safe haven investment. Prime yields tightened in 2021 given the supply shortage and high tenant demand for centrally located office assets. Prime office yields are below 3% in Paris and German A-cities and are between 3 and 3.5% in Amsterdam, London, Madrid and Brussels. In the aftermath of Brexit, prime yields in the UK remain higher than other European capitals. However, stronger than expected economic recovery and renewed investor interest could translate into a market correction. New energy performance standards and centrality requirements are putting upward pressure on the yields of obsolete and energy inefficient assets, particularly in urban peripheries.

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    news-2887 Fri, 11 Feb 2022 10:34:33 +0100 La Francaise Real Estate Managers acquires two adjacent mixed-use assets in Bristol, UK /en/who-we-are/news/detail/la-francaise-real-estate-managers-acquires-two-adjacent-mixed-use-assets-in-bristol-uk/ La Française Real Estate Managers (REM), acting on behalf of a collective real estate investment vehicle, has acquired from IV Real Estate two adjacent office buildings with ground floor leisure operators:
  • Gilbert House (ca. 12,800 sq. feet), a Grade II listed Art Deco building built in 1933 by Sir Gilbert Scott and fully refurbished in 2020/2021,
  • 41 Corn Street (ca. 24,000 sq. feet), built in 1964 and refurbished in 2020/2021, in Bristol, one of the top six regional office markets in the United Kingdom.
  • The recently refurbished buildings, 100% let on long leases, offer good quality office accommodations in the historic heart of Bristol and are well placed, within 15-minutes walking distance of Bristol Temple Meads Railway Station, to attract occupiers seeking good amenities, which include bicycle storage, roof terraces, new heating, generous floor to ceiling heights. 

    Historically the banking district of the city, Corn Street is now home to numerous restaurants and high-end hotels. The attractive setting and good level of services have made it an appealing neighbourhood for young companies to locate. The office space is fully let to a technology company operating in the e-commerce sector and the two ground floor retail units are let to leisure operators. 

    Peter Balfour, Head of Real Estate UK for La Française Real Estate Managers said, “There is a low level of vacancy and a limited supply of Grade A offices in the central core of Bristol.  A new vibrancy is emerging with many secondary offices converted into residential property, hotels and leisure facilities.  This makes it an attractive place to live and work. 

    La Francaise REM was advised by Joiner Cummings. IV Real Estate was advised by Savills and Alder King.

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    news-2882 Mon, 07 Feb 2022 14:42:57 +0100 Inflation: what’s next? /en/who-we-are/news/detail/inflation-whats-next/ By François Rimeu, Senior Strategist, La Française AM Inflation is one of the main topics (if not THE most important) for financial markets right now, and it could remain the case for at least the next six months. We will try to review in this paper what “could” happen on the inflation front moving forward, what are the risks and what does inflation mean for central banks. As an introduction, it is important to emphasize that nobody knows what will happen, that uncertainties remain high and that there is virtually no past reference period that we can refer to to estimate how and when inflation could come down. We will therefore try to analyse what the most probable outcome could be.

    We expect Eurozone inflation to average 4.7% over 2022, 150bps above the European Central Bank’s (ECB) estimate in December, and core inflation to average 2.7%, 80bps above the ECB’s estimate. More specifically, we expect headline inflation above 5% at least until June, followed by a slow decline in Q3 and a more pronounced decline in Q4. We expect headline inflation to stand at around 3% at year end and core inflation at around 2.3%. Base effects will become very negative in the coming months (because of energy prices and supply disruption). 

    Higher natural gas and oil prices explain most of the upward revisions since the beginning of the year. In terms of energy outlook, the situation remains highly uncertain with some bullish factors that will likely end at some point while others could last longer (i.e., energy transition in Europe leading to gradual closing of coal and nuclear power plants in some European countries). Additionally, the Ukraine / Russia crisis is adding some uncertainty around the supply of natural gas. 
    Food inflation is also trending higher which is not a major surprise considering that leading indicators (fertilizer prices for instance) have also been trending higher for some months. Here again uncertainty remains high, especially with Russia cancelling imports of Nitrate Ammonium (one of the components of fertilizer) for 2 months until April 2. Considering the high Producer Price Index (PPI), the strong momentum in processed food and coming wage inflation, we consider inflation risk to be skewed to the upside. 

    For 2023, we expect core and headline inflation to significantly decrease to 1.7% on average, but again, uncertainties remain high. The evolution of supply disruptions, wage dynamics and energy prices will be of utmost importance. 

    Whatever inflation expectations may be for 2023, current massive inflation numbers and high energy prices point to a significant risk of much higher inflation forecasts by the ECB in March, especially the ones for 2022. The two-year horizon (2024) might dangerously approach the 2% level, which could lead to a more hawkish outlook. Inflation will put pressure on the ECB to maintain a relatively hawkish tone during most of 2022, which is negative for market sentiment.

    On the US side, we also expect inflation to remain very high in the coming months. We expect 2022 inflation to average 5.7% and core inflation to average around 5%. The evolution throughout the year will be comparable to what we expect in Europe with very high inflation until the end of April (above 7 %) and a slowdown until the end of the year. We expect headline and core inflation to end the year around 3.5%, above the FED’s objective. 

    Home prices have a significant influence on owner’s equivalent rent (OER) and rent components, which overall account for 40% of core inflation. With regards to rents, several indices (REIS rents, Zillow rents) suggest that the current acceleration in rent inflation could continue well into 2022, taking the YoY pace of above 5% in S2 2022 and 2023. 
    Wages are also an important determinant for the medium-term inflation perspective (especially in services). Over the last six months, the Atlanta FED wage tracker has accelerated to 4.5% YoY, a 20-year high. The near-term outlook remains uncertain: the job quits rate in the private sector suggests further acceleration in wages, while the Conference Board’s expectations index, based on consumers’ short-term outlook for income, business and labour market conditions, suggests that a decline is coming.  

    Contrary to Europe, we expect high core US inflation, even in 2023, mainly because of high core inflation in the service sectors (high OER and rent components). We expect inflation to come out lower than in 2022 but to average around 2.8% in 2023, above the FED’s target rate.

    High inflation figures in the coming months will support a relatively hawkish tone from the Fed, which is again negative for market sentiment.

    Personal consumption has been very high in the US in 2021 thanks to strong fiscal support that is now slowly fading. Historically in the US, there is a negative correlation between inflation and personal expenditures and if this relationship stands here again, we must expect consumption to slow down over the coming quarters. Consequently, US growth could disappoint towards the second part of the year even if inflation is still high. 

    Potential slowing growth, high inflation and central bank tightening… this is not the best environment for risk sentiment overall.
     

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    news-2879 Tue, 01 Feb 2022 14:22:16 +0100 Pre ECB commentary /en/who-we-are/news/detail/pre-ecb-commentary-1/ The European Central Bank (ECB) will hold its first general council (GC) of 2022 on February 3. It is an intermediate meeting, so no new economic projections will be published at this meeting, meaning that the ECB is unlikely to announce anything material. Please find below what we expect:
  • We expect no change on monetary policy, meaning nothing concerning a new series of targeted longer term refinancing operations (TLTRO) or tiering. It seems premature before June 2022.
  • We expect President Lagarde to acknowledge the upward trend in inflation, and thus the need to upgrade significantly its 2022 inflation forecast in March. 
  • But uncertainty remains high, especially regarding medium-term inflation and growth outlooks, which will, in our opinion, lead the ECB to postpone any significant announcement.
  • We expect President Lagarde to say that rate hikes are unlikely in 2022 (vs very unlikely in December statement).
  • On the growth side, we expect no change; risks to an economic outlook being “broadly balanced”. 
  • All in all, it might be difficult for President Lagarde not to sound hawkish with inflation expectations skyrocketing for 2022. We believe President Lagarde will try to push back market expectations concerning a rate liftoff but without success. We expect moderate flattening on the Euro swap curve. 

     

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    news-2878 Tue, 01 Feb 2022 09:00:00 +0100 La Française Real Estate Managers (REM) acquires first healthcare asset in Lyon, France /en/who-we-are/news/detail/la-francaise-real-estate-managers-rem-acquires-first-healthcare-asset-in-lyon-france/ La Française Real Estate Managers (REM), acting on behalf of a collective real estate investment vehicle, has acquired its first healthcare asset in Lyon, France. La Française REM, which is among the leading real estate investment managers in the Office sector in Europe (Source: IPE TOP 150 Real Estate Investment Managers, AuM 30/06/2021) has more recently sought to expand its expertise and has reinforced its investment team with a healthcare investment specialist. Just three months after the arrival of Jérôme Valade, Head of Healthcare Real Estate, La Française REM has closed its first acquisition, The Rockefeller, located at 60 D Avenue Rockefeller, in Lyon.

    The asset, which is easily accessible by public transport, is in the 8th district of Lyon, in the heart of the Bioparc, an intelligence cluster dedicated to innovative companies in the health and technology fields. With nearly 100,000 jobs in the health sector, the greater Lyon area is one of the ten largest biotechnology and health markets in Europe.

    The building, completed in 2019, meets the latest standards in terms of thermal performance. The Rockefeller offers 5 971 m2 of floor space spread over a ground floor and five upper floors and accommodates around one hundred multidisciplinary medical and paramedical practices, ranging from general medicine to psychology, radiology, oncology, and dietetics. The building also houses a balneotherapy centre, a childcare facility, research areas and a restaurant. The property includes 159 indoor parking spaces and an additional 6 for people with reduced mobility.

    The Rockefeller is fully leased under a firm 12-year lease to MEDICINA, a healthcare provider that is well established in its local market and recognized by all actors in the healthcare system. The tenant's medical project aims to improve the care of patients by offering them a comprehensive healthcare package associating prevention, care and well-being.

    Jérôme Valade, Head of Healthcare Real Estate at La Française REM concluded, “The Rockefeller is a fully let, Best-In-Class asset that benefits from a central location in a major French city, and the facility, with a variety of practitioners under a single roof, satisfies the growing demand for healthcare services.”

    La Française Real Estate Managers was advised by 14 Pyramides on notarial aspects, Cabinet Jeantet on legal, Proactim and Delpha Conseil on technical due-diligence and Cap Terre for the environmental audit.

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    news-2873 Thu, 27 Jan 2022 09:00:00 +0100 La Française Real Estate Managers acquires fourth Amsterdam asset /en/who-we-are/news/detail/la-francaise-real-estate-managers-acquires-fourth-amsterdam-asset/ La Française Real Estate Managers (REM), acting on behalf of two collective real estate investment vehicles, has acquired off market, from RJB Group, its fourth asset in Amsterdam, Netherlands. The six-storey multi-let office building, completed 18 months ago by Amsterdam Development, is located at 60-82 Koivistokade in Houthavens, an up and coming “live & work” neighborhood in Amsterdam, just 15 mins from the main station by bus or bicycle. The area has been undergoing development since 2010 and has already attracted multiple commercial and residential projects 

    The modern and sustainable building (R+5) offers approximately 4.811 m2 of flexible office space, balconies on almost every floor and a terrace on the 6th floor overlooking the IJ river. The floors have a loft-style industrial character with a flexible layout and an excellent floor to ceiling height.

    Mark Wolter, Managing Director for Germany of La Française Real Estate Managers said, “We are delighted to secure our fourth asset in Amsterdam. The building’s A+ energy consumption label illustrates perfectly our sustainable investment strategy.”

    La Française Real Estate Managers was advised by Houthoff on legal aspects, by Savills Building & Project Consultancy on technical Due Diligence and Cap Terre on ESG Due Diligence.

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    news-2869 Mon, 24 Jan 2022 15:22:01 +0100 What to expect at the upcoming FOMC meeting /en/who-we-are/news/detail/what-to-expect-at-the-upcoming-fomc-meeting/ The Federal Open Market Committee (FOMC) is likely to use its January meeting this week to set the stage for a rate hike in March and to begin formulating a plan for balance sheet reduction. Please find below what we expect:

    • The Federal Reserve System (FED) to confirm a rate hike in March following the publication of very robust data on employment and prices.
    • As uncertainty remains very high, especially on the inflation front, we expect the FED to remain data dependant regarding the pace of rate hikes in 2022.
    • The FED to confirm the tapering pace ($30bn per month), with quantitative easing ending in March. We do not think the FED will end purchases abruptly at this meeting.
    • We also expect the FED to give more information regarding the balance sheet runoff, without committing to a specific timeline (nor to a specific amount) to avoid any panic reaction on financial markets. The formal announcement could come during the summer, after the first two rate hikes (March and June).
    • We do not expect the FED to indicate being open to the possibility of a 50bps hike in March.
    • Given recent comments from FOMC members supporting the current hawkish bias of the FED (and thus market pricing), we do not expect a significant hawkish surprise at this meeting

    In conclusion, the statement is unlikely to differ considerably from the December statement. Consensus seems to be leaning towards a hawkish tilt, with financials markets already short on US treasuries (short end of the curve). We expect a modest steepening of the US curve.

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    news-2867 Mon, 24 Jan 2022 12:01:06 +0100 DISCOVER THE CITY by LA FRANCAISE /en/who-we-are/news/detail/discover-the-city-by-la-francaise/

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    news-2851 Fri, 14 Jan 2022 17:04:36 +0100 Growth Stock Prices Gone Awry? /en/who-we-are/news/detail/growth-stock-prices-gone-awry/ Sometimes equity prices and fundamentals diverge dramatically. There is no telling when they will re-converge but history implies that fundamentals ultimately drive stock prices. Small Growth Stocks Relative to Large Cap Stocks

    • Over the past six months, the S&P SmallCap 600 Growth Index has underperformed the large cap S&P 500 index by 6%. However, during that time small cap growth stock fundamentals outperformed—the S&P SmallCap 600 Growth Index earnings per share (EPS) grew 10% faster than S&P 500 EPS.
    • This dynamic has driven already inexpensive small cap growth stocks to deep value territory. Indeed, the S&P SmallCap 600 Growth Index price-to-earnings is now at its largest discount to the S&P 500 in more than 20 years.
    • Historically, fundamentals drive stock prices so valuation should take care of itself over the long term. The last time the valuation discount between small growth and large cap stocks was this large, in early 2001, the S&P SmallCap 600 Growth Index outperformed the S&P 500 by more than 50% during the subsequent five years.
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    news-2850 Fri, 14 Jan 2022 11:07:00 +0100 Back to business /en/who-we-are/news/detail/back-to-business-1/ Against the backdrop of a return to growth, the reduction of monetary support programs, rate hikes and the Omicron variant, La Française AM shares its view regarding the markets stance as well as its outlook to start off the year on the right foot. Despite disruptions in the production system and the oscillation of constraints linked to health risks, global growth continues. The instantaneous trend remains positive but is nevertheless difficult to assess precisely. The Chinese slowdown, which is mostly the product of political initiatives to fight against the pandemic, social disparities, and promote a cleaner economy, will be one of the major unknowns in 2022.

    Short-term trends in the United States and Europe diverge slightly. After a slowing third quarter, the American growth accelerated in the fourth quarter. In Europe, the impressive third-quarter figures may soften slightly. Yet, multiple indicators suggest an interesting basis for 2022.

    Indeed, 2022 is shaping up to be a strong economic year, barring a major health interruption. Of course, the Chinese activity downturn in conjunction with the real estate finance crisis must be closely observed. However, supply disruptions should gradually ease and states will continue to support the economic players most affected by the pandemic. On the private sector side, household savings rates and corporate profits remain high. Despite recent inflation's impoverishing consequences, these variables will encourage final consumption and investment across a wide range of sectors, compensating for the recent period and responding to emerging problems, most notably climate change.

    On the political side, the central issue is likely to be which version of President Biden's economic plan is finally adopted. Finally, the issue of inflationary risk will continue to preoccupy investors, even though the monetary environment has changed. We continue to believe that inflationary shifts will rapidly decline and allow central banks to maintain financial conditions favourable to the economy in regards of actual rates and financial market performance.

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    news-2844 Tue, 11 Jan 2022 10:05:00 +0100 La Française strengthens its institutional sales team based in Germany /en/who-we-are/news/detail/la-francaise-strengthens-its-institutional-sales-team-based-in-germany/ La Française, an international asset management firm with total assets in excess of 56 billion euros (as at 30 November 2021) and offices throughout Europe and in South Korea, continues to pursue its development strategy for the German market and is pleased to announce the arrival of Maximilian Mudra as Sales Director - Institutional Business Development in Germany. Maximilian Mudra will be responsible for client relationships and further expanding La Française's investment expertise across all asset classes with institutional investors. He will report to Kay Scherf, Managing Director for Sales and Marketing at La Française Systematic Asset Management GmbH. 

    Kay Scherf commented, "With Maximilian Mudra, we have found an expert with many years of sales experience for the expansion of our institutional business in Germany. His long-standing expertise and experience will help us to position our ESG (Environmental, Social and Governance) and real estate expertise in the institutional sector in particular. Maximilian is an optimal addition to our sales team."

    Maximilian Mudra joins from Pictet Asset Management, where he was most recently Institutional Sales Director for pension funds, insurance companies and foundations in Germany and Austria. Previously, he worked for Lingohr & Partner Asset Management, Credit Suisse, Commerzbank and Bankhaus Metzler. Mudra holds a Bachelor of Arts from the Institut Universitaire de Technologie, Colmar/France and is a DVFA investment analyst (German Association for Financial Analysis and Asset Management). Mudra brings to La Française almost thirty years of experience in the financial industry, including over twenty years in asset management and sales. 

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    news-2822 Tue, 28 Dec 2021 09:00:00 +0100 INTERNET NOTICE TO SHAREHOLDERS OF THE SUB-FUND LA FRANCAISE JKC CHINA EQUITY (THE “SUB-FUND”) EN > SG /en/who-we-are/news/detail/internet-notice-to-shareholders-of-the-sub-fund-la-francaise-jkc-china-equity-the-sub-fund-en-sg/ In the context of the implementation of the Regulation (EU) 2020/852 “Taxonomy", the Company’s board of directors (the “Board”) informs you that the Board has decided to amend the prospectus of the Sub-Fund by adding the following mention: "The European Union’s Taxonomy aims to identify economic activities that are considered as being environmentally sustainable. The Taxonomy identifies these activities according to their contribution to six major environmental objectives:

    • Climate change mitigation,
    • Climate change adaptation,
    • Sustainable use and protection of water and marine resources,
    • Transition to a circular economy (waste, prevention and recycling),
    • Pollution prevention and control
    • Protection and restoration of biodiversity and ecosystems.

    Currently, technical screening criteria have been developed for certain economic activities that can contribute substantially to two of these objectives: climate change mitigation and climate change adaptation. These criteria are currently awaiting publication in the Official Journal of the European Union. The data presented below therefore reflect only the alignment with these two objectives, on the basis of the non-definitively published criteria, as submitted to the European co-legislators. We will update this information in the event of changes to these criteria, the development of new review criteria for these two objectives, as well as the entry into force of the criteria for the other four environmental objectives: the sustainable use and protection of water and marine resources; the transition to a circular economy, the pollution prevention and control and the protection and restoration of biodiversity and ecosystems.

    To be considered sustainable, an economic activity must demonstrate that it contributes substantially to one or more of the 6 environmental objectives, while not significantly harming any of the other environmental objectives (the so-called DNSH principle, "Do No Significant Harm").

    To be considered aligned with the European Taxonomy, the activity must also respect the human and social rights guaranteed by international law.

    ]]>
    news-2821 Tue, 28 Dec 2021 09:00:00 +0100 INTERNET NOTICE TO SHAREHOLDERS OF THE SUB-FUND LA FRANCAISE JKC CHINA EQUITY (THE “SUB-FUND”) EN > SE /en/who-we-are/news/detail/internet-notice-to-shareholders-of-the-sub-fund-la-francaise-jkc-china-equity-the-sub-fund-en-se/ In the context of the implementation of the Regulation (EU) 2020/852 “Taxonomy", the Company’s board of directors (the “Board”) informs you that the Board has decided to amend the prospectus of the Sub-Fund by adding the following mention: "The European Union’s Taxonomy aims to identify economic activities that are considered as being environmentally sustainable. The Taxonomy identifies these activities according to their contribution to six major environmental objectives:

    • Climate change mitigation,
    • Climate change adaptation,
    • Sustainable use and protection of water and marine resources,
    • Transition to a circular economy (waste, prevention and recycling),
    • Pollution prevention and control
    • Protection and restoration of biodiversity and ecosystems.

    Currently, technical screening criteria have been developed for certain economic activities that can contribute substantially to two of these objectives: climate change mitigation and climate change adaptation. These criteria are currently awaiting publication in the Official Journal of the European Union. The data presented below therefore reflect only the alignment with these two objectives, on the basis of the non-definitively published criteria, as submitted to the European co-legislators. We will update this information in the event of changes to these criteria, the development of new review criteria for these two objectives, as well as the entry into force of the criteria for the other four environmental objectives: the sustainable use and protection of water and marine resources; the transition to a circular economy, the pollution prevention and control and the protection and restoration of biodiversity and ecosystems.

    To be considered sustainable, an economic activity must demonstrate that it contributes substantially to one or more of the 6 environmental objectives, while not significantly harming any of the other environmental objectives (the so-called DNSH principle, "Do No Significant Harm").

    To be considered aligned with the European Taxonomy, the activity must also respect the human and social rights guaranteed by international law.

    ]]>
    news-2815 Tue, 28 Dec 2021 09:00:00 +0100 INTERNET NOTICE TO SHAREHOLDERS OF THE SUB-FUND LA FRANCAISE JKC ASIA EQUITY (THE “SUB-FUND”) EN > SG /en/who-we-are/news/detail/internet-notice-to-shareholders-of-the-sub-fund-la-francaise-jkc-asia-equity-the-sub-fund-en-sg/ In the context of the implementation of the Regulation (EU) 2020/852 “Taxonomy", the Company’s board of directors (the “Board”) informs you that the Board has decided to amend the prospectus of the Sub-Fund by adding the following mention: "The European Union’s Taxonomy aims to identify economic activities that are considered as being environmentally sustainable. The Taxonomy identifies these activities according to their contribution to six major environmental objectives:

    • Climate change mitigation,
    • Climate change adaptation,
    • Sustainable use and protection of water and marine resources,
    • Transition to a circular economy (waste, prevention and recycling),
    • Pollution prevention and control
    • Protection and restoration of biodiversity and ecosystems.

    Currently, technical screening criteria have been developed for certain economic activities that can contribute substantially to two of these objectives: climate change mitigation and climate change adaptation. These criteria are currently awaiting publication in the Official Journal of the European Union. The data presented below therefore reflect only the alignment with these two objectives, on the basis of the non-definitively published criteria, as submitted to the European co-legislators. We will update this information in the event of changes to these criteria, the development of new review criteria for these two objectives, as well as the entry into force of the criteria for the other four environmental objectives: the sustainable use and protection of water and marine resources; the transition to a circular economy, the pollution prevention and control and the protection and restoration of biodiversity and ecosystems.

    To be considered sustainable, an economic activity must demonstrate that it contributes substantially to one or more of the 6 environmental objectives, while not significantly harming any of the other environmental objectives (the so-called DNSH principle, "Do No Significant Harm").

    To be considered aligned with the European Taxonomy, the activity must also respect the human and social rights guaranteed by international law.

    ]]>
    news-2814 Tue, 28 Dec 2021 09:00:00 +0100 INTERNET NOTICE TO SHAREHOLDERS OF THE SUB-FUND LA FRANCAISE JKC ASIA EQUITY (THE “SUB-FUND”) EN > SE /en/who-we-are/news/detail/internet-notice-to-shareholders-of-the-sub-fund-la-francaise-jkc-asia-equity-the-sub-fund-en-se/ In the context of the implementation of the Regulation (EU) 2020/852 “Taxonomy", the Company’s board of directors (the “Board”) informs you that the Board has decided to amend the prospectus of the Sub-Fund by adding the following mention: "The European Union’s Taxonomy aims to identify economic activities that are considered as being environmentally sustainable. The Taxonomy identifies these activities according to their contribution to six major environmental objectives:

    • Climate change mitigation,
      Climate change adaptation,
      Sustainable use and protection of water and marine resources,
      Transition to a circular economy (waste, prevention and recycling),
    • Pollution prevention and control
    • Protection and restoration of biodiversity and ecosystems.

    Currently, technical screening criteria have been developed for certain economic activities that can contribute substantially to two of these objectives: climate change mitigation and climate change adaptation. These criteria are currently awaiting publication in the Official Journal of the European Union. The data presented below therefore reflect only the alignment with these two objectives, on the basis of the non-definitively published criteria, as submitted to the European co-legislators. We will update this information in the event of changes to these criteria, the development of new review criteria for these two objectives, as well as the entry into force of the criteria for the other four environmental objectives: the sustainable use and protection of water and marine resources; the transition to a circular economy, the pollution prevention and control and the protection and restoration of biodiversity and ecosystems.

    To be considered sustainable, an economic activity must demonstrate that it contributes substantially to one or more of the 6 environmental objectives, while not significantly harming any of the other environmental objectives (the so-called DNSH principle, "Do No Significant Harm").

    To be considered aligned with the European Taxonomy, the activity must also respect the human and social rights guaranteed by international law.

    ]]>
    news-2813 Tue, 28 Dec 2021 09:00:00 +0100 INTERNET NOTICE TO SHAREHOLDERS OF THE SUB-FUND LA FRANCAISE JKC ASIA EQUITY (THE “SUB-FUND”) EN > FI /en/who-we-are/news/detail/internet-notice-to-shareholders-of-the-sub-fund-la-francaise-jkc-asia-equity-the-sub-fund-en-fi/ In the context of the implementation of the Regulation (EU) 2020/852 “Taxonomy", the Company’s board of directors (the “Board”) informs you that the Board has decided to amend the prospectus of the Sub-Fund by adding the following mention: "The European Union’s Taxonomy aims to identify economic activities that are considered as being environmentally sustainable. The Taxonomy identifies these activities according to their contribution to six major environmental objectives:

    • Climate change mitigation,
    • Climate change adaptation,
    • Sustainable use and protection of water and marine resources,
    • Transition to a circular economy (waste, prevention and recycling),
    • Pollution prevention and control
    • Protection and restoration of biodiversity and ecosystems.

    Currently, technical screening criteria have been developed for certain economic activities that can contribute substantially to two of these objectives: climate change mitigation and climate change adaptation. These criteria are currently awaiting publication in the Official Journal of the European Union. The data presented below therefore reflect only the alignment with these two objectives, on the basis of the non-definitively published criteria, as submitted to the European co-legislators. We will update this information in the event of changes to these criteria, the development of new review criteria for these two objectives, as well as the entry into force of the criteria for the other four environmental objectives: the sustainable use and protection of water and marine resources; the transition to a circular economy, the pollution prevention and control and the protection and restoration of biodiversity and ecosystems.

    To be considered sustainable, an economic activity must demonstrate that it contributes substantially to one or more of the 6 environmental objectives, while not significantly harming any of the other environmental objectives (the so-called DNSH principle, "Do No Significant Harm").

    To be considered aligned with the European Taxonomy, the activity must also respect the human and social rights guaranteed by international law.

    ]]>
    news-2789 Tue, 28 Dec 2021 09:00:00 +0100 Announcement via the Internet: LA FRANCAISE SUB DEBT mutual fund EN > UAE /en/who-we-are/news/detail/announcement-via-the-internet-la-francaise-sub-debt-mutual-fund-en-uae/ We would like to inform you that the management company La Française Asset Management has decided to make some amendments to the regulatory documentation of the fund La Française Sub Debt concerning temporary acquisitions and transfer of securities, the related guarantees as well as the remuneration generated by these transactions. In addition, in order to comply with Regulation (EU) 2020/852 known as “Taxonomy”, the management company has decided to amend the prospectus of the mutual fund.

    • Modifications concerning transactions for the temporary purchase and transfer of securities

    Transactions for the temporary transfer of securities (securities lending, repurchase agreements) may now be carried out up to a maximum of 60% of the sub-fund's assets, instead of the 50% maximum as was previously the case.

    As part of these transactions, the UCI will now be able to receive/pay financial guarantees in the form of a transfer of full ownership of securities and/or cash instead of cash only.

    In addition, it has been specified that the entirety of the generated direct and indirect operating costs will be borne by the management company. The share of these costs may not exceed 40% of the income generated by these transactions.

    Finally, the wording of these sections has been revised for greater clarity.

    ]]>
    news-2788 Tue, 28 Dec 2021 09:00:00 +0100 Announcement via the Internet: LA FRANCAISE SUB DEBT mutual fund EN > SG /en/who-we-are/news/detail/announcement-via-the-internet-la-francaise-sub-debt-mutual-fund-en-sg/ We would like to inform you that the management company La Française Asset Management has decided to make some amendments to the regulatory documentation of the fund La Française Sub Debt concerning temporary acquisitions and transfer of securities, the related guarantees as well as the remuneration generated by these transactions. In addition, in order to comply with Regulation (EU) 2020/852 known as “Taxonomy”, the management company has decided to amend the prospectus of the mutual fund.

    • Modifications concerning transactions for the temporary purchase and transfer of securities

    Transactions for the temporary transfer of securities (securities lending, repurchase agreements) may now be carried out up to a maximum of 60% of the sub-fund's assets, instead of the 50% maximum as was previously the case.

    As part of these transactions, the UCI will now be able to receive/pay financial guarantees in the form of a transfer of full ownership of securities and/or cash instead of cash only.

    In addition, it has been specified that the entirety of the generated direct and indirect operating costs will be borne by the management company. The share of these costs may not exceed 40% of the income generated by these transactions.

    Finally, the wording of these sections has been revised for greater clarity.

    ]]>
    news-2782 Tue, 28 Dec 2021 09:00:00 +0100 INTERNET NOTICE TO SHAREHOLDERS OF THE SUB-FUND LA FRANCAISE LUX INFLECTION POINT CARBON IMPACT GLOBAL (THE “SUB-FUND”) EN > SE /en/who-we-are/news/detail/internet-notice-to-shareholders-of-the-sub-fund-la-francaise-lux-inflection-point-carbon-impact-global-the-sub-fund-en-se/ In the context of the implementation of the Regulation (EU) 2020/852 “Taxonomy", the Company’s board of directors (the “Board”) informs you that the Board has decided to amend the prospectus of the Sub-Fund by adding the following mention: "The European Union’s Taxonomy aims to identify economic activities that are considered as being environmentally sustainable. The Taxonomy identifies these activities according to their contribution to six major environmental objectives:

    • Climate change mitigation,
    • Climate change adaptation,
    • Sustainable use and protection of water and marine resources,
    • Transition to a circular economy (waste, prevention and recycling),
    • Pollution prevention and control
    • Protection and restoration of biodiversity and ecosystems.

    Currently, technical screening criteria have been developed for certain economic activities that can contribute substantially to two of these objectives: climate change mitigation and climate change adaptation. These criteria are currently awaiting publication in the Official Journal of the European Union. The data presented below therefore reflect only the alignment with these two objectives, on the basis of the non-definitively published criteria, as submitted to the European co-legislators. We will update this information in the event of changes to these criteria, the development of new review criteria for these two objectives, as well as the entry into force of the criteria for the other four environmental objectives: the sustainable use and protection of water and marine resources; the transition to a circular economy, the pollution prevention and control and the protection and restoration of biodiversity and ecosystems.

    To be considered sustainable, an economic activity must demonstrate that it contributes substantially to one or more of the 6 environmental objectives, while not significantly harming any of the other environmental objectives (the so-called DNSH principle, "Do No Significant Harm").
    To be considered aligned with the European Taxonomy, the activity must also respect the human and social rights guaranteed by international law.

    ]]>
    news-2781 Tue, 28 Dec 2021 09:00:00 +0100 INTERNET NOTICE TO SHAREHOLDERS OF THE SUB-FUND LA FRANCAISE LUX INFLECTION POINT CARBON IMPACT GLOBAL (THE “SUB-FUND”) EN > IT /en/who-we-are/news/detail/internet-notice-to-shareholders-of-the-sub-fund-la-francaise-lux-inflection-point-carbon-impact-global-the-sub-fund-en-it/ In the context of the implementation of the Regulation (EU) 2020/852 “Taxonomy", the Company’s board of directors (the “Board”) informs you that the Board has decided to amend the prospectus of the Sub-Fund by adding the following mention: "The European Union’s Taxonomy aims to identify economic activities that are considered as being environmentally sustainable. The Taxonomy identifies these activities according to their contribution to six major environmental objectives:

    • Climate change mitigation,
    • Climate change adaptation,
    • Sustainable use and protection of water and marine resources,
    • Transition to a circular economy (waste, prevention and recycling),
    • Pollution prevention and control
    • Protection and restoration of biodiversity and ecosystems.

    Currently, technical screening criteria have been developed for certain economic activities that can contribute substantially to two of these objectives: climate change mitigation and climate change adaptation. These criteria are currently awaiting publication in the Official Journal of the European Union. The data presented below therefore reflect only the alignment with these two objectives, on the basis of the non-definitively published criteria, as submitted to the European co-legislators. We will update this information in the event of changes to these criteria, the development of new review criteria for these two objectives, as well as the entry into force of the criteria for the other four environmental objectives: the sustainable use and protection of water and marine resources; the transition to a circular economy, the pollution prevention and control and the protection and restoration of biodiversity and ecosystems.

    To be considered sustainable, an economic activity must demonstrate that it contributes substantially to one or more of the 6 environmental objectives, while not significantly harming any of the other environmental objectives (the so-called DNSH principle, "Do No Significant Harm").
    To be considered aligned with the European Taxonomy, the activity must also respect the human and social rights guaranteed by international law.

    ]]>
    news-2769 Tue, 28 Dec 2021 09:00:00 +0100 Announcement via the Internet: LA FRANCAISE CARBON IMPACT 2026 sub-fund of the La Française SICAV EN > SG /en/who-we-are/news/detail/announcement-via-the-internet-la-francaise-carbon-impact-2026-sub-fund-of-the-la-francaise-sicav-en-sg/ In order to comply with Regulation (EU) 2020/852 referred to as “Taxonomy”, we hereby inform you that the management company has decided to amend the prospectus of the LA FRANCAISE CARBON IMPACT 2026 sub-fund of the La Française SICAV by adding the following statement: “The objective of the European Union Taxonomy is to identify economic activities considered to be sustainable from an environmental perspective. The taxonomy identifies these activities according to their contribution to six major environmental objectives:

    • Climate change mitigation;
    • Climate change adaptation;
    • The sustainable use and protection of water and marine resources;
    • Transition to a circular economy (waste, prevention and recycling);
    • Pollution prevention and control;
    • The protection and restoration of biodiversity and ecosystems.

    Technical screening criteria have now been developed for certain economic activities that can substantially contribute to two of these objectives: climate change mitigation and climate change adaptation. These criteria are currently awaiting publication in the Official Journal of the European Union. The data presented below therefore only reflects an alignment with these two objectives, based on unfinished criteria as submitted to the EU co-legislators.

    We will update this information in the event of changes to these criteria, the development of new review criteria for these two objectives, and the implementation of criteria for the other four environmental objectives: the sustainable use and protection of water and marine resources; the transition to a circular economy; pollution prevention and control; the protection and restoration of biodiversity and ecosystems.

    In order to be considered sustainable, an economic activity must demonstrate that it substantially contributes to the fulfilment of one of the six objectives, while not harming any of the other five (a principle known as DNSH, "Do No Significant Harm").

    For an activity to be considered aligned with the European Taxonomy, it must also respect the human and social rights guaranteed by international law.
    The Fund does not currently make any commitment with regard to aligning its activity with the European Taxonomy.

    ]]>
    news-2764 Tue, 28 Dec 2021 09:00:00 +0100 Announcement via the Internet: LA FRANCAISE RENDEMENT GLOBAL 2028 PLUS sub-fund of the La Française SICAV EN > SG /en/who-we-are/news/detail/announcement-via-the-internet-la-francaise-rendement-global-2028-plus-sub-fund-of-the-la-francaise-sicav-en-sg/ In order to comply with Regulation (EU) 2020/852 referred to as “Taxonomy”, we hereby inform you that the management company has decided to amend the prospectus of the LA FRANCAISE RENDEMENT GLOBAL 2028 PLUS sub-fund of the La Française SICAV by adding the following statement: “The objective of the European Union Taxonomy is to identify economic activities considered to be sustainable from an environmental perspective. The taxonomy identifies these activities according to their contribution to six major environmental objectives:

    • Climate change mitigation;
    • Climate change adaptation
    • The sustainable use and protection of water and marine resources;
    • Transition to a circular economy (waste, prevention and recycling);
    • Pollution prevention and control;
    • The protection and restoration of biodiversity and ecosystems.

    At present, technical screening criteria have been developed for certain economic activities capable of contributing substantially to the following two objectives: climate change mitigation and climate change adaptation. These criteria are currently awaiting publication in the Official Journal of the European Union. The data presented below therefore only reflects the alignment with these two objectives, based on the criteria that has not been definitely adopted, as submitted to the EU co-legislators.

    We will update this information in the event of any changes to these criteria, the development of new review criteria relating to these two objectives, and when the criteria relating to the other four environmental objectives comes into force: the sustainable use and protection of water and marine resources; the transition to a circular economy; pollution prevention and control; protection and restoration of biodiversity and ecosystems.

    In order to be considered sustainable, an economic activity must demonstrate that it contributes substantially to the achievement of one of the six objectives, while not harming any of the other five (a principle known as DNSH, "Do No Significant Harm").

    For an activity to be considered aligned with the European Taxonomy, it must also respect human and social rights guaranteed by international law.

    ]]>
    news-2758 Tue, 28 Dec 2021 09:00:00 +0100 Announcement via the Internet: LA FRANCAISE RENDEMENT GLOBAL 2028 sub-fund of the La Française SICAV EN > SG /en/who-we-are/news/detail/announcement-via-the-internet-la-francaise-rendement-global-2028-sub-fund-of-the-la-francaise-sicav-en-sg/ In order to comply with Regulation (EU) 2020/852 referred to as “Taxonomy”, we hereby inform you that the management company has decided to amend the prospectus of the LA FRANCAISE RENDEMENT GLOBAL 2028 sub-fund of the La Française SICAV by adding the following statement: “The objective of the European Union Taxonomy is to identify economic activities considered to be sustainable from an environmental perspective. The taxonomy identifies these activities according to their contribution to six major environmental objectives:

    • Climate change mitigation;
    • Climate change adaptation;
    • The sustainable use and protection of water and marine resources;
    • Transition to a circular economy (waste, prevention and recycling);
    • Pollution prevention and control;
    • The protection and restoration of biodiversity and ecosystems.

    At present, technical screening criteria have been developed for certain economic activities capable of contributing substantially to the following two objectives: climate change mitigation and climate change adaptation. These criteria are currently awaiting publication in the Official Journal of the European Union. The data presented below therefore only reflects the alignment with these two objectives, based on the criteria that has not been definitely adopted, as submitted to the EU co-legislators. We will update this information in the event of any changes to these criteria, the development of new review criteria relating to these two objectives, and when the criteria relating to the other four environmental objectives comes into force: the sustainable use and protection of water and marine resources; the transition to a circular economy; pollution prevention and control; protection and restoration of biodiversity and ecosystems.

    In order to be considered sustainable, an economic activity must demonstrate that it contributes substantially to the achievement of one of the six objectives, while not harming any of the other five (a principle known as DNSH, "Do No Significant Harm").

    For an activity to be considered aligned with the European Taxonomy, it must also respect human and social rights guaranteed by international law.

    ]]>
    news-2746 Tue, 28 Dec 2021 09:00:00 +0100 Announcement via the Internet: LA FRANÇAISE GLOBAL COCO sub-fund of the La Française SICAV EN > UAE /en/who-we-are/news/detail/announcement-via-the-internet-la-francaise-global-coco-sub-fund-of-the-la-francaise-sicav-en-uae/ In order to comply with Regulation (EU) 2020/852 referred to as “Taxonomy”, we hereby inform you that the management company has decided to amend the prospectus of the LA FRANÇAISE GLOBAL COCO sub-fund of the La Française SICAV by adding the following statement: “The objective of the European Union Taxonomy is to identify economic activities considered to be sustainable from an environmental perspective. The taxonomy identifies these activities according to their contribution to six major environmental objectives:

    • Climate change mitigation;
    • Climate change adaptation;
    • The sustainable use and protection of water and marine resources;
    • Transition to a circular economy (waste, prevention and recycling);
    • Pollution prevention and control;
    • The protection and restoration of biodiversity and ecosystems.

    At present, technical screening criteria have been developed for certain economic activities capable of contributing substantially to the following two objectives: climate change mitigation and climate change adaptation. These criteria are currently awaiting publication in the Official Journal of the European Union. The data presented below therefore only reflects the alignment with these two objectives, based on the criteria that has not been definitely adopted, as submitted to the EU co-legislators. We will update this information in the event of any changes to these criteria, the development of new review criteria relating to these two objectives, and when the criteria relating to the other four environmental objectives comes into force: the sustainable use and protection of water and marine resources; the transition to a circular economy; pollution prevention and control; protection and restoration of biodiversity and ecosystems.

    In order to be considered sustainable, an economic activity must demonstrate that it contributes substantially to the achievement of one of the six objectives, while not harming any of the other five (a principle known as DNSH, "Do No Significant Harm").

    For an activity to be considered aligned with the European Taxonomy, it must also respect human and social rights guaranteed by international law.

    The Fund does not currently make any commitment with regard to aligning its activity with the European Taxonomy.

    ]]>
    news-2745 Tue, 28 Dec 2021 09:00:00 +0100 Announcement via the Internet: LA FRANÇAISE GLOBAL COCO sub-fund of the La Française SICAV EN > IT /en/who-we-are/news/detail/announcement-via-the-internet-la-francaise-global-coco-sub-fund-of-the-la-francaise-sicav-en-it/ In order to comply with Regulation (EU) 2020/852 referred to as “Taxonomy”, we hereby inform you that the management company has decided to amend the prospectus of the LA FRANÇAISE GLOBAL COCO sub-fund of the La Française SICAV by adding the following statement: “The objective of the European Union Taxonomy is to identify economic activities considered to be sustainable from an environmental perspective. The taxonomy identifies these activities according to their contribution to six major environmental objectives:

    • Climate change mitigation;
    • Climate change adaptation;
    • The sustainable use and protection of water and marine resources;
    • Transition to a circular economy (waste, prevention and recycling);
    • Pollution prevention and control;
    • The protection and restoration of biodiversity and ecosystems.

    At present, technical screening criteria have been developed for certain economic activities capable of contributing substantially to the following two objectives: climate change mitigation and climate change adaptation. These criteria are currently awaiting publication in the Official Journal of the European Union. The data presented below therefore only reflects the alignment with these two objectives, based on the criteria that has not been definitely adopted, as submitted to the EU co-legislators. We will update this information in the event of any changes to these criteria, the development of new review criteria relating to these two objectives, and when the criteria relating to the other four environmental objectives comes into force: the sustainable use and protection of water and marine resources; the transition to a circular economy; pollution prevention and control; protection and restoration of biodiversity and ecosystems.

    In order to be considered sustainable, an economic activity must demonstrate that it contributes substantially to the achievement of one of the six objectives, while not harming any of the other five (a principle known as DNSH, "Do No Significant Harm").

    For an activity to be considered aligned with the European Taxonomy, it must also respect human and social rights guaranteed by international law.

    The Fund does not currently make any commitment with regard to aligning its activity with the European Taxonomy.

    ]]>
    news-2733 Tue, 28 Dec 2021 09:00:00 +0100 Announcement via the Internet: La Française Rendement Global 2025 (hereinafter the "Fund") EN > UAE /en/who-we-are/news/detail/announcement-via-the-internet-la-francaise-rendement-global-2025-hereinafter-the-fund-en-uae/ In order to address the risk of early redemptions and to ensure the sustainability of the Fund's management over time, the La Française Asset Management management company has decided to adjust the maturity of the securities in the Fund's portfolio as follows: The fund will invest in bonds that mature in December 2025 at the latest and/or bonds with a longer maturity, but which have a call option before December 2025. The fund does not invest in perpetual bonds.

    This change will come into effect on 31 December 2021.

    The other features of the Fund remain unchanged.

    We would like to draw your attention to the need and importance of reading the key investor information document of the Fund. This is available at www.la-francaise.com.

    Potential investors should read all key investor information documents before making any decision to invest.

    ]]>
    news-2732 Tue, 28 Dec 2021 09:00:00 +0100 Announcement via the Internet: La Française Rendement Global 2025 (hereinafter the "Fund") EN > SG /en/who-we-are/news/detail/announcement-via-the-internet-la-francaise-rendement-global-2025-hereinafter-the-fund-en-sg/ In order to address the risk of early redemptions and to ensure the sustainability of the Fund's management over time, the La Française Asset Management management company has decided to adjust the maturity of the securities in the Fund's portfolio as follows: The fund will invest in bonds that mature in December 2025 at the latest and/or bonds with a longer maturity, but which have a call option before December 2025. The fund does not invest in perpetual bonds.

    This change will come into effect on 31 December 2021.

    The other features of the Fund remain unchanged.

    We would like to draw your attention to the need and importance of reading the key investor information document of the Fund. This is available at www.la-francaise.com.

    Potential investors should read all key investor information documents before making any decision to invest.

    ]]>
    news-2731 Tue, 28 Dec 2021 09:00:00 +0100 Announcement via the Internet: La Française Rendement Global 2025 (hereinafter the "Fund") EN > UK /en/who-we-are/news/detail/announcement-via-the-internet-la-francaise-rendement-global-2025-hereinafter-the-fund-en-uk/ In order to address the risk of early redemptions and to ensure the sustainability of the Fund's management over time, the La Française Asset Management management company has decided to adjust the maturity of the securities in the Fund's portfolio as follows: The fund will invest in bonds that mature in December 2025 at the latest and/or bonds with a longer maturity, but which have a call option before December 2025. The fund does not invest in perpetual bonds.

    This change will come into effect on 31 December 2021.

    The other features of the Fund remain unchanged.

    We would like to draw your attention to the need and importance of reading the key investor information document of the Fund. This is available at www.la-francaise.com.

    Potential investors should read all key investor information documents before making any decision to invest.

    ]]>
    news-2727 Fri, 17 Dec 2021 14:15:56 +0100 A Stock Picker’s Market /en/who-we-are/news/detail/a-stock-picker-s-market/ Some investors favor passive equity investing where diversification and low turnover are prime features. But as the next technological revolution unfolds and causes wealth creation to become concentrated in fewer holdings, does active management make more sense? Percent of U.S. Public Companies Creating or Destroying Shareholder Wealth*

    • Over their lifetimes, the majority of U.S. common stocks have destroyed shareholder wealth, according to academic research. However, we believe that the overall U.S. stock market in aggregate increased shareholder wealth, which illustrates that wealth creation is concentrated among select common stock.
    • The concentration of wealth creation has intensified. From 1926 to 1995, 0.50% of public companies accounted for a quarter of wealth creation, but since 1995, just 0.29% of firms have done so.
    • Clearly, not all equities are good investments, which in our view underscores the importance of skilled active managers who can seek companies with strong long-term fundamentals.

    *Shareholder wealth is the increase/decrease in the wealth earned by a company’s shareholders above/below that which would have been earned in the one-month Treasury bill.

    ]]>
    news-2726 Fri, 17 Dec 2021 14:11:29 +0100 European real estate market: recovery is gaining momentum in Q3 2021 /en/who-we-are/news/detail/european-real-estate-market-recovery-is-gaining-momentum-in-q3-2021/ Real estate has upheld its status as a safe haven, driven by an attractive risk/return ratio in a low interest-rate environment. Despite the abundance of liquidity, the investment market is somewhat tight and restricted by the quality of supply. Investors remain extremely selective and are increasingly sensitive to Environmental, Social and Governance (ESG) criteria. In the rental market, the demand for office space is mainly focused on the most efficient and sustainable premises in centrally located and accessible areas. Against this backdrop, investors are turning their attention to “state of the art” buildings owing to their ability to cater to the new challenges, such as flexible offices and co-working, as well as to increasingly demanding energy criteria. The search for centrally located premises should help to maintain the attractiveness of traditional business districts, which continue to benefit from low vacancy.

    Increasing investment volumes

    In the third quarter of 2021, European investment volume for offices continued to grow and reached €153 billion YTD as at 30/09/2021. Germany (€37.9bn), the UK (€37.5bn) and France (€16bn) remain the markets favoured by both local and international investors. Investors are mainly focusing on assets in the centre of capital cities, particularly in the office segment, although major regional cities are playing an increasing role. Offices remain the most popular asset class for investors, accounting for 50% of investments in Europe YTD as at 30/09/2021, followed by logistics at 30%. Tourism assets have recovered strongly with investment volumes up 63% in Q3 compared to the same period in 2020. The retail segment, especially the food, household goods and sports sectors, is recovering due to a new urban retail hierarchy. 

    Finding a new balance in office rental markets

    In the wake of the first signs of recovery witnessed in the first half of 2021, the rental market in major European cities gained momentum in Q3 2021. Despite the rise of remote working, offices remain essential to corporate culture. and are increasingly geared towards promoting the well-being of their users.

    Take-up increased by 47% in Q3 2021 compared to Q3 2020. Another encouraging sign can be found in the evolution of net absorption, which refers to new demand for real estate space. It turned positive in Q2 2021 for the first time since Q4 2019 and posted an increase of 339% Q-on-Q in Q3 2021, thus illustrating occupier growth plans. 

    In Europe, immediate supply declined in Q3 2021 for the first time since the start of the pandemic. The decline in available supply was particularly evident in Berlin, which posted a drop of 22% over one quarter. Vacancy rates in the larger European cities remain generally under control, ranging from below 3% in the main German cities to above 10% in Madrid and Milan. Although the share of new office space has increased due to a high delivery rate of projects begun before the health crisis, office supply as a whole is still mainly made up of second-hand assets that no longer meet users' expectations.

    Solid performance of prime rental prices

    The gap between assets that meet new practices in central locations and those that no longer meet user expectations is widening and leading to the creation of a two-tier market. For grade-A properties, prime rents remain broadly stable at record high levels across Europe. Berlin, Lyon and London have recorded year-on-year increases in headline rents, while prime rents adjusted in Dublin and Madrid. The outskirts of large cities, where supply remains substantial, are also experiencing downward pressure on their rents.

    Incentives have increased across all European markets, both at the time of signing new leases and when negotiating the renewal or extension of existing leases. The gap between headline and economic rental values is widening.

    Sources: CBRE, La Française REM Research

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    news-2724 Tue, 14 Dec 2021 14:12:34 +0100 ECB Preview, Quantitative Easing under the spotlight /en/who-we-are/news/detail/ecb-preview-quantitative-easing-under-the-spotlight/ The European Central Bank (ECB) will hold its quarterly press conference on December 16th. The ECB must maintain its policy options open given heightened uncertainty regarding inflation. However, the institution will not abandon its transitory inflation view despite upside risks to the inflation outlook. The central bank will update its macro-economic projections with the first publication of the 2024 projection. Please find below what we expect:

    • The ECB will maintain its forward guidance introduced in July 2021. ECB President Lagarde will emphasize that an interest-rate increase next year is very unlikely. However, she will also warn that the Governing Council (GC) will not hesitate to act when the three conditions of its forward guidance are satisfied. President Lagarde will not push back a rate liftoff beyond2023 year-end.
    • The pandemic emergency purchase programme (PEPP) will end in March 2022 as scheduled despite Omicron.
    • For the successor to the PEPP, the asset purchase programme (APP) should be upsized to an average €40bn per month beginning next April to the end of 2022. Additionally, the GC can supplement the €20bn monthly average of the APP with a fixed-size and temporary envelope until December 2022, between €150 to €200bn. 
    • We do not expect an announcement concerning the addition of Greek bonds to the APP at this meeting, given reinvestments in maturing Greek holdings under the PEPP. 
    • To prevent fragmentation risk, the flexibility of the PEPP will be transferred to reinvestments in maturing debt in the PEPP.
    • On the economic front, we expect the ECB’s inflation projections to be revised significantly higher in 2021 (2.5% vs 2.2% previously) and in 2022 (2.8% vs 1.7% previously). We expect the 2024 inflation forecast to stay below the long-term objective (2%) at 1.8%. On the growth side, we expect projections will indicate slightly higher growth in 2021 (from 5.0% to 5.1%), lower GDP growth in 2022 (from 4.6% to 4.3%) but higher growth in 2023 (from 2.1% to 2.3%). 

    The main risk (judging from a hawkish stance) would be that the ECB decides to delay decisions on future QE to February 2022, claiming there is too much uncertainty to act at the current meeting, but this is not our base case scenario. The bond markets, namely in Italy, Spain, Portugal and particularly Greece, would be vulnerable under this scenario. 

    Disclaimer

    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2723 Tue, 14 Dec 2021 10:01:24 +0100 FED Preview /en/who-we-are/news/detail/fed-preview/ At the Federal Reserve’s next policy meeting on December 14-15, we expect the FOMC will announce an accelerated reduction in the pace of asset purchases introduced at the November meeting after strong economic growth (labor supply, spending growth) and heightened inflationary pressure. Please find below what we expect:

    • The Federal Reserve System (FED) to announce that they will double the pace of tapering to $30bn per month beginning in mid-January 2022 (i.e., they previously announced $15bn). This would mean that Quantitative Easing would end in March 2022 (instead of June 2022 previously).
    • Consequently, on policy rates, the dots plot will show earlier rate hikes: two hikes next year (0.625%) and five more hikes through 2024 (three in 2023 to 1.375 % and two hikes in 2024 to 1.875%). The longer-run fed funds will be unchanged at 2.5%.
    • The policy statement will reflect these hawkish changes. According to Chair Powell’s recent remarks, the FED will stop characterizing higher inflation as “transitory”. Nevertheless, Chair Powell will continue to outline that price pressures should ease into next year. He will also emphasize that the risk of persistently high inflation could threaten the longevity of economic expansion and therefore also pose a risk to the employment side of the Federal Open Market Committee’s dual mandate. We also expect Chair Powell to underline that future monetary decisions will depend on macro-economic data.
    • We expect the SEP (Summary of Economic Projections) to indicate lower growth in 2021 (from 5.9% to 5.5%) but higher GDP growth in 2022 (from 3.8% to 3.9%) and unchanged growth for 2023 and 2024 (respectively 2.5% et 2.0%).  
    • We expect the committee will revise its forecast for higher Personal Consumption Expenditures (PCE) inflation figures with projections moving up from 4.2% to 5.3% in 2021, from 2.2% to 2.4% in 2022 and unchanged in 2023 and in 2024, respectively 2.2% and 2.1%.  

    To summarize, we expect that Chair Powell will prepare investors for interest rates hikes in 2022 if inflation remains elevated. We expect him to highlight that the FED policy will continue to be flexible and that the timing of interest rate increases will be data dependant. There is very little room for policy mistakes here with traders already weighing the potential impacts of less generous monetary settings. We expect high volatility but, in the end, a “prudent” FOMC outcome stressing the high degree of uncertainty. 

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2722 Wed, 15 Dec 2021 09:00:00 +0100 La Française Real Estate Managers (REM) maintains solid growth and announces record inflows for collective real estate investment vehicles /en/who-we-are/news/detail/la-francaise-real-estate-managers-rem-maintains-solid-growth-and-announces-record-inflows-for-collective-real-estate-investment-vehicles/ One year after its client-focused reorganisation and the arrival of Philippe DEPOUX as Chairman, La Française Real Estate Managers (REM) announces solid growth of its real estate activity in 2021, despite the apprehension of some international investors due to the economic uncertainty created by the health crisis. For 2021, La Française REM has forecast gross inflows of nearly 2.5 billion euros, bringing its assets under management to more than 29 billion euros, an increase of more than 9% compared to 2020. The management company has exceeded its record level of inflows recorded in 2019 on its range of collective real estate investment vehicles and attributes this momentum to the implementation of its strategic road map which emphasises in particular: 

    • the relevance and effectiveness of the asset management of the real estate portfolio;
    • changes to the range of investment vehicles in terms of sustainability, meeting new investor requirements;
    • a diversification strategy aimed at new asset classes, which should be profitable in the post COVID-19 world, focusing on logistics, senior housing and health care real estate and a strengthened presence on international markets, namely in Germany, Luxembourg, Belgium, the Netherlands, Ireland and the United Kingdom;
    • innovation in terms of accessibility and development of investment solutions.

    Asset management

    The appeal of the investment solutions offered by La Française REM lies in particular in their capacity to effectively navigate an unprecedented storm, such as the one we have just experienced. The real estate assets managed by La Française REM consist of around 65% offices, 10% retail, 10% residential/managed residences, 10% logistics and 5% diversification products (vineyards, hotels, other). The rent collection approach adopted by La Française REM, which can be summed up in a selective and negotiated support policy or in a firm approach to large tenants, has made it possible to maintain a good collection rate of rents, as is the case for the collective real estate vehicle product range managed by La Française REM which at the end of November had collected 95% of the rents billed since the beginning of the year.  

    Philippe DEPOUX, Chairman of La Française REM, added: “La Française REM is a set of professions that creates value for the end investor. Today, the asset management teams are in the spotlight. Each m2 is managed as well as possible. We are building our asset management strategy around three main areas, namely sustainability (ESG), flexibility and service-based options. The close relationship and professionalism of our teams as well as the quality of our real estate portfolio has allowed us to navigate this unprecedented period with confidence. With 300,000 m2 let or re-let in 2021, a financial occupancy rate of nearly 93% over the year, we have maintained the performance of our real estate investment vehicles for the benefit of investors. Going forward, we will continue to support our tenants with the newly created Tenant Services Transformation Unit. In 2022, we will gradually roll out a rental offer focused on flexible occupancy and service-based options.” 

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    news-2718 Tue, 14 Dec 2021 09:00:00 +0100 La Française LUX-Inflection Point Carbon Impact Global distinguished for second consecutive year with FNG-Label EN > BE /en/who-we-are/news/detail/la-francaise-lux-inflection-point-carbon-impact-global-distinguished-for-second-consecutive-year-with-fng-label-en-be/ La Française AM is proud to announce that its “low carbon” global equities sub-fund, La Française LUX-Inflection Point Carbon Impact Global (sub-fund of Luxembourg SICAV), has received the Forum Nachhaltige Geldanlagen (FNG) two-star Label for sustainable mutual funds, valid for the year 2022. This distinction recognizes the quality of the forward-looking methodology for quantifying carbon emissions, developed by the group’s extra-financial research center, La Française Sustainable Investment Research (SIR), which is integrated into the sub-fund’s investment strategy. 

    The FNG-Label is the quality standard for sustainable investments on German-speaking financial markets: Germany, Austria, Liechtenstein and Switzerland. It was launched in 2015 after a three-year development process involving key stakeholders. The sustainability certification must be renewed annually. 
    Successfully certified funds pursue a stringent and transparent sustainability approach, the application of which has been checked by the University of Hamburg, an independent auditor.

    The quality standard comprises the following minimum requirements:

    • Transparent and easy-to-understand presentation of the fund’s sustainability strategy in the context of the Eurosif Transparency Code and the FNG Sustainability Profile,
    • Exclusion of armaments and weapons,
    • Exclusion of nuclear power (including uranium mining),
    • Exclusion of coal (mining and significant power generation),
    • Exclusion of fracking and oil sands,
    • Exclusion of tobacco (production),
    • Exclusion in cases of systematically and / or severe violation of the principles of the UN Global Compact,
    • The fund’s entire portfolio is checked against sustainability criteria (social and environmental responsibility, good corporate governance, United Nations Sustainable Development Goals or others).

    La Française LUX-Inflection Point Carbon Impact Global was awarded two out of three possible stars for its particularly ambitious and comprehensive sustainability strategy, which gained it additional points in the areas of institutional credibility, product standards, and selection and dialogue strategies.

    Nina LAGRON, CFA, Head of Large Cap Equites at La Française AM, concluded: "For the second consecutive year, La Française LUX-Inflection Point Carbon Impact Global has been awarded the FNG label. This sub-fund, which benefits from three valid labels: SRI (French), Greenfin (French) & FNG, is a perfect example of the degree of selectivity that we strive to respect in order to contribute to the transition towards a low-carbon economy." 

    La Française LUX – Inflection Point Carbon Impact Global: The sub-fund aims to contribute to the transition to a low carbon economy while achieving long-term capital growth

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    news-2712 Fri, 10 Dec 2021 15:40:47 +0100 Metaverse – A Brave New World /en/who-we-are/news/detail/metaverse-a-brave-new-world/ The traditional internet is launching into the digital stratosphere. An alternate world where people live digital lives similar to their physical ones may one day exist and it is called the metaverse. The creation of this virtual world may potentially offer huge opportunity for those who lead its development. “Metaverse” Company Mentions

    • Public companies have recently begun to discuss the metaverse more with mentions in public calls and press releases in November exceeding the sum of those mentions in the previous year. The conversations are not just occurring in tech (48% of mentions) but also in consumer services (17%), telecommunications (7%), consumer cyclicals (5%) and business services (5%) corporations. The companies discussing it range from chip companies like Nvidia and Qualcomm to software companies like Microsoft to gaming companies like Roblox, to consumer companies such as Ralph Lauren and Disney.
    • The metaverse may be a 3D interoperable (components work together) digital world with many of the same things we have in our physical world, including an economy where people earn money, trade goods and shop for digital assets, as well as enjoy social lives and partake in education and entertainment. Traveling to virtual destinations will be possible from the comfort of one’s home. Interacting with people around the world without the barrier of language may be possible. Attending a concert shoulder to shoulder with a global audience is another application.
    • We believe, attractive investment opportunities related to the metaverse include companies building platforms on which the metaverse is created as well as those that provide enabling hardware and software.
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    news-2710 Wed, 08 Dec 2021 11:27:49 +0100 NOTICE TO SHAREHOLDERS OF THE SUB-FUND JKC ASIA BOND 2023 (THE “SUB-FUND”) EN > LU /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-jkc-asia-bond-2023-the-sub-fund-en-lu/ Dear Shareholder, The Company’s board of directors (the "Board") hereby informs you that the prospectus of the Company (the “Prospectus”) has been updated in order to clarify how environmental, social and governance (ESG) factors are integrated into the investment decisions. 1) Update of the investment policy

    The first paragraph of the investment policy has been clarified as follows:

    “The sub-fund invests mainly in government and corporate bonds of any credit quality from Asian
    Pacific countries, excluding Japan, that mature on or before 31 December 2023. ESG (Environmental
    Social Governance) characteristics are assessed and integrated into the Investment manager’s
    analysis of the target investments as further detailed under “ESG (Environmental Social and
    Governance) Integration”
    below.”

    The description of the investment strategy has been clarified as follows:

    “Strategy The investment manager uses a long only approach that is based on global economic
    and financial analysis as well as analysis of companies’ balance sheets and insights into sovereign debt fundamentals. The investment manager may also use arbitrage strategies in the event of market opportunities or changes in companies’ risk profile.

    The Investment determines an ESG profile of the government and corporate bonds based on
    qualitative and quantitative data sourced on an on-going basis from public data and from
    information collected during the due diligence stage (including interviews with management of
    corporates, official announcements and publications).

    ]]>
    news-2706 Wed, 08 Dec 2021 11:19:06 +0100 NOTICE TO SHAREHOLDERS OF THE SUB-FUND JKC ASIA BOND 2023 (THE “SUB-FUND”) LUX > SGD /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-jkc-asia-bond-2023-the-sub-fund-lux-sgd/ Dear Shareholder, The Company’s board of directors (the "Board") hereby informs you that the prospectus of the Company (the “Prospectus”) has been updated in order to clarify how environmental, social and governance (ESG) factors are integrated into the investment decisions. 1) Update of the investment policy

    The first paragraph of the investment policy has been clarified as follows:

    “The sub-fund invests mainly in government and corporate bonds of any credit quality from Asian
    Pacific countries, excluding Japan, that mature on or before 31 December 2023. ESG (Environmental
    Social Governance) characteristics are assessed and integrated into the Investment manager’s
    analysis of the target investments as further detailed under “ESG (Environmental Social and
    Governance) Integration”
    below.”

    The description of the investment strategy has been clarified as follows:

    “Strategy The investment manager uses a long only approach that is based on global economic
    and financial analysis as well as analysis of companies’ balance sheets and insights into
    sovereign debt fundamentals. The investment manager may also use arbitrage strategies in the
    event of market opportunities or changes in companies’ risk profile.

    The Investment determines an ESG profile of the government and corporate bonds based on
    qualitative and quantitative data sourced on an on-going basis from public data and from
    information collected during the due diligence stage (including interviews with management of
    corporates, official announcements and publications).

    ]]>
    news-2704 Wed, 08 Dec 2021 10:55:50 +0100 NOTICE TO SHAREHOLDERS OF THE SUB-FUND JKC ASIA BOND 2023 (THE “SUB-FUND”) CH > EN /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-jkc-asia-bond-2023-the-sub-fund-ch-en/ Dear Shareholder, The Company’s board of directors (the "Board") hereby informs you that the prospectus of the Company (the “Prospectus”) has been updated in order to clarify how environmental, social and governance (ESG) factors are integrated into the investment decisions. 1) Update of the investment policy

    The first paragraph of the investment policy has been clarified as follows:

    “The sub-fund invests mainly in government and corporate bonds of any credit quality from Asian Pacific countries, excluding Japan, that mature on or before 31 December 2023. ESG (Environmental Social Governance) characteristics are assessed and integrated into the Investment manager’s analysis of the target investments as further detailed under “ESG (Environmental Social and Governance) Integration” below.”

    The description of the investment strategy has been clarified as follows:

    “Strategy The investment manager uses a long only approach that is based on global economic and financial analysis as well as analysis of companies’ balance sheets and insights into sovereign debt fundamentals. The investment manager may also use arbitrage strategies in the event of market opportunities or changes in companies’ risk profile.

    The Investment determines an ESG profile of the government and corporate bonds based on qualitative and quantitative data sourced on an on-going basis from public data and from information collected during the due diligence stage (including interviews with management of corporates, official announcements and publications).

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    news-2701 Wed, 08 Dec 2021 10:38:33 +0100 NOTICE TO SHAREHOLDERS OF THE SUB-FUND SUSTAINABLE REAL ESTATE SECURITIES (THE “SUB-FUND”) EN > LU /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-sustainable-real-estate-securities-the-sub-fund-en-lu/ Dear Shareholder, The Company’s board of directors (the "Board") hereby informs you of the following changes to be made to the prospectus of the Company (the “Prospectus”): 1) Use of benchmark

    In order to ensure compliance with the disclosure requirements foreseen by the ESMA Q&A on the UCITS Directive related to the use of a benchmark, the following paragraph has been added to the investment policy:

    "The sub-fund is actively and discretionarily managed. The sub-fund is not managed in
    reference to an index."


    2) Update of the section “Derivatives and Techniques”

    The description of the use of repurchase and reverse repurchase transactions has been clarified by adding further details on the efficient portfolio management techniques that may be used:

    “The sub-fund may also use repurchase and reverse repurchase agreements for efficient portfolio management (as further described in section “Instruments and Techniques the SubFunds may use”) such as (but not limited to) to create arbitrage positions designed to profit from changes in interest rate spreads.”

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    news-2699 Wed, 08 Dec 2021 10:33:20 +0100 NOTICE TO SHAREHOLDERS OF THE SUB-FUND SUSTAINABLE REAL ESTATE SECURITIES (THE “SUB-FUND”) CH /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-sustainable-real-estate-securities-the-sub-fund-ch/ Dear Shareholder, The Company’s board of directors (the "Board") hereby informs you of the following changes to be made to the prospectus of the Company (the “Prospectus”): 1) Use of benchmark

    In order to ensure compliance with the disclosure requirements foreseen by the ESMA Q&A on the UCITS Directive related to the use of a benchmark, the following paragraph has been added to the investment policy:

    "The sub-fund is actively and discretionarily managed. The sub-fund is not managed in reference to an index."

    2) Update of the section “Derivatives and Techniques”

    The description of the use of repurchase and reverse repurchase transactions has been clarified by adding further details on the efficient portfolio management techniques that may be used:

    “The sub-fund may also use repurchase and reverse repurchase agreements for efficient portfolio management (as further described in section “Instruments and Techniques the Sub-Funds may use”) such as (but not limited to) to create arbitrage positions designed to profit from changes in interest rate spreads.”

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    news-2694 Wed, 08 Dec 2021 10:20:23 +0100 NOTICE TO SHAREHOLDERS OF THE SUB-FUND INFLECTION POINT CARBON IMPACT GLOBAL (THE “SUB-FUND”) EN > SE /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-inflection-point-carbon-impact-global-the-sub-fund-en-se/ Dear Shareholder, The Company’s board of directors (the "Board") hereby informs you of the following changes to be made to the prospectus of the Company (the “Prospectus”): 1) Clarification of the investment policy

    The first paragraph of the investment policy of the Sub-Fund will be clarified in order to include a concrete percentage of exposure to equities of global companies and so to read as follows: “The sub-fund invests mainly in equities of global companies, including those in emerging markets, that have committed to reducing their carbon emissions, expanding their low carbon strategy and replacing fossil energy sources with low-carbon emission alternatives. The sub-fund invests at least 66% of its net assets in equities and equity-related securities issued by large capitalisation companies in any sector. Investments may include American and global depositary receipts (ADRs and GDRs)."

    2) Update of risk warnings

    In compliance with the already applicable investment policy, a reference to credit risk and derivatives risk has been added to the list of risks typically associated with ordinary market circumstances. The reference to risks relating to liquidity has been removed from the risks typically associated with unusual market conditions. Furthermore, a reference to counterparty risk has been added to the list of risks typically associated with unusual market conditions.

    ]]>
    news-2691 Wed, 08 Dec 2021 10:11:53 +0100 NOTICE TO SHAREHOLDERS OF THE SUB-FUND INFLECTION POINT CARBON IMPACT GLOBAL (THE “SUB-FUND”) LU /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-inflection-point-carbon-impact-global-the-sub-fund-lu/ Dear Shareholder, The Company’s board of directors (the "Board") hereby informs you of the following changes to be made to the prospectus of the Company (the “Prospectus”): 1) Clarification of the investment policy

    The first paragraph of the investment policy of the Sub-Fund will be clarified in order to include a concrete percentage of exposure to equities of global companies and so to read as follows: “The sub-fund invests mainly in equities of global companies, including those in emerging markets, that have committed to reducing their carbon emissions, expanding their low carbon strategy and replacing fossil energy sources with low-carbon emission alternatives.

    The sub-fund invests at least 66% of its net assets in equities and equity-related securities issued by large capitalisation companies in any sector. Investments may include American and global depositary receipts (ADRs and GDRs)."

    2) Update of risk warnings

    In compliance with the already applicable investment policy, a reference to credit risk and derivatives risk has been added to the list of risks typically associated with ordinary market circumstances. The reference to risks relating to liquidity has been removed from the risks typically associated with unusual market conditions. Furthermore, a reference to counterparty risk has been added to the list of risks typically associated with unusual market conditions.

    ]]>
    news-2688 Wed, 08 Dec 2021 10:04:13 +0100 NOTICE TO SHAREHOLDERS OF THE SUB-FUND INFLECTION POINT CARBON IMPACT GLOBAL (THE “SUB-FUND”) CH /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-inflection-point-carbon-impact-global-the-sub-fund-ch/ Dear Shareholder, The Company’s board of directors (the "Board") hereby informs you of the following changes to be made to the prospectus of the Company (the “Prospectus”): 1) Clarification of the investment policy

    The first paragraph of the investment policy of the Sub-Fund will be clarified in order to include a concrete percentage of exposure to equities of global companies and so to read as follows:

    “The sub-fund invests mainly in equities of global companies, including those in emerging markets, that have committed to reducing their carbon emissions, expanding their low carbon strategy and replacing fossil energy sources with low-carbon emission alternatives.

    The sub-fund invests at least 66% of its net assets in equities and equity-related securities issued by large capitalisation companies in any sector. Investments may include American and global depositary receipts (ADRs and GDRs)."

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    news-2685 Wed, 08 Dec 2021 09:29:30 +0100 Notice to shareholders of the sub-fund Inflection Point Carbon Impact Euro (the “sub-fund”) LUX /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-inflection-point-carbon-impact-euro-the-sub-fund-lux/ Dear Shareholder, The Company’s board of directors (the "Board") hereby informs you of the following changes to be made to the prospectus of the Company (the “Prospectus”): The first paragraphs of the investment policy of the Sub-Fund has been clarified to read as follows:

    "The sub-fund invests mainly in equities issued by Eurozone companies that have committed to reducing their carbon emissions, expanding their low carbon strategy and replacing fossil energy sources with low carbon emission alternatives. The sub-fund invests at least 85% of its net assets in equities and equity-related securities issued by companies of any sector and market capitalisation that are registered in the Eurozone.

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    news-2680 Wed, 08 Dec 2021 09:00:00 +0100 Olivier Brouwers joins La Francaise as head of Benelux & Nordics /en/who-we-are/news/detail/olivier-brouwers-joins-la-francaise-as-head-of-benelux-nordics/ Paris, 8 December 2021: La Française, a multi-expertise asset management group with more than 56 billion euros under management, is strengthening its dedicated international development team (excluding France) and announces the appointment of Olivier Brouwers as Head of BENELUX & NORDICS. Olivier will report to Gerardo Duplat, Head of International Business Development. Olivier BROUWERS joins the team dedicated to the Benelux and Scandinavian markets, alongside Gianni Pauwels, Sales Manager - Belgium and the Netherlands, and Clément Maillet, Sales Manager - Luxembourg. As Head of Benelux & Nordics, Olivier will develop the securities and real estate activities for institutional clients and fund selectors. With nearly twenty-five years of experience in the asset management industry (active and passive), Olivier brings to La Française a solid understanding of the challenges of cross-border fund distribution and socially responsible investment.

    Olivier BROUWERS (49) began his career in 1996 with Paribas Bank Belgium, in the private banking division. In 1998, he joined Invesco France and acquired an initial experience in the distribution of funds, particularly to the Belgian market. Three years later, he helped set up Invesco Asset Management in Belgium, where he began a career spanning nineteen years, initially as Sales and Client Services Manager for institutional and retail clients in Belgium and Luxembourg. With each promotion, Olivier's scope of responsibilities grew to include Benelux, France and Scandinavia. As early as 2013, Olivier understood the role of the financial industry in contributing to a more sustainable economy. At the same time, he became a member of the Sustainable Product Committee, an area of expertise that he would continue to develop throughout his career

    More recently, Olivier was CEO ad-interim for more than a year for the asset management subsidiary of the Belfius Group. In addition to the regulatory and organisational aspects of the position, he also gained first-hand experience of the increasingly stringent requirements of distributors with regard to asset management companies. 

    Olivier BROUWERS holds a Bachelor's degree in Economics with a specialisation in finance from the Université libre de Bruxelles (ULB-Solvay) and is also a graduate of the Belgian Association of Financial Analysts

    Gerardo DUPLAT, Head of International Business Development concluded “As a result of his extensive multicultural experience, Olivier was the obvious choice to develop the Benelux and Nordics markets. He excels in the field of cross-border distribution, the deployment of local development strategies, active versus passive management and sustainable investment". 

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    news-2678 Mon, 06 Dec 2021 16:24:03 +0100 Should You Fear the Taper? /en/who-we-are/news/detail/should-you-fear-the-taper/ With the Federal Reserve currently tapering its quantitative easing, a look at history may shed light on the impact of the change on financial markets, including interest rates and stocks. Federal Reserve Balance Sheet Trends and the Impact on Financial Markets

    • Interest rates have generally risen during quantitative easing, as the chart above suggests. That may be counterintuitive to some given a very large purchaser of bonds may be expected to drive yields lower. However, we believe that historically, the market priced in the stimulative impact of quantitative easing on the economy, which actually boosted interest rates during periods of quantitative easing.
    • During both the tapering of 2014 (when the Fed’s balance sheet grew at a slower pace) and when quantitative tightening occurred in 2018 and 2019 (when the Fed’s balance sheet declined), interest rates trended lower as the market priced in slower economic growth.
    • Given that history suggests that interest rates may decline during the current tapering, we believe investors’ fear of rising rates may be alleviated i.e. concern about higher interest rates lowering the present values of future earnings may be misplaced. Therefore, lower interest rates may potentially support that equities and stocks could fare well as they did during the previous tapering and quantitate tightening periods.
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    news-2670 Mon, 29 Nov 2021 11:40:12 +0100 NOTICE TO SHAREHOLDERS OF THE SUB-FUND MULTISTRATEGIES OBLIGATAIRES (THE “SUB-FUND”) CH > EN /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-multistrategies-obligataires-the-sub-fund-ch-en/ Dear Shareholder, The Company’s board of directors (the "Board") hereby informs you of the following changes to be made to the prospectus of the Company (the “Prospectus”): 1) Clarification of the investment policy

    The first paragraph of the investment policy of the Sub-Fund will be clarified in order to include a concrete percentage of exposure to bonds and so to read as follows:

    "The sub-fund invests mainly in bonds of any credit quality, including below investment grade bonds, and in any currency from OECD issuers.

    Specifically, the sub-fund invests at least 75% of its net assets in fixed rate, floating rate or inflation-indexed debt securities and negotiable debt instruments.

    " The investment policy will also be clarified to foresee that the sub-fund may invest up to 25% of its net assets in non-OECD countries and up to 20% its net assets in cash and cash equivalents.

    The Sub-Fund’s modified duration has also been modified and may now vary from -3 to 7 (instead of -3 to 5).

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    news-2669 Mon, 29 Nov 2021 11:26:46 +0100 NOTICE TO SHAREHOLDERS OF THE SUB-FUND EURO INFLATION (THE “SUB-FUND”) EN > LU /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-euro-inflation-the-sub-fund-en-lu/ Dear Shareholder, The Company’s board of directors (the "Board") hereby informs you of the following changes to be made to the prospectus of the Company (the “Prospectus”): 1) Change of investment policy

    The Sub-Fund’s investment policy will be changed in order to foresee that the sub-fund may invest up to 100% of its net assets in any type of bonds issued in the Eurozone, to remove the possibility to invest in credit notes and to foresee that the sub-fund may invest up to 10% in securities which are not rated investment grade.

    The fact that at least 75% of the Sub-Fund’s net assets will be invested in investment grade
    government bonds issued in the Eurozone and that the Sub-Fund may invest up to 20% in cash
    or cash equivalents has also been clarified

    As from 31 of December 2021, the revised investment policy of the Sub-Fund will therefore read as follows:

    "Objective To outperform (net of fees) the Bloomberg Barclays Capital Euro Government Inflation-Linked Bond Index, over any given 3-year period. Investment policy

    The sub-fund invests at least 75% of its net assets in investment grade government bonds issued in the Eurozone.

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    news-2665 Mon, 29 Nov 2021 10:38:46 +0100 NOTICE TO SHAREHOLDERS OF THE SUB-FUND MULTISTRATEGIES OBLIGATAIRES (THE “SUB-FUND”) EN > LU /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-multistrategies-obligataires-the-sub-fund-en-lu/ Dear Shareholder, The Company’s board of directors (the "Board") hereby informs you of the following changes to be made to the prospectus of the Company (the “Prospectus”): 1) Clarification of the investment policy

    The first paragraph of the investment policy of the Sub-Fund will be clarified in order to include a concrete percentage of exposure to bonds and so to read as follows:

    "The sub-fund invests mainly in bonds of any credit quality, including below investment grade bonds, and in any currency from OECD issuers. Specifically, the sub-fund invests at least 75% of its net assets in fixed rate, floating rate or inflation-indexed debt securities and negotiable debt instruments.

    " The investment policy will also be clarified to foresee that the sub-fund may invest up to 25% of its net assets in non-OECD countries and up to 20% its net assets in cash and cash equivalents.

    The Sub-Fund’s modified duration has also been modified and may now vary from -3 to 7 (instead of -3 to 5).

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    news-2661 Mon, 29 Nov 2021 10:19:01 +0100 NOTICE TO SHAREHOLDERS OF THE SUB-FUND MULTI-ASSET INCOME (THE “SUB-FUND”) EN > LU /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-multi-asset-income-the-sub-fund-en-lu/ Dear Shareholder, The Company’s board of directors (the "Board") hereby informs you of the following changes to be made to the prospectus of the Company (the “Prospectus”) and more specifically the appendix relating to the Sub-Fund: 1) Change of the investment objective

    As from 31 of December 2021 (the “Effective Date”), the investment objective of the Sub- Fund will be amended to add a sustainable investment objective in accordance with article 9 of Regulation (EU) 2019/2088 on sustainability‐related disclosures in the financial services sector (SFDR). The investment objective will therefore read as follows:

    ”Objective: To achieve regular income and capital growth (total return) over the medium to long term by investing, using a flexible multi-asset allocation approach in securities previously screened against environmental, social and governance (ESG) investment criteria with the aim of achieving a weighted average of the portfolio's greenhouse gas emissions per euro invested (carbon intensity) at least 30% lower than that of the composite benchmark 20% MSCI World HD (net total return) + 40% ICE Bofa Global High Yield Index + 40% JP EMBI Global Diversified Index. The sub-fund is actively and discretionarily managed. The index is used to define the eligible investment universe with the objective of reducing carbon intensity. The management strategy is without constraints on the index.”

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    news-2659 Mon, 29 Nov 2021 10:10:02 +0100 NOTICE TO SHAREHOLDERS OF THE SUB-FUND GTS RÉACTIF (THE “SUB-FUND”) EN > LU /en/who-we-are/news/detail/notice-to-shareholders-of-the-sub-fund-gts-reactif-the-sub-fund-en-lu/ Dear Shareholder, The Company’s board of directors (the "Board") hereby informs you of the following changes to be made to the prospectus of the Company (the “Prospectus”): 1) Clarification of the investment policy

    The first paragraph of the investment policy of the Sub-Fund will also be clarified in order to include a concrete percentage of exposure to equities and bonds and so to read as follows:

    "The sub-fund invests at least 51% of its net assets in equities and bonds from anywhere in the world, including emerging markets, directly or indirectly through investments in other funds."

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    news-2650 Fri, 19 Nov 2021 16:36:59 +0100 Energized /en/who-we-are/news/detail/energized/ During the past 70 years, the U.S. has become better at using less energy to produce more goods and services. This trend is illustrated by energy intensity, as measured by the ratio of energy consumption to GDP, which has declined 63% since 1950. This increase in productivity could potentially help dampen the recent impact of higher oil and gas prices on the U.S. economy and corporate earnings. With technology helping drive increased domestic energy production, we believe, higher prices may even potentially support the economy by driving growth in capital expenditures by energy companies.

    U.S. Energy Intensity

     

    • A lot has changed since the 1970s when the U.S. experienced an oil supply shock that drove significant inflation. Our new digital economy is less energy dependent and we believe data is the new oil. At the same time, automobiles, buildings and manufacturing have become more energy efficient.
    •  Energy, while being less of an input cost for companies, may even be more likely to support GDP growth as higher prices cause energy companies to potentially increase their capital expenditures to produce more. We believe, the increase in capital expenditure may exceed the extent to which higher energy prices limit consumption.
    • We don’t think investors need to be overly concerned with higher energy prices crimping the economy, but we do believe there is opportunity in growth-oriented technology providers to oil and gas companies to help optimize well drilling and other areas of upstream exploration and production. Additionally, as the price of solar or wind energy becomes cheaper relative to prices for oil and gas, higher hydrocarbon prices may help spur activity in alternative energy solutions, in our view.

     

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    news-2646 Thu, 18 Nov 2021 09:00:00 +0100 Inflation: are we going back to the 1970s? /en/who-we-are/news/detail/inflation-are-we-going-back-to-the-1970s/ For several months now, fears of stagflation (a period of high inflation without economic growth) have resurfaced, similar to the situation we experienced in the 1970s. But is this fear credible? The 1970s were marked by an unprecedented oil crisis, with prices increasing more than tenfold between 1973 and 1980 (source: Bloomberg). For comparison purposes, this would equate today to the price of a barrel of oil rising from 60 dollars (the average price over the last five years) to over 600 dollars. Back in the 1970s, this price hike was linked to a supply problem (the end of the Bretton Woods agreements, reprisals linked to the Yom Kippur War in 1973), which had significant consequences: an increase in production costs, a rise in prices coupled with a reduction in profits, a fall in purchasing power and consequently, a decrease in demand. This crisis led to France and other countries embarking on extensive nuclear power plant construction programmes to limit their dependence on fossil fuels.

    The problem of stagflation, as experienced in the 1970s, was therefore essentially a supply-based problem, which, as we will see below, seems quite different from the current state of affairs.

    To begin, let us cast an eye on the situation in America.

    The United States should see domestic inflation exceed 6% by the end of the year (source: Cacib), a level that has not been reached since the early 1990s. This increase cannot be solely attributed to an increase in the prices of services, as inflation in this segment is fairly stable compared to the pre-Covid scenario. On the other hand, it is essentially due to an increase in energy prices, mainly resulting from highly favourable base effects on oil. Oil prices have been driven up not by a supply problem - as OPEC has excess production capacity - but by a sharp increase in demand. Inflation has also been fuelled by a new phenomenon: the rise in prices in the goods sector (for example, vehicles). This increase can be explained by both supply and demand issues.

    Finally, for there to be stagflation, there must be a strong slowdown in growth, which is not currently the case in the United States and its growth forecasts for 2022 standing at 4%.
    As such, the American situation can be clarified as follows: inflation is mainly linked to strong demand and actual growth being above potential growth, which does not correspond to a stagflation scenario.
    What about inflation in the euro area? The inflation rate should reach 4.25% at the end of the year (source: Cacib). Once again, this will be driven by an increase in the price of a barrel of oil as well as a significant increase in gas and electricity prices. While the oil issue is essentially a demand issue, the gas market is suffering from serious supply problems due to the dispute between Russia and the European Union about Nord Stream 2. Another marked difference to the US is that inflation on goods is more contained, which should allow inflation in Europe to fall faster than in the United States. 

    In terms of growth, we envisage the same scenario as in the US, with actual growth in 2022 expected to exceed potential growth by more than 4% (source: Bloomberg). However, this figure could be revised downwards due to the negative impact of rising gas prices on growth. A stagflation scenario could therefore eventually emerge if gas prices continued to soar, but this would require the situation to play out over several quarters, which at present seems unlikely.

    The most probable scenario therefore seems that both inflation and growth will remain high. In this scenario, central banks should gradually withdraw some of their monetary support, leading to higher rates (especially in the US) and a continuation of the sectoral rotation currently underway in the equity markets.

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    news-2643 Wed, 10 Nov 2021 15:03:34 +0100 ENABLING THE CLIMATE TRANSITION: Network improvements with 5G /en/who-we-are/news/detail/enabling-the-climate-transition-network-improvements-with-5g/ By Deepshikha Singh, Senior ESG Analyst, La Française Sustainable Investment Research Possibly the largest emissions challenge that faces the Telecommunications industry is the need to design eco-friendly and inexpensive networks to allow for exponentially greater flows of information. In recent years, improvements in energy efficiency across the entire value chain through new networks like 4G and fibre have surprised positively. According to ETNO, between 2010 and 2018, there was an increase in data carried by networks by 1100%, but a reduction in associated carbon emissions by 40% and only a 6% increase in electricity consumption.1 New developments  like 5G are expected to be 90% more energy efficient for consumers per Mbps of data than legacy 4G. Telefonica reports that FTTH (fibre-to-the-home) is 85% more energy efficient and less material-intensive than copper  technology.

    5G, in combination with fibre and other communications technologies, will be the key infrastructure for the digital age. It has the potential to unlock major gains in green technologies with applications for smart buildings, smart cities and smart agriculture. Its ability to support artificial intelligence, robotics, internet of things, remote control and virtual reality will allow for innovation in a wide range of industries and economic sectors.

    Due to these enhanced capabilities, the data   traffic is expected to grow even more exponentially over the next decade.2 Despite its energy efficiency at the level of a user, a typical 5G base station consumes up to twice or more the power than a 4G base station. And energy costs can grow even more at higher frequencies, due to a need for more antennas and a denser layer of small cells. Next generation computing facilities needed to support local processing and new IoT services will also add to overall network power usage. According to a joint study released by InterDigital, a mobile and video technology research and development company, and ABI Research in November 2020, the 5G ecosystem will see a 160% increase in power requirements by 2030, vs 2020 levels.3 In this scenario, it will be even more imperative that the sector as a whole moves towards renewable energy – not only in its own operations but in the entire value chain.

    (1)    https://etno.eu/downloads/reports/the%20state%20of%20digital%20communications%202021.pdf
    (2)    https://www.fiercewireless.com/tech/5g-base-stations-use-a-lot-more-energy-than-4g-base-stations-says-mtn
    (3)    https://www.datacenter-forum.com/datacenter-forum/5g-will-prompt-energy-consumption-to-grow-by-staggering-160- in-10-years

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    news-2641 Wed, 10 Nov 2021 14:08:17 +0100 Carbon Impact Quarterly: the enabling role of telecommunications in the climate transition /en/who-we-are/news/detail/carbon-impact-quarterly-the-enabling-role-of-telecommunications-in-the-climate-transition-1/ In August 2021, the United Nations Intergovernmental Panel on Climate Change (IPCC) published the first part of its Sixth Assessment Report “AR6 Climate Change 2021: The Physical Science Basis”1. These reports assess scientific, technical, and socioeconomic information concerning climate change and they will form the basis for intergovernmental negotiations at the COP26 conference. Some of the major conclusions include:

    • The planet is warming faster than previously thought, with projections of 1.5°C to 1.6°C warming within the next two decades, i.e., by 2040 itself.
    • Limiting warming at 1.5°C is unlikely unless there are “immediate, rapid and large-scale” reductions in greenhouse gas emissions. To enable this requires a coordinated and whole-of-government policy approach, redirecting economies and investments towards sustainability goals, including on climate.

    The report has been called ‘code red for humanity’ by the UN Secretary-General. It is unequivocal that human influence has warmed the atmosphere, ocean and land, and human-induced climate change is already affecting many weather and climate extremes in every region across the globe. The world’s publicly listed companies are emitting nearly 11 gigatons of greenhouse gases collectively every year. That puts them on a trajectory to exceed their share of the global carbon budget as soon as 2026 . According to the IPCC, there is only a 50% chance of remaining below 1.5 degrees even if the net zero targets for 2050 are met. It is therefore imperative that all actors (governments, corporations, and people) in all regions and all sectors act now to affect the necessary change.

    As investors, we need to widen our lenses on climate change and the demand for climate action from our investee firms beyond the high-emitting sectors. The Information and Communication Technology (ICT) sector has long escaped the scrutiny of investors, regulators, and other actors in the climate change debate because of its low carbon profile. But as data consumption grows exponentially, the carbon footprint of the entire industry could very likely grow as well. Expert predictions have forecasted that internet usage will annually increase by 30-40% implying that there will be 30 times today’s internet traffic in just 10 years.

    In its annual update report in January 2020, the European Telecommunications Network Operators’ Association (ETNO) stated that the entire ICT sector generates 2-4% of global GHG emissions. By comparison, the aviation sector has just under 2% of the global footprint in emissions and steel production accounts for just below 3% – that is a strong reason to take a closer look.

    The ICT sector is vast, and although the lines are blurring, Telecommunications firms are at the heart of the digital revolution. 
    Telecommunications companies are alone responsible for up to 40% of emissions from the ICT sector, representing about 1.5-2% of global GHG emissions . Almost the entire carbon footprint of the Telecommunications sector comes from the networks – both fixed and mobile. This is a major area where effective climate strategies for these firms contrast with the technology firms, for whom data centers are a major source of GHG emissions . Physical risks from climate change can be significant as the Telecommunications sector has a significant amount of infrastructure assets.

    (1 ) IPCC, 2021: Climate Change 2021: The Physical Science Basis. Cambridge University Press. In Press.

    (2) https://www.msci.com/documents/1296102/26195050/MSCI-Net-Zero-Tracker.pdf

    (3) Telecoms & ESG: I Feel The Need…. The Need For Balance; Exane BNP Paribas, August 2020

    (4) See our Carbon Impact Quarterly from February 2021 for a discussion of the climate transition strategies in the Technology sector and Microsoft as a case study. blueroom.la-francaise.com/carbon-impact-quarterly-2/

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    news-2640 Wed, 10 Nov 2021 14:03:44 +0100 Teleworking, proof of the digitalisation of the economy /en/who-we-are/news/detail/teleworking-proof-of-the-digitalisation-of-the-economy/ Pierre Schoeffler, Senior Advisor, La Française Group and Philippe Depoux, Chairman of La Française Real Estate Managers In ten years’, time, what will we remember about 2020? The pandemic, of course, but also, and above all, the remarkable proliferation of digitalisation in consumer usage and working life. Teleworking is one of the key indicators of this rapid shift towards digitalisation. It has been facilitated by changes made to working practices in companies over a number of years, including the development of project-based management and matrix organisation structures.

    The spread of teleworking

    According to DARES , during the 2020 spring lockdown, 25% of employees in France were teleworking full time, compared to the previous rate of just 3% of employees, and they only did so as part of a partial teleworking scheme. The business world suddenly realised the scale of the transformation taking place when INSEE  estimated that 40% of jobs in France could at least partially be carried out by remote working. 

    How quickly is “post-crisis” telework spreading? Without a doubt, very quickly. According to the temporary employment company Adecco, 12% of jobs in Europe referenced partial teleworking in mid-2021 compared to 3% a year earlier. However, the level of remote working varies greatly from one country to another and from one sector to another. Northern European countries are culturally more inclined to develop this practice and it is most common in highly skilled knowledge-intensive service roles such as professional services or information and communication technology (ICT) services. It is less prevalent in manufacturing and market services and in jobs that require a physical presence to perform many tasks. Finally, a new type of inequality in the labour market has arisen as a result of the eligibility or non-eligibility for teleworking in different jobs.

    Teleworking and the office market

    For the office real estate market, teleworking goes hand-in-hand with “fewer” office jobs. What order of magnitude are we talking about? In office buildings in the Île-de-France region, which is the largest in Europe with approximately 50 million m2 of occupied space, 2.5 million people were employed in offices at the end of 2020. If 40% of jobs are effectively carried out remotely, as forecasted by INSEE, and considering that two days of telework will become the norm for these jobs, the number of office jobs will decrease by approximately 400,0001. Given that the surface footprint of an office job is 20 m2, this amounts to 8 million m2 that would potentially disappear in terms of demand. 

    Nevertheless, the increase in productivity brought about by teleworking combined with the increase in the number of office jobs due to positive demographics and the tertiarization of the French economy should compensate for this negative impact over the coming years.

    With teleworking, the office market is therefore facing a structural change in its balance between supply and demand. This change will have a profound effect on the design of workspaces, the construction and structuring of the office market, as well as on the evolving nature of the relationship between landlords and tenants owing to companies' increased need for flexibility. 
    Other commercial real estate sectors in France have undergone major changes over the past twenty years: a decrease in industrial building areas, a sharp increase in warehouse areas, a transformation of retail areas and hospitality businesses, an emergence of new real estate investment segments such as data centres. These large-scale shifts were to a large extent caused by the growing digitalisation of the economy (e-commerce, digital platforms, cloud computing) as well as by a change in the economic dynamics of the areas formerly focused on the creation of added value from industrial competitiveness and now fuelled by revenue generation that is spent locally. This shift creates both challenges and opportunities in equal measure.

    The office market is confronted with an unprecedented shift in terms of its abruptness and scale. The forced trek towards digitalisation of working habits and consumption patterns is structurally changing the fundamental balance between different real estate sectors, such as offices, housing, logistics and commerce, as well as affecting the relationship between different areas: cities, suburban areas, medium-sized towns and rural areas, making it necessary to carry out a cross-sectional assessment between segments and locations rather than a vertical assessment by segment. The ongoing transformation will foster the emergence of buildings that combine user experience, flexibility and versatility of use, capacity to develop services and to play an inclusive role in the city, offer value to its occupants and provide energy efficiency. Moreover, as the Blanchard-Tirole report  points out, teleworking is also an asset for mitigating climate change and a means of adapting to it.


    Disclaimer:

    THIS COMMENTARY IS INTENDED FOR PROFESSIONAL INVESTORS ONLY WITHIN THE MEANING OF MIFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. Website information for the regulatory authorities: Autorité de Contrôle Prudentiel et de Résolution www.acpr.banque-france.fr, Autorité des Marchés Financiers www.amf-france.org La Française Real Estate Managers was approved by the “Autorité des Marchés Financiers” under N GP07000038 on June 26th 2007, approval (i.e. the Carte professionnelle) granted by the Paris Ile-de-France “Chambre du Commerce & de l’Industrie” under CPI N 7501 2016000 006 443 – Transactions on Buildings and Business Assets and Real Estate Management.

    1French Ministry of Labour
    2French Statistical Office
    3“The Major Future Economic Challenges”, report by Olivier Blanchard and Jean Tirole co-chairing a commission of renowned international experts, supported by France Stratégie, an independent institution reporting to the Prime Minister

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    news-2631 Fri, 29 Oct 2021 09:07:12 +0200 FED: Time to taper, but it is not time to raise rates. /en/who-we-are/news/detail/fed-time-to-taper-but-it-is-not-time-to-raise-rates/ The Federal Reserve (FED) will hold its press conference on November 3. The Federal Open Market Committee (FOMC) is expected to announce the gradual tapering of its asset purchases. We expect Fed Chair Powell to adopt a balanced communication strategy by reaffirming the dovish forward guidance on rates. Please find below what we expect:

    • The FOMC will likely announce a gradual tapering at a monthly pace of $10bn for treasury securities and $5bn for agency mortgage-backed securities beginning in mid-November. This would mean that Quantitative Easing would finish in June 2022.
    • The Fed will maintain its policy of reinvesting principal payments on its holdings.
    • The FOMC will keep some flexibility to adjust the pace of asset purchases depending on upcoming employment and inflation data. Fed Chair Powell will emphasize that the Committee could act if higher-than expected inflation were to persist for an extended period. 
    • The central bank will make some substantial changes to its policy statement to warrant the decision to taper asset purchases.
    • We do not believe the FOMC will change the characterization of inflation i.e., “Inflation is elevated, largely reflecting transitory factors”. But Jerome Powell will likely highlight that the Committee will monitor incoming data carefully, namely the risk on the de-anchoring of inflation expectations.
    • Obviously, the FED will keep the federal funds target range steady at 0-0.25%. 

    The main risk, from the hawkish side, would be signs that Jerome Powell is less convinced than before by the temporary inflation narrative. This meeting may lead to a flattening of the US treasury yield (UST) curve.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2625 Tue, 26 Oct 2021 18:05:18 +0200 Higher inflation and slowing growth. No new announcement before December. /en/who-we-are/news/detail/higher-inflation-and-slowing-growth-no-new-announcement-before-december/ The European Central Bank (ECB) will hold its press conference on October 28. The Governing Council is expected to maintain an accommodative tone to preserve easy financing conditions and to push back on early lift-off (hike) expectations. Please find below what we expect:

    • The ECB will confirm the levels of key interest rates, its forward guidance, the pace of its pandemic emergency purchase programme (PEPP), its purchases under the asset purchase programme (APP), reinvestment policies and longer-term refinancing operations.
    • President Lagarde will insist on forward guidance, which was strengthened last July, before alluding to the first rate hike in the Eurozone which should be far away. 
    • While risks remain tilted to the upside, she will also reaffirm that the surge in inflation, driven by shocks in supply chains, namely food and energy, is temporary and that the current spike in inflation should fade in the medium term. Nevertheless, the ECB will continue to monitor very closely second-round effects (wage inflation).

    We do not expect a lot of information concerning its policy post December 2021, i.e., what degree of asset purchasing flexibility the ECB will retain post-PEPP in the APP or targeted longer-term refinancing operations (TLTRO).

    All in all, this ECB meeting is expected to be uneventful. In December on the other hand, we should have an update of their macro-economic projections (with fresh projections for 2024). 

    We believe dovish communication on forward guidance could push front-end interest rates lower.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.
     

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    news-2624 Tue, 26 Oct 2021 16:21:36 +0200 COP 26: the major challenges /en/who-we-are/news/detail/cop-26-the-major-challenges/ By Gaël Binot and Hervé Chatot, Emerging Markets Fixed Income Manager and Cross Asset Manager respectively, La Française AM Six years after COP21 in Paris, the next United Nations conference on climate change - COP26 - will be held in Glasgow next month. The conference will be held against the backdrop of the energy crisis and the increase in extreme weather events which are becoming ever more devastating. Climate change now stands squarely at the heart of the political agenda and is also becoming more of a priority for investors.

    The latest report from the IPCC (Intergovernmental Panel on Climate Change) published in August calls for the urgent need to reduce greenhouse gas (GHG) emissions by 2030. The measures previously taken have proven insufficient to date.

    The stakes are therefore relatively high. This COP 26 certainly promises to be the most important conference since its inception. Actions taken or not taken will be decisive in giving humanity a chance to limit global warming to 1.5 °C and avoid a major climate catastrophe.

    Few countries have kept their promises and stuck to the targets of the Paris Agreement in 2015. Under current policies, global warming will reach about 3 °C. Although a significant number of countries have set a target of net zero GHG emissions by 2050, progress remains sorely lacking.

    In this context, can we expect any significant step forward? In our view, a variety of issues need to be addressed.

    Firstly, countries must strengthen their commitment to reduce GHG emissions by 2030 in order to limit global warming to 1.5 °C. The emphasis must be placed on making up for time lost.

    According to Climate Action Tracker, almost all developed countries need to step up their GHG emission reduction targets as quickly as possible. It is vital to implement more ambitious nationally determined contributions (NDCs) in order to meet their targets. Today, 68 countries (responsible for 61% of global GHG emissions) have adopted a target of net zero emissions but only 80 countries (responsible for 36% of global GHG emissions) have updated their national contributions with more ambitious targets according to ClimateWatch.

    While some countries such as the United States, Canada, the United Kingdom, along with the European Union, have reviewed and officially submitted more ambitious NDCs, certain large economies, such as Australia, Indonesia, Mexico, Brazil, Russia, have yet to improve their climate targets.

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    news-2616 Fri, 22 Oct 2021 14:21:34 +0200 The Mid Cap Message /en/who-we-are/news/detail/the-mid-cap-message/ We believe mid cap stocks fly below many investors’ radar. They can potentially enhance returns and increase diversification. In fact, we think they offer much more than that. What are some investors missing when it comes to mid caps? Risk-Adjusted Return Metrics

    • Historically, mid caps have provided superior risk-adjusted returns. The Sharpe Ratio, which is the average return earned in excess of the risk-free rate per unit of total risk, can potentially help investors understand the return of an investment compared to its risk. Generally, the higher the ratio, the better. The Treynor Ratio is a performance metric that determines how much excess return was generated for each unit of systematic risk undertaken by a portfolio. Again, generally, the higher the ratio, the better.
    • The mid cap space may also be conducive to finding alpha given that mid cap managers had an active share of 87% as compared to large cap managers’ 73% as of yearend 2020, according to eVestment data.1 Additionally, mid cap stocks have less sell-side research coverage than large cap stocks (nearly half the average number of analysts), potentially making it easier to have differentiated views on sales, earnings and cash flows among mid caps.2
    • Surprisingly, with all of these potential benefits, investors seem to be underweight mid cap stocks. According to data from Morningstar, mid caps make up 20% of total market capitalization but only 11% of U.S. equity mutual funds and ETFs. We believe this gap may represent a significant opportunity for investors to re-allocate to a promising equity category.
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    news-2609 Tue, 19 Oct 2021 09:46:34 +0200 In a rising rate environment, where is the sweet spot in fixed income? /en/who-we-are/news/detail/in-a-rising-rate-environment-where-is-the-sweet-spot-in-fixed-income/ by Gabriel Crabos, Credit Fund Manager, La Francaise AM Strong Economic Recovery Scenario

    Economic growth is intensifying as the r oll-out of the COVID-19 vaccination program progresses and economies reopen. Global growth is expected to reach +5.9% in 2021 according to the latest IMF projections. The outlook on defaults on High Yield (HY) debt remains very favorable, particularly in Europe and the United States, thanks to the economic recovery following the health crisis and the support of central banks (FED, ECB, BOE, etc.). The financial situation of companies has clearly improved with leverage ratios (net leverage, interest coverage ratio etc.)that have returned to the pre-Covid level. Finally, corporate liquidity has never been so strong in the face of very limited bond maturities: in Europe approx. 13% of the stock of HY debt is due in 2022 and 2023 versus a cash position of 30% of gross debt; in the US less than 8% of the stock of HY debt is due in 2022 and 2023 versus a cash position of 16% of gross debt. However, the situation is somewhat different and less favorable in emerging markets.

    Though the FED and ECB have been cautious, considering inflationary pressures as “transitory”, they are nevertheless preparing markets for a decrease in asset purchases (i.e., tapering). We believe tapering could create more volatility in the markets. However, in our opinion, it does not constitute a disruptive element that could cause a significant widening of credit spreads and a sudden increase in defaults. Moreover, any curve steepening should benefit the banking sector.

    La Francaise AM believes in a strong economic recovery scenario, judging by the positive trends in corporate fundamentals and contained default rates. In our view, the greatly feared consequences of the end of state aid in Europe and the US on the solvency of companies will be limited.

    A flexible asset allocation

    In today’s environment with upward inflationary pressures and the prospect of future interest rate hikes by central banks, La Francaise AM offers a pure credit strategy with limited exposure to interest rate sensitivity, La Francaise Carbon Impact Floating Rates. As its name implies, the fund invests in Floating Rate Notes (FRN).

    FRN are bonds issued by corporate issuers and banks. They exhibit very limited interest rate sensitivity as the coupon is based on a margin over a benchmark rate (i.e. Euribor 3M, SOFR…). Furthermore, the volatility of FRNs is more limited than fixed rate bonds: the volatility of the Euro Investment Grade FRN index is close to 80% lower than the Euro Investment Grade Fixed index, which is a clear benefit to a diversified asset allocation in the fixed income universe. La Francaise Carbon Impact Floating Rates is primarily invested in FRN (approx. 74% of assets as end of September 2021) and thanks to the attractive features of FRNs is able to generate a limited modified duration of 0.31 and a 1-year weekly volatility of 0.77%

    The fund allows for a flexible and global asset allocation (Investment Grade and High Yield, geographic and sectoral positioning) and given the current exposure of the fund to the financial sector (approx. 60%), should benefit from curve steepening movements as banks fundamentals should improve. The fund’s exposure (minimum 50% of IG and maximum 50% of HY) seeks to capitalize on La Francaise AM’s credit expertise and strongest credit convictions through investments in Floating Rates Notes, the systematic hedging of foreign exchange risks and a long-term diversification objective of approximately 130 issuers. 

    Bond selection is subject to a variety of financial and extra financial filters. First, La Française AM’s exclusion policy, which covers controversial weapons, companies from blacklisted countries etc., and ESG filters are applied to the initial investment universe of over 4 500 companies. Approximately 2 000 companies remain and are thereafter subject to a four-step credit analysis:  

    • fundamental approach, 
    • solvency and liquidity analysis, 
    • profitability analysis 
    • country approach: influence of macro data on the issuer and its sector) 

    and to “ESG” and “Carbon Transition” analyses. Only then, does the fund management team proceed with portfolio construction, selecting from what is now an investable universe of only 600 companies, while keeping sight of the overall investment objective of achieving a carbon footprint at least 50% lower than the composite benchmark (50% Bloomberg Barclays Global Aggregate Corporate Index + 50% ICE BofAML BB-B Global High Yield Index).

    La Francaise AM believes that the inclusion of ESG and Carbon criteria in the fund’s investment strategy can only have a positive impact on its credit profile due to an even more stringent selection process. Companies that embark on the transition have demonstrated their ability to adapt to their environment. They are generally more agile and less sensitive to climate risks. Likewise, if the impact is positive on the quality of the fund's issuers, it could also have a positive impact on the fund's volatility. Within the Bloomberg Euro Floating Rate Notes index (LEF1TREU), the volatility of the 25% of issuers with the best ESG ratings have a one-year volatility (as at end of Sept. 2021) of 0.2% compared to 0.3% for 25% with the worst ratings. 

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    news-2604 Fri, 15 Oct 2021 15:13:11 +0200 The Robot Future Is Now /en/who-we-are/news/detail/the-robot-future-is-now/ The earliest known industrial robot dates back to 1937. It was a crane-like device powered by a single electric motor. It was capable of five axes of movement and could grab objects and stack wooden blocks in pre-programmed patterns. Today’s robots, of course, have advanced tremendously. Where are these advancements most prominent? Global Size of the Market for Industrial Robots
    Between 2019 and 2027

    • The bulk of robot use lies in the industrials sector. Historically, robots have predominated in automobile manufacturing and in hazardous environments. However, with the latest step changes in innovation, the end markets and applications for robots are accelerating from manufacturing to services, and from working in collaboration with humans to working autonomously.
    • Logistics is a key example where innovation in sensing and artificial intelligence have recently driven a robot revolution. Labor shortages in distribution centers were problematic pre-pandemic; Covid-19 has further highlighted the need for robotic solutions across various sorting, storage and fulfillment applications. Utilizing robotic applications in farming, harvesting and even crop protection is another example. We also believe health care will be one of the fastest growth areas in robotics across a number of applications including nursing services, surgical assistance, biotechnology and laboratory processing.
    • Companies that may benefit from the robot revolution will likely include global leaders in industrial robot manufacturing along with the underlying supply chain of servo motors (used to control speed in cars), lasers and component provider
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    news-2603 Fri, 15 Oct 2021 12:03:48 +0200 La Française Real Estate Managers lands second prime office building in Scotland /en/who-we-are/news/detail/la-francaise-real-estate-managers-lands-second-prime-office-building-in-scotland/ La Française Real Estate Managers recently completed the off-market acquisition of its second real estate asset in Scotland and the first on behalf of one its French collective real estate investment vehicles. The vendor, GSS Developments Ltd., is a privately owned and run property development business, established in 2000. The office building, completed in 2018 by GSS Developments, is located in the Exchange district of Edinburgh, at 2 Semple Street. The Exchange district has a concentration of modern office buildings occupied by financial and commercial tenants. 

    The six-storey corner building provides 35,090 sq.ft. of offices, 9,776 sq.ft. of retail space and basement arrival facilities. The property is multi let to occupiers Including Huawei Technologies Co. Ltd. - a multinational technology company and RSM - a provider of audit, tax and consulting services. The property factors in sustainability and wellbeing enhancements, including BREEAM “Very Good” and EPC “A” ratings, air-conditioning delivered via Air source head pump technology, intelligent LED lighting on all floors, 47 bike spaces with maintenance facilities, electric car charging points and good connectivity by various means of transport.

    La Française Real Estate Managers was advised by Savills and by Lindsays on legal aspects.  GSS was represented by JLL and by Addleshaw Goddard on legal aspects.

    Peter Balfour, Managing Director, Head of Real Estate – UK, La Française Real Estate Managers, said “Approximately ten percent of the real estate portfolio managed by La Française Real Estate Managers is located outside of France. The building’s strong sustainability credentials, coupled with a limited supply of quality buildings, makes 2 Semple Street a valuable addition to our rapidly growing international real estate portfolio. It’s been a pleasure dealing with GSS Developments which has delivered a product that suits a long-term investor.”

    Paul Stevenson, GSS Developments Director, said “We are proud to have delivered 2 Semple Street, which is widely regarded as a high quality and market leading building, benefiting from strong sustainability credentials; a goal we sought to achieve in 2016 when construction commenced. Securing blue chip occupiers such as Huawei and RSM, coupled with this disposal to an international asset management group such as La Francaise, is testament to the quality of product GSS Developments have delivered at 2 Semple Street.”

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    news-2602 Mon, 25 Oct 2021 09:00:00 +0200 La Française REM announces the arrival of two new talents to the french Asset Management team, dedicated to institutional investors /en/who-we-are/news/detail/la-francaise-rem-announces-the-arrival-of-two-new-talents-to-the-french-asset-management-team-dedicated-to-institutional-investors/ Paris, 21 October 2021: La Française Real Estate Managers (REM), asset management firm with close to €28 billion in assets under management (30/06/2021), is pleased to announce the arrival of two new talents to the French asset management team, dedicated to institutional investor business: Adrien Bérenger and Cédrick Becker, respectively appointed Senior Asset Manager – Value Added Strategies and Senior Asset Manager – International Institutional Investors. Both will report directly to Xavier Barreyat, Director of Asset and Fund Management for the institutional division of La Française REM in France. 

    Xavier Barreyat, Director of Asset and Fund Management, said, “Institutional investors are increasingly allocating to real estate and diversifying their investment strategies across an array of sub-sectors. In today’s post COVID-19 real estate market, experienced asset managers are more than ever a must have. Adrien and Cédrick will provide much valued experience to the French team and will play a crucial role in supporting the financial performance of our clients’ investments.”

    More information:

    The Institutional division of La Française REM, under the leadership of David Rendall, Managing Director of La Française Real Estate Managers – Institutional division, is responsible for adhoc real estate investment solutions specifically designed for institutional investors on primarily Core/Core+ strategies, but also Value Added and Opportunist strategies. He is supported by a team of qualified investment professionals who are operating beyond the three primary European real estate markets (France, Germany and the UK, including Ireland) to Benelux. Philippe Depoux, Chairman of La Française Real Estate Managers, oversees both the Institutional and Retail divisions of the asset management firm.

    The French asset management team:
    Director of Asset and Fund Management - France, Xavier Barreyat

    • Core / Core + strategies:
    • French institutional investors: Christophe Fleury, Senior Asset Manager
    • International institutional investors: Cédrick Becker, Senior Asset Manager
    • Value Added Strategies: Adrien Bérenger, Senior Asset Manager

    Aged 34, Adrien Bérenger, Senior Asset Manager, specialized in value-added investment strategies

    Adrien has 12 years of experience in real estate beginning with Union Investment Real Estate where he began as a junior asset manager. In 2016, he was promoted to Director of Asset Management for the Belgian office. Two years later, he returned to France as Senior Asset Manager and was further promoted in 2020 to Director of Asset Management France, responsible specifically for redevelopment projects. 

    Adrien holds a master’s degree in Real Estate Management from ESSEC business school. He is a member of the Royal Institution of Chartered Surveyors.

    Aged 37, Cédrick Becker, Senior Asset Manager

    Cédrick has more than 12 years of experience in real estate beginning in 2009 with GE Real Estate as an analyst. Cédrick joined the Aerium Group in Luxembourg in 2010 as an asset manager and oversaw the Benelux portfolio. In 2012, he moved to Paris and became Investment Manager, working on the acquisitions and disposals of the French portfolio. In 2015, he joined Allianz Real Estate as Senior Asset Manager / Team Head. For six years, Cédrick managed a diversified portfolio (office, retail & logistics), comprised of assets located in France and the Netherlands. 

    Cédrick holds a master’s degree in Finance and an undergraduate degree in economics from the University of Paris-Dauphine. He also holds master’s degree in Corporate Finance from ESCP Business School

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    news-2592 Tue, 12 Oct 2021 09:00:00 +0200 Alger Launches High-Conviction Alger SICAV-Alger Mid Cap Focus Fund EN > AT /en/who-we-are/news/detail/alger-launches-high-conviction-alger-sicav-alger-mid-cap-focus-fund-en-at/ Alger Management, Ltd. (“Alger”) is pleased to announce the launch of Alger SICAV-Alger Mid Cap Focus Fund1 (the “Fund”). The Fund will typically invest in 50 high-conviction mid capitalization growth equities. La Française is a distributor of the Alger SICAV in Europe. Amy Y. Zhang, CFA, the portfolio manager of the Fund, joined Alger in 2015 and has 26 years of investment experience. Additionally, Amy has a “AA” Fund Manager Rating from Citywire and manages a suite of high-conviction small and mid-cap strategies.

    “Mid cap stocks have outperformed both small and large caps over the past three decades, which provides an exceptionally fertile ground for active stock picking,” said Amy. “The Fund is a focused, high conviction portfolio of ‘best ideas’ generated by our team of experienced analysts. We seek to invest in mid cap companies with defensible competitive positions and high financial quality, as indicated by solid balance sheets and strong cash flow generation that can compound value over the long term,”

    Dan Chung, CEO and Chief Investment Officer of Alger, said, “We continue to expand Alger’s suite of high-conviction, focused portfolios with the launch of this Fund. In fact, we have more than $19 billion in assets under management in focused portfolios. We believe this demonstrates that our clients recognize our skill and capabilities as active stock pickers and that there is significant demand for these types of strategies.”

    Amy also manages the well-recognized Alger SICAV - Small Cap Focus Fund2, a five-star Overall Morningstar rated fund (Class A US, among 303 US Small-Cap Equity funds, based on risk-adjusted returns as of 6/30/21).

    “I am quite proud of the results Amy and her team of talented analysts have delivered in the Small Cap Focus Fund and I believe that investors seeking alpha and access to more of our team’s best ideas will be interested in learning more about this new Fund,” added Dan.

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    news-2587 Mon, 11 Oct 2021 10:21:38 +0200 Identifying Risk /en/who-we-are/news/detail/identifying-risk/ Many people view growth stocks that have relatively high shorthand valuation multiples, such as price-to-earnings, as more risky. But recent history suggests this may not be the case. What might investors be missing? Downside Capture

    • Growth stocks, defined as the Russell 3000 Growth Index, have exhibited lower downside capture than value stocks, as defined by the Russell 3000 Value Index, over the past three, five and ten years. This means that growth stocks have performed better in down markets than value stocks, a key characteristic that many investors view as indicative of having lower risk.
    • There may be several reasons why growth stocks exhibit less risk, including lower levels of financial leverage or debt; and lower levels of operating leverage or higher margins. Perhaps most importantly, growth stocks may potentially benefit from secular trends as opposed to cyclical drivers of fundamental growth. Compare a company that makes construction cranes (i.e., value) with a social network company (i.e., growth). The former is likely to have more financial and operating leverage and be more sensitive to economic conditions than the latter, in our view.
    • This dynamic may make value stocks riskier despite their lower valuations. At times, we believe growth stocks may face challenges of investors wrestling with matters such as future market share gains and the appropriate rate at which to discount back future cash flows, but growth stocks also may have underappreciated characteristics, such as those described above, that may potentially mitigate their risk, particularly with respect to down markets.
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    news-2586 Mon, 11 Oct 2021 10:15:06 +0200 Global warming - Are we on the right trajectory? /en/who-we-are/news/detail/global-warming-are-we-on-the-right-trajectory/ Written by Nina Lagron, CFA, Head of Large Cap Equities, La Française AM on 24| 08 | 2020 196 nations signed the Paris Agreement in 2015, committing to limiting global warming to well below 2 degrees Celsius. The signing of the international treaty constituted a milestone as nations across the globe adopted for the first time a common goal and recognized their collective responsibility.

    However, in today’s post-Covid 19 economy, how are nations faring relative to their Nationally Determined Contributions (NDCs)? According to the UN Environment Programme’s 2020 Emission Gap Report, we are far off target and on a direct path for global warming of more than 3 degrees Celsius.  Unfortunately, measures to contain the propagation of COVID-19, including lock-down and the resulting disruption in global shipping, caused but a temporary estimated 7% reduction in green-house gas emissions in 2020 and will not have a lasting effect on global emissions because of their temporary nature. (Forster, P. M. et al. Current and future global climate impacts resulting from COVID-19. Nat. Clim. Change 10, 913–919 (2020). 

    Where is post-Covid stimulus going?

    The key to a long-term impact on global warming includes directing post-Covid 19 stimulus towards green infrastructure while waning fossil-fuel support. But what proportion of global post-Covid stimulus is actually going to concrete actions supporting economic activity that enhance environmental and natural resource quality over a longer term? G20 nations have spent $14.9 trillion on post Covid-19 stimulus packages and though exact figures differ, sources agree that the percentage of green stimulus is inadequate to sustain reduced carbon emissions. Over the past 18 months, G20 governments have allocated but “$363 billion to sectors or projects that aim to buoy up the economy and to cut emissions or aid climate adaptation against $1.2 trillion for carbon intensive sectors such as aviation and construction with no green element”. (BNEF). The only two countries to allocate similar stimulus to green and carbon intensive sectors are France and Japan.  Whereas China for example, with 247 GW of new capacity in coal power, either under construction or announced and permitted, has allocated $2.1 billion to green stimulus as opposed to $215 billion to carbon intensive sectors. (BNEF) 

    The race is on to phase out fossil-fuel support and COP26, when NDCs will be discussed, is closing in fast. Under ETF (Enhanced Transparency framework), effective 2024, nations will be held accountable and a first assessment on target progress will be made.

    Fiduciary responsibility of Asset Managers

    We as asset managers have a fiduciary responsibility to redirect capital towards sustainable investment solutions, to adapt our investment strategies accordingly and to engage with companies on matters such as climate transition risk, corporate governance, carbon emission reduction targets, etc. It is our responsibility as asset managers to induce positive change. Regulators and Central Banks are also pushing in this direction: the upcoming EU taxonomy is just one example of how climate awareness is shaping the fund management industry. 

    When considered against the backdrop of the EU Taxonomy, which defines environmentally friendly activities in an effort to provide a common language for end-investors and redirect capital towards sustainable investment solutions, the reality of post-Covid spending is dramatic and in total opposition to the common goal of limiting global warming. While the oil & gas sector and other carbon intensive sectors have rebounded strongly thanks to post-Covid support, we as sustainable asset managers are required to underweight carbon intensive sectors. So I ask, “when will fiscal stimulus policy become aligned with the urgent goal of limiting global warming and are asset owners willing to accept the potential underperformance of their portfolio resulting from the mismatch between fiscal policy and what is needed to kick off the energy transition?”    

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    news-2585 Mon, 11 Oct 2021 10:09:34 +0200 What we suspected has been confirmed! /en/who-we-are/news/detail/what-we-suspected-has-been-confirmed-1/ By Virginie Wallut, Director of Real Estate Research and Sustainable Investment at La Française Real Estate Managers September 2021 During the first half of 2021, we began to glimpse the first signs of a revival of the European office real estate market. In Q2, the economy of the eurozone rebounded as sanitary measures progressively lifted. Investment and rental markets logically bounced back, and recent activity may be indicative of the start of a new cycle against the backdrop of new ESG-related (environmental, social and governance) regulations and changing investor and user behavior.

    Promising investment volume figures

    The figures are promising. After four quarters of uninterrupted decline (2020), the volume of office real estate investments continued to rise over the first two quarters of 2021, due in large part to accommodative financing conditions and favorable valuation perspectives. Across the board and with the United Kingdom in lead position, all European countries, apart from France, registered an increase in investment volumes. A rebound in France is expected in Q3 2021. Naturally, demand was focused on prime assets, with strong ESG performance. However, investors continued to shy away from dated assets given the capital expenditures necessary for renovation.

    Diverging yields of Primary and Secondary assets

    Prime office assets in Europe, particularly resilient, continued to offer attractive yields, especially in the low-for-long interest rate environment. However, investors are now demanding a risk premium, subject to local market conditions, on secondary assets.

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    news-2583 Mon, 11 Oct 2021 09:56:51 +0200 La Francaise Real Estate Managers and Altarea sign partnership to meet growing demand for new rental housing /en/who-we-are/news/detail/la-francaise-real-estate-managers-and-altarea-sign-partnership-to-meet-growing-demand-for-new-rental-housing/ La Française Real Estate Managers (REM), a real estate management company with nearly €28 billion under management, including more than 50% on behalf of French and international institutional investors, has entered into a partnership agreement with ALTAREA for the sourcing of a large volume of residential rental assets located in France The agreement covers 600 housing units per year over two years, including 200 vacant housing units and five managed residences. 

    This second partnership signed in 2021 confirms La Française REM's ambition to accelerate its development in the residential rental property market.

    The proposed projects will have to meet strict specifications including the following criteria:

    • To be residential assets in the broadest sense such as housing, student residences, senior housing and co-living assets.
    • Comply with La Française's new Construction charter which sets minimum environmental and social standards, particularly in terms of energy and environmental performance, preservation of resources and integration of projects within the surrounding area.
    • Be located primarily in Île-de-France and in large regional cities.

    Philippe Depoux, Chairman of La Française Real Estate Managers commented, “Residential real estate fits perfectly into a strategy of diversification. Residential property generally offers less volatility than the tertiary sector and is very resilient in terms of rental income. Residential real estate can generate attractive returns in our low interest rate environment. In order to meet the growing demand from institutional investors, we naturally approached ALTAREA, a long-term partner of the La Francaise Group to meet the challenges of transforming urban areas. This partnership agreement is a pledge of quality and testifies to our mutual trust".

    Jacques Ehrmann, Managing Director of the ALTAREA group stated, “We are witnessing a new wave of interest from institutional investors in residential real estate in France. It is a sign of the confidence they have in this asset class which offers favourable long-term return prospects while responding to market demand and occupier needs. This partnership with La Française is part of our overall strategy of selling residential property to institutional investors, by offering - through all of our residential development brands - quality products that integrate environmental requirements and new usage patterns.” 

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    news-2582 Mon, 11 Oct 2021 09:24:23 +0200 Will green bonds be enough to meet carbon reduction targets? /en/who-we-are/news/detail/will-green-bonds-be-enough-to-meet-carbon-reduction-targets/ By Gaël Binot and Hervé Chatot, respectively Emerging Markets Fixed Income Manager and Cross Asset Manager, La Française AM At the end of 2020, the European Union decided to revise its environmental objectives upwards by targeting a 55% reduction in greenhouse gases by 2030 compared to 1990 levels, replacing the previous target of 40%. This new objective, "in line with the Paris agreement to contain the temperature rise well below 2°C" has led to a firmer commitment from EU Member States to accelerate investment in the green transition to fight against the negative impact of climate change.

    A third of the €750 billion NextGenerationEU (NGEU) European recovery plan will be used to finance environmental projects by 2026. To achieve this target, the European Commission will issue €250 billion in green bonds over the next five years, thereby becoming the largest issuer of green bonds. European Commissioner Valdis Dombrovskis said that " “Europe will need around €350 billion euros of annual extra investment to meet its 2030 emissions target in energy systems alone.”

    The EU is developing a set of regulatory measures to ensure market transparency and guide investors towards genuine green investments.

    In Europe, pending the future European standard (taxonomy) on green emissions which will not be available for at least a year, the first European green issuances will be based on current market practices. These practices are based on the voluntary standard of the International Capital Market Association (ICMA) and its four principles ("Green Bond Principles"): use of proceeds, process for evaluation and selection, management of proceeds and reporting. The purpose of this regulation is to ensure market transparency to guide investors towards truly green investments. 

    At the end of 2020, the total stock of green bonds issued by States was $88bn globally and $77bn in Europe. However, the size of this market is still relatively insignificant in comparison with the total amount of global and European sovereign issues. Nevertheless, to achieve the States' objectives in terms of the decarbonisation of economies, the investment needs of energy-related infrastructure are immense. The International Renewable Energy Agency (IRENA) estimated that $110 trillion will be needed between 2016 and 2050 to achieve a low carbon energy system.The financing of these needs makes green bonds a booming market with strong potential for growth.

    In Spain, on the basis of the “Green Bond Framework”, the Spanish Treasury has identified an envelope of €13.6 billion in green government spending over the 2018-2021 period. On 7 September, Spain launched its first green bond for 5 billion euros repayable in July 2042, thereby joining ten other EU countries that have issued green bonds: France, Germany, the Netherlands, Belgium, Ireland, Sweden, Poland, Hungary, Lithuania and more recently Italy (€8.5 billion in March 2021). 

    This first Spanish green issue was a success, drawing more than 60 billion euros from investors. The annual return in euros was 1.034 %. After this first Spanish issue, Germany also launched a new green bond with an issue volume of €3.5 billion on 8 September, maturing in August 2031. The growing interest of investors is reflected in the green premium - a "Greenium" - of 4.4 bp compared to the traditional bond with the same maturity, issued a few months earlier.

    The European Commission has announced the first green issue of the €250 billion programme for the month of October. The size of the EU's green issues will make Europe a world leader in sustainable finance. This first issue is also an initial step in the construction of a green yield curve which will serve as a benchmark in the future for green issues in euros by European States. 

    The future needs for green financing, the commitment of the European executive to earmarking funds for projects linked to climate change and recent investor appetite for European green issues all suggest that there will be a demand for this initial issue. 

    A number of other States will be issuing green, social and sustainable bonds over the coming years. It will be essential to be able to verify the allocation of funds to environmental and sustainable projects, etc., through a binding international standard. However, to achieve the carbon emission reduction targets for 2030 and 2050 and to change the energy mix of countries, issuing green bonds alone will not be enough. The EU's flagship climate project, the European Emission Trading Scheme - EU ETS, must help investment flows into taxonomically aligned activities and accelerate change in all the sectors concerned. 

    Disclaimer

    DOCUMENT FOR INFORMATION PURPOSES. THIS DOCUMENT IS INTENDED FOR NON-PROFESSIONAL INVESTORS AS DEFINED BY MiFID. The information contained in this document is provided for information purposes only and it does not under any circumstances constitute an offer or invitation to invest, investment advice, or a recommendation relating to any specific investments. The specific information, opinions and figures that are provided are considered to be well-founded or accurate on the date when they were drawn up based on current economic, financial and stock market conditions, and they reflect the La Française Group's current opinions regarding the markets and market trends. They have no contractual value and are subject to change, and they may differ from the opinions of other management professionals. Please note, past performance is no guarantee of future results and that the level of performance is not constant over time. Published by La Française AM FINANCE Services, whose registered office is at 128, boulevard Raspail, 75006 Paris, France, and which is licensed as an investment services provider by ACPR under no. 18673. La Française Asset Management is a management company licensed by the AMF under no. GP97076 on 1 July 1997.

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    news-2575 Fri, 01 Oct 2021 11:13:48 +0200 Letter to unitholders EN > UAE (La Française Global Coco sub-fund) /en/who-we-are/news/detail/letter-to-unitholders-en-uae-1/ Re: Modification of the La Française Global Coco sub-fund, a sub-fund of the La Française SICAV Dear Sir, Madam,

    You are a unitholder in the La Française Global Coco sub-fund. We thank you for the trust you have placed in us.

    • Changes coming into force on 6 October 2021:

    The management company has decided to amend the regulatory documentation of the La Française Global Coco sub-fund (hereinafter the "Sub-Fund") particularly in order to take into account environmental, social and governance criteria (known as "ESG" criteria) in the selection of issuers of the securities described below. The sub-fund will now be classified in Article 8 in accordance with the SFDR regulation (products that promote environmental and/or social characteristics) and in category 1 in accordance with the Autorité des marchés financiers instruction 2020-03 (significant commitment approach).

    In addition, the sub-fund may now invest in bonds and negotiable debt securities issued or guaranteed by governments (public debt) up to a limit of 50% of net assets.

    These changes do not require the approval of the Autorité des marchés financiers and will be effective from 6 October 2021.

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    news-2573 Fri, 01 Oct 2021 11:09:29 +0200 Letter to unitholders EN > IT (La Française Global Coco sub-fund) /en/who-we-are/news/detail/letter-to-unitholders-en-it/ Re: Modification of the La Française Global Coco sub-fund, a sub-fund of the La Française SICAV Dear Sir, Madam,

    You are a unitholder in the La Française Global Coco sub-fund. We thank you for the trust you have placed in us.

    • Changes coming into force on 6 October 2021:


    The management company has decided to amend the regulatory documentation of the La Française Global Coco sub-fund (hereinafter the "Sub-Fund") particularly in order to take into account environmental, social and governance criteria (known as "ESG" criteria) in the selection of issuers of the securities described below. The sub-fund will now be classified in Article 8 in accordance with the SFDR regulation (products that promote environmental and/or social characteristics) and in category 1 in accordance with the Autorité des marchés financiers instruction 2020-03 (significant commitment approach).

    In addition, the sub-fund may now invest in bonds and negotiable debt securities issued or guaranteed by governments (public debt) up to a limit of 50% of net assets.

    These changes do not require the approval of the Autorité des marchés financiers and will be effective from 6 October 2021.
     

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    news-2558 Fri, 01 Oct 2021 10:10:31 +0200 Letter to unitholders (La Française Rendement Global 2028 Plus sub-fund) /en/who-we-are/news/detail/letter-to-unitholders-3/ Re: Modification of the La Française Rendement Global 2028 Plus sub-fund, a sub-fund of the La Française SICAV Dear Sir, Madam,

    You are a unitholder in the La Française Rendement Global 2028 Plus sub-fund. We thank you for the trust you have placed in us.

    The Management Company has decided to amend the regulatory documentation of the La Française Rendement Global 2028 Plus sub-fund (hereinafter the "Sub-Fund"). Therefore, La Française Asset Management is proposing to develop the La Française Rendement Global 2028 Plus sub-fund in order to adapt to the current environment by trying to provide solutions in view of the low interest rate environment. The performance of the Sub-Fund may also be affected by other factors, such as hedging costs and defaults.

    • Changes effective as of 6 October 2021 requiring authorisation from the Autorité des marchés financiers:

    The Sub-Fund may now invest in non-rated securities up to a maximum of 30% of the net assets.
    In addition, the Sub-Fund may invest in contingent convertible bonds (so-called "cocos") up to a maximum of 20% of the net assets. A risk has been added under the heading "risk profile" in the prospectus relating to the investment in contingent convertible bonds.

    Finally, the financial leverage will be limited to 150% of the net assets of the sub-fund compared to 120% currently.

    These changes will result in an increase in the risk/return profile of the Sub-Fund. However, the Sub-Fund's SRRI (5) will remain unchanged.

    These changes were approved by the AMF on 20 September 2021.

    • Changes effective as of 6 October 2021, not requiring authorisation from the Autorité des marchés financiers:

    The Management Company has decided to implement extra-financial measures in the Sub-Fund, in particular in order to take into account environmental, social and governance criteria (so-called "ESG "criteria) in the selection of issuers of securities. However, it is specified that the extra-financial approach implemented in this Sub-Fund is not systematic

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    news-2553 Fri, 01 Oct 2021 09:52:20 +0200 Letter to unitholders (La Française Global Floating Rates sub-fund) /en/who-we-are/news/detail/letter-to-unitholders-2/ Re: Modification of the La Française Global Floating Rates sub-fund, a sub-fund of the La Française SICAV Dear Sir, Madam,

    You are a unitholder in the La Française Global Floating Rates sub-fund. We thank you for the trust you have placed in us.

    The management company has decided to amend the regulatory documentation of the La Française Global Floating Rates sub-fund (hereinafter the "Sub-Fund") particularly in order to take into account environmental, social and governance criteria (known as "ESG" criteria) in the selection of issuers of the securities described below.

    The sub-fund will now be classified in Article 9 in accordance with SFDR regulations (products with a sustainable investment objective) and in category 1 in accordance with the Autorité des marchés financiers instruction 2020-03 (significant commitment approach). In addition, the name of the sub-fund will be changed to: La Française Carbon Impact Floating Rates.

    The sub-fund may now use options (derivative instruments) and invest in green bonds. Finally, a sustainability risk and an ESG investment risk have been added in the prospectus of your mutual fund. These changes do not require the approval of the Autorité des marchés financiers and will be effective from 6 October 2021. The sections affected and the nature of the modifications are listed in Annex 1 to this letter.

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    news-2550 Wed, 29 Sep 2021 09:20:17 +0200 A topical overview of the subordinated debt market /en/who-we-are/news/detail/a-topical-overview-of-the-subordinated-debt-market/ by Jérémie Boudinet, Credit Fund Manager, La Française AM Market reaction to Covid-19 

    This market segment was at first heavily impacted, with drawdowns reaching as much as c. 30%, but the recovery has been just as strong, thanks to the early support from governments and regulators, which knew that financial institutions were needed to be part of the solution for the Covid-19 crisis. The only counterparty to all the financial support banks received was the temporary suspension of dividend distributions, which actually was good news for bondholders, as capital strength was being preserved!

    Moving forward, a positive outlook on subordinated debt instruments 

    The financial subordinated debt space is now mature in Europe, and we expect new bond supply to be used almost only for refinancing purposes. At the same time, the riskiest layer of bank subordinated debt, Tier 1 bonds (aka CoCos), is attracting more and more demand worldwide, as the product is seen as less volatile than in the past and thanks to its average yield of c. 3%, which is quite rare in the current market environment. In our view, financial subordinated debt should represent a “carry” product for the quarters to come, thanks to its limited sensitivity to higher rates and more stable credit fundamentals.

    The challenges associated with integrating ESG criteria 

    In our view, there are two big challenges when it comes to integrating ESG criteria into a subordinated debt fund. First, having access to sufficient and reliable information, especially for non-listed or smaller institutions. We sold our exposures on one Swiss private bank and a French mutual insurance company, due to insufficient disclosure and overall lack of transparency. Thankfully, disclosure has been improving significantly these last two years, and we expect this issue to disappear over time. Secondly, how to deal with controversies? Assessing both financial and ESG impacts has to be done hand-in-hand with ESG analysts. We have, for example, sold our exposures to a Nordic bank, due to the materiality of a money-laundering scandal.

    Inflation risk and credit markets 

    High Beta credit markets, namely segments which are not too sensitive to higher rates, can tackle potentially higher inflation. Higher inflation, which should translate into higher rates, can bring back some investors which left credit markets due to insufficient yields. Yet, what matters most is not the absolute level of rates, but rather the pace at which fixed income investors adjust to them. In other words, volatility on rates is the true danger here in my opinion, rather than the return of inflation, which shouldn’t have an immediate strong impact on the European monetary policy.

    Consolidation of the European Banking sector 

    The consolidation of the European banking sector is a positive tidal wave for subordinated bondholders. European politicians and regulators have gotten rid of their “Too Big To Fail” mantra, which had an awful effect on the perception of systemic risk for the whole sector. With lower-for-much-longer rates and hampered profitability prospects, banks have no choice but to get together in order to reduce their costs, while continuing to strengthen their balance sheets in order to satisfy ever harsher capital requirements. We are left with fewer issuers, but whose credit quality tends to be more solid on average and whose subordinated bonds get bigger and which are more frequently traded and easy to access.

    Positive outlook on Spanish banking sector 

    We have been holding for quite some time a positive view on the Spanish corporate sector and especially on its banking sector, which has experienced a very challenging, but successful, restructuring process. There were more than 60 credit institutions back in 2009, while there are less than 15 nowadays, whose fundamentals are much more resilient than before. Some institutions may – again – merge one with another in the future, but we feel like we’re at the end of the road, consolidation-wise. We continue to see good opportunities on second tier players and regional banks, which currently benefit from sound fundamentals and attractive yields.


    Subordinated Debt and Coco’s strategies are available only to professional investors as defined below. Execution services shall only be provided to professional investors. Non-professional clients (negative target market) are excluded.
    Professional investors have the following characteristics: 

    • sound knowledge of financial products and transactions: 
    • experience in the financial industry. 

    Subordinated Debt and Coco’s strategies are not accessible for non-professional investors, unless they obtain professional investment advice AND investment in the strategy is solely for the purpose of diversification or a mandate has been signed.  

    Risks associated with an investment in subordinated debt instruments: Risk of capital loss, interest rate risk, credit risk, risk arising from techniques such as derivatives, counterparty risk, risk associated with holding convertible bonds, risk related to contingent convertibles, equity market risk, potential risk of a conflict of interests, legal risk)

    THIS COMMENTARY IS INTENDED FOR PROFESSIONAL INVESTORS ONLY WITHIN THE MEANING OF MIFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. To the best of its knowledge and belief, La Française AM considers the information contained herein is accurate as at the date of publication. The information provided herein is non-contractual. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. The La Française Group shall not be liable in any way whatsoever for any direct or indirect damage resulting from the use of this publication or the information it contains. This publication may not be reproduced, in whole or in part, disseminated or distributed to third parties without the prior written permission of the La Française Group. www.la-francaise.com

    By La Française Asset Management - Société par Actions Simplifiée (Simplified Joint-Stock Company) with a capital of €17,696,676 - RCS PARIS B 314 024 019 - Portfolio management company approved by the AMF under no. GP 97-076 on July 1, 1997.

    Issued by La Française AM Finance Services, whose head office is located at 128 boulevard Raspail, 75006 Paris, France. It is regulated by the "Autorité de Contrôle Prudentiel" as an investment services provider under number 18673 X, an affiliate of La Française. Website information for the regulatory authorities: Autorité de Contrôle Prudentiel et de Résolution www.acpr.banque-france.fr, Autorité des Marchés Financiers www.amf-france.org

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    news-2549 Tue, 05 Oct 2021 09:00:00 +0200 La Française Real Estate Managers strengthens its french investment team dedicated to institutional clients /en/who-we-are/news/detail/la-francaise-real-estate-managers-strengthens-its-french-investment-team-dedicated-to-institutional-clients/ Paris, 5 October 2021: La Française Real Estate Managers (REM), the real estate division of La Française Group, restructured its business in 2020 following the appointment of Philippe Depoux as Chairman. The aim was to cultivate a customer-oriented approach with the creation of an Institutional division as well as a Retail division. The Institutional division of La Française REM has developed a range of real estate mandates dedicated to institutional investors – both French and international – primarily based on Core/Core+ as well as Value Added and Opportunist strategies.  

    Under the leadership of David Rendall and through its pan-European real estate platform with three management centres (in France, Germany and the United Kingdom), the Institutional division of La Française REM currently manages more than 14 billion euros of real estate assets on behalf of institutional investors. To support the growing appetite of institutional investors in the real estate asset class and in particular logistical and managed residential sectors, La Française REM is pleased to announce several developments within the investment team, which is managed by Leslie Villatte, Director of Institutional Investments and Real Estate Development – France:

    • Arthur Brizard and Benjamin Fanget have both been promoted to the position of Deputy Director of Investments. Since 2014, Arthur has helped to establish the foundations of the institutional real estate product range. In 2016, Benjamin – with seventeen years of experience in real estate – joined the institutional division and provided his expertise, in particular for the acquisition and development of value-added operations and managed residences. 
       
    • and the arrival of two new talents: Pierre-Edouard Niel and Emeric Poyer who have been appointed Investment Manager and Investment Associate respectively. As part of the Institutional division, they will be involved in the entire acquisition process, from sourcing to the closing of real estate transactions. Pierre-Edouard brings more than nine years of extensive experience to La Française REM in office real estate (development and promotion) while Emeric has an in-depth knowledge of real estate financing and experience at an international level. Pierre Edouard will report to Benjamin Fanget and Emeric to Arthur Brizard.

    Leslie Villatte, Director of Institutional Investments and Real Estate Development – France stated “Institutional investors' enthusiasm for real estate is not waning. We're witnessing an acceleration in investments across all sectors, but mainly in the managed residential and logistics sectors. In order to support this strong demand and to set ourselves apart from our peers, we must put together an experienced investment team, where each member provides complementary skills."

    Notes

    photo de Arthur Brizard rondeArthur Brizard, Deputy Director of Investments, La Française REM

    Arthur joined La Française Real Estate Partners (renamed La Française Real Estate Managers) in 2014, during the creation of the real estate product range targeted to French and international institutional investors. After working for three years as an analyst, Arthur was promoted to Investment Manager and became Senior Investment Manager in 2020. Arthur graduated from ESTP and holds a specialised master's degree in real estate from the ESSEC Business School.

    Photo ded Benjamin Fanget ronde Benjamin Fanget, Deputy Director of Investments, La Française REM 

    Benjamin Fanget joined La Française Real Estate Partners (renamed La Française Real Estate Managers) in 2016 as an Investment Manager. He has been particularly involved in the acquisition of managed residences and more generally in the acquisition of tertiary assets.

    Benjamin began his career as an acquisition analyst at Shaftesbury Asset Management in 2005, before becoming an asset manager and then pursuing an entrepreneurial endeavour. In 2014, he joined Gecina as an Investment Manager specialising in student residences and, later, in healthcare residences. Benjamin is a graduate of the École Centrale de Lyon and has a master's degree in international finance from HEC. 

    photo de Pierre-Edouard rondePierre-Edouard Niel, Investment Manager, La Française REM

    After graduating from the École Centrale de Lyon and completing a specialised master's degree in finance from ESCP Europe, Pierre-Edouard began his career with several internships in real estate businesses – as a site supervisor at Eiffage, AMO consultant at JLL and then Asset Manager at AEW. Subsequently, he joined the acquisition team of the real estate company Gecina where he held the position of Analyst for two years. He was then promoted to the position of Investment Officer, which he held for two years before joining the Altarea group, where he became Investment Manager for three years, in charge of sourcing new office development projects.

    Photo de Emeric Poyer rondeEmeric Poyer, Investment Associate, La Française REM

    Emeric has more than three years of experience in real estate and structured finance in banking. Before joining La Française REM, Emeric worked in the real estate finance team at Crédit Agricole CIB in London. He also worked in the Agency team in New York and the Trade Finance team in Paris on behalf of financial institutions. Emeric holds a master's degree in finance from Audencia Business School and has an engineering degree from ESEO.

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    news-2548 Thu, 30 Sep 2021 09:26:00 +0200 VINCI Immobilier, in co-development with Nacarat, has concluded with La Française REM (acting on behalf of PFA) /en/who-we-are/news/detail/vinci-immobilier-in-co-development-with-nacarat-has-concluded-with-la-francaise-rem-acting-on-behalf-of-pfa-the-sale-on-completion-vefa-of-the-ovelia-senior-services-residence-le-pavillon-victoria-in-aix-les-bains/ The sale on completion (VEFA) of the OVELIA senior services residence "Le Pavillon Victoria" in Aix-Les-Bains


    La Française Real Estate Managers (REM), on behalf of PFA (a Danish pension fund), has recently concluded the VEFA acquisition, from VINCI Immobilier and Nacarat, of the senior services residence "Le Pavillon Victoria" in Aix-Les Bains, which will be operated by OVELIA. 

    Nestled in the heart of the historic city centre of Aix-les-Bains, this senior residence is scheduled for delivery in August 2023. It has a total surface area of 5,818 m² and includes 105 housing units. 

    Designed by So Architectes, the operation will include the refurbishment of the former "Le Bristol" hotel and the construction of a second building which will house the living units and 630 m² of service spaces.

    Several types of apartments will be made available for rent to independent seniors, from studios to three-room flats (with terraces or balconies). Large common areas will create a living environment which will help to foster well-being and a community spirit: indoor heated swimming pool, fitness space, restaurant with private dining room, hairdressing and beauty salon. In addition, many services will be offered to residents to simplify their daily lives: home maintenance, entertainment, cultural outings, emergency call system, 24/7 reception, 24/7 on-site presence and minor DIY work. The residential project aims to achieve NF Habitat certification. 

    “This is an exceptional project, in terms of location and the architectural quality of the building to be renovated. We are delighted with this first transaction with La Française as part of our new partnership", stated Olivier de la Roussière, Chairman of VINCI Immobilier.

    “We are proud to be able to renovate this remarkable building and retain its strong architectural features. This project perfectly illustrates our desire to invest in the heart of cities while simultaneously leveraging our know-how in terms of managed residences, regeneration of existing assets and programmatic innovation”, emphasised Ludovic MONTAUDON, President of Nacarat. 

    “This development project, undertaken by VINCI Immobilier in co-development with Nacarat and operated by OVELIA, perfectly illustrates our investment strategy, which aims to limit the artificialisation of soils. With the market for senior serviced residences becoming more and more competitive, the partnership recently concluded with VINCI Immobilier, with whom we have cultivated a relationship based on trust, as well as the professionalism of our investment teams, affirms our ability to acquire high-quality assets for the benefit of PFA”, concluded Philippe Depoux, Chairman of La Française Real Estate Managers.

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    news-2543 Tue, 21 Sep 2021 11:50:42 +0200 The end of the Merkel era and what next? /en/who-we-are/news/detail/the-end-of-the-merkel-era-and-what-next/ By François Rimeu, Senior Strategist, La Française AM The German federal election will take place at the end of the week (September 26th) and will mark the end of the Merkel era. With less than a week before the election, the latest opinion polls suggest that the Social Democratic Party (SPD) will receive about 25-26% of votes, the Christian Democratic Union (CDU) /Christian Social Union (CSU) about 21-22%, the Greens about 16%, the Free Democratic Party (FDP) and Alternative for Germany (AFD) roughly 11% each and the Left about 6-7%. As a result, the next government almost certainly will be a three-party coalition, with the most probable outcome being (assuming that the CDU/CSU would not accept to be part of a coalition led by the SPD and knowing that the SPD would not be favourable to a cooperation either):

    • SPD, Greens and FDP coalition (Traffic Light), with Olaf Scholz as chancellor
    • SPD, Greens and Left coalition (Red-Red-Green), with Olaf Scholz as chancellor
    • CDU/CSU, Greens and FDP coalition (Jamaica), with Armin Laschet as chancellor

    With more than 50% of votes already in and still a significant number of “undecided” votes, the German federal election outcome remains highly uncertain but, looking at the current situation, it seems clear that the Greens will be the second biggest party in the next government no matter what the outcome is. 

    What are the implications of the various scenarios on financial markets? 
    In the « Jamaica » case, we expect almost no change. It would be disappointing for European integration (and therefore for peripheral spreads) to have a coalition led by the CSU/CDU without the « crisis leadership » of Angela Merkel.

    In the « Traffic Light » scenario, we expect slightly higher German yields and narrower peripheral spreads, at least over the short term. This coalition could lead to more European integration than before but also a more relaxed fiscal stance (Greens) and some pro-business policies (FDP).

    The Red-Red-Green alliance might not appear to be the most likely but Greens could refuse to form a coalition with the FDP so it cannot be ruled out. This is the scenario with the most important potential impact on financial markets.  German yields could climb higher and peripheral spreads could narrow again, and more significantly. It could also be positive for the €uro currency, again because of the pro-integration stance of such a coalition (less break-up risk).

    But if we forget for one minute the consequences on European rates, the most important outcome of the German federal election is that the Greens are present in every coalition and will therefore play a very significant role in the future government, which could have several consequences:

    • The Greens are more likely to take an opposing stance to Russia and China. 

    For example, the Greens are against the controversial Nord Stream 2 pipeline that will run from Russia through the Baltic Sea and which Merkel's government is still defending. They have openly shown support for opposition groups in Russia, China, and Belarus. In the context of rapidly rising energy prices in Europe and « Deglobalization », this political stance could lead to renewed tension on Gas prices over the medium term with positive consequences on inflation. They might also push the EU to become more assertive with countries such as Hungary or Poland on justice independence, gender equality or on any European « Rule Of Law ». In a similar manner, they might take a hard line with China on Human rights. 

    • They could also push hard for large investments in renewable energies, much needed considering that Germany relies heavily on fossil fuels. They have mentioned that they want to ensure a transition to a zero-emissions economy with 100% renewable energy by 2035. They also target E-cars to replace combustion cars by 2030. 


    All of these policies are positive for growth, positive for inflation but will necessitate both heavy investments and a very loose fiscal policy. 

    The last point to underline and perhaps the most important question for the months to come: How will the next German federal government be able to adopt very loose policies (more spending, more budget deficit) given the current stance of the SPD, FDP and CSU/CDU on constitutional limits? They could avoid amending Germany’s constitution through technical steps such as changing the formula used to calculate the countercyclical buffer or frontloading the disbursements of special fund reserves. However, at some point, they will need to seriously challenge the German « debt brake ». This discussion might prove to be very important for the future of Europe. 


    Disclaimer

    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2539 Mon, 20 Sep 2021 17:09:10 +0200 Upcoming FED meeting: spotlight on the dot plot /en/who-we-are/news/detail/upcoming-fed-meeting-spotlight-on-the-dot-plot/ As widely expected, at the Federal Reserve’s next policy meeting on Sept.21-22, the Federal Open Market Committee (FOMC) will announce the start of tapering at upcoming meetings, most likely during the November meeting, effective beginning of December. As the July minutes stated, the US economy reached its goal on inflation and was “close to being satisfied” with the progress of job growth. We do not think that disappointing job creation figures for the month of August will incite the FED to further postpone tapering. 

    • We expect the FOMC to keep policy rates unchanged.
    • The « dot plot » might be the most important announcement of this FOMC meeting. We do not think the 2022 and 2023 median dots will change (no hike in 2022, and two hikes in 2023) but 2022 is definitely a close call. We expect the 2024 median dot to show three hikes.
    • We expect the SEP (Summary of Economic Projections) to indicate lower growth in 2021 (from 7.0% to 6.0%) but higher GDP in 2022 (from 3.3% to 3.5%) and unchanged growth for 2023 (2.4%).  We expect the new 2024 projection to show 2% growth.
    • We expect the FOMC will revise its forecast for higher inflation figures (Personal Consumption Expenditures) with projections moving up from 3.4% to 4.2% in 2021, from 2.1% to 2.2% in 2022 and unchanged in 2023 at 2.2%. We expect median inflation expectations at 2.1% for 2024.
    • We expect FED Chief Powell to maintain an accommodative tone and to downplay any strong potential signals from the dot plot. He will also dissociate the start of asset-purchase tapering from policy-rate hikes. 

    As was the case in June, a more aggressive pace of hikes (dot plot) could push front-end interest rates higher, but this is not our base case scenario.      


    Disclaimer

    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2538 Mon, 20 Sep 2021 14:12:24 +0200 What we suspected has been confirmed! /en/who-we-are/news/detail/what-we-suspected-has-been-confirmed/ By Virginie Wallut, Director of Real Estate Research and Sustainable Investment at La Française Real Estate Managers September 2021 During the first half of 2021, we began to glimpse the first signs of a revival of the European office real estate market. In Q2, the economy of the eurozone rebounded as sanitary measures progressively lifted. Investment and rental markets logically bounced back, and recent activity may be indicative of the start of a new cycle against the backdrop of new ESG-related (environmental, social and governance) regulations and changing investor and user behavior.

    Promising investment volume figures

    The figures are promising. After four quarters of uninterrupted decline (2020), the volume of office real estate investments continued to rise over the first two quarters of 2021, due in large part to accommodative financing conditions and favorable valuation perspectives. Across the board and with the United Kingdom in lead position, all European countries, apart from France, registered an increase in investment volumes. A rebound in France is expected in Q3 2021. Naturally, demand was focused on prime assets, with strong ESG performance. However, investors continued to shy away from dated assets given the capital expenditures necessary for renovation.

    Diverging yields of Primary and Secondary assets

    Prime office assets in Europe, particularly resilient, continued to offer attractive yields, especially in the low-for-long interest rate environment. However, investors are now demanding a risk premium, subject to local market conditions, on secondary assets.

    Prime and secondary yields in Europe

    The perceived risk on centrally located assets remained weak in markets with low vacancy rates or on assets with promising value-added perspectives in light of new user behavior. The context was however quite different for peripheral location assets! 

    During S1 2021 and across most European markets, prime asset yields registered a slight decrease. Alternatively, in certain markets, such as Madrid and Amsterdam, with high vacancy rates (over-supply), yields increased. Prime assets located in Paris and the primary German cities offered yields below 3%.

    Rebound in take-up

    The second quarter of 2021 was marked by a general rebound in take-up across European real estate markets. Some projects, liberating space, were even cancelled. Total take-up over twelve months ending Q2 2021 was slightly higher than year-end 2020. However, the rebound was not homogeneous across all markets. On average, the vacancy rate of European office real estate assets increased by 140 bps over the twelve-month period, ending Q2 2021.  No surprise that obsolete second-hand assets made up the bulk of supply. Conversely, vacancy remained low for centrally located assets that satisfy new user work habits. For example, the level of supply at the end of Q2 2021 amounted to only five months of take-up (based on average take-up over the past five years) in the central business districts of Berlin and Munich and nine months in Paris central business district. Supply remained weak in the main German cities and Luxembourg; vacancy rates were below 4%.

    Supporting factors for prime asset rental values

    The heavy demand for prime office assets in Q2 2021 should continue to support prime rental values. Alternatively, assets located in the suburbs of large cities such as Madrid or Milan or in sub-markets with excessive supply could suffer a correction in rental values. Across all of Europe, significant lease incentives have continued to widen the gap between headline and economic rental values. In the long-term, increasing construction costs and ESG performance booster measures could put upward pressure on rents.

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    news-2536 Fri, 17 Sep 2021 13:52:34 +0200 Cash: King or Trash? /en/who-we-are/news/detail/cash-king-or-trash/ Some say cash is king and that may be true if you happen to time your investments effectively, but over the long term we believe cash may be closer to trash. That is because the U.S. government reliably prints more money and the resulting increase in supply puts downward pressure on the value of a dollar. Purchasing Power of $1 in Hershey Bars

    • Back in 1928, a one and a half-ounce Hershey’s bar cost about $0.04, giving the holder of a one dollar bill the purchasing power of approximately 25 candy bars. After World War II, its price doubled to around $0.08. During the 1980s, the candy bar cost about $0.40 and today it is more than $1.00, meaning that the same dollar bill cannot purchase even one delicious Hershey’s chocolate bar.
    • Economics 101 teaches us that increasing the supply of a good puts downward pressure on its price, all else equal. The U.S. money supply (M21) has grown 7% annually over the past 60 years. However, just since the start of the pandemic, it has grown over 30% or nearly $5 trillion.
    • In the face of such strong supply growth, we do not favor large asset allocations to cash. We prefer stocks to potentially protect purchasing power over the long term. In our view, growth stocks that are less susceptible to the pressure of rising input costs, such as online marketplaces for goods or professional services, as well as payment networks or processors, may even benefit from higher pricing.

    1 M2 is a measure of the U.S. money stock that includes M1 (currency and coins held by the non-bank public, checkable deposits and travelers’ checks) plus savings deposits (including money market deposit accounts), small time deposits under $100,000 and shares in retail money market mutual funds.

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    news-2533 Wed, 15 Sep 2021 17:19:25 +0200 China's New Electric Vehicle sales continue to be unstoppable in August /en/who-we-are/news/detail/china-s-new-electric-vehicle-sales-continue-to-be-unstoppable-in-august/ by Sherry Ma, Equity Analyst, JK Capital Management Ltd., a La Française group-member company

    In August, China's New Electric Vehicle (NEV) car manufacturers announced stellar sales numbers. According to the China Association of Automobile Manufacturers (CAA), the production and sales volume of locally manufactured NEVs in China climbed to 309,000 and 321,000 vehicles respectively during the month, an increase of 180% YoY and 120% over the 2019 levels. This means the penetration rate of NEVs rose to 17.8% in August, also reaching a record high.

    Monthly China NEV sales volume (000 vehicles)

    Chart, line chart Description automatically generated

    Source: China Association of Automobile Manufacturers (CAAA)- September 2021

    China has been accelerating the development of NEVs to achieve its target of reaching carbon emissions peak by 2030 and being carbon-neutral by 2060. From the second half of 2019 to the end of 2020, China's new energy vehicle penetration rate had not been able to break through 6% due to multiple factors such as subsidy withdrawals and the impact of the Covid 19 pandemic. Since the beginning of 2021 however, China's NEV penetration rate has soared from 5% to nearly 18% in just eight months. The Chinese government has set a target for NEVs to make up 20% of new car sales by 2025. According to China Association of Automobile Manufacturers, that goal might be reached well ahead of schedule as the NEV market may have already seen the turning point from being policy-led to being market-led.

    Penetration rate of NEV in China (%)

    A picture containing light Description automatically generated

    Source: China Association of Automobile Manufacturers (CAAA) – September 2021

    Overall vehicle sales in China stood at 1.8 million in August, down by 17.8% YoY and 5.9% MoM. Sales of passenger vehicles were 1.55 million, higher than the production volume of 1.49 million. The sales fall in August was attributed to two reasons: On the one hand, semiconductor factory shutdowns in Malaysia led to a tight production schedule for automotive-grade chips, which worsened the chip shortages that started with the Covid 19 pandemic. On the other hand, the adoption of Stage VI emissions standards for heavy-duty vehicles caused a short-term market fluctuation, affecting demand for trucks and commercial vehicles.

    Under such chips-shortage situations, we can see that Chinese carmakers adopted flexible supply chain management to help sustain buoyant NEV sales. Previously, there were no direct communication channels between carmakers and chip suppliers. Currently, Chinese carmakers seek to liaise directly with chip suppliers or to buy chips from the secondary market to sidestep chip shortages. 

    Local brands continued to gain market share because of more effective measures dealing with the chip shortage and strong NEV sales growth. In August, local brands' passenger vehicles accounted for a 45.3% market share, improving from 36.5% in January 2021. Trendy brands such as Tesla and economical Wuling models have made the NEV segment a dumbbell shape, the best-selling models being the least and the most expensive ones.

    NEV's penetration rates among local Chinese brands' sales was 35% in August, while it was only 2.7% for foreign brands under joint ventures. BYD sold 61,409 NEV units in August, representing an increase of 301% YoY and 21% MoM. SAIC-GM Wuling, known for its affordable mini-sized models, sold 43,783 NEV vehicles in August, a 140% YoY increase.

    Emerging pure EV brands also released delivery numbers: Li Auto delivered a total of 9,433 units, leading the trio. Xpeng delivered 7,214 vehicles, an increase of 172% compared to August 2020, and Nio reported 5,880 cars delivered. Although Xpeng and Nio's delivery numbers in August showed a decline MoM, both companies gave positive guidance for September. Nio will likely deliver about 9,000 vehicles in September, a jump of over 50% from August. Xpeng, too, is looking at monthly delivery volumes of 15,000 in Q4, doubling its current number.

    Monthly sales volume of top NEV brands (vehicles)

    Chart, line chart Description automatically generated

    Source: China Passenger Car Association (CPCA) – September 2021

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. The opinions expressed by the author are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. Published by JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.

    ]]> news-2529 Fri, 10 Sep 2021 13:51:47 +0200 Digital Scarcity /en/who-we-are/news/detail/digital-scarcity/ The next frontier of the digital revolution may be to create digital scarcity such that digital assets can be uniquely owned and not copied. Blockchain technology can accomplish this feat without a centralized middleman, enabling true ownership of digital goods–call it the NFT (non-fungible token) economy. OpenSea NFT Marketplace

    • Non-fungible tokens are digital representations of unique assets. In a video game, for example, one can buy gear such as a sword or shield and subsequently own, trade or sell it, even outside of the particular game for use as an investment as a collectible or tool in other games. Given that the item may be unique and controlled by an individual, not a video game publisher, its value may be more durable than traditional, fungible virtual items controlled by a central third party like a video game publisher. OpenSea, the world’s largest NFT marketplace, shows that trading activity in NFTs has exploded this year.
    • NFTs can be much more than items in video games; they can be art. In March, an NFT representing a group of digital images sold at Christie’s for $69 million. They can also be the modern-day equivalent of trading cards, such as NBA Top Shot moments, which are NFT videos of basketball plays. Ultimately, you may be able to buy or sell NFTs of your car or house and thereby reduce the extent to which lawyers, fees and documents are necessary.
    • Because NFTs are opening the opportunity to own digital assets, they are driving growth in the  cryptoasset ecosystem. Investors may want to consider public equities that benefit from continued blockchain adoption such as exchanges, digital payment platforms or wallets or semiconductors used in blockchain infrastructure.
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    news-2528 Fri, 10 Sep 2021 09:29:05 +0200 Freight rates are skyrocketing as Covid restrictions create massive bottlenecks in ports /en/who-we-are/news/detail/freight-rates-are-skyrocketing-as-covid-restrictions-create-massive-bottlenecks-in-ports/ by Aravindan Jegannathan, CFA, Senior Equity Analyst & Fabrice Jacob, CEO, JK Capital Management Ltd., a La Française group-member company In March 2021, we wrote about how global supply chains were in a state of disarray and how the growing shortage of containers exacerbated the issues faced by the global shipping industry, pushing freight rates to new heights. In that write up, we mentioned how global container demand had been surging as a result of China getting out of the Covid lockdown crisis earlier than any other country while millions of people in the West were still in lockdown, purchasing tablets, computers and all kinds of equipment to work from home and find new distractions.

    We thought at that time that the surge for Chinese goods would taper as soon as Europe gets out of lockdowns and back to some kind of normality, with shipping rates and container leasing prices going back to their normal level. We were completely wrong: It got far worse.

    To give a recap, global shipping freight rates started to rise since mid-2020 and have been on a constant uptrend ever since, with no end in sight. This is the result of a confluence of factors.

    China’s zero Covid policy was undoubtedly an initial success that boosted Chinese exports, taking the country’s trade surplus to new heights. But today this policy is backfiring on the Chinese economy as entire cities are regularly put under lockdown as soon as a handful of Covid cases appear. This is directly impacting logistic centres and container ports. In August, after identifying one single Covid case at the Zhoushan terminal of the third largest container port in the world, Ningbo, Chinese authorities shut down all operations for two weeks, ordering all workers to be quarantined. It had a ripple effect on the ports of Shanghai, Xiamen and Hong Kong where traffic was diverted. Shipping analysts have described the impact on global trade of this single event as having been worse than the Suez Canal blockage by a container ship last March, an incident that lasted for six days. The Ningbo port shutdown in August was only two months after a similar situation happened in another busy Chinese port, the Shenzhen - Yantian container port.

    The zero Covid policy of China also means that quarantine measures applied to crew members delay the turnaround of ships, as they also need to go through quarantine, with different rules being applied to them depending on their vaccination status and their own nationality. The standard procedure for ships docking in a port anywhere around the world is to go through two days of testing for the crew and for the cargo, as well as two days of testing before a ship goes to dry dock. A typical round trip from Shanghai to Los Angeles that took five weeks pre-pandemic has now gotten stretched to eight weeks given the Covid restrictions and safety precautions carried out in ports.

    Container ports around the world are facing major bottlenecks as a result, leading to much longer turnaround times and skyrocketing prices. Container shortage is more acute than vessel shortage due to a lack of port handling capacity. As a result, the ships leave their containers stranded in ports and start their next voyage as soon as possible as the cost of keeping a ship idle in the port waiting to get empty containers reloaded back proves to be cost ineffective in the current circumstances, with freight rates being stratospheric.  This automatically curtailed the industry capacity by 60% creating significant pressure on the freight rates.

    In normal circumstances, a typical snapshot of container flows shows that roughly 40 percent of all moving containers are returning to East Asia (often empty) while around 20 percent are heading to North America and 20 percent are heading to Europe (always full). However, during the first half of 2021, 45 percent of the containers were heading to North America, 40 percent were heading to Europe and only 15 percent were returning to East Asia, the reason being that a large proportion of empty containers are left in parking lots in Europe and the United States.

    Maersk which reported strong 2Q21 results last month estimated that global container shipping demand was up only 2.7% in 2Q21 compared to 2Q19 (using pre-pandemic as the base year) while their average freight rate for forty-foot equivalent unit increased by 63% from US$1,868 per FEU in 2Q19 vs US$3,308 per FEU in 2Q21. The Drewry World Container Index of spot rates rose to $9,987 per FEU as on 2nd September 2021 which was nearly 7x higher than what it was two years ago.  https://www.drewry.co.uk/supply-chain-advisors/supply-chain-expertise/world-container-index-assessed-by-drewry

     

    Chart Description automatically generated

    Source: Bloomberg, JKC – September 2021

    According to Singamas Container Holdings Ltd., one of the largest container manufacturers in the world, a standard twenty-foot Corten steel dry container had an average selling price of USD3,175 in the first half of 2021. The same container had a selling price of USD1,830 in the first half of 2020, representing an increase of 73% year-on-year. The price of Corten steel itself went up from USD535/ton to USD764/ton over the same timeframe, a 43% increase. And prices keep on going up.

    To make matter worse, Christmas is coming. Typically, supply orders for Chinese goods are placed in August/September for delivery in early December. Given the uncertainty of delays in shipments, western retailers are said to be ordering significantly more than what they would typically order, in different batches, to make sure their shelves won’t be empty for the Christmas season. We heard of some retailers ordering as much as twice what they would normally order under normal circumstances in order to minimise their risk. This will necessarily have an impact on Chinese exporters next year as the inflated order books they are seeing now will likely be followed by a post-Christmas adjustment due to some heavy de-stocking by the same retailers.

    The current chaos should normally be a short-term phenomenon as these bottlenecks will eventually ease. Some additional shipping and container capacity will get added in the coming year while demand growth should taper. Unfortunately, the ruthless zero-covid policy of China is not helping, and there is no sign that such policy will soften. Indeed, we expect more lockdowns of port infrastructures and more disruptions in the coming weeks, especially as the Delta variant is spreading rapidly across the world. Currently the industry consensus is for the bottleneck to last at least until the end of 2022, or even beyond as there are no signs of any improvement on the horizon.

    We remain mindful that the shipping freight rates, and container prices could quickly pull back from their current ultra-high levels, with an impact on the stocks that have benefitted from this trend.

    A new stock exchange in China: The Beijing Stock Exchange is born

    By Sabrina Ren, Equity Portfolio Manager & Fabrice Jacob, CEO, JK Capital Management Ltd., a La Française group-member company

    While addressing the 2021 China International Fair for Trade in Services on 2nd September, President Xi Jinping focused on innovations for small and medium-sized enterprises (SMEs). He touched on reforms to be undertaken at the National Equities Exchange and Quotations (NEEQ), the over-the-counter (OTC) market of China that covers companies that are not listed on the main exchanges of Shanghai and Shenzhen, and he announced the creation of the Beijing Stock Exchange. The Beijing Stock Exchange will be the third official exchange of mainland China, three decades after the setting up of the Shanghai Stock Exchange and of the Shenzhen Stock Exchange.

    There are today 4,467 companies listed on the Shanghai Stock Exchange and Shenzhen Stock Exchange, with a total market capitalisation of Rmb86.7 trillion (USD13.5 trillion). The mainland Chinese stock market is the second largest in the world, behind the United States (USD52 trillion) and ahead of Japan (USD7.2 trillion).

    The Beijing Stock Exchange will be different from its two larger siblings. Its purpose will be to foster the growth of SMEs while adapting to their characteristics. There will be a supervision of investor suitability as investors will need to be qualified to invest in innovative SMEs, with all the risks it encompasses. The Beijing Stock Exchange will be a springboard towards the more developed stock markets of China while offering a financing platform that will complement the traditional banking sector which, as we know, has always been wary of lending money to privately-owned SMEs. The idea is to nurture a group of high-tech small and medium-sized enterprises with high growth potential, advanced technology, and strong market competitive edges (also called in China "little giant" companies).

    The establishment of the Beijing Stock Exchange marks a new stage of reform for the NEEQ, this OTC market that foreign equity investors are typically not very familiar with. The NEEQ is an alternative way to obtain financing through the listing of equities that do not qualify for listing on the Shanghai or Shenzhen stock exchanges. It is essentially a pre-listing or startup exchange that has less stringent and lower capital threshold requirements for listing. The NEEQ was established in January 2013.

    Over the years, the NEEQ market has developed into a three-tier structure: the Basic tier, the Innovative tier and the Select tier, with respectively 5,988, 1,250 and 66 companies currently listed under each tier. The total market capitalisation of the NEEQ market is RMB2.4 trillion (USD370bn), which is approximately the size of the stock market of Finland. According to the arrangements devised by the securities regulator, the CSRC, the Beijing Stock Exchange will be built largely around the listing rules that currently apply to the existing NEEQ Select tier, while companies to be listed on the Beijing Stock Exchange are expected to mainly come from the NEEQ Innovation tier. Going forward, the NEEQ market will maintain a structure composed of the NEEQ Basic tier, the NEEQ Innovation tier and the Beijing Stock Exchange (which will replace the Select tier). The listing mechanism will be registration-based as opposed to approval-based, which should simplify and accelerate the listing process.

    To summarise, China will soon have three main exchanges, and one OTC market: 1) the Shenzhen Stock Exchange, which itself consists in the Shenzhen main board + the ChiNext market (a NASDAQ-type of market), 2) the Shanghai Stock Exchange, which consists in the Shanghai main board + the Shanghai Stock Exchange Science and Technology Innovation Board (also known as the “STAR” board), and 3) the Beijing Stock Exchange discussed above. The NEEQ will remain as the OTC market and will be largely used as an incubation platform for the Beijing Stock Exchange.

    disclaimer

    Informative Document for professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. The opinions expressed by the author are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. Published by JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.

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    news-2525 Thu, 09 Sep 2021 09:37:38 +0200 Market Update /en/who-we-are/news/detail/market-update-3/ The synchronisation of fiscal and monetary policies, the increase in vaccination and the gradual reopening of economies have enabled the world economy to rebound strongly: the economic recovery is not, however, synchronous between different regions of the world and sectors of activity. The world economy is expected to grow by 6% in 2021 according to the latest IMF forecasts. The outlook has been gradually upgraded for developed countries, and for emerging countries it remains largely unchanged at 6.3%. As for China, once the world's leading driver for growth, the country is facing a slowdown in its activity against the backdrop of the resurgence of the pandemic and efforts to catch up running out of steam.

    In the US, Joe Biden's administration injected $1.9 trillion (9% of GDP) into the economy in March 2021, adding to the $900 billion stimulus plan announced in December 2020. Additional fiscal stimulus measures are expected in the second half of 2021. Simultaneously, the European Union started to distribute funds from its €750 billion 'Next Generation EU' recovery plan, the majority of which will be committed over the period 2021-20231. The beneficiary countries have a reform and investment programme in line with the EU's climate and digital transition objectives.

    Sharpening the focus on central banks, the Fed and the ECB remained cautious, deeming inflationary pressures likely to pass. However, the Fed is communicating effectively and preparing the markets for a decrease in its asset purchases by the end of the year. This is already the case in the UK, Canada and Australia, where central banks have already opted to scale down their asset purchase programmes. As for the emerging countries, they are sometimes in a more complex situation. Thus, the central banks of Brazil, Russia, Turkey, Hungary and Chile raised their key rates following inflationary pressures linked to the rebound in commodities, in the absence of massive vaccination, their economies continue to suffer from health constraints.

    The greatest concern for investors at the moment remains the health risk. The increase in the number of cases in the United States, the delay in vaccination and the loss of effectiveness of the vaccine against the Delta variant are all fuelling these concerns. The zero COVID strategy of certain countries (Asia, Japan, Australia, New Zealand) could also find themselves in difficulty and disrupt new global production chains. We will then have to expect downward growth revisions primarily in China and the United States.
    In this uncertain environment, we have identified resilient areas liable to benefit from the recovery of the global economic cycle:

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    news-2523 Tue, 07 Sep 2021 16:34:40 +0200 ”This is not a tapering!” /en/who-we-are/news/detail/this-is-not-a-tapering/ During its September 9 press conference, the European Central Bank (ECB) is expected to address two major topics: new macro-economic projections and an update on the pandemic emergency purchase program (PEPP). On the economic front, we expect the ECB to maintain an optimistic tone given the progress on the European vaccination campaign, despite slowdowns in China and the USA. But the central bank will emphasize that uncertainties related to COVID-19 remain. We expect new macro-economic projections to show improved growth in 2021 (4.8% vs 4.6% in June) and higher inflation across the board but especially in 2021 (2.2% vs 1.9% in June).

    We expect the ECB to reduce the pace of the PEPP (from €80bn to €70bn a month) consistent with the improving economic outlook and its will to consume the PEPP envelop in full. We do not expect the Governing Council to make any announcement concerning the future of the pandemic emergency and the asset purchase programs following the PEPP’s expected end in March 2022.  In our opinion, the ECB will maintain very proactive and accommodative communication on their future monetary support.

    Recent positive inflation surprises, even if temporary (yet to be confirmed), put some pressure on the ECB. Communicating about a reduction in the pace of the current Quantitative Easing program while keeping a very accommodative tone will not be an easy task for ECB President Lagarde, especially with a higher growth forecast. 

    We expect some volatility following this press conference, with moderately higher rates.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2522 Fri, 03 Sep 2021 14:10:11 +0200 What Is Your Bias? /en/who-we-are/news/detail/what-is-your-bias/ For every buyer in the stock market there is a seller, but why do some acquire shares of a security while others sell? Why do some types of investors fare better than others in certain market environments? To answer these questions, it is helpful to understand who the major market participants are and what their biases may be. Institutional vs. Retail

    1-Year Performance

     

    • Stocks with high institutional ownership have done much better than stocks with high retail ownership over the past year. To understand why retail-heavy stocks have underperformed over the past year, we must understand how retail investors typically invest.
    • Stocks with large retail ownership often have defensive characteristics such as high dividend payout ratio and low beta, both of which have underperformed over the past year. The weak relative performance of large telecommunications and consumer staples companies, many of which are widely held by retail investors, is a good example of this risk averse bias. Institutional investors certainly have their own biases but they are generally less risk averse than retail investors, which has helped their performance over the past year.
    • We all have biases that left unchecked can hamper our returns. We have developed a checklist (Making Better Decisions Checklist) that can help investors recognize and overcome their biases and hopefully make better decisions.
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    news-2521 Wed, 01 Sep 2021 15:15:34 +0200 Letter to unitholders EN-UAE /en/who-we-are/news/detail/letter-to-unitholders-en-uae/ Re: La Française Sub-Debt (Y units FR0013321916, IC CHF H units FR0013017985, R units FR0011766401, C units FR0010674978, RC USD H units FR0013251196, RD USD H units FR0013397346, TC EUR units FR0013289063, A units FR0013321932*, I GBP H units FR0013334018*, L units FR0013480266*, IC USD H units FR0013324159, TC USD H units FR0013289055, TS units FR0013397759, S units FR0013289071, D units FR0010969311)).

    *The unit is not registered in United Arab Emirates

    Dear Sir/Madam,

    We would like to thank you, as a unitholder in the La Française Sub-Debt fund (hereinafter, the “Fund”), for the trust you have placed in us.

    1. The operation

    In order to avoid any divergence of interests between the Fund manager and investors, and in the context of compliance with the new ESMA directive concerning the method of calculating performance fees, the management company has decided to set up a system of variable management fees for units eligible for outperformance fees, calculated with reference to the outperformance of a benchmark index, based on the new ESMA methodology.

    The Fund's management objective and benchmark indicator are therefore modified and will be aligned with the trigger threshold for variable management fees when applicable.
    The Fund's new composite benchmark will be as follows: 50% Markit iBoxx EUR Contingent Convertible (IBXXC2CO Index) + 25% Markit iBoxx EUR Non-Financials Subordinated (I4BN Index) + 25% Markit Iboxx EUR Insurance Subordinated (IYHH Index).

    These changes to the Fund's legal documentation have no impact on the Fund's investment strategy, which remains unchanged.

    This modification does not require authorisation from the French Financial Markets Authority and will come into force on 23 September 2021.

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    news-2519 Wed, 01 Sep 2021 14:40:15 +0200 Letter to unitholders - SGD /en/who-we-are/news/detail/letter-to-unitholders-sgd/ Re: La Française Sub-Debt (Y units FR0013321916, IC CHF H units FR0013017985, R units FR0011766401, C units FR0010674978, RC USD H units FR0013251196, RD USD H units FR0013397346, TC EUR units FR0013289063, A units FR0013321932, I GBP H units FR0013334018, L units FR0013480266, IC USD H units FR0013324159, TC USD H units FR0013289055, TS units FR0013397759, S units FR0013289071, D units FR0010969311)).

    Dear Sir/Madam,

    We would like to thank you, as a unitholder in the La Française Sub-Debt fund (hereinafter, the “Fund”), for the trust you have placed in us.

    1. The operation

    In order to avoid any divergence of interests between the Fund manager and investors, and in the context of compliance with the new ESMA directive concerning the method of calculating performance fees, the management company has decided to set up a system of variable management fees for units eligible for outperformance fees, calculated with reference to the outperformance of a benchmark index, based on the new ESMA methodology.

    The Fund's management objective and benchmark indicator are therefore modified and will be aligned with the trigger threshold for variable management fees when applicable. The Fund's new composite benchmark will be as follows: 50% Markit iBoxx EUR Contingent Convertible (IBXXC2CO Index) + 25% Markit iBoxx EUR Non-Financials Subordinated (I4BN Index) + 25% Markit Iboxx EUR Insurance Subordinated (IYHH Index).

    These changes to the Fund's legal documentation have no impact on the Fund's investment strategy, which remains unchanged. This modification does not require authorisation from the French Financial Markets Authority and will come into force on 23 September 2021. If you accept the terms, these modifications do not involve any action on your part.

    If, however, the changes do not reflect your interests, you can have your units redeemed1 free of charge from 23 August 2021 until 23 September 2021.

    1 The amount of any capital gains made as a result of this redemption will be subject to the taxation applicable on the date of the transaction.

    ]]>
    news-2511 Wed, 01 Sep 2021 11:30:17 +0200 Letter to unitholders EN-AT /en/who-we-are/news/detail/letter-to-unitholders/ Re: La Française Sub-Debt (Y units FR0013321916*, IC CHF H units FR0013017985*, R units FR0011766401*, C units FR0010674978, RC USD H units FR0013251196*, RD USD H units FR0013397346*, TC EUR units FR0013289063*, A units FR0013321932*, I GBP H units FR0013334018*, L units FR0013480266*, IC USD H units FR0013324159*, TC USD H units FR0013289055*, TS units FR0013397759*, S units FR0013289071*, D units FR0010969311*)). *The unit is not registered in Austria

    Dear Sir/Madam,

    We would like to thank you, as a unitholder in the La Française Sub-Debt fund (hereinafter, the “Fund”), for the trust you have placed in us.

    1. The operation

    In order to avoid any divergence of interests between the Fund manager and investors, and in the context of compliance with the new ESMA directive concerning the method of calculating performance fees, the management company has decided to set up a system of variable management fees for units eligible for outperformance fees, calculated with reference to the outperformance of a benchmark index, based on the new ESMA methodology.

    The Fund's management objective and benchmark indicator are therefore modified and will be aligned with the trigger threshold for variable management fees when applicable.
    The Fund's new composite benchmark will be as follows: 50% Markit iBoxx EUR Contingent Convertible (IBXXC2CO Index) + 25% Markit iBoxx EUR Non-Financials Subordinated (I4BN Index) + 25% Markit Iboxx EUR Insurance Subordinated (IYHH Index).

    These changes to the Fund's legal documentation have no impact on the Fund's investment strategy, which remains unchanged.
    This modification does not require authorisation from the French Financial Markets Authority and will come into force on 23 September 2021.
    If you accept the terms, these modifications do not involve any action on your part. If, however, the changes do not reflect your interests, you can have your units redeemed1 free of charge from 23 August 2021 until 23 September 2021.

    1 The amount of any capital gains made as a result of this redemption will be subject to the taxation applicable on the date of the transaction.

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    news-2510 Wed, 01 Sep 2021 10:51:40 +0200 La Française collective real estate investment vehicle acquires its first Micro-living asset in Germany /en/who-we-are/news/detail/la-francaise-collective-real-estate-investment-vehicle-acquires-its-first-micro-living-asset-in-germany/ A La Française collective real estate investment vehicle, represented by La Française Real Estate Managers, has acquired its first Micro-Living building, operated by Hood House, from the developer SICON Hospitality GmbH. The property is located at Am Poßmoorweg 6, in a sought-after residential area of Hamburg, and offers state-of-the-art serviced living space. It is situated in the established and renowned submarket of Winterhude.

    The re-development project of a former office building into a modern, serviced, six-storey living space commenced in 2019 and was recently completed in June 2021. The interior was fully refurbished, and the façade was partially renewed by the owner. It offers 5,301 m2 of floor space and a total of 148 apartments (18 – 43 m2 per room) for short and long-term stays of up to 6 months, as well as a restaurant area on the ground floor. The basement level, comprised primarily of technical and storage space, offers a total of 17 parking spaces. Furthermore, in order to reduce energy use and associated costs, the building has a rooftop solar water heating system.

    The Micro-Living building is fully let to the operator, Hood House GmbH, a subsidiary of Sicon GmbH, who operates similar properties throughout Hamburg.

    Mark Wolter, Managing Director of La Française Real Estate Managers - Germany said, “We are delighted to secure our first micro-living asset in Germany. This acquisition is perfectly in line with our strategy to diversify our German real estate portfolio with assets that perform well relative to Environmental, Social & Governance criteria. Furthermore, the asset offers a solution to changing consumer-user behavior, as communal living space becomes more sought after. We are confident in the long-term attractiveness of the property itself, as well as the asset class”.

    La Française Real Estate Managers was advised by Norton Rose Fulbright on legal aspects and by Witte Projektmanagement GmbH on technical Due Diligence and project monitoring. Savills Immobilien Beratungs GmbH and Pankow Consulting GmbH advised the vendor.

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    news-2508 Wed, 01 Sep 2021 09:22:41 +0200 La Française AM boosts its management team with three new talents /en/who-we-are/news/detail/la-francaise-am-boosts-its-management-team-with-three-new-talents/ Paris, 21 August 2021: With €56 billion in assets under management, La Française deploys its multi-expertise (financial and real estate assets) business model both in France and abroad. To support the development of its High Yield credit and Large Cap equities expertise, La Française AM, the group’s securities investment manager, is pleased to announce the arrival of three new talents.

    Victoire Dubrujeaud and Delphine Cadroy have joined the High Yield team, led by Akram Gharbi, Head of High Yield Investment, within the credit division, headed by Paul Gurzal, Head of Credit. They will both enhance the strong development of La Française AM's expertise in fixed maturity funds, which represents more than €1 billion in assets under management (as at 31/05/2021).

    Victoire Dubrujeaud, High Yield Fund Manager, brings to La Française AM a solid knowledge of the high yield market acquired over ten years of experience, mainly as a credit analyst. She began her career at Amundi Asset Management as an Investment Grade Credit Analyst, specialising in the consumer, distribution and healthcare sectors, before diversifying into High Yield in the chemicals, metals and gaming sectors. In 2017, she joined SCOR Investment Partners as a High Yield and Leveraged Loans Analyst, then became Fund Manager/High Yield Analyst at ODDO BHF Asset Management in 2019 where she managed nearly €2 billion in fixed maturity funds. Victoire holds a master’s degree in Financial Engineering from the University of Paris IX - Dauphine and the University of Paris II – Panthéon Assas.

    Delphine Cadroy, High Yield Fund Manager, joined La Française AM after five years of international experience beginning in London with Société Générale as an analyst in syndicated loans, before joining Amazon, then Moody's as an Analyst in Leveraged Finance, responsible for a portfolio of twenty companies, rated high-yield and operating in the healthcare, business services and consumer sectors. Delphine holds a Master of Science from the Ecole des Hautes Etudes Commerciales de Paris (HEC Paris).

    Akram Gharbi, Head of High Yield Investment, commented “The development of the high-yield market and the growing demand from investors for this asset class are pushing us to strengthen our expertise in this area and expand our international coverage".

    Paul Troussard has joined the Large Cap Equities team, under the direction of Nina Lagron, Head of Large Cap Equities, to strengthen the coverage of the euro zone.

    Paul Troussard, Large Cap Equities Fund Manager, spent more than four years at Clartan Associés as a European equities fund manager, all sectors. There, he developed an expertise in extra-financial analysis by participating in the implementation of an ESG (Environmental, Social and Governance) investment strategy and in the launch of a sustainable European small and mid-cap fund. Paul holds a master’s degree in Asset and Risk Management from IESEG School of Management and spent a year studying in China (Hong Kong Baptist University – Beijing Normal University) as part of his course of studies.

    Nina Lagron, CFA, Head of Large Cap Equities, said “Paul's arrival will allow us to focus on the team's new sustainable investment themes.”

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    news-2501 Mon, 30 Aug 2021 14:19:31 +0200 August 2021: Attempted fraud by NEOBUY, which illegally claims to be a subsidiary of the La Française Group. /en/who-we-are/news/detail/august-2021-attempted-fraud-by-neobuy-which-illegally-claims-to-be-a-subsidiary-of-the-la-francaise-group/ Identity theft alert: NEOBUY, a Mexican e-commerce company is impersonating the La Française Group and illegally claiming to be a subsidiary of the La Française Group. The La Française Group notes that the NEOBUY website is currently usurping the identity of the La Française Group.  
     
    NEOBUY is illegally claiming to belong to the La Française Group and to have raised funds to contribute to the development of Mexican companies.   
     
    We would like to draw your attention to the danger of using this site, which does not benefit from any agreement from La Française to use its name. 
     
    We invite you to take note of the warnings issued by the Autorité des Marchés Financiers, which regularly publishes the list of players on blacklists that have been warned by the Autorité des Marchés Financiers and/or that are impersonating a regulated player.   
     
    If you would like to place your trust in the La Française Group for financial investments, we will be happy to assist you by offering you appropriate solutions in a regulated and secure environment.

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    news-2498 Fri, 06 Aug 2021 14:02:55 +0200 Taking Off? /en/who-we-are/news/detail/taking-off/ One of the most depressed sectors of the global economy is travel and leisure. Fortunately, we believe the future looks brighter. As growth in this sector ramps up, what are potential opportunities for investments? Worldwide Travel and Tourism Revenue

    • The pandemic drove travel and leisure spending down 60% in 2020. With the introduction of vaccines, spending is expected to rise 29% this year, with a more extensive recovery next year when the industry is expected to grow 61%.
    • While the entire industry may benefit in the short term, long-term winners will be differentiated by their positioning in the industry, in our view. Data from Booking.com suggests that the main source of vacation inspiration for the majority of people is searching online while only about one third find inspiration from talking to friends and family. Not only does planning begin online, but 65% of travel dollars are spent online with that share forecasted to rise to 72% by 2025, according to Statista.
    • We believe there may be opportunity where economic recovery overlaps with secular growth, such as in online travel booking companies for which the market is expected to rise from $518B in 2020 to $983B in 2027, according to ReportLinker. Additionally, casinos and low-cost airlines may benefit as well.
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    news-2496 Mon, 02 Aug 2021 09:06:48 +0200 Playing Catch-Up /en/who-we-are/news/detail/playing-catch-up/ In the battle against the pandemic, some countries are faring better than others. Thankfully, we think lagging countries are likely to catch up, with important implications for investors. Real GDP Relative to Pre-Pandemic

     

    • While the U.S. has recovered all of its lost GDP during the pandemic, other countries have been less fortunate. For India, Brazil, Japan, the U.K., Euro Zone and Canada, the next leg of growth includes just getting back to pre-Covid levels.
    • However, we think the likelihood that these struggling economies do ultimately recover combined with larger than typical valuation discounts may make them especially attractive to investors. Non-U.S. stocks are trading at about twice their historical discount to U.S. stocks. Moreover, many non-U.S. countries may continue to enjoy monetary stimulus support and even fiscal stimulus in some cases well after the U.S. begins to tighten.
    • Within non-U.S. equity markets, we think stocks look attractive in that they may offer investors growth at a more compelling valuation. Not only does the non-U.S. tech sector trade at a doubledigit discount to the U.S.’s tech sector, but key innovative areas such as business process automation, e-commerce and communication platform as a service can be purchased at material discounts to their U.S. counterparts.
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    news-2492 Thu, 29 Jul 2021 10:51:00 +0200 A crucial step towards China’s carbon neutrality goal /en/who-we-are/news/detail/a-crucial-step-towards-china-s-carbon-neutrality-goal/ by Mu Huang, Middle Office Manager, JK Capital Management Ltd., a La Française group-member company Background

    As China’s latest efforts to drive decarbonization, the long-awaited national emission trading scheme (ETS) kicked off on July 16th at the Shanghai Environment and Energy Exchange. The grand opening was marked by a deal initiated by SOE giant China Petroleum & Chemical Corp (Sinopec) to purchase 100,000 tons of carbon emission quota from China Resources Group at RMB 52.92/ton. 

    Since 2011, 8 regional ETSs have been established in major provinces and cities across China as pilot programs to prepare for the launch of the nationwide carbon market. During the pilot phase, structural issues such as isolated markets and government over-intervention have caused huge price disparity (ranging from 10 to 80 RMB/ton) and low market liquidity. Challenges encountered during the pilot phase forced the regulator to postpone the official launch date and reduce its original scope from more than 20 industries to focus only on the power generation industry as it has “more reliable and verifiable data.” Although not as ambitious as the regulator originally planned, the national ETS still covers 2,162 key companies in the power generation industry that accounts for more than 40% of the country’s energy-related carbon emissions, making it the largest ETS globally. 

    Implications 

    Simply put, carbon quotas or the right to emit carbon are currently allocated to major power generating companies free of charge. The exchange serves as a marketplace where heavy polluters purchase additional quotas from less-polluting companies in order to fulfil their regulatory obligations. At the other end of the trade, cleaner generators sell their excess quotas in exchange for additional income, which they may invest in clean technology to further reduce their emission level. Through this mechanism, as the supply of quota is reduced incrementally which inevitably drives up the price of carbon, all participants are incentivized to reduce their emissions to improve profitability. 

    The relatively sufficient amount of free quotas has led to a lower demand from polluting companies to buy additional quotas, which in turn results in a low trading price of carbon in China, around RMB 50/ton compared to other markets such as the European Union (EU) around EUR 50/ton. At the current price level, for companies that still largely depend on legacy coal-powered units, the cost of purchasing additional carbon quota is estimated to be between 5% to 25% of their overall production cost. The status quo is expected to change in the coming years as carbon price increases due to reduced quota supply. This is precisely the point of establishing a carbon market to push heavy polluters to accelerate the transformation to cleaner forms of energy or adopt technological innovations such as Carbon Capture, Utilization, and Storage (CCUS) through a market-based mechanism.

    Although the short-term implications of the national ETS may seem limited, the national ETS, more importantly, serves as a regulatory infrastructure to regulate other carbon-intensive sectors in China. Other than electricity, it is expected to soon cover seven other industries, including petrochemical, chemical, construction materials, steel, nonferrous metal, papermaking and aviation, allowing the country to effectively regulate the emission activities of its heavy polluters. Through the pilot programs, the above-mentioned industries ended up facing many challenges. Having so many different industries involved created lots of technical issues. Many also found it difficult to absorb the additional cost of carbon. For example, due to the cross-boundary nature of the aviation industry which currently accounts for 2% of the global carbon emissions, measuring and reducing emissions within the sector has proven by the EU ETS’s previous attempt to be both technically (specifically for the Monitoring, Reporting and Verification (MRV) system) and politically challenging. As China joins the club to reduce carbon emissions and as the MRV system gradually improves, we may expect multilateral cooperation on carbon trading with a wider industry inclusion to become more promising and viable.  

    Future outlook

    Going forward, the Chinese regulator is expected to leverage more experiences from its international peers to continuously fine-tune and expand its carbon trading scheme. Most importantly, setting the number of quotas within a reasonable range would allow the scheme to effectively facilitate technological innovation and emission reduction measures toward the reduction target, and avoid market crashes, which is what the EU ETS experienced during its initial stage. The current attempt by the EU to include more international and complex businesses such as those within the maritime industry would also be exemplary for the Chinese regulator. 

    Coupled with a wider industry inclusion, the supply of free quotas is expected to be gradually tightened by the regulator, driving the price up and closer to the international average level. Allowing the entrance of more market participants and structured financial products would further facilitate price discovery, and ultimately support China’s goal to achieve carbon neutrality by 2060. Furthermore, as an important supplement mechanism to the mandatory ETS, the voluntary market Certified Emission Reduction (CCER) is expected to reopen to provide more flexibility and incentives to a wider range of market participants.

    Sources:
    1 China’s New Carbon Market Inks First Bulk Agreement (caixinglobal.com) 
    2 生态环境部:全国碳市场选择以发电行业为突破口 有两方面考虑 (baidu.com) 
    3 Caixin Explains: How China’s New Carbon Market Will Work (caixinglobal.com) 
    4 m.weekly.caixin.com/m/2021-07-24/101744783.html&nbsp;
    5 张希良:明年全国碳市场将囊括更多行业_环科频道_财新网 (caixin.com)
    6 In the first 2005-2007 EU-ETS phase, only three member states had caps that were lower than baseline 2005 emissions levels. This caused a glut on the allowance market - permit prices crashed to a low of €0.03 per ton in December 2007.
    7 分析|新建碳边境、增收排放费范围,欧盟气候新政如何冲击全球_世界频道_财新网 (caixin.com) 
    8 Since March 14, 2017, NDRC temporarily suspended CCER project registration and credit issuance in order to revise the Interim Measures for the Administration of Voluntary Emission Trading of GHG.

    Disclaimer

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. The opinions expressed by the author are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. Published by JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.

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    news-2490 Mon, 26 Jul 2021 17:13:28 +0200 What to expect from the July 28th Federal Open Market Committee (FOMC) meeting /en/who-we-are/news/detail/what-to-expect-from-the-july-28th-federal-open-market-committee-fomc-meeting/ PRE FED commentary, by François Rimeu, Senior Strategist
  • We do not expect any substantial change from the July FOMC policy statement.
  • On the economic front, we expect the FED to maintain a cautious optimistic tone considering the spread of the delta variant. 
  • Employment has strengthened but FED members will need more data before being comfortable tightening financial conditions. 
  • We believe Chair Powell will indicate tapering discussions will continue during the summer.  
  • We do not expect major details on the tapering process. The FED may announce a change at Jackson Hole conference (August 26-28) or during the September meeting (21-22) before a formal announcement in December.
  • We expect Chair Powell to reaffirm that price increases are mainly transitory, but he might emphasize that the Committee could act if higher-than expected inflation was to persist for an extended period. 
  • In summary, we expect the FED to maintain a prudent approach, which will have no significant impact on financial markets.


    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2489 Fri, 23 Jul 2021 14:04:59 +0200 Fast(er) Food /en/who-we-are/news/detail/fast-er-food/ Digital transformation is impacting every industry. In food service, many companies recognize that to keep up with competitors and thrive, they need to invest in technology, which we believe is creating opportunities for investors who can identify the leaders in this race. Strategic Considerations in Food Service

    • After experiencing the challenges of the pandemic, nearly three quarters of food service executives (71%) said digital transformation is “very important,” according to a survey by Panasonic. More than half (59%) of respondents said their top strategic priority is integrating physical, digital and mobile shopping experiences. This is nearly three times the proportion who ranked integration of physical and digital shopping as a top priority in early 2020.
    • Restaurants are investing in technologies to become more efficient. These include mobile devices for associates, customer kiosks, smart inventory/shelf solutions, mobile apps for customers, food lockers for customer pickup and license plate recognition. Some are even experimenting with facial recognition in kiosks and at point-of-sale.
    • The technology race is allowing some restaurants to gain significant market share. Consider that only 15% of total food service transactions were initiated via an ordering app in 2020. While that is a huge jump from 6% in the prior year, it pales in comparison to restaurants like Chipotle, which conducts half of business digitally or Wingstop, which is 60% digital. Digital leaders and the companies that enable their transformation are likely to outperform peers, in our view.
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    news-2488 Tue, 20 Jul 2021 17:51:08 +0200 La Française AM, positive outlook for high yield in 2021 /en/who-we-are/news/detail/la-francaise-am-positive-outlook-for-high-yield-in-2021/ Key takeaways: - Favorable fundamental and technical factors for Global High Yield market - Performance should mainly be driven by carry - Caution on Emerging Market issuers During S1 2021, the high yield bond market outperformed the investment grade segment. This movement was driven by a set of positive factors: the substantial drop in default rates, especially in the US, extremely accommodative central bank monetary policies and the strong performance of fallen angels. (Source: La Française AM, BoAML, data as at 31/05/2021) 

    The cautious stance on emerging markets in the global strategies of La Française AM has paid off as performance in the region was substantially hindered by China where corporate defaults and stress ratios stood at their highest for many years. (Source: BoAML, data as at 30/04/2021) That being said, the outlook for the high yield market for the remainder of 2021 remains positive as both fundamental and technical factors remain strong. “The global high yield market significantly outperformed the global investment grade market by more than 400 basis points. Year to date, the performance was 3.3% for high yield (denominated in euros) compared to -1% for investment grade”, said Akram Gharbi, Head of High Yield Investment at La Française AM. For the remainder of the year, La Française AM forecasts that performance will be mainly driven by carry as spreads continue to fluctuate within a relatively narrow range. Any market stress resulting from a change in central bank policy will most likely be short lived and could provide an attractive market entry opportunity. 

    “For Q3, we expect global high yield spreads to move within a range of 320 to 360 basis points. And any spread widening beyond 360 basis points because of rising concern about the delta variant of Covid-19, could represent a good buying opportunity. We remain confident in global economic recovery and central bank support”, said Gharbi.
    Alternatively, experts at La Française AM anticipate struggles in the private lending sector. “Lufthansa, for example, as a listed company has access to the market. Private companies, however, will struggle for lending. Therefore, we expect to see a high increase in default rates in private lending, but not in the high yield market”, said Gharbi.

    Inflation, not here to stay

    La Française AM does not expect a lasting return of inflation and believes the recent appreciation in the US consumer price index (CPI) to be temporary as due to cyclical factors. “We are not afraid of inflation”, said Gharbi. For inflation to be a long-term risk, the production capacity needs to be destroyed by a long-term collapse in global supply (surge in corporate defaults). The absence of inflationary risk should keep interest rates low and central banks should maintain accommodative monetary policies. At the current time, it is more appropriate to talk about short-term price adjustments which are typical in a recovery phase”, commented Gharbi.

    Outlook on the second half of 2021

    La Française remains positive on High Yield for the next six months. Several reasons support this optimism. Firstly, corporate fundamentals in the US and Europe remain strong and the global economic recovery should continue until the end of the year and beyond. Therefore, default rates should stay low in these regions (below 3.5% in US, stable at around 2% in Europe). Secondly, technical factors are still favorable to the asset class and there is still value to be found for investors looking for a stable coupon over the next few years. Gharbi is confident: “High Yield is the only market in the liquid fixed income space where you can find a 3% net yield.”  And finally, most of the performance for the rest of 2021 should come from carry as spreads will likely remain within a range of 320 and 360 basis points.

    Opportunities outshine risks

    The short-term risk will likely be linked more to flows rather than fundamentals, i.e., a change in central bank policy, mainly the Fed. “At the moment, economic recovery in the US is gaining speed and may induce the Fed to adopt a less dovish stance. I do not think the Fed will put an abrupt end to its accommodative policy, but they could draw some liquidity from the market which might create some volatility. But that is not a game changer for us”, argues Gharbi. The mid-term risk could be linked to the political situation in Europe, as there will be elections in Germany and France which could generate some volatility in the market. The most significant mid-term risk according to La Française AM is related to the health situation in Emerging Markets, as the number of COVID-19 cases continues to increase in these regions. “In terms of regions, we still prefer Europe and the US and see value and good opportunities in the primary market with issuers like Triton Water, Allied Universal and Douglas, just to name a few”, said Gharbi.

    La Française AM continues with its cautious stance on the Emerging markets. “We are not planning to increase our exposure to emerging markets in the short term as we think the situation could get worse before getting better”, said Gharbi. In terms of ratings, La Française AM still sees value in “BB” rated issuers operating in sectors related to COVID-19, such as airline companies and industrials, some of which have only recovered 70 % of their spread widening compared to almost 100 % for “BB” rated companies operating in sectors unaffected by the pandemic. “Therefore, we expect the rally to continue in this part of the market”, concluded Gharbi.

    Disclaimer
    This commentary is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Past performance is not indicative of future performance. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2486 Tue, 20 Jul 2021 14:15:52 +0200 The ECB will hold its quarterly monetary policy meeting on July 22nd. /en/who-we-are/news/detail/the-ecb-will-hold-its-quarterly-monetary-policy-meeting-on-july-22nd/ Please find below what we expect:
  • We expect the ECB to redefine its forward guidance to align it with the strategic review.
  • We expect this new forward guidance to sway towards a more accommodative monetary stance, taking into account the new 2% inflation target (vs « close but below 2% ») and the fact that they will tolerate inflation moderately above 2%.
  • We expect the ECB to insist on the need to have a « forceful and persistent » answer when rates are at the lower bound.
  • We expect the introductory statement to evolve towards a « more narrative-based and more concise monetary policy statement ».
  • We do not expect to have clarification about the end of the Pandemic Emergency Purchase Programme (PEPP) and the potential increase of the Asset Purchase Programme (APP) following March 2022. Those decisions will be left for the September meeting or the ECB forum in Sintra (September 28-29th).
  • We expect the ECB to probably maintain a cautious tone on the economic front, due to concerns about the delta variant of COVID-19. 
  • All in all, we expect the ECB to adopt a dovish stance, but market reaction could be relatively limited considering they have already priced it in.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2485 Tue, 20 Jul 2021 14:11:08 +0200 What to make of China’s latest macro data? To paraphrase a Hollywood movie, “It’s complicated” /en/who-we-are/news/detail/what-to-make-of-china-s-latest-macro-data-to-paraphrase-a-hollywood-movie-it-s-complicated/ by Fabrice Jacob, CEO, JK Capital Management Ltd., a La Française group-member company We always knew that Chinese macro data for the second quarter would be confusing. That proved to be an understatement. Not only the year-on-year comparisons turned out to be as meaningless as we thought given the hugely distorted base effect twelve months ago, but in addition the interpretation of these data was made even more complicated by the central bank’s decision to cut its Required Reserve Ratio (RRR) just a few days prior to the release of the Q2 data.

    What is the RRR? It is the amount of cash all banks need to keep permanently at the People’s Bank of China (PBoC), the central bank. It is one way for the government to control the amount of credit flowing into the economy. Except that five years ago, the Chinese government decided to shift its focus away from the RRR and towards Open Market Operations whereby the PBoC intervenes directly on the interbank market through Repurchase Agreements (“Repos”, used to siphon liquidity) and Reverse Repurchase Agreements (“Reverse Repos”, to inject liquidity). The RRR had stopped being an active monetary policy tool.  

    What happened? Out of the blue, Premier Li Keqiang hinted at a possible cut in the RRR “at the appropriate moment” during a meeting of the State Council on 7th July. The justification he gave was “to counter the negative impact of rising raw material prices”, even though administrative measures to that effect are already bearing fruits. The 50bps RRR cut that returned RMB1tn of cash to the Chinese banks was announced by PBoC two days later, on 9th July. The reason put forward by PBoC in its official statement was to help banks repay medium-term lending facilities (MLF) that the PBoC had decided not to roll over. In other words, PBoC was asked by the State Council to use what had been in the past a very high-profile monetary policy tool to execute a technical treasury operation that was not worth writing about. And it all happened two days before China was scheduled to announce its GDP numbers for the second quarter and a series of high-profile macro data for the month of June. 

    It was not difficult for analysts to jump to the conclusion that some scary numbers were about to be released and that the government was proactively managing the impact by loosening its monetary policy. But to everyone’s surprise, that was not the case, even though the Q2 numbers proved to be particularly confusing.

    Looking at the Q2 headline numbers taken at face value, growth collapsed from 18.3%YoY in Q1 2021 to 7.9%YoY in Q2 2021, slightly below the analysts’ consensus of 8.0%. But of course, the Q1 2021 YoY comparison had been massively inflated by the -6.8% GDP contraction that occurred in Q1 2020 when Covid hit. The same comment can be made for any country around the world when it comes to year-on-year economic comparison made between the first half of 2021 and the first half of 2020. Which is why analysts find it more relevant to compare Q2 2021 numbers with Q1 2021 numbers, i.e. focus on quarterly growth instead of annual growth, or to compare Q2 2021 with Q2 2019, i.e. do a 2-year annualised growth analysis. The picture looks totally different using that perspective: China had a good second quarter even though most analysts were expecting the economy to start slowing down. Instead, it kept on accelerating.

    On a QoQ basis, seasonally adjusted Q2 GDP growth was +1.3%, up from +0.6% in Q1. On a 2Y-o-2Y basis, annual compounded growth increased from 5.0% in Q1 to 5.5% in Q2. This is not very far from the last pre-Covid growth in Q4 2019 of 5.8%. For the full year 2021, the Bloomberg consensus for GDP growth remains at 8.5%. This consensus number remained unchanged following the release of the Q2 data.

    Looking now at the June numbers that were announced simultaneously and once again focusing on annualised 2y-o-2y comparisons, the picture is quite similar. Nominal retail sales accelerated from an annualised 2-year growth rate of 4.5% in May to 4.9% in June. Adjusted by inflation, real retail sales accelerated from an annualised 2-year growth of 3.0% in May to 3.3% in June. Retail sales in China are now well ahead of their pre-Covid level. This is important as retail sales had been the laggard among Chinese macro data throughout last year.

    Industrial production was slightly lower with an annualized 2-year growth rate of 6.5% in June vs 6.6% in May whereas fixed assets investments accelerated to 5.7% in June vs 4.7% in May.
    Other numbers announced included the unemployment rate of China which remained at a two-year low of 5.0% for the second month in a row. Household incomes are now 11.5% above their pre-pandemic level. On the import/export front, the trade surplus of China reached USD51.5bn in June, up from USD45.4bn in May and above the consensus estimate of USD44.8bn.
    In conclusion, Q2 GDP numbers and June activity statistics surprised us on the upside as we were anticipating a visible slowdown. It was quite the opposite in the end, even though the headline numbers taken at face value can give a very different impression. We do not really understand why PBoC cut the RRR, other than to execute immediately a decision made by the State Council that had been announced by China’s Premier and that could not be disregarded. This would not be the first time as there is no such thing as an independent central bank in China. 

    Economists are split when it comes to the direction of China’s monetary policy for the rest of the year, whether rates will be cut, hiked, or left unchanged. There are too many moving parts for them to reach a consensus, one of them being obviously the possible impact on China of the Delta variant of Covid. However, there is a consensus as to the fact that China is expected to sequentially slow down, on a month-on-month basis, even though it has not transpired in statistics yet.

    Sources: Bloomberg, Nomura, Citi, Capital Economics, Pantheon Macroeconomics – July 2021      

    Dislcaimer

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. The opinions expressed by the author are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. Published by JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.

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    news-2481 Fri, 16 Jul 2021 14:15:53 +0200 Fixing the Building Blocks of Life /en/who-we-are/news/detail/fixing-the-building-blocks-of-life/ Optimism about genetic and cellular medicine has surged as vaccines utilizing messenger RNA (mRNA) rapidly curtail the Covid-19 pandemic. Yet even before Covid-19, new technologies had sparked rapid and sustainable growth of novel therapeutics and accelerating demand for companies that provide life sciences tools and other services needed to develop, manufacture and distribute innovative medical treatments.

    Cell & Gene Therapy Market

    • Revenue for cell and genetic therapeutics is forecast to grow at a 40% compound annual growth rate and reach $33 billion by 2024. These regenerative therapies include editing genes and replacing cells such as T cells that attack cancer. While the most well-known application may be mRNA that instructs cells to create antigens that induce Covid-19 antibodies, other therapies that edit cells with CRISPR technology1 are promising. Already CRISPR is being used to contain malaria in mosquitos and may ultimately be effective in treating hemophilia, cystic fibrosis and cancer. Additionally, CRISPR recently contributed to very favorable Phase I trial data for a rare genetic disorder in humans, the first such evidence that it can be deployed directly into the bloodstream to treat disease.
       
    • Growth is being supported, in part, by technology becoming more affordable. In 2008, it cost $1,000,000 to conduct genetic sequencing. It has since dropped to below $1,000. The development of safer viral vectors that deliver instructions to correct problems with cells or DNA is also supporting the growth of regenerative therapy while demand for better treatments for cancer, immunodeficiencies, central nervous system disorders and other ailments is pervasive.
       
    • Rather than focus on firms that may have their success tied to a single unproven treatment, we prefer to examine businesses with products that support multiple companies that are developing regenerative medicine. These products include materials for producing medical treatments, cloud-based technology for tracking clinical trials, specialty logistics such as refrigerated transportation, research equipment and manufacturing of medical treatments. 1 CRISPR technology is a tool for editing genomes. It allows researchers to alter DNA sequences and modify gene function.
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    news-2480 Thu, 22 Jul 2021 09:00:00 +0200 La Française REM and VINCI IMMOBILIER sign partnership to meet growing demand for new rental housing /en/who-we-are/news/detail/la-francaise-rem-and-vinci-immobilier-sign-partnership-to-meet-growing-demand-for-new-rental-housing/ La Française Real Estate Managers (REM), a real estate asset management firm with more than EUR 27 billion under management – nearly 50% of which on behalf of French and international institutional investors – has entered into a partnership agreement with VINCI Immobilier for the sourcing of a large volume of residential rental assets located in France. The agreement covers 500 housing units per year over two years, including vacant housing units and residences managed by the VINCI Immobilier Managed Residences business unit. This partnership attests to La Française REM's ambition to accelerate its development in the residential rental property market.

    The proposed projects will be residential assets in the broad sense, such as housing, student housing facilities, senior housing and co-living assets, situated primarily in Ile-de-France and major regional French cities.

    Assets will adhere to ambitious environmental standards and comply with La Française’s new-construction charter (in terms of energy and environmental performance, preservation of resources and integration of projects within surrounding area) and Vinci Immobilier’s environmental approach (which strives to combat climate change, optimize resources through the development of the circular economy and preserve natural environments).

    Philippe Depoux, CEO of La Française Real Estate Managers stated: “We are witnessing institutional investors flocking back to residential rental properties, an asset class which is very resilient in terms of rental income and with returns that can be attractive in our low-rate environment. In order to meet this very structured demand in a very competitive investment universe, we naturally turned to VINCI Immobilier, with whom we have long had a significant volume of business relating to high-quality real estate assets. This partnership is a pledge of security, quality and mutual trust.”

    Olivier de la Roussière, CEO of VINCI Immobilier added: “This partnership is in fact the fruit of a very strong and long-standing commercial relationship with La Française. It strengthens VINCI Immobilier's multi-channel strategy in terms of marketing its production of residential operations, a very large part of which is sold to institutional investors. This partnership is part of VINCI Immobilier's environmental strategy, which aims to offer institutional investors ever more responsible and sustainable assets.”

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    news-2479 Thu, 08 Jul 2021 17:27:00 +0200 Re: Modification of the La Française Inflection Point Multi Trends mutual fund /en/who-we-are/news/detail/re-modification-of-the-la-francaise-inflection-point-multi-trends-mutual-fund/ Re: Modification of the La Française Inflection Point Multi Trends mutual fund Dear Sir/Madam,

    You are a unitholder in the La Française Inflection Point Multi Trends mutual fund and we thank you for the trust you have placed in us.

    1. The operation

    The management company, La Française Asset Management, developed responsible and sustainable investment strategies some time ago as part of its responsible stance. One of its strategies, deployed in a number of the sub-funds of its Luxembourg SICAV, La Française LUX, is designed to favour companies working in energy transition towards a less carbon intensive economy. Aside from its environmental aspirations, this approach is based on the conviction that the companies that are most active on this front will not only be in the best position to cope with future impacts, but will also be the most able to seize long-term growth-generating opportunities.

    The management company has decided to allow the La Française Inflection Point Multi Trends fund (hereinafter the “ Fund ”) to benefit from this approach by transforming it into a feeder fund for the La Française LUX Inflection Point Carbon Impact Euro sub-fund (class F EUR - LU0840091218) (sub-fund of the La Française LUX SICAV) (hereinafter the “master UCITS”).

    This decision changes the management objective and the investment strategy, as well as the benchmark indicator of La Française Inflection Point Multi Trends. The name of the Fund will also be changed to “La Française Actions €CO2 Responsable”.

    For information purposes, La Française LUX Inflection Point Carbon Impact Euro, formerly known as La Française Lux - Inflection Point European Equity, was the master fund of the Fund until 1 October 2018.

    This change was approved by the AMF on 8 April 2021 and will come into effect on 23 June 2021.

    By participating in this operation, you agree that your Fund will invest entirely in a sub-fund of the La Française Lux SICAV subject to the rules of Luxembourg law. The sub-fund and its depositary come under the jurisdiction of the courts of the Grand Duchy of Luxembourg, unlike the Fund, which is a UCITS under French law. However, please note that the management company of the Fund and of the La Française Lux SICAV is La Française Asset Management.

    If you accept these terms, this operation requires no action on your part. If, however, you do not agree with these changes, you can redeem your securities at any time at no cost. The Fund will not apply any redemption fees.

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    news-2476 Wed, 07 Jul 2021 10:52:23 +0200 Didi, the Chinese Uber, gets listed in the US and faces headwinds at home /en/who-we-are/news/detail/didi-the-chinese-uber-gets-listed-in-the-us-and-faces-headwinds-at-home/ by Gun Woo, Senior Analyst, JK Capital Management Ltd., a La Française group-member company Didi, often dubbed the Chinese Uber, listed last week in the US. Didi is a ride-hailing app, which works exactly as Uber does. Established in 2012, the company was backed by Tencent and merged with its main competitor Kuaidi, backed by Alibaba, in 2015. In 2016, Apple became a shareholder of Didi, and, the same year, in a surprise move after years of fierce competition, Didi acquired Uber’s operations in China in a share swap transaction. Didi then became the dominant player in China while Uber received a stake in the company (12% currently).

    The valuation of Didi at IPO was around USD 68bn, representing a discount to Uber’s USD 100bn market cap. The companies are still very comparable in size with Gross Transaction Values (GTV) for ride-hailing services of roughly USD 27bn in 2020 for both although Didi has a stronger revenue and profit profile. Didi’s net loss was USD 1.3bn in 2020, whereas Uber booked USD 4.8bn of net losses.

    So, why was Didi priced at a discount to Uber? We see two elements that can explain it. First is the regional diversification element. Within Uber’s revenue only 60% is generated in the US while 98% of Didi’s revenue is generated in China. Uber is the leader by market share not only in the US, but also in Europe, Latin America, Australia, and India while overseas expansion has so far been limited for Didi. 

    The second element is business diversification. Uber has successfully diversified in food delivery services “Uber Eats”. In 2020, 35% of Uber’s revenue was generated by the delivery business. Although the GTV from ride-hailing of both companies are at similar levels, the total GTV of Uber is about USD 58bn while Didi’s is only USD 31bn. The food delivery opportunity in China is already dominated by Meituan and Alibaba’s Ele.me, leaving limited space for Didi to expand in that space. Didi is now rather pursuing the grocery delivery market instead.

    The listing of the Chinese ride-hailing company started well until, just two days after the IPO, news came out that Didi was under scrutiny from the Chinese government with regards to its data collection and security practices. Two days later the Cyberspace Administration of China (CAC) announced that Didi had committed serious violations in the collection and usage of personal information and ordered the app to be pulled from Chinese app stores until it is remedied (which means Didi cannot add more users or drivers, existing ones however can still use the app). No details were shared as to what precisely the investigation centres on, when or where the alleged violations occurred or whether there will be more penalties to come. This led to some share price weakness which will likely carry on in the near future. Many commentators were quick to theorise that this was all too conveniently scheduled, and that the Chinese administration deliberately waited for the listing to make an example of Didi for other companies to refrain their desires for a US listing. But it has since come out that warnings of the administration to Didi had already been published in May and people close to the matter revealed the Chinese cybersecurity watchdog suggested the Chinese ride-hailing giant delay its initial public offering and urged it to conduct a thorough self-examination of its network security. It appears that Didi chose to ignore the warning, perhaps under pressure from its shareholders to get the listing done.

    This is an unfortunate hiccup, and we believe Didi will likely make the necessary amendments soon and resume full operations. What we think is more interesting in the long term is the question of who will take the leadership in the autonomous driving market? It is clear that this is the market both Didi and Uber want to get. With no drivers involved the GTV could easily translate fully into revenue (currently only 20% translates into revenue). More cars could provide Didi service during the idle time, there would be no bottleneck of ride supply. At this nascent stage, it is still unclear who, of the manufacturers or of the ride-hailing companies, will take the lead. Didi, Uber, Geely, Tesla, Baidu, Huawei, Google, Apple and many others are in the starting blocks. Whoever succeeds will likely determine the future of the ride hailing companies such as Didi. 

    Sources: Didi SEC filings, Uber SEC filings

    disclaimer

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. The opinions expressed by the author are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. Published by JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.

     

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    news-2475 Fri, 02 Jul 2021 15:16:42 +0200 LETTER TO UNITHOLDERS OF THE "La Française Rendement Global 2022*" MUTUAL FUND / UAE /en/who-we-are/news/detail/letter-to-unitholders-of-the-la-francaise-rendement-global-2022-mutual-fund-uae/ Re: Merger-absorption operation of the "La Française Rendement Global 2022*" mutual fund by the "La Française Rendement Global 2028"* sub-fund of the "La Française" SICAV Dear Sir/Madam,
    As a unitholder in the La Française Rendement Global 2022 mutual fund, we would like to thank you for the trust you have placed in us.

    1. Operation

    We wish to inform you that La Française Asset Management, the management company of the La Française Rendement Global 2022 mutual fund, has decided to merge the La Française Rendement Global 2022 mutual fund (hereinafter the "Absorbed Fund") into the “La Française Rendement Global 2028"* sub-fund of the "La Française" SICAV (hereinafter the "Absorbing UCI").

    La Française Asset Management would like to offer you the possibility of taking a position in the Absorbing UCI, whose management is based on a similar strategy but with a longer maturity and a broader investment universe. The issues have a maturity of five years or more and refinancing at less than five years is almost non-existent. The Absorbed Fund has experienced a significant number of early redemptions ("callables"), and further portfolio acquisitions have been rendered difficult in the context of a reduced primary market. Moreover, reinvestment conditions do not allow for optimal fund performance.

    Furthermore, we consider that a traditional carry strategy would not be in the interests of investors insofar as a significant part of the expected performance over the recommended investment period has already been achieved. As such, the estimated residual return is low. As a reminder, the objective of the Absorbed Fund* is, over the recommended investment period of eight years from the launch date until 31 December 2022, to outperform (net of fees) bonds issued by the French Government denominated in euro and maturing in 2022.

    As an example, the estimated net return of the R unit on 2 June 2021 until the maturity of the Absorbed Fund* will be 0% after deducting the estimated running costs (1.16%) and hedging costs (0.43%).
    The outstanding amount of the Absorbed Fund* on 2 June 2021 is 126,493,115.12 euros.

    As a result, the merger-absorption into the Absorbing UCI would enable you to gain new market opportunities before the 2022 maturity.
    However, you are currently a holder of the Absorbed Fund* which is currently exposed to a decreasing interest rate sensitivity over time and which is now low. The Absorbing Fund has a longer maturity and a higher interest rate exposure with a sensitivity of 0 to 9.

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    news-2470 Thu, 01 Jul 2021 11:41:38 +0200 LETTER TO UNITHOLDERS OF THE "La Française Rendement Global 2022" MUTUAL FUND /en/who-we-are/news/detail/letter-to-unitholders-of-the-la-francaise-rendement-global-2022-mutual-fund/ Re: Merger-absorption operation of the "La Française Rendement Global 2022" mutual fund by the "La Française Rendement Global 2028" sub-fund of the "La Française" SICAV 1. Operation

    We wish to inform you that La Française Asset Management, the management company of the La Française Rendement Global 2022 mutual fund, has decided to merge the La Française Rendement Global 2022 mutual fund (hereinafter the "Absorbed Fund") into the “La Française Rendement Global 2028" sub-fund of the "La Française" SICAV (hereinafter the "Absorbing UCI").

    La Française Asset Management would like to offer you the possibility of taking a position in the Absorbing UCI, whose management is based on a similar strategy but with a longer maturity and a broader investment universe. The issues have a maturity of five years or more and refinancing at less than five years is almost non-existent. The Absorbed Fund has experienced a significant number of early redemptions ("callables"), and further portfolio acquisitions have been rendered difficult in the context of a reduced primary market. Moreover, reinvestment conditions do not allow for optimal fund performance.

    Furthermore, we consider that a traditional carry strategy would not be in the interests of investors insofar as a significant part of the expected performance over the recommended investment period has already been achieved. As such, the estimated residual return is low. As a reminder, the objective of the Absorbed Fund is, over the recommended investment period of eight years from the launch date until 31 December 2022, to outperform (net of fees) bonds issued by the French Government denominated in euro and maturing in 2022.

    As an example, the estimated net return of the R unit on 2 June 2021 until the maturity of the Absorbed Fund will be 0% after deducting the estimated running costs (1.16%) and hedging costs (0.43%).
    The outstanding amount of the Absorbed Fund on 2 June 2021 is 126,493,115.12 euros.

    As a result, the merger-absorption into the Absorbing UCI would enable you to gain new market opportunities before the 2022 maturity.
    However, you are currently a holder of the Absorbed Fund which is currently exposed to a decreasing interest rate sensitivity over time and which is now low. The Absorbing Fund has a longer maturity and a higher interest rate exposure with a sensitivity of 0 to 9.

    The Absorbed Fund will be merged into the Absorbing UCI under the following conditions:

    • The I unit (FR0012020659) * of the Absorbed Fund will be absorbed by the IC EUR share class (FR0013439478) of the Absorbing UCI;
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    news-2468 Tue, 06 Jul 2021 09:00:00 +0200 La Française expands its range of funds available on the IZNES platform /en/who-we-are/news/detail/la-francaise-expands-its-range-of-funds-available-on-the-iznes-platform/ Paris, 6 July 2021: La Française, a management group with 56 billion euros in assets, has expanded its range of funds available on IZNES, the pan-European investment platform for UCI (Undertakings for Collective Investment) units and Blockchain record-keeping. As of now, two La Française AM flagship funds, both awarded the French SRI Label, are available on the platform. The asset management firm hence offers its institutional clients the possibility to carry out all subscription and redemption operations in real time:

    • La Française Sub Debt, subordinated debt fund with more than 1 billion euros in assets under management (31/05/2021).

    La Française Sub Debt is a diversified portfolio comprising approximately 130 subordinated debt securities with an average Investment Grade issuer rating of A- (Source: La Française, as of 31/05/2021), co-managed by Paul Gurzal, Head of Credit, and Jérémie Boudinet, Credit Portfolio Manager.

    • La Française Trésorerie ISR, money market fund with more than 7 billion euros in asset under management (as at 17/06/2021), co-managed by Philippe Ouvré and Fabien de la Gastine, Fixed Income Fund Managers.

    Asset Class: Bonds and other debt securities denominated in euros.
    Fund and units: La Française Sub Debt / Part C
    ISIN Code: FR0010674978
    Horizon: Over 10 years
    Risk and return profile on a scale of 1 to 7 (7 corresponds to a higher risk and a potentially higher return):

    5 (Associated risks: Risk of capital loss, interest rate risk, credit risk, risk arising from techniques such as derivatives, counterparty risk, risk associated with holding convertible bonds, risk related to contingent convertibles, equity market risk, potential risk of a conflict of interests, legal risk)

    The French Financial Markets Authority reminds prospective investors that the annualized performance target in excess of 7% stated in the 'Management objective' section is based on the realisation of market assumptions set by the management company and it is not a guarantee of Fund return or performance.

    Asset Class: Money Market
    Fund and Units: La Française Trésorerie ISR / Part I
    ISIN code : FR0010609115
    Horizon: More than 3 months

    Risk and return profile on a scale of 1 to 7 (7 corresponds to a higher risk and a potentially higher return):
    1 (associated risks: discretionary risk, interest rate risk, credit risk, risk of capital loss, counterparty risk)

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    news-2466 Tue, 29 Jun 2021 09:42:30 +0200 Solar goes through the roof in the world’s two most populated countries /en/who-we-are/news/detail/solar-goes-through-the-roof-in-the-world-s-two-most-populated-countries/ by Aravindan Jegannathan, CFA, Senior Equity Analyst, JK Capital Management Ltd., a La Française group-member company On 20th June 2021, the National Energy Administration (NEA) of China launched a program to promote rooftop solar power in pilot counties. According to the notice issued by the administration, those counties with enough suitable roof area shall apply for participation in the pilot project which has an application deadline on 15th July 2021. Qualifying counties are those where the proportion of roof area that is suitable for hosting rooftop solar panels is at least 50% for government organisations, 40% for public buildings such as schools and hospitals, 30% for industrial and commercial premises and 20% for rural residences.

    Prior to this pilot project announcement, on 9th June 2021, the government released a document to promote the use of green energy in counties to reduce the share of fossil fuel in the energy mix by rising the proportion of roof area installed with photovoltaic (PV) systems and promote the application of Building Integrated PV (BIPV). In contrast to the BAPV, or Building Applied Photovoltaics, which is adding solar panels to pre-existing buildings, BIPV is becoming more popular in China and worldwide as this integrates PV elements at the construction stage of new buildings. BIPV integrates photovoltaics modules into the building such as the roof or the facade. It serves the dual purpose of being used as a building envelope material and a power generator. BIPV systems can provide savings in materials and electricity costs, reduce the use of fossil fuels and emission of ozone depleting gases while adding to the building’s architectural aesthetics. 

    According to data issued by the National Bureau of Statistics and the Chinese Academy of Building Research, China’s current existing building area is about 80 billion square metres. Another 100 million square metres of daylighting tile roof area are added every year. Once applied on a large scale, BIPV can have widespread adoption in China. NEA believes BIPV has greater application potential than BAPV. While BAPV model requires some renovation to the roof, BIPV is part of the building which lowers the cost. The ownership of the equipment and of the electricity produced is also clear as it is owned by the building owner, which reduces the complexity of the business model and the number of parties involved. According to calculations by Tianfeng Securities, the BIPV market may grow by more than 80% on an annual compounded basis between 2020 and 2025 as the industry is in a stage of rapid expansion. With the combined effort of government bodies, the emphasis on BIPV’s widespread adoption in pursuit of carbon neutrality by 2060 as promised by Xi Jinping cannot be understated. The command economy of China combined with instructions given by the very top of the State makes this goal achievable assuming actions such as the one described here are implemented, and we have all reasons to believe that they will. 

    Separately, a similar development on rooftop solar panels was observed in India. One of India’s largest listed companies Reliance Industries Limited (RIL) announced its plans to spend USD 10bn towards the development of solar energy over the next three years. It plans to spend USD 8bn towards building four “Giga factories” that would produce solar cells, modules, hydrogen, fuel cells and a battery grid to store electricity on 5,000 acres of land at Jamnagar, Gujarat where RIL’s refining complex is located. An additional US$2bn would be spent towards developing a value chain, partnerships and futuristic technologies associated with green energy development. 

    As part of the company’s plan, the integrated solar photovoltaic module factory would establish and enable at least 100GW of solar energy by 2030. A majority of this power is expected to come from rooftop and decentralised solar installations in villages. Reliance is known for executing large sized projects in record time. It became the number one telecom operator in India in a matter of two years after launching RJio on the back of establishing itself as the world’s largest oil refinery group in the mid-2000s. Reliance’s commitment to clean energy may prove beneficial for India to meet its sustainability goals, but the path to success will be more uncertain given the limited involvement of the central government of India. 

    Source: CICC and www.news.qq.com

    disclaimer 

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. The opinions expressed by the author are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. Published by JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.

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    news-2464 Mon, 28 Jun 2021 09:55:16 +0200 The enabling role of financial institutions in the transition to net zero /en/who-we-are/news/detail/the-enabling-role-of-financial-institutions-in-the-transition-to-net-zero/ In April, CDP (formerly, the Carbon Disclosure Project) published a report summarising the findings from the first round of responses to its questionnaire tailored specifically to the financial services sector. The headline figure was that portfolio emissions of global financial institutions are on average over 700x larger than reported operational emissions, and only 25% of disclosing institutions calculate and report these financed emissions.1

    Although this is the first time that this difference has been quantified so starkly, these figures did not come as a surprise. It is through the people, businesses and activities that they choose to support commercially, that financial institutions have the biggest impact and are most exposed to climate-related risks and opportunities.

    The difficulty of measuring and managing these financed emissions and the corresponding risks and opportunities lies at the heart of our Carbon Impact approach to financial institutions, which we have developed with many of the topics raised in the CDP report in mind. As such, the key takeaway which we would like to underline is not those figures themselves – however striking they may be – but rather the message that “on top of providing green finance, the finance sector must become green”. As the authors of the report highlight, “While most financial institutions are focused on providing sustainable finance, they are less focused on ensuring that the entirety of their business is aligned with net zero”2.

    Indeed, this rings true. If 2020 was the year of the net-zero commitment, 2021 is so far proving to be the year of the trillion dollar pledge, with some of the world’s largest banks fighting for the spotlight to showcase their green ambitions. US banks Citi, JP Morgan and Bank of America have all thrown their hat in the ring in recent months, announcing new 10-year sustainable financing targets, matching and indeed surpassing those made by their European counterparts over the last few years.

    Yet, at the same time, highlighting so starkly this disconnect to which CDP was referring, the league table of fossil fuel financing compiled each year by the Rainforest Action Network confirmed in March that global banks provided $750 billion in financing to coal, oil and gas industries in 2020. This brings the total support to $3.8 trillion in the five years since the Paris Agreement.3 Despite the impact of the pandemic, which reduced global demand and resulted inage a roughly 9% reduction in fossil fuel financing across the board, the world’s 60 largest banks still increased their financing to the 100 companies most responsible for fossil fuel expansion by over 10%4.This stands in glaring contrast to the total overhaul laid out by the International Energy Agency (IEA) in its “Roadmap for the Global Energy Sector” published in May, which calls for all new oil and gas exploration projects to stop as of this year, if we are going to meet the net-zero goal of the Paris Agreement.5

    Similarly, an analysis by Reclaim Finance and Urgewald of financial flows to all 934 companies on the Global Coal Exit List showed that institutional investors held investments totalling more than $1 trillion in companies operating along the thermal coal value chain. The report showed that at the start of this year, the world’s two largest institutional investors alone had a combined exposure of $170 billion to the coal industry – accounting for 17% of institutional investments in global coal6.

    Ultimately, any carbon impact assessment of a bank or asset manager boils down to the simple question of how it is cleaning up or ‘greening’ its portfolio, and as these figures so clearly show, it needs to be as much a question of increasing exposure to green activity, as it is about reducing its exposure to ‘brown’ activity. In our opinion, it is most importantly about actively shifting the scales between the two, by supporting clients in their transition efforts through any levers at their disposal: active engagement, advisory services, green finance, sustainability-linked products, to name but a few. In the following pages we will explore in detail what this looks like in practice. The figures on either extreme will always be the ones to make headlines, but financial institutions and their investors alike would be wise to take a broader perspective than just those prescribed by prevailing definitions and frameworks and support all efforts to shift the scales and facilitate a reduction in real world emissions.

    As positive as a tighter coal policy or a new green financing pledge may be, an isolated commitment on either end – however sizeable – does not guarantee the desired real-world impact on its own. The financial institutions that we rate most highly are not necessarily those with the lowest fossil fuel exposure today, or the largest green financing target, but rather those which demonstrate a fully integrated strategy across all operations and activities, not just detached efforts in particular hotspots of its business.

    For the purposes of this publication, we will focus on lending and investment portfolios – excluding underwriting activities. Although insurance companies, both as asset owners and underwriters, undoubtedly have an important role to play in the transition – as all financial firms do – for the sake of simplicity, we apply narrow boundaries for this assessment of financial institutions, and consider only banks and asset managers, and their respective activities which pertain to capital allocation.

    (1) CDP, “The Time to Green Finance”; April 2021
    (2) CDP; 2021
    (3) Rainforest Action Network, “Banking of Climate Chaos 2021”; March 2021
    (4) Rainforest Action Network; March 2021
    (5) International Energy Agency, “Net Zero by 2050: A Roadmap for the Global Energy Sector”; May 2021
    (6) Reclaim Finance, “Groundbreaking Research Reveals the Financiers of the Coal Industry”; February 2021

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    news-2463 Fri, 25 Jun 2021 16:48:52 +0200 Drowning in Debt? /en/who-we-are/news/detail/drowning-in-debt/ The huge fiscal stimulus in response to the Covid pandemic has caused the already massive global debt load to surge. Will the global economy drown under the ever-rising tide of debt or can it tread water?

    • Recently released data shows that global debt soared 15% last year to a record $221 trillion or 290% of global GDP. Most of the $28 trillion increase was due to a 25% surge in government debt.
    • However, low interest rates have kept the cost to service debt relatively low. Even in the U.S., where interest rates are higher than in most developed economies, private sector debt service relative to income is only 14.2% compared to the 20-year average of 15.6%. Additionally, the Congressional Budget Office estimates that the interest on the federal debt will equate to 1.4% of GDP this year, lower than it was 15 years ago.
    • Although U.S. interest payments at both the federal and private sectors are not yet at levels where they take up disproportionate shares of our resources, we believe something will have to change in the next couple of decades so that the trajectory of the debt load does not continue unabated. Notwithstanding the very fast growth the economy may experience this year, we believe this debt issue implies slower real economic growth over the long run which may put a premium on the  companies able to generate their own secular growth. These companies could potentially include businesses involved in solar energy, online betting, e-commerce, cloud computing, streaming media, artificial intelligence and novel medical treatments.

     

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    news-2462 Thu, 24 Jun 2021 11:27:25 +0200 La Française Real Estate Managers winner of Real Estate Brand Award - category France / Investors /en/who-we-are/news/detail/la-francaise-real-estate-managers-winner-of-real-estate-brand-award-category-france-investors/ Last night it was made official. Philippe Depoux accepted on behalf of La Française Real Estate Managers a Brand Diamond in the France / Investor category. The European Real Estate Brand Institute honors the strongest brands in the European Real Estate industry for their activities in brand management and their overall positioning. 

    Awards are given based on the opinion of more than 109,000 real estate industry experts on over 1,400 brands from 45 European markets.

    Runners-up included AXA Investment Managers and Amundi Asset Management

     

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    news-2461 Wed, 23 Jun 2021 14:28:58 +0200 Q1 2021 European Real Estate Market, first signs of a revival? /en/who-we-are/news/detail/q1-2021-european-real-estate-market-first-signs-of-a-revival/ by Virginie Wallut, Director of Real Estate Research and Sustainable Investing, La Française Real Estate Managers Snapshot of European real estate investment market 

    Q1 2021 activity in the European real estate market, regardless of travel restrictions and sanitary measures, maintained a certain dynamic. In Q1 2021, the volume of corporate real estate investments amounted to €40 billion in Europe (€10 billion in the United Kingdom, €9 billion in Germany, €5 billion in France and €2 billion in Benelux). Though this represents a decline of 40% compared to Q1 2020, the level of investments remains satisfactory given the exceptional volume recorded in Q1 2020. (Source: CBRE)

    Investment volumes vary drastically depending on asset class. Demand for logistics real estate was confirmed and investors showed renewed interest in offices. However, the tourism and retail sectors continue to be largely impacted by the health crisis despite the high demand for diversification assets. 

    During S2 2021, we anticipate that investors will continue to favor more liquid markets, namely Germany, France and the UK. However, we are witnessing a situation similar to 2009, meaning that today’s real estate market is a “local investor” market, and the number of cross-border transactions has declined significantly. (Source: CBRE) Perhaps, this too will evolve as travel restrictions are progressively lifted and the vaccination roll-out gains in traction.

    Prime Office yields in Europe

    The health crisis has naturally accelerated the flight to quality. In the low-for-long interest rate environment, demand for core assets is keeping prime real estate yields under pressure. Since the start of the pandemic, office yields have remained broadly stable for prime assets, i.e., Paris and the main German cities show prime yields below 3%. (Source: CBRE) We can expect a greater disparity between prime and secondary office market yields as we move further into 2021.

    The prospect of an upturn in the economic activity of tenants is pushing some investors to position themselves on riskier assets with more opportunistic strategies. However, this type of strategy must take into consideration new work habits and user demand for sustainable and flexible buildings, with an emphasis on safety and new health directives and well-being.

    Investment activity should pick up in the coming months, especially if the rebound in rental markets is confirmed. Investors may position themselves on lower yielding assets in the short-term in anticipation of economic recovery. 

    Rental market
    In Europe, take-up was down 23% year-on-year (Q1 2021 vs Q1 2020). However, take-up varies significantly depending on the fundamentals of the market. In Q1 2021, the Hague, Brussels and Berlin have shown an increase of more than 50% compared to Q1 2020, whereas Dublin, Amsterdam and La Défense have shown a decline of more than 50%. (Source: CBRE)

    European markets were subject to increased vacancy rates. Despite the gradual lifting of Covid restrictions in Q2, this trend should continue due to the completion of projects initiated before the crisis. In one year, supply increased by 30% in Europe.  In Q1 2021, in central locations, especially in Germany, the increase in supply remained limited with vacancy rates below 5%. (Source: CBRE)

    The rental values of prime locations remained broadly stable since the start of the health crisis. However, markets, where current or future supply is abundant, such as Madrid or Dublin, have recorded headline rent corrections. In Q1, prime rents appear to have landed in the UK after four quarters of continuous decline. Peripheral location rental values experienced downward pressure given abundant supply. In all markets, lease (existing and new) incentives are common.

    Sources: CBRE, La Française REM Research
     

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    news-2459 Tue, 22 Jun 2021 15:22:43 +0200 Notice: Mutual fund " La Française Inflection Point Multi Trends " (" La Française Actions €CO2 Responsable ") /en/who-we-are/news/detail/notice-mutual-fund-la-francaise-inflection-point-multi-trends-la-francaise-actions-eurco2-responsable/ This notice follows the letter to unitholders distributed on 21 May 2021 informing you that the “La Française Inflection Point Multi Trends” mutual fund was to be made a feeder fund of the “La Française LUX Inflection Point Carbon Impact Euro” sub-fund (class F EUR - LU0840091218) (sub-fund of the La Française LUX SICAV). As 23 June is a public holiday in Luxembourg, this operation will be performed at the net asset value as at 24 June 2021.

    We would like to draw your attention to the necessity and importance of reading the key investor information document of the "La Française Actions €CO2 Responsable".

    Potential investors should read all key investor information documents before making any decision to invest.

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    news-2457 Fri, 18 Jun 2021 14:31:14 +0200 Great Expectations? /en/who-we-are/news/detail/great-expectations/ Investors have been enthusiastic about economic recovery plays including many value equities, but is too much optimism baked into these stock prices? The data shows that investors may have great expectations for this segment of the market, while those companies that continue to grow year in and year out are less in favor.

    Performance vs. Fundamentals Year to Date

    • Year to date, value stocks, which tend to have more exposure and leverage to the economy, have outperformed growth stocks, which are generally driven by more secular forces, independent of the economic cycle, such as e-commerce or digital payments.
    • Much of the appreciation in value indices is based on expectations of a revenue and earnings snap-back as the economy recovers from the pandemic. Estimates have been rising for value stocks as a result of the gradual return to normalcy in the economy, but it may surprise investors that revenue estimates have actually been growing faster for the Russell 3000 Growth Index than the Russell 3000 Value Index.
    • In the market’s view, many companies that experienced large revenue and profit declines may see improvements in their fundamentals in the coming months. With that now reflected in stock prices to some degree, investors are left to ponder what comes next. When we consider the next five years, we see slower economic growth but faster secular change driven by innovation, an environment we believe is well-suited to growth stocks.
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    news-2456 Fri, 18 Jun 2021 09:06:15 +0200 “What is your outlook on European equity for the second half of 2021?” /en/who-we-are/news/detail/what-is-your-outlook-on-european-equity-for-the-second-half-of-2021/ We are still constructive on European equity markets. Fundamentals remain supportive with vaccination finally getting done, economies on the verge of full reopening and corporate earnings looking great thanks to the very low 2020 comparison. Governments will probably be sluggish to unplug support to the economy, which will translate into an abundance of liquidity – usually positive for equity markets. What’s more, the bravest ones like Mr. Biden’s are even discussing adding stimulus. This will make investors more confident about growth – another positive for equities.

    Similarly, central banks have pledged not to remove stimulus for the time being. The Fed's first hike will not happen in 2021 but most probably in the second half of 2022. The ECB will keep buying corporate bonds for the foreseeable future: the first program to be wound down will be the PEPP, which is only made of sovereign debt, not corporate bonds. Firms will therefore continue to enjoy abundant liquidity, another positive factor for Equity markets.

    Although they are expensive in the US, valuations in Europe are not stretched, especially if looking at risk premium (earnings yield minus German bunds yield). Lastly, equities have historically been a good inflation hedge, which makes them attractive in the current environment.


    Disclaimer

    This commentary is intended for professional investors only within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2455 Thu, 17 Jun 2021 11:13:08 +0200 Huawei’s new smartphone operating system: Harmony 2.0 /en/who-we-are/news/detail/huawei-s-new-smartphone-operating-system-harmony-2-0/ by Gun Woo, Senior Analyst, JK Capital Management Ltd., a La Française group-member company When the relations between the US and China started degrading under the Trump administration and Huawei felt the weight of sanctions, one subject appeared particularly problematic for the smartphone maker: its reliance on Google’s operating system, Android. At the time, Huawei had announced it had an operating system (OS) ready should it no longer be allowed to rely on Android, although the company backtracked afterwards to say the said OS was not fully commercially ready and adopted Android’s open-source OS, called EMUI, without GMS (Google Mobile Service) support starting September 2020 when the sanctions came in. Huawei has now released its OS, Harmony 2.0, which will be installed on all the Huawei phones freeing the manufacturer from any engagement to Google within the software system.

    The release of the OS is quite remarkable as it shows the ability to replace key pieces of software with home developed quality ones. The Harmony OS system is not based on Unix or Android. It is completely independent. Some functionalities look very similar to some patented features of Android or Apple such as some logics, gestures features, or sequences and there could be patent-related uncertainty in the future, especially in the global market. But this is not overly critical at this stage. The most important element to make Harmony a success will now be the app-developer environment. Many applications will likely not work on this OS. Huawei does put forward its own emulator that can easily convert Android apps into Harmony apps, but users of the iOS emulator for the Android OS know the performance is hardly satisfying. The emulator can mechanically change the language, but it will not give it a nice commercial finish or an ergonomic feel. This is why app developers often need to double the efforts and the costs to release versions of their app for the different platforms. It explains also why, for PCs, there are fewer software available for the Mac OS then there are for the Windows OS. In the gaming world, PlayStation and Xbox are the lead actors competing to bring more game developers to their platform. Relatively smaller players like Nintendo have a hard time competing and need to find their own niche in which to thrive without the contribution of many game developers.

    Whether app-developers will start working in the Harmony OS environment is the key question.  It all depends on how many end-users the Harmony OS will attract. If the market is deep enough app-developers will eventually invest to have products made for the platform. Many Chinese consumer-electronics companies such as Midea, Haier, Joyoung, and Fotile, have already agreed to use this OS on their consumer electronic devices like washing machines or ovens. However, smartphone makers like Oppo, Vivo, or Xiaomi have not yet. If they do, at least for the domestic market, the Harmony OS may be a success. 

    Huawei’s smartphone shipment has already dropped to 4% of the global market share in Q1 2021, from 20% at its peak. At this level, the challenge to launch an OS is very different. Huawei needs other Chinese smartphone makers to adopt it and they may request Huawei to abandon manufacturing altogether as a requisite for their move. But this would only solve the problem for the Chinese market. Globally, Apple’s iOS and Google’s Android are well implanted, and it is hard to imagine a third OS taking significant market share from them and attracting developers. Harmony may need to be something like Nintendo in the gaming world, a niche player with its own environment, features, followers and reasons for existence. Until then, although we salute the technical tour-de-force to have released a completely new and independent OS, it is not the “Get-out-of-jail” free card Huawei needs. At least not yet.

    Source: Counterpoint Technology Market Research
     

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    news-2453 Mon, 14 Jun 2021 17:29:29 +0200 Federal Open Market Committee (FOMC) June 15-16 meeting: tapering discussion, new economic and policy rate projections (respectively SEP & DOT Chart) /en/who-we-are/news/detail/federal-open-market-committee-fomc-june-15-16-meeting-tapering-discussion-new-economic-and-policy-rate-projections-respectively-sep-dot-chart/ Obviously, we expect the FOMC to keep the federal funds target range steady at 0-0.25%. We also expect the Committee to maintain a combined $120bn per month pace for asset purchases ($80bn per month for Treasury securities and $40bn per month for agency mortgage-backed securities). However, the latest comments by key FOMC members (Kaplan, Harker) suggest that the FED may launch tapering discussions at the upcoming meeting. During the press conference, we do not think FED Chair Jerome Powell will reveal any clues on the committee ’s debate.  Minutes of the June FOMC meeting will be helpful. Mr. Powell is likely to emphasize that tapering is premature since the Federal Reserve remains far from achieving “substantial further progress” especially after consecutive downside surprises in May and April nonfarm payroll count growth. 

    To balance the Fed’s tone, Mr. Powell will reaffirm the dovish forward guidance on rates. Hence, we do not believe that the median forecast for the federal funds rate at the end of 2023 will show a 25bp rate hike.

    On economic projections, we believe the FOMC will upgrade growth and inflation in 2021 on the back of positive indicators, published since the last meeting in March. For 2022 and 2023, we do not see material change notably on inflation projections. During the press conference, we think FED Chair Jerome Powell will reiterate that high realized inflation largely reflects transitory factors.

    In summary, we believe that the FED will try to keep a balanced communication, that is to keep its accommodative monetary policy stance despite new discussions about gradual tapering.

    We do not think this meeting will have a significant impact on rates, but it could lead to a moderately steeper curve in US interest rates.


    Disclaimer

    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2451 Fri, 11 Jun 2021 14:06:20 +0200 Barkingly Bullish /en/who-we-are/news/detail/barkingly-bullish/ Are you one of the 12.6 million U.S. households that acquired a new pet in 2020? There has been an explosion in pet acquisitions and there are multiple investment opportunities stemming from the strong and persistent growth of the pet industry.

    • As the chart demonstrates, pets are extremely meaningful to Americans, many of whom consider their pets as members of the family. As a result, pet industry purchases have risen steadily, outpacing overall economic growth. This year’s expenditure is estimated at $110 billion in the U.S., up 6% over the prior year, according to American Pet Products Association.
    • Like any family member, pets require medical care. Recently, vets and emergency animal care have reported surges in patients and difficulty managing the increased volume of animals they see. The veterinary diagnostics market is one of the fastest growing segments of the pet industry at over 9% annual growth. The fast growth is driven by increasing household penetration of pets and our attitudes towards them (millennials take their pets to the vet more than 25% more frequently than baby boomers), and by new technological advancements that pull testing from labs to point of care.1
    • The opportunities in the pet industry abound but we believe the most exciting areas benefiting from the pet boom are medication and wellness product providers, vet diagnostics companies, pet food safety testing businesses and high-end pet foods.

    1 Heska 2020 Investor Day.

    La Française AM Finance Services, in accordance with the terms of an agreement signed with Alger Management, Ltd, is a distributor of the Alger SICAV in Europe.

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    news-2449 Thu, 10 Jun 2021 09:38:51 +0200 Market flash : Inflation surprise /en/who-we-are/news/detail/market-flash-inflation-surprise-1/ Inflation: early signs Inflation is now, one of the main sources of concern within the financial market industry. There is indeed a lot of uncertainties regarding the transitory nature of these inflationary pressures.

    For several months now, signs of inflation have increased in our economies. One of the most distinct signs of pressure emerged from the commodities market, currently displaying significant price increases within raw materials. Since the end of 2019 (i.e. before the start of the crisis associated with the pandemic), iron ore has increased by 69%, copper by 61%, and nickel by 21%, and these increases are not limited to industrial metals but also affect agricultural raw materials with wheat and corn increasing by 17% and 60% respectively.

    The Real Estate market is in a way very similar, it has pushed wood prices to extreme levels (+229% since the end of 2019…) and central banks to consider measures to limit loan access in countries such as New Zealand and Canada. The strong demand for goods (offsetting the closure of a large part of services) also caused a break in the semiconductor supply chains, leading once more to inflationary tension on several categories of goods (Electronics, second-hand cars, etc.)

    So far, energy has been the only commodity that has not shown a huge increase over the period (+3.73%), this is mainly due to a sharp decline in commercial flight demand since March 2020.

    Implications in the economy

    Consequently to these price hikes, production costs are soaring in our economies (US PPI up 9.5% over 12 months, highest since July 2008) which should have repercussions, at least partially, on consumer prices given the current household savings rate.

    Since last April, monetary and fiscal policy measures conducted by central banks and governments have been key drivers of this sudden inflation: rate cuts (for central banks still having this possibility) balance sheet size increases, and extensive fiscal stimulus not seen since the post WWII era. It is reasonable to expect monetary policies to become more restrictive, however, this should be done gradually to not “damage” the recovery, even if it implies taking the risk of being a little too late.

    If we add base effects to all of this, which also have and will continue to have positive effects on inflation in 2021, the conclusion seems evident: if there is no inflation now, then there will never be, as everything seems aligned for inflation to rebound strongly. Is inflation going to be on average at levels not seen for 15 years in the main developed economies? We lean in this direction. 

    Is inflation a momentary effect?

    Nonetheless, the most important question today concerns the transitory or non-transitory nature of this inflation. If we listen to the US Federal Reserve’s speech and if we share its interpretations, then yes, this inflation is transitory, and it is unrealistic to hope for greater structural inflation as long as the labour market remains so far from full employment. 

    Indeed, it is very likely that much of the inflation we are currently experiencing is transitory. Second-hand car prices will normalise once supply issues are resolved, base effects will naturally disappear, and the US fiscal stimulus may have reached its limits which will limit the further rise in commodities. On the Real Estate side, the transitory nature of inflation would keep these assets’ rate of return under pressure and support their valuation.
    The chart below shows that most of the current inflation is coming from sectors severely hit by the Covid-19 crisis. 

    Source: CEIC. Goods and services related to Covid-19: Real estates, Second-hand cars, car rentals, airlines tickets, televisions, toys, computers.


    Nevertheless, it seems to us that this reflation theme should continue to persist in the current markets and guide the allocation choices of the coming months, for two reasons.

    The first is merely psychological and has to do with the fact that future inflation figures will be high and will most likely remain so until at least the beginning of next year. This has historically had an impact on the investor’s psyche.

    The second reason concerns the current uncertainty and the fact that no one knows precisely how the prices of the services currently reopening will evolve or what the exact consequences of this crisis will be, both in terms of the countries’ future development choices (ecological transition, infrastructure, digitalisation, etc.) and their choices concerning the way in which they will be financed (new debt, fiscal rebalancing, etc.). That uncertainty, paired with high inflation figures, should keep guiding the financial markets for at least a few more months.

    Asset allocation adjustment
    The current environment should lead to changes in asset allocations at least for a while, and this movement is already underway.

    In this context, we favour companies that will benefit from an inflationary environment, such as banks, which will see their transformation margins increase, or companies that are rather cyclical (raw materials, energy) and well-positioned within their sector, which will be able to pass on price increases to their customers. In terms of support, we favour equities, High-Yield, subordinated financials and emerging debt. Historically, High-Yield and subordinated debt have performed very well in phases of reflation accompanied by strong growth. Good inflation is a positive phenomenon for corporates and high yielding assets.

    This phase should also remain very positive for real assets such as real estate, as rental property holdings allow rents to rise during periods of rising inflation, as they are indexed to indices of which inflation is the main component. This concerns real-estate assets held directly, but also indirectly for real-estate held through funds, particularly SCPIs.

    The information contained in this document does not constitute investment advice, an investment proposal or any type of recommendation whatsoever to invest in the financial markets. It is provided solely for informational and educational purposes and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The assessments contained herein reflect the opinions of their authors at the time of publication and are subject to change at a later date. These opinions may differ from those of other investment professionals. Please note that the value of an investment may rise or fall and also that past performance results are no indication of future results. Under no circumstances may La Française Group be held liable for any direct or indirect losses resulting from the use of this document or the information contained therein. This document may not be reproduced, transmitted or distributed to third parties, in whole or in part, without the prior written consent of La Française Group. Published by La Française AM Finance Services, located at 128 boulevard Raspail, 75006 Paris,   France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, nº 18673 X, subsidiary of La Française. La Française Asset Management is a management company agreed by the AMF under the number GP97076 on July 1, 1997. For more information, check the websites of the authorities: Autorité de Contrôle Prudentiel et de Résolution (ACPR) www.acpr. banque-france.fr, Autorité des Marchés Financiers (AMF) www.amf-france.org.

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    news-2447 Wed, 09 Jun 2021 10:37:58 +0200 The ECB will hold its quarterly monetary policy meeting on June 10th. /en/who-we-are/news/detail/the-ecb-will-hold-its-quarterly-monetary-policy-meeting-on-june-10th/ Please find below what we expect:
  • We expect the ECB to keep its interest rates at record lows.
  • We expect no significant change in the Pandemic Emergency Purchase Programme (PEPP) and no indication that the program will be wound down before March 2022. In terms of wording, we think that the ECB could commit to “higher” PEPP purchases in Q3 while stressing flexibility during the summer months. Previous wording was « significantly higher », which translates into a modest slowdown in Q3 vs Q2.
  • We expect communication on the potential end to the PEPP to be postponed to September.
  • We expect the inflation and growth outlook to materially change, reflecting the reopening of economies, the vaccination roll-out and higher commodity prices:
    • On the inflation front, the ECB previously estimated that inflation would peak in the last quarter of 2021 at 2%; we expect this figure to be revised higher, to around 2.8%. We expect Ms. Lagarde to insist that inflation pressures will prove to be temporary. 
    • Changes could be less pronounced on the growth side. We expect the ECB to wait for more evidence that growth is really accelerating before revising its 4% 2021 growth target higher. Nonetheless, we expect the ECB to forecast 2021 growth at 4.2%.
  • We also expect Ms. Lagarde to communicate about climate risk and how ignoring climate risk would be dangerous for central banks.
  • Finally, Ms. Lagarde could repeat Ms. Schnabel’s communication regarding rising yields:  “Rising yields are a consequence of investors becoming more optimistic and this is precisely what  we want to see.“
  • We think that the ECB will postpone the difficult decision to September and keep all options open. Thursday’s meeting should be a non-event.

    Disclaimer

    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.
     

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    news-2439 Mon, 07 Jun 2021 11:15:40 +0200 Notice: "La Française Rendement Global 2028 Plus" sub-fund of the "La Française" SICAV governed by French law /en/who-we-are/news/detail/notice-la-francaise-rendement-global-2028-plus-sub-fund-of-the-la-francaise-sicav-governed-by-french-law/ We would like to inform you that the management company La Française Asset Management has decided to make a modification to the regulatory documentation of the “La Française Rendement Global 2028 Plus” sub-fund of the “La Française” SICAV concerning the temporary purchase and transfer of securities, the related guarantees as well as the remuneration generated by these transactions. Thus, transactions for the temporary transfer of securities (securities lending, repurchase agreements) may now be carried out up to a maximum of 60% of the sub-fund's assets, instead of the 50% maximum as was previously the case.

    As part of these transactions, the UCI will now be able to receive/pay financial guarantees in the form of a transfer of full ownership of securities and/or cash instead of cash only.

    In addition, it has been specified that the entirety of the generated direct and indirect operating costs will be borne by the management company. The share of these costs may not exceed 40% of the income generated by these transactions.

    Finally, the wording of these sections has been revised for greater clarity.

    This modification does not require the approval of the French Financial Markets Authority and will come into force on 10 June 2021. The regulatory documentation will be amended accordingly.

    The other features of the sub-fund remain unchanged.

    We wish to draw your attention to the necessity and importance of reading the key investor information document of the "La Française Rendement Global 2028 Plus " sub-fund, which is available at www.la-francaise.com.

    Potential investors should read all key investor information documents before making any decision to invest.

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    news-2434 Mon, 07 Jun 2021 10:33:11 +0200 Notice: "La Française Rendement Global 2025" sub-fund of the "La Française" SICAV governed by French law. /en/who-we-are/news/detail/notice-la-francaise-rendement-global-2025-sub-fund-of-the-la-francaise-sicav-governed-by-french-law-7/ We would like to inform you that the management company "La Française Asset Management" has decided to make some modifications to the “La Française Rendement Global 2025” sub-fund of the “La Française” SICAV concerning:
  • the temporary purchases and transfer of securities, the related guarantees as well as the remuneration generated by these transactions;
  • the maturity of the securities.
  • Modifications concerning transactions for the temporary purchase and transfer of securities
  • Transactions for the temporary transfer of securities (securities lending, repurchase agreements) may now be carried out up to a maximum of 60% of the sub-fund's assets, instead of the 50% maximum as was previously the case.

    As part of these transactions, the UCI will now be able to receive/pay financial guarantees in the form of a transfer of full ownership of securities and/or cash instead of cash only.

    In addition, it has been specified that the entirety of the generated direct and indirect operating costs will be borne by the management company. The share of these costs may not exceed 40% of the income generated by these transactions.

    Finally, the wording of these sections has been revised for greater clarity.

    • The maturity of the securities.

    The sub-fund will now have the opportunity to invest in securities whose maturities may exceed the sub-fund's maturity date by up to one year. However, the average maturity of the portfolio shall not exceed the maturity date of the sub-fund. Thus, this will be specified in the regulatory documentation:

    "The investment strategy involves the discretionary management of a portfolio of bonds issued by private or public bodies. The fund may invest in securities that mature by 31 December 2026, i.e. one year after the fund's maturity. However, the portfolio's average maturity must not go beyond 31 December 2025.

    This modification does not require the approval of the French Financial Markets Authority and will come into force on 10 June 2021. The regulatory documentation will be amended accordingly.

    The other features of the sub-fund remain unchanged.

    We wish to underline the need and importance of reading the key investor information document of the "La Française Rendement Global 2025" sub-fund, which is available at www.la-francaise.com.

    Potential investors should read all key investor information documents before making any decision to invest.

    ]]>
    news-2430 Mon, 07 Jun 2021 10:18:49 +0200 Market flash: Inflation surprise /en/who-we-are/news/detail/market-flash-inflation-surprise/ Inflation: early signs Inflation is now, one of the main sources of concern within the financial market industry. There is indeed a lot of uncertainties regarding the transitory nature of these inflationary pressures.

    For several months now, signs of inflation have increased in our economies. One of the most distinct signs of pressure emerged from the commodities market, currently displaying significant price increases within raw materials. Since the end of 2019 (i.e. before the start of the crisis associated with the pandemic), iron ore has increased by 69%, copper by 61%, and nickel by 21%, and these increases are not limited to industrial metals but also affect agricultural raw materials with wheat and corn increasing by 17% and 60% respectively.

    Commodities evolution since 2019

    Source: Bloomberg. Evolution of future contract prices (in $)

    The Real Estate market is in a way very similar, it has pushed wood prices to extreme levels (+229% since the end of 2019…) and central banks to consider measures to limit loan access in countries such as New Zealand and Canada. The strong demand for goods (offsetting the closure of a large part of services) also caused a break in the semiconductor supply chains, leading once more to inflationary tension on several categories of goods (Electronics, second-hand cars, etc.)

    So far, energy has been the only commodity that has not shown a huge increase over the period (+3.73%), this is mainly due to a sharp decline in commercial flight demand since March 2020.

    ]]>
    news-2426 Mon, 07 Jun 2021 09:38:03 +0200 Notice: "La Française Global Coco" sub-fund of the "La Française" SICAV governed by French law /en/who-we-are/news/detail/notice-la-francaise-global-coco-sub-fund-of-the-la-francaise-sicav-governed-by-french-law-2/ We would like to inform you that the management company La Française Asset Management has decided to make some modifications to the regulatory documentation of the “La Française Global Coco” sub-fund of the “La Française” SICAV concerning temporary acquisitions and transfer of securities, the related guarantees as well as the remuneration generated by these transactions. Thus, transactions for the temporary transfer of securities (securities lending, repurchase agreements) may now be carried out up to a maximum of 60% of the sub-fund's assets, instead of the 50% maximum as was previously the case.

    As part of these transactions, the UCI will now be able to receive/pay financial guarantees in the form of a transfer of full ownership of securities and/or cash instead of cash only.

    In addition, it has been specified that the entirety of the generated direct and indirect operating costs will be borne by the management company. The share of these costs may not exceed 40% of the income generated by these transactions.

    Finally, the wording of these sections has been revised for greater clarity.

    This modification does not require the approval of the French Financial Markets Authority and will come into force on 10 June 2021. The regulatory documentation will be amended accordingly.

    The other features of the sub-fund remain unchanged.

    We wish to draw your attention to the necessity and importance of reading the key investor information document of the "La Française Global Coco" sub-fund, which is available at www.la-francaise.com.

    Potential investors should read all key investor information documents before making any decision to invest.

    ]]>
    news-2421 Mon, 07 Jun 2021 09:22:54 +0200 Notice: "La Française Carbon Impact 2026" sub-fund of the "La Française" SICAV governed by French law /en/who-we-are/news/detail/notice-la-francaise-carbon-impact-2026-sub-fund-of-the-la-francaise-sicav-governed-by-french-law/ We would like to inform you that the management company La Française Asset Management has decided to make a modification to the regulatory documentation of the “La Française Carbon Impact 2026” sub-fund of the “La Française” SICAV concerning temporary acquisitions and transfer of securities, the related guarantees as well as the remuneration generated by these transactions. Thus, transactions for the temporary transfer of securities (securities lending, repurchase agreements) may now be carried out up to a maximum of 60% of the sub-fund's assets, instead of the 50% maximum as was previously the case.

    As part of these transactions, the UCI will now be able to receive/pay financial guarantees in the form of a transfer of full ownership of securities and/or cash instead of cash only.

    In addition, it has been specified that the entirety of the generated direct and indirect operating costs will be borne by the management company. The share of these costs may not exceed 40% of the income generated by these transactions.

    Finally, the wording of these sections has been revised for greater clarity.

    This modification does not require the approval of the French Financial Markets Authority and will come into force on 10 June 2021. The regulatory documentation will be amended accordingly.

    The other features of the sub-fund remain unchanged.

    We wish to draw your attention to the necessity and importance of reading the key investor information document of the "La Française Carbon Impact 2026" sub-fund, which is available at www.la-francaise.com.

    Potential investors should read all key investor information documents before making any decision to invest.

    ]]>
    news-2417 Mon, 07 Jun 2021 09:11:30 +0200 Notice: "La Française Global Floating Rates" sub-fund of the "La Française" SICAV governed by French law /en/who-we-are/news/detail/notice-la-francaise-global-floating-rates-sub-fund-of-the-la-francaise-sicav-governed-by-french-law/ We would like to inform you that the management company La Française Asset Management has decided to make a modification to the regulatory documentation of the “La Française Global Floating Rates” sub-fund of the “La Française” SICAV concerning temporary acquisitions and transfer of securities, the related guarantees as well as the remuneration generated by these transactions. Thus, transactions for the temporary transfer of securities (securities lending, repurchase agreements) may now be carried out up to a maximum of 60% of the sub-fund's assets, instead of the 50% maximum as was previously the case.

    As part of these transactions, the UCI will now be able to receive/pay financial guarantees in the form of a transfer of full ownership of securities and/or cash instead of cash only.

    In addition, it has been specified that the entirety of the generated direct and indirect operating costs will be borne by the management company. The share of these costs may not exceed 40% of the income generated by these transactions.

    Finally, the wording of these sections has been revised for greater clarity.

    This modification does not require the approval of the French Financial Markets Authority and will come into force on 10 June 2021. The regulatory documentation will be amended accordingly.

    The other features of the sub-fund remain unchanged.

    We wish to draw your attention to the necessity and importance of reading the key investor information document of the "La Française Global Floating Rates" sub-fund, which is available at www.la-francaise.com.

    Potential investors should read all key investor information documents before making any decision to invest.

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    news-2415 Tue, 08 Jun 2021 07:59:00 +0200 La Française innovates and joins the IZNES platform /en/who-we-are/news/detail/la-francaise-innovates-and-joins-the-iznes-platform/ La Française, a management group with more than 55 billion euros in assets, has joined IZNES, the pan-European investment platform for UCI (Undertakings for Collective Investment) units and Blockchain record-keeping. As a member of the working group since the project’s launch in 2017, La Française has actively contributed to the creation of IZNES and now, following the successful completion of an extensive test phase, has referenced on the platform a first investment vehicle, LF Trésorerie ISR, the group’s "flagship” money market fund with close to 8 billion euros in assets under management (as at 24/05/2021).

    In doing so, La Française is able to offer its institutional clients the option of adopting a new, simplified customer experience. All fund subscription or redemption operations can in fact be carried out in real time. The platform offers a variety of advantages to La Française's institutional investors:

    • Access to a comprehensive product database, with all the features and documents relating to the funds;
    • Ability to view subscriptions and redemptions in real time, with cut-off times very close to those of the prospectus;
    • Access to recordkeeping updated in real time and registered in blockchain, guaranteeing immutability and traceability.

    Thierry Gortzounian, Chief Operating Officer of La Française AM Finance Services declared: “La Française places the client at the heart of its strategy. Following the launch of our own digital distribution platform dedicated to retail investors, La Française continues to innovate in the interest of its investor base and has joined the IZNES platform. We can now offer our institutional clients, in France and across Europe, an alternative subscription channel. We operate in an ever-changing environment and are proud to have participated in this innovative project called IZNES".

    Asset class: Money Market
    Fund and Units: La Française Trésorerie ISR/ I units
    ISIN code: FR0010609115
    Horizon: More than 3 months
    Risk and return profile on a scale of 1 to 7 (7 corresponds to a higher risk and a potentially higher return): 1 (associated risks: discretionary risk, interest rate risk, credit risk, risk of capital loss, counterparty risk)

    ]]>
    news-2414 Tue, 08 Jun 2021 10:08:00 +0200 La Française’s BCO Regional Award-winning Edinburgh refurbishment project runs for June National Awards /en/who-we-are/news/detail/la-francaises-bco-regional-award-winning-edinburgh-refurbishment-project-runs-for-june-national-awards/ La Française Real Estate Managers’ refurbishment project at 10 George Street, situated within the Edinburgh New Town World Heritage site, was awarded the British Council for Offices’ (BCO) Regional Award for Scotland in the Refurbishment/Recycled Workspace category in 2020. It is now going forward to the National Awards scheduled on June 10, 2021. The British Council for Offices' (BCO) mission is to research, develop and communicate best practice in all aspects of the office sector. The BCO is part of the Property Industry Alliance (PIA) and supports its best practice framework for a responsible real estate industry.

    The asset management project entailed the refurbishment of 10 George Street, bringing it up to modern office standards and creating a flexible design that allows any combination of multiple or single tenancy. The focus of the project was on the intelligent reuse of much of the existing structure and adding 15% of additional space, thus meeting modern office demand in a central location. Previously, the building suffered from poor daylight and an inefficient floorplate.

    Following the retrofit, the building offers a spacious and luminous environment conducive to better collaboration and communication. The replacement of the curtain walling and mechanical and electrical systems has brought the building up to modern energy-use standards by decreasing heat loss and solar gain.

    The installation and optimization of modern equipment, namely Energy Efficient Heat Recovery VRF air conditioning, contributes to controlling energy consumption. The building, given the thermal comfort, acoustic performance, reduction of CO2 emissions, energy monitoring, etc. targets a BREEAM rating of Very Good.

    The project was undertaken on behalf of La Francaise’ client Sampension KP, and the project team included Reiach and Hall as Architect, Buro Happold as structural, mechanical and electrical designers and Cushman & Wakefield as project managers.

    Peter Balfour, Investment Director, La Française Real Estate Managers-UK, concluded, « Keeping in line with our holistic approach, La Française, as a committed investor, paid particular attention to reducing the building’s negative externalities, especially its CO2 emissions, while offering flexible, bright workspace and external terraces with views across the City. We are pleased to have given new life to an obsolete building, making a positive contribution to the urban landscape in a World Heritage location and providing an energy efficient office building.”
    Lyle Chrystie, Director of Reiach and Hall Architects said, “It was a pleasure to support the La Francaise vision to redevelop the building as a new sustainable office. The re-launch of 10 George Street marks the successful completion of the refurbishment of a tired and dated 1990’s office Building in the heart of the Edinburgh World Heritage Site.

    The key measure was the re-invention (instead of replacement) of the tired space which has achieved very significant embodied carbon savings and the new systems have enabled a formerly energy hungry building to now operate in a sustainable way. We are delighted the BCO have chosen to reward the client and our team’s sustainable approach with a regional BCO award and with its current shortlisting for a national award.”
    Environmental and societal challenges are opportunities to reconsider the future. Identifying drivers of change and understanding how they will fashion global growth and ultimately influence long-term financial performance is at the heart of La Française’s mission. The group’s forward-looking investment strategy is built upon this conviction.

    Organized around two business lines, financial and real estate assets, La Française has developed a multi-boutique model to serve institutional and retail clients in France and abroad.

    La Française, aware of the importance of the extensive transformations occurring in our increasingly digital and connected world, has created an innovation platform which brings together the new activities identified as key businesses of tomorrow.
    La Française has 55 billion euros in assets under management as at 31/03/2021 and has operations in Paris, Frankfurt, Hamburg, London, Luxembourg, Madrid, Milan, Hong Kong and Seoul.

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    news-2412 Tue, 01 Jun 2021 12:10:05 +0200 Understanding climate-related risks is not only about forecasting the worst, it is also about knowing what to do when it happens: the Taiwan drought /en/who-we-are/news/detail/understanding-climate-related-risks-is-not-only-about-forecasting-the-worst-it-is-also-about-knowing-what-to-do-when-it-happens-the-taiwan-drought/ by Mu Huang, Middle Office Manager, JK Capital Management Ltd., a La Française group-member company The unexpected Covid outbreak in Taiwan is not the only factor currently troubling the islands’ chipmakers. Taiwan has been facing its worst drought in more than half a century and it is having a more enduring effect on the semiconductor industry and the island’s economy than people initially anticipated. 

    Many of the island’s water reservoirs are currently at less than 20% of their capacity, with water levels falling below 10% for some, including reservoirs that are the primary sources of water for science parks. 

    The water shortage also impacts hydropower generation. Although hydropower only accounts for 2% of Taiwan’s energy generation mix, it is the most ideal energy source to meet sudden increases in energy demand. As the water-power nexus has partially led to rationing, hydropower can no longer be counted on to make up for the excess demand of both commercial and residential users who are now witnessing rolling blackouts across the island. 

    As Taiwan is one of the rainiest places in the world, historically water supply has never been an issue. This was an advantage for chipmakers as advanced semiconductor manufacturing is heavily dependent on a stable supply of high-quality freshwater. As this historical drought hits, the Taiwan government has decided to shut off irrigation across tens of thousands of acres of farmland, in order to prioritise precious water supply for its most important industry, semiconductors. In some cities, the government even started rationing water use by suspending water supplies for two days a week. 

    Meanwhile, the island top chipmakers including TSMC, United Microelectronics and Winbond have also initiated their own contingency plans to deal with the water shortage, including mobilising water trucks. TSMC has ordered over 100 water trucks for USD30m, which may just be the start of an inevitably rising water cost for the company. TSMC’s other contingency plan includes a wastewater treatment plant capable of treating industrial water so it can be reused to make semiconductors. According to the company’s latest sustainability report, it currently uses 156,000 tons of water a day and the treatment plant would be able to generate 67,000 tons of water that would flow back into the chipmaking process by 2024, about 43% of its need. However, the demand for water supply may increase significantly in the future and this may only bring marginal relief. A 200W EUV (Extreme Ultraviolet Lithography) system, which is required for manufacturing 7nm or below chips, requires 1,600 litres of water per minute for cooling down, whereas a conventional DUV (Deep Ultraviolet Lithography) machine which manufactures less advanced chips requires only 75 litres per minute. Therefore, as production focus shifts towards more advanced chips (14mn or below), so will the chipmakers’ needs for water, and in a dramatic way. 

    Despite offering an advanced level of disclosures in terms of ESG (environmental, social & governance) matters, TSMC nonetheless fails to thoroughly assess the potential water supply risk that could lead to operation disruption. In its 2020 CDP Water Security questionnaire, the company found “drought is the primary potential water risk although the likelihood of drought is ‘unlikely’” even though the WRI Aqueduct Water Risk Atlas reveals that many of the company’s foundries are located in medium to high water stress areas. 

    This would certainly not be unique to TSMC as other chipmakers and electronics manufacturing companies in Taiwan may soon experience operation disruptions due to water supply shortages and other climate-driven events. The matter may be worse for them as they have fewer resources and competencies to resolve the issue. 

    This is one of the examples where understanding and analysing a company’s ESG related disclosures is critical as it reveals a significant operational risk. We will continue monitoring the Taiwan drought situation and the contingency plans chipmakers are putting in place for the inevitable future occurrences of similar situations.

    Location of TSMC Foundries Clusters

    Source: WRI Aqueduct Water Risk Atlas – May 2021

    Sources:

    •    BBC
    •    NIKKEI ASIA
    •    The Japan Times
    •    GIZMOCHINA

    disclaimer

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. The opinions expressed by the author are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. Published by JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.

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    news-2411 Tue, 01 Jun 2021 12:05:27 +0200 India’s dawn of the digital payment era /en/who-we-are/news/detail/indias-dawn-of-the-digital-payment-era/ by Aravindan Jegannathan, CFA, Senior Equity Analyst, JK Capital Management Ltd., a La Française group-member company Over the past week “Paytm”, India’s third largest e-commerce payments platform announced its plans to go public later during this year with an expected listing date in November 2021 coinciding with Indian festival Diwali. Paytm established itself as a platform for online bill payments and mobile recharge in 2009. It introduced the mobile wallet in 2014. The IPO process is expected to start in late June or early July this year. As per market estimates, Paytm is looking at an estimated valuation of USD25-30bn and expects to raise ~USD2.5-3bn which could potentially make this deal the largest ever capital fund raising in the history of Indian equity markets. 

    The company raised USD1bn in November 2019 in its latest financing round led by T. Rowe Price valuing the company at USD16bn. Paytm's IPO debut is expected to include a mix of new and already existing shares to meet the regulatory requirements. According to SEBI's regulations, 10% of the shares will have to be floated within two years while 25% will have to be within five years. Paytm’s revenues rose by 1.3% to INR36,280mn (USD500mn) while its losses declined by 40% to INR29,420mn (USD405mn) in FY20. 

    As per research firm Bernstein’s pre-IPO primer, Paytm's revenue base is expected to double to USD1bn by FY23 driven by strong growth in non-payments revenue which is expected to grow at 87% CAGR and contribute to 33% of revenues from current 20%. Paytm, a start-up based in Noida is currently backed by investors like Berkshire Hathaway, Softbank Group and Alibaba’s Ant Group. Ant Group is the largest investor in Paytm with a 40% stake.

    As per RedSeer Consulting, a major Private Equity, Internet and Growth Focused advisory based in India, digital payments are expected to grow by 3x from INR2,162tn (USD30tn) in FY20 to INR7,092tn (USD97tn) in FY2025. Within digital payments, mobile payments that currently account for 1% of digital payments at INR25tn (USD34bn) are expected to reach 3.5% of digital payments or INR250tn (USD3.5tn) by FY2025. The total mobile payment users who currently stand at about 160 million are expected to reach to around 800 million users over this period which is expected to create a strong growth opportunity for payment platforms in India. Digital and mobile payments in India have been growing alongside smartphone penetration which has risen from 2% in 2005 to 26% in 2015 and currently at 32% in 2020. This is expected to reach 36% by 2022. 

    We are closely watching the payments landscape in India and will evaluate the investment opportunity at the time of the IPO. We remain optimistic about the growth opportunities within this space while remaining watchful of the valuation and the competitive landscape. As per National Payments Corporation of India (NCPI) data as on February 2021, PhonePe (Walmart) processed 42.5% of all mobile payment transactions, while Google Pay processed 36.1%. Paytm is ranked number 3, accounting for a 14.8% market share, followed by Axis Bank App’s at 2.8% market share and Amazon Pay at 1.9% market share. The NCPI has set out new guidelines for digital payment apps limiting their share in the overall volume of transactions at 30% in a bid to enforce parity in the country’s fast-growing digital payments industry. The new rules, effective from the quarter beginning January 2021, also provide existing players with dominant market shares with a window of two years for compliance, in order to minimise friction for customers as per the regulatory body NCPI which is an umbrella organisation under the Reserve Bank of India.

    Sources:

    https://community.nasscom.in/communities/digital-transformation/fintech/india-digital-payments-2020-launching-the-first-adoption-index-time-is-now.html
     
    https://www.businesstoday.in/current/corporate/paytm-raises-usd-1-billion-to-become-india-most-valued-startup-takes-valuation-to-usd-16-billion/story/390928.html 
     
    https://www.financialexpress.com/industry/digital-payments-market-in-india-likely-to-grow-3-folds-to-rs-7092-trillion-by-2025-report/2063132/ 
     
    https://inc42.com/features/can-fintech-giant-paytm-give-india-its-biggest-ipo/ 
     
    https://www.businesswire.com/news/home/20201110005992/en/2020-Indian-Mobile-Payments-Market-Analysis-5X-Growth-by-2025---ResearchAndMarkets.com 

    disclaimer

    Informative Document for professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. The opinions expressed by the author are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. Published by JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.

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    news-2410 Fri, 21 May 2021 14:22:20 +0200 Best of Both Worlds? /en/who-we-are/news/detail/best-of-both-worlds/ Here is a riddle for you: what grows faster in middle age than in its youth? We believe the answer is mid cap stocks. Mid cap companies have historically produced enviable results relative to younger/smaller cap companies (as well as more mature larger cap companies).

    • U.S. mid cap equities have significantly outperformed both large and small caps over the past several decades. We believe this may be because mid cap stocks are in the “sweet spot.” They are beyond the perils of infancy because they may have more seasoned management teams and proven business models yet still are small enough to have more robust revenue growth than large caps.
    • In our view, the middle of the equity capitalization spectrum is a fertile place for active managers compared to the large end when considering its higher active share (87% vs. 73%)1 and scarcer analyst coverage (11 per stock vs. 21)2. This has historically resulted in higher alpha.
    • With mid cap stocks comprising less than one-eighth of U.S. mutual fund and ETF equity exposure, according to Morningstar data, investors may want to consider adding to what may potentially be an investing sweet spot.

    1 eVestment.
    2 FactSet.

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    news-2407 Thu, 20 May 2021 10:28:56 +0200 Does remote working favour office markets in German B-cities? /en/who-we-are/news/detail/does-remote-working-favour-office-markets-in-german-b-cities/ By Virginie Wallut, Director of Real Estate Research and SRI. Remote working, at least two days per week, will no doubt trigger a geographic splintering of the real estate market. B-city markets, recognized for their better quality of life, are likely to attract the workforce of tomorrow.  

    Historically, B-city markets have behaved more defensively and generated more stable returns over the long term. The below graph illustrates how the demand to supply ratio (an indicator of market tightness) has evolved over time. A low ratio indicates an undersupplied market (owner’s market). A high ratio indicates a market where demand may struggle to absorb supply (tenant’s market).


    Supply/demand ratio in selected cities in Germany

     

                                                

    Source : CBRE, PMA, La Française REM Research

    Historically and especially during times of crises, B-city markets have been more balanced, with demand proportionate to supply. This situation is likely due to more restrictive financing conditions for developers in regional markets and therefore to fewer speculative construction projects. B-city property markets are generally speaking better positioned to manage a decrease in demand and absorb more swiftly any oversupply which would be due to the time lag between construction and delivery. In 2020, the overall volume of take-up declined less in B-cities than in A-cities because of their economic fabric. B-city markets are made up of Small or Medium Sized Businesses or Industries (SMEs and SMIs) that are more agile and proactive in their real estate decisions as opposed to larger groups that drive take-up in A-city markets. Furthermore, while supply has increased relatively moderately in B-cities, 5% y-o-y, it has increased more markedly in A-cities, +20% y-o-y. (Source: CBRE) The above graph reveals, however, that the average supply/demand indicator of A-cities does not correctly reflect certain geographic disparities. A-city center locations present the same defensive behavior as B-cities whereas A-city peripheral locations are much more cyclical and exposed to the economic consequences of crises. The lower supply in A-city central locations is undoubtedly due to the scarcity of constructable property rather than to any reluctance on the part of banks to finance development projects. 

    However, quantitative indicators cannot tell the whole story. The health crisis has accelerated the polarization of office markets. Remote working will not cap the demand for office space, but it will create new needs that cannot be accommodated by the existing office stock for technical reasons. On the one hand, we anticipate an acceleration in the obsolescence of certain office assets that no longer meet user demands. On the other hand, we anticipate a high demand for offices that meet the new expectations of users (i.e., offices that are flexible, sustainable and connected, with a wide range of services, improved accessibility, layouts capable of ensuring satisfactory sanitary standards). Only the most modern offices will be able to respond to these new work patterns. More than ever, the quality of assets is essential. However, B-cities are faced with a lack of state-of-the-art offices. At the end of 2020, only 16% of the office stock in B-cities had been built within the past twenty years. (Source: CBRE) This means that 84% of companies currently occupy buildings that were delivered more than twenty years ago and that are in need of major renovation work in order to deploy hybrid organizations.

    In conclusion, by on the ground investment specialists

    We therefore believe that B-city markets present particularly interesting defensive characteristics in the current phase of the property cycle. Mark Wolter, Country Head - Germany and Managing Director of La Française Real Estate Managers – Germany, added, “The wide heterogeneity of the German market is an asset in this context and is increasingly putting a variety of prosperous B-cities into focus.” However, it is essential to assess the characteristics of assets in light of new user habits in order to avoid unwanted downward pressure on rent levels and property valuations that would naturally arise as tenants vacate obsolete office space. Sandra Metzger, Deputy Managing Director of La Française Real Estate Managers – Germany, concluded, “Building quality is key in today’s changing environment. From our experience, tenants are actively searching for highly flexible, modern and sustainable office space, which is still lacking in most German B-cities. This represents an interesting opportunity for value creation.”

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française Real Estate Managers. The portfolio management company La Française Real Estate Managers received AMF accreditation No. GP-07000038 on 26 June 2007 and AIFM accreditation under Directive 2011/61/EU, dated 24/06/2014 (www.amf-france.org).

     

     

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    news-2406 Tue, 18 May 2021 09:34:54 +0200 China bucks the global trend by tightening its monetary policy /en/who-we-are/news/detail/china-bucks-the-global-trend-by-tightening-its-monetary-policy/ by Marcus Weston, Fixed Income Senior Portfolio Manager, JK Capital Management Ltd., a La Française group-member company As global markets continue to nervously track rising commodity prices after the US released its blow out April inflation numbers last week (week of May 10), most governments and central banks appear to be showing much less concern. For now, it appears monetary and fiscal policies in most of the world’s major developed economies will remain on the present expansionary course, at least until we see if the current inflation trend does indeed prove to be ‘transitory’ or not. 

    Once again, the notable exception remains China. Unsaddled with the headwind of uncontrolled virus outbreaks and related industrial lockdowns, China has been the first major country to tighten its post Covid financial policies. Last week, this was further emphasised after People’s Bank of China released its April monthly lending and social financing statistics that not only showed a further decline in credit growth for the world’s second largest economy, but a deceleration that exceeded market expectations. Bank loan growth saw an increase of RMB1.28trn that was well below consensus expectations of RMB1.56trn while the Aggregate Financing to the Real Economy (AFRE) which includes loans and bonds saw a net growth of RMB1.85trn (vs RMB2.25trn expectations). Consequently, China’s M2 money supply came down from +9.4% YoY in March to +8.1% YoY in April. It is now back to the pre-Covid levels of 2018/19.

    A credit slowdown has been well flagged. Indeed, China has been on a deleveraging path since 2018 and the reversal last year was only seen as temporary to deal with the initial effects of Covid. Nevertheless, the recent numbers indicate that the return to normalisation is coming faster than estimated. Looking closer into the figures, the recent slowdown in aggregate credit growth has mostly been driven by slower growth in domestic bond issuance which should not come as a significant surprise given the government’s multiple announcements on tighter lending conditions in the SOE (state-owned enterprise) and property sectors. 

    Typically, aggressive policy tightening should raise some concerns in financial markets, particularly for risk assets like equities and High Yield debt which tend to be more sensitive to lending conditions. However, we believe the High Yield bond market’s benign reaction to the data so far does indicate that investors are well prepared for this policy direction. China property bonds have already priced in the tighter lending policies in recent months after the introduction of the “Three-Red-Lines” rules last year. Given the fact that recent balance sheet data suggests this has driven a deleveraging push for many developers, this could prove to be a positive trend over the medium term for bondholders. It should also be remembered the monetary tightening is coming at a time of resilient economic growth in China. Indeed, the Caixin April composite PMI recorded a rebound to 54.7 in April (up from 53.1 in the previous month). 

    China is doing what most global central banks are still avoiding to do which is to tackle rising inflation early and head on. If global commodity price rises prove to be more lasting and less transitory, then China’s asset markets could be well positioned to weather the oncoming market turbulence.
    Sources: Bloomberg, Capital Economics

    Disclaimer

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. The opinions expressed by the author are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. Published by JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.

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    news-2405 Mon, 17 May 2021 09:32:10 +0200 Bet on This? /en/who-we-are/news/detail/bet-on-this/ Three years ago the Supreme Court effectively cleared the way for states to legalize sports betting, unleashing a growth industry. Is this an industry on which investors should place their bets? U.S. Online Sports Betting Gross Revenue

    • The U.S. online sports betting industry is still nascent as it becomes increasingly legal in more states. Using some data from around the world, we believe that its potential may be quite large. If the U.S. market were to mature to the U.K.’s or Australia’s gross revenue per adult, the domestic market would ultimately be more than 20 times larger at $24 billion.
    • The sports betting industry worldwide is projected to grow 14% annually over the next several years. However, the fastest growth is forecasted to occur in the U.S., where progress on stateby-state legalization and technological innovations are expected to drive strong growth of 31% annually.1
    • As the industry grows, we believe there is an attractive opportunity for companies that operate sports betting businesses as well as those that provide technology platforms and data to facilitate wagering.

    1 H2 Gambling Capital via Genius Sports Group.

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    news-2404 Wed, 12 May 2021 10:20:53 +0200 Expediting the development of solid-state batteries in Asia /en/who-we-are/news/detail/expediting-the-development-of-solid-state-batteries-in-asia/ By Gun Woo, Senior Analyst, JK Capital Management Ltd., a La Française group-member company Last week (week starting May 3), during its earnings conference call, Murata, a Japanese electronic component maker, announced that it will begin mass-producing all-solid-state lithium-ion batteries, months ahead of its original plan. This is a surprising and amazing accomplishment as many experts expected the technology would take another 3 to 5 years before reaching a commercial stage.

    Lithium-ion batteries are everywhere: in smartphones, notebooks, electric vehicles…. They are easy to recharge and have big energy density – they are way more efficient than nickel-cadmium rechargeable batteries that were used in the previous decade. In terms of energy density, nickel-cadmium was 100Wh/kg when lithium-ion is 300Wh/kg. 

    What Murata announced last week is the beginning of a new era in battery technology: the solid-state battery. Traditional lithium-ion batteries are filled with liquid electrolyte, a highly flammable compound which leads to explosive risks when a battery breaks open. This liquid electrolyte is expected to be replaced with a solid material which will allow batteries to become both smaller and safer.
    The idea of developing solid-state lithium-ion batteries has been around for decades, but the technical barrier that consists in the lack of movement of lithium ions in a solid electrolyte made the application very difficult. However, after years of research, certain companies started to have breakthroughs. QuantumScape Corporation and Solid Power are some of the companies in the US that have attracted a lot of attention from carmakers including Volkswagen, BMW and Ford.

    Certain Asian companies are also emerging as battery innovators. Murata Manufacturing from Japan is one of them. It is now expected to deliver its first commercial solid-state batteries later this year. Those will however be small in size and primarily used in wearable devices. Another company having had breakthroughs is Hitachi Zosen Corp, another Japanese company which recently announced that it was developing a solid-state battery for larger size applications including aerospace and industrial equipment. In China, Qingtao Energy seems to be leading the race. The start-up that was funded by Tsinghua University has deployed a solid-state battery production line in Kunshan, next to Shanghai, and has already unveiled a 300Wh/kg solid-state battery for electric vehicles. Their technology is planned to be commercialised by the end of 2022. 

    We see a lot of potential in this development and are excited to see it come about earlier than expected. Korean company Hansol Chemical, for example, is developing materials used in solid-state batteries and sells the electrode binder material that is used in all types of lithium-ion batteries. 

    The Taiwanese company Chroma ATE Inc. should also stand to benefit as it produces testing equipment for electric vehicle batteries. If the industry standard was to evolve from lithium-ion batteries to solid-state batteries, demand for Chroma’s equipment would see a significant growth as it did when the transition towards liquid lithium-ion batteries took place. 

    The emergence of commercially viable solid-state batteries is a revolution that will transform the global electric vehicle landscape.

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. The opinions expressed by the author are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. Published by JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.
     

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    news-2403 Wed, 12 May 2021 09:29:04 +0200 Should Asian dollar bond investors worry about inflation? /en/who-we-are/news/detail/should-asian-dollar-bond-investors-worry-about-inflation/ By Marcus Weston, Fixed Income Senior Portfolio Manager, JK Capital Management Ltd., a La Française group-member company One word that will always send bond investors into a blind panic is “inflation”. Naturally with any fixed return asset, if the value of money declines, so too will the present value of future cash flows over the long term. Compounding this is the ever-present fear that central banks will aggressively tighten policies to contain inflation by raising benchmark interest rates and creating an immediate near term hit on bond price relative value. 

    Since the middle of 2020, such inflation fears have rapidly gathered momentum across the world. The combination of ultra-easy monetary policy from most of the world’s leading central banks, a virus induced suppression of global upstream production for much of the past 12 months and expectations of a rapid rebound in global consumer demand as countries emerge from their COVID lockdowns has created a perfect environment for prices to rise. Adding to thisn a US Federal Reserve that has clearly taken the view that an inflation overshoot should be encouraged, rather than feared, implies inflation pressure is not likely to go away any time soon.

    As a result, global commodity prices are spiking. In the US, steel prices currently trade at three times their historical long run average. (Source: CNN) Copper prices on the London Metals Exchange have increased 30% since the start of 2021 crossing $10,000/tonne for the first time in 10 years and global food prices are surging with the CRB Food Index also up 42% ytd. (Source: Bloomberg) Even oil, a sector that should be negatively impacted by COVID induced travel restrictions is back to its 2019 levels. (Source: Bloomberg) This all spells a serious worry for global fixed income markets.

    In Asia, Investment Grade (IG) bond prices have generally remained resilient in the face of this massive risk. The Markit Iboxx ADBI Index (which is 85% IG) is down -1.1% since the start of the year, but that only takes the Index back to where it was trading last November. (Source: Bloomberg) For the time being, Fed governor Powell’s comforting words of sustained easy monetary policy have clearly supported demand for Asian investment grade dollar bonds. However, one has to wonder how long this can last. 

    For fixed income investors there are two ways to avoid the ravages of inflation. One is to move to shorter duration where any future interest rate hikes would have a much lower impact on prices and secondly is to move down the credit curve into higher yielding assets that are less sensitive to risk free yields and potentially can even benefit from rising prices if their underlying businesses are exposed to commodity sectors. It would seem Asia’s high yield bond market is uniquely suited to such an environment. With an average maturity of 3.5 years, it is the shortest duration bond market in the world. (Source: Barclays Bloomberg Indices) Meanwhile average yields across B and BB rated bonds in Asia trade at a sustained premium to other developed markets. Against the US, the Asian High Yield (HY) bond premium has actually increased in the past year. (Source: HSBC)    

    In China, construction costs for real estate projects average at RMB3,500-4,000/sqm, of which building materials only represent approximately 55-60%. (Source: JKC research based on various company checks) Even within these raw materials, a large proportion is accounted for by cement which has not seen the same degree of price appreciation in China this year compared to other industrial commodities. Given the average selling price of property across the country is over RMB10,000/sqm, land prices still remain the main cost and therefore the main contributor to developers’ margins. (Source: China National Bureau of Statistics) In other words, it is still the government policy of price caps (both in terms of land sales and finished product prices) that largely dictates the financial health of property companies. As we have seen in recent years, the Chinese government has been extremely proactive in real estate policy, but the overarching motive has been to maintain stability in the sector and critically to force developers to strengthen their balance sheets. On this basis, we believe even if raw material prices did start to pressure the sector’s viability, we would expect a rapid policy response, either by relaxing price caps on properties or, more likely, forcing raw material producers to maintain adequate and fairly priced supply. It is also worth remembering that, in contrast to most of the world’s leading economies, China has continued to maintain a tight monetary policy for the past 12 months indicating they are ahead of the curve in dealing with the risk of rising inflation.

    In summary, we do think inflation is a concern for Asian USD bond investors as commodity prices have reached a level where dollar interest rate policy intervention is only a matter of time. Nevertheless, the characteristics of the Asian HY market with its low duration and high carry provides a way to remain exposed to fixed income assets, particularly if one remains at the short end of the maturity curve.

    Informative Document for professional investors only as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. The opinions expressed by the author are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. Published by JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.
     

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    news-2402 Mon, 10 May 2021 14:29:02 +0200 The reality problem of Net-Zero ambitions /en/who-we-are/news/detail/the-reality-problem-of-net-zero-ambitions/ by Roland Rott, CFA, Managing Director of La Française Sustainable Investment Research and Head of ESG & Sustainable Investment Research, La Française Group. Why investors should urgently look at corporate climate strategy.

    In the last twelve months, the number of companies that have committed to Net-Zero carbon emissions has doubled again. An estimated quarter of global CO2 emissions and more than half of global GDP are already part of Net-Zero commitments. However, the gap between the ambition to reduce CO2 emissions to zero in the coming decades and the reality is wide. It is still difficult to determine how such voluntary commitments will lead to target achievement. More clarity is desirable here. 

    Greenhouse gas emissions play a major role in global warming. That is why the private sector has long sought to reduce CO2 in the atmosphere through energy efficiency programs and similar initiatives. The urgency of the climate crisis, however, raises the bar significantly. Due to the Paris Agreement in 2015, more and more countries are articulating their ambitions in this regard. For example, six countries have already enshrined their Net-Zero targets in law, five countries have proposed legislation to this effect, 14 countries have developed guidelines, and many more countries are currently considering introducing Net-Zero targets. The EU, for example, intends to be the first continent to become carbon neutral by 2050 through the European Green Deal. 

    Therefore, in the private sector, reducing CO2 emissions has become a strategic goal that goes far beyond the well-intentioned environmental targets of the past. Today, CO2 reduction is already a priority for many companies and their stakeholders – including shareholders and debt providers. That is because the stakes are significant in the upcoming transformation of the economy toward zero-emissions growth: business models are becoming obsolete, new corporate activities are emerging, adaptations are necessary, and each company must disclose its specific response to climate change. 

    Number of companies per year with science-based target (2015-2020)

    However, due to the voluntary nature of the most Net-Zero commitments, companies may state targets without anchoring them concretely in the business plan. What is urgently needed, therefore, are Net-Zero ambitions that are backed up with science-based interim CO2 reduction targets. What business measures will be taken within the company over the next five years to move significantly closer to the Paris Agreement target? A recent study shows that companies that have set themselves short- and medium-term targets are reducing emissions at a much higher rate than the overall economic average.

    Not surprisingly, banks, insurers and asset managers are increasingly being invited to actively manage climate risks and opportunities in their portfolios. However, at present, a well-diversified portfolio can only be as climate-friendly as the average of the companies listed on the market. The new EU Climate Benchmark has therefore defined, for example, as a requirement that the CO2 intensity of the portfolio must be reduced by 7% each year in order to be compatible with scientific climate targets. Therefore, there is a measurement problem as well as an incentive problem. Investors are well equipped to play a critical role in enforcing the CO2 reduction targets of portfolio companies. This is because methods very similar to those used in financial analysis are needed for investors to sanction metrics such as earnings growth, cash flow and balance sheet ratios. The challenge for investors here is to integrate ESG data and climate research insights into the investment process. It is a demanding and meaningful challenge. Armed with this knowledge, a constructive dialogue between companies and investors will also be able to develop. The greater use of AGM voting rights should provide additional incentives for this engagement.

    Looking ahead, it is expected that significantly improved reporting standards will make it easier for the financial sector to set ambitious CO2 reduction targets for investment portfolios. This increases the pressure on portfolio companies to take concrete short- and medium-term measures and, in the competition for capital, to deliver the urgently needed transformation solutions for Net-Zero 2050 already in this decade.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. 

     

     

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    news-2401 Fri, 07 May 2021 14:21:23 +0200 Is Anyone Feeling Wealthier? /en/who-we-are/news/detail/is-anyone-feeling-wealthier/ Americans are feeling more affluent with their increased net worth resulting from strong equity and housing markets, particularly if they have owned real estate and stocks over the past few years. Given estimates of propensity to spend, this increased net worth could lift spending by several hundred billion dollars and potentially benefit the larger economy. Household Net Worth Surges

    • The chart paints a favorable story in the U.S, where aggregate household net worth is approximately $130 trillion and is estimated to have increased in the first quarter by the most in well over half a century.
    • This is being driven by bull markets in American’s two primary assets: 1) home values, which represent approximately $35 trillion in wealth, are up 10% year over year and 2) stocks, which represent a similar amount, are up much more. Of course, this only applies to Americans who are invested in real estate and the stock market.
    • A 20% increase in countrywide net worth would be about $25 trillion. If 2% of that were spent, as research suggests, we could see $500 billion of incremental spending, adding about 2.5% to GDP.
    • At Alger, we believe economic growth will be robust in 2021. We are finding attractive opportunities among high-quality growth, asset light, innovative companies with exposure to recovering end-markets, such as travel and leisure, aerospace, retail, automobiles and energy.
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    news-2399 Thu, 06 May 2021 16:09:00 +0200 All eyes on inflation /en/who-we-are/news/detail/all-eyes-on-inflation/ By François Rimeu, Senior Strategist, La Française AM The course of inflation over the coming months and quarters is one of the most important subjects for the financial markets, with a lot of uncertainty about how long the inflationary pressures that we are currently experiencing will last.

    Indeed, for several months now the signs of inflation have been increasing in our economies. One of the most obvious signs of this is changes in raw material prices: since the end of 2019 (i.e. before the beginning of the pandemic) the price of iron ore has increased by +133%, copper by +58% and aluminium by +33 % , and these increases have also taken place in the agricultural sector with wheat rising by 27% and corn by 54% (Source: Bloomberg). For now, these increases have mainly had an impact on production prices, but it is very likely that companies will try to pass them on to the end consumer, especially considering the currently high level of savings. Real estate markets are also experiencing strong rises in most of the developed economies, for example in the United States or in Germany where prices have risen by +12% over the last 12 months (Source: Bloomberg).

    These effects are mainly linked to the monetary and budgetary measures that have been taken by central banks and governments over the past year, including across the board rate cuts (or increases in the size of balance sheets), and stimulus plans on a scale which is virtually unprecedented in the post-war period. These effects are also due to the Covid-19 crisis, with a sharp increase in the demand for goods in order to make up for the non-availability of many services.

    Coupled with all this, we must also consider the very important base effects that will impact inflation figures both in Europe and in the United States. US inflation is in fact likely to accelerate sharply over the next two months, with underlying inflation expected to approach 4% and "core" inflation of around 3%; if the base effects then subside, “core” inflation (across the board price rises excluding highly volatile elements such as agricultural or energy sector raw materials) should nevertheless remain at around 2.5% up to the end of 2022, i.e. a more than adequate level for the US Federal Reserve. The European situation is different because even if there too we will see base effects pushing inflation to 2% by the end of the year, it should then rapidly fall back to around 1%.

    The final factor is that some sub-components of inflation seem to being showing signs of a rebound over the next few months, e.g., the real estate component (including rents for rental investments) and also, for example, the used car market. Beyond the already high expectations, we must therefore take into account a non-zero probability that the figures may be higher than our current estimates.

    This rise in inflation, coupled with extremely low real rates at the moment, should lead to an increase in US nominal rates over the coming months. We could well see the 10-year American interest rate at 2% within a few months. 

    DOCUMENT FOR INFORMATION PURPOSES. THIS DOCUMENT IS INTENDED FOR NON-PROFESSIONAL INVESTORS AS DEFINED BY MiFID. The information contained in this document is provided for information purposes only and it does not under any circumstances constitute an offer or invitation to invest, investment advice, or a recommendation relating to any specific investments. The specific information, opinions and figures that are provided are considered to be well-founded or accurate on the date when they were drawn up based on current economic, financial and stock market conditions, and they reflect the La Française Group's current opinions regarding the markets and market trends. They have no contractual value and are subject to change, and they may differ from the opinions of other management professionals. Please also note that past performance is no guarantee of future results and that the level of performance is not constant over time. Published by La Française AM FINANCE Services, whose registered office is at 128, boulevard Raspail, 75006 Paris, France, and which is regulated as an investment services provider by ACPR (“Autorité de contrôle prudentiel et de résolution”) under no. 18673. La Française Asset Management is a management company approved by the AMF under number GP97076 on 01/07/1997.
     

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    news-2397 Mon, 03 May 2021 15:16:17 +0200 “All that glitters is not gold” - William Shakespeare /en/who-we-are/news/detail/all-that-glitters-is-not-gold-william-shakespeare/ By Nina Lagron, CFA, Head of Large Cap Equites, La Française AM Well on its way to limiting global warming to well below 2° C, the European Union has put in place ambitious legislative policy to reduce emissions by at least 60% by 2030 compared to 1990 levels. The European Climate law goes further to propose a legally binding target of net zero greenhouse gas emissions by 2050. Further CO2 emission standards for cars and vans (Regulation EU 2019/631) were set by the European Parliament and put into application as of January 1, 2020. In conjunction with this legislation, the European market is bearing witness to a boom in the sale of new electric vehicles. According to the European Automobile Manufacturers Association, sales of new electric vehicles including all-electric and plug-in hybrids jumped 51.8% to 110,630 in Q3 2019 alone. But is it a case of “green-washing” and what are the hidden environmental impacts of electric vehicles? Do low CO2 emission cars really exist? 

    Environmental impacts

    Transport accounted for 24% of global carbon dioxide emissions from energy in 2018 (Source: IEA), of which passenger vehicles (cars and buses) accounted for 45%. Given the potential for reductions and the corresponding impact on global emissions, the development of electric vehicle technology is essential to reaching climate objectives. 

    However, it is important for an informed decision not to be blind sighted by the promise of zero tailpipe emissions for electric vehicles in full electric mode but rather to consider all the associated sources of greenhouse gas emissions resulting from all direct and indirect sources of CO2 pollution production, referred to as Scope 1, 2 and 3 emissions. These include the emissions associated with the manufacture and the extraction, processing and distribution of energy sources (electric power and fuel). A study published in the journal Nature Sustainability (Vol 3 June 2020, Net emission reductions from electric cars and heat pumps in 59 world regions over time) confirmed that electric vehicle technologies were worthwhile expanding, given the CO2 savings over conventional cars. However, the source of electricity has an effect on the emissions of the electric vehicle, which will vary by geographic area and its use of specific energy sources (i.e., natural gas, nuclear, coal, wind…) for electricity generation. For example, in a study conducted by German scientists and presented at the Ifo Institute on April 17, 2019, electric vehicles, when taking into account the production of batteries and the German energy mix, are said to generate even more CO2 than diesel models. Hence, disparities exist depending on the country and energy source.

    Furthermore, the debate intensifies depending on the technology considered and climate conscious consumers should be weary of over-selling. For example, according to a recent study published by Transport & Environment (11/2020) entitled “Plug-in hybrids: is Europe heading for a new dieselgate?”, three of the most popular plug-in hybrid vehicles (PHEVs) sold in 2019 generated 28 to 89% higher emissions than advertised, in optimal test conditions. Whereas PHEVs boast low CO2 emissions that are generally no more than a third of a traditional combustion engine car, those three vehicles tested by Emissions Analytics, commissioned by Transport & Environment for the purposes of the study, all fell short of their promised carbon emissions savings objectives even when starting with a fully charged battery. And the results fell even shorter of objectives when starting with an empty battery, producing up to eight times more in CO2 emissions than advertised.

    New Green Finance regulations could put a halt to manufacturers advertising PHEVs as “sustainable investments” as early as 2026 and hence accelerate the transition to fully electric vehicles, bringing Europe closer to the climate goal. Some proactive EU member states have already excluded PHEVs from tax breaks, which has resulted in a rise in sales of battery electric vehicles (Source: electrive.com, Is this the end of plug-in hybrid sales in the EU). However, it is important not to lose sight of the fact that the transition to electric vehicles does not always result in large greenhouse gas reductions, since electricity generation is not yet decarbonized. An accurate evaluation of Scope 1, 2 and 3 emissions over the full life cycle of the vehicle is necessary to evaluate on a case-by-case basis electric car manufacturers and their ability to contribute favorably and at the desired pace to limiting global warming to well below 2°C. The availability of accurate data to quantify Scope 1, 2 and 3 emissions is key. 

    In conclusion, keep in mind that all that glitters is not all green!

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-2395 Fri, 30 Apr 2021 16:45:19 +0200 Housing Starts on the Rise /en/who-we-are/news/detail/housing-starts-on-the-rise/ Each year over half a trillion dollars of new residential construction is put in place, supporting many millions of jobs. Will new construction be a growth engine?

    Source: U.S. Bureau of the Census.
    Notes: Dark blue line is six-month moving average. SAAR is seasonally adjusted annual rate.

    • While housing starts have tripled off of their lows in 2009 after the Global Financial Crisis, they are still not at what we would consider normal levels. Household growth is increasing, necessitating new homes for many Americans; household growth has recently averaged more than 1.5 million units per year. When we also consider teardowns of aging units and increased demand for second homes resulting from the pandemic, we believe materially higher levels of housing starts are sustainable over the long term. 
    • Interestingly, government-sponsored mortgage loan company Freddie Mac recently indicated there is a housing shortage of 3.8 million units, which means the country will have to produce homes above the level of long-term sustainable demand. Despite an uptick in interest rates, homebuilders such as Lennar Corporation report that the housing market remains robust across the country. Moreover, the S&P/Case-Shiller U.S. National Home Price Index has seen an 11% increase year over year as of January.
    • In our view, companies that are positioned to benefit from this trend may include homebuilders, materials businesses, purveyors of home improvement products, retailers that sell homewares and realtors.
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    news-2393 Wed, 28 Apr 2021 09:33:54 +0200 High Yield Market Update /en/who-we-are/news/detail/high-yield-market-update-1/ The past week was marked by a return of risk aversion due to the increase in COVID-19 contamination in Asia, and more specifically in India. However, macroeconomic data remained positive, notably unemployment figures in the US and PMIs in Europe. On the central bank front, the ECB unsurprisingly left its key rates unchanged and stressed that it remains ready to adjust its purchase programmes to prevent an unwarranted tightening of financial conditions. Against this backdrop, the major equity indices declined with the Euro Stoxx 50 and the S&P 500 posting declines of -0.5% and -0.1% respectively. Despite a slight spread widening (+2bps), the Global High Yield index posted a stable performance over the period.

    disclaimer

    THIS DOCUMENT IS INTENDED FOR PROFESSIONAL INVESTORS ONLY WITHIN THE MEANING OF MIFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel et de Résolution (www.acpr.banque-france.fr) as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF (www.amf-france.org) under no. GP97076 on 1 July 1997.

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    news-2392 Wed, 28 Apr 2021 09:30:18 +0200 Sub debt update by Jérémie Boudinet /en/who-we-are/news/detail/sub-debt-update-by-jeremie-boudinet/ Subordinated debt markets were a bit soft this week due to lower activity on the secondary market and slightly lower liquidity, according to our counterparties. In addition, investors were more focused on the High Yield market, which had a huge number of primary issues. On the perpetual debt side, no primary issuances are noted this week, which is not too surprising given that companies are starting to release their Q1 2021 results. Therefore, we note a sluggish performance over the week, in particular on the €AT1s segment which posted a performance of -0.01%. Corporate Hybrids were -0.12% and Insurance subordinated debt was -0.11% during the week.  We find this situation healthy after the strong appreciation over the last two months. 

    Disclaimer          

    Subordinated debt is suitable for professional investors as defined below. Execution only services can only be provided to professional investors. Retail investors are excluded from the positive target market.
    Professional Investors have the following characteristics:

    • Good knowledge of relevant financial products and transactions
    • Financial industry experience 

    Subordinated debt is not suitable for retail investors unless they have professional investment advice AND the investment is for diversification purposes only or have signed a discretionary portfolio mandate.
    THIS DOCUMENT IS INTENDED FOR PROFESSIONAL INVESTORS ONLY WITHIN THE MEANING OF MIFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel et de Résolution (www.acpr.banque-france.fr) as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF (www.amf-france.org) under no. GP97076 on 1 July 1997.

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    news-2390 Tue, 27 Apr 2021 14:09:23 +0200 India, as the country battles with COVID-19 /en/who-we-are/news/detail/india-as-the-country-battles-with-covid-19/ by Marcus Weston, Fixed Income Senior Portfolio Manager & Aravindan Jegannathan, CFA, Senior Equity Analyst, JK Capital Management Ltd., a La Française group-member company Back in June 2020, India’s sovereign credit rating was hit by a double downgrade. First, Moody’s lowered its rating from Baa2 to Baa3 which was not itself a surprise given that the agency had been holding the Indian rating above the level of both S&P and Fitch for the previous three years. But more crucially they lowered the rating outlook from stable to negative. Two weeks later, Fitch lowered its own BBB- India rating outlook, also from stable to negative. These two actions last summer had effectively exposed India and most of its major corporate bond issuers by bringing the Indian sovereign debt on the cusp of a potential downgrade to junk, something the country had not seen since 2007.

    Given that the COVID outbreak was one of the catalysts of the June 2020 rating actions, there has understandably been rising market concern that the catastrophic growth in COVID cases on the subcontinent in recent weeks could now trigger the downgrade of India below its critical investment grade status. Certainly, the humanitarian disaster currently unfolding in the country with an exponential rise in both cases and fatalities is putting a massive strain on domestic public services, while inadequate social distancing in the country combined with the emergence of highly virulent new strains will almost certainly drive a push for aggressive new lockdowns to contain the spread. 

    The country is indeed facing an unprecedented rise in COVID cases: 2.3 million new cases were reported in the past 7 days only. While a resurgence of COVID in India can be seen across the country, large political rallies throughout five Indian states where elections just took place was undoubtedly a contributing factor. So was the celebration of Kumbh Mela, an important Hindu religious gathering often termed as one of the largest gatherings of human beings on the planet that happens once every twelve years.

    Given this terrifying context, anyone would be expecting Indian markets to be in a tailspin. However, market reaction has been extremely muted so far. Since the start of March India’s benchmark SENSEX Index has fallen just below 3% and, as of the time of writing, remains in positive territory for the year. The Bloomberg Barclays USD Credit India index is also positive for the year, an amazing feat considering the move in underlying US Treasury yields since January. In other words, there are very little signs of market nervousness, let alone panic, for either equities or bonds in India.

    Of course, there are structural explanations for this surprising resilience. For many years India has enjoyed a strong “diversification-bid” as foreign investors wanting exposure to Asia have been forced to overweight Indian securities to offset the dominance of China in pan-Asian markets. A lack of new issuance from India certainly justifies this from a bond market perspective. Meanwhile some recent volatility in certain segments of the Chinese bond market including weakness in State-Owned Enterprise bonds and property developer bonds has further increased the attractiveness of India as a regional counterbalance. Nevertheless, the key question is whether the market is being complacent in overlooking the growing risks in the Indian economy as a strong demand for Indian securities still prevails.

    India has had its fair share of market scares in the past. In 2018, the surprise defaults of IL&FS Investment and Dewan Housing Finance triggered a crash in the non-banking financial companies (NBFC) sector. It is perhaps for this reason that NBFCs are one area where there have been some concerns that this segment could be vulnerable if we saw a massive decline of economic activity as a result of the latest COVID spike. However, we believe the current situation is very different to 2018.

    In late 2018, in the aftermath of the IL&FS fiasco, NBFCs struggled to obtain funding due to the overall market sentiment that prevailed. At the time of the IL&FS debacle, mutual funds were the key providers of liquidity to NBFCs, allowing them to roll over their debt. As major mutual funds also got hit by the IL&FS bankruptcy, funding to NBFCs from mutual funds dried up, triggering panic among NBFCs, their shareholders and their bondholders.

    Today the situation is very different. Both mutual funds and NBFCs have learned from the IL&FS crisis. While mutual funds have systematically reduced their exposure to the NBFC space by being very selective on names with good underlying assets, the NBFCs have also diversified their funding sources, typically through the securitisation of their assets. The NBFCs also realised that borrowing on a short-term basis to take advantage of low rates while lending on a long-term basis was not sustainable. The share of non-convertible debentures and commercial papers which accounted for 54 percent of the total NBFC funding in 2018 dropped to 34 percent in 2020. Albeit paying a hefty price, the sector has now evolved into a more sustainable business model with a proper alignment of asset and liability duration. Growth expectations have also tapered down to high single digits from the high teens growth rate it experienced prior to the IL&FS crisis. Investors and banks have differentiated the good ones from the bad ones with respect to the quality of the underlying assets, the liability mix and the credit rating. From a portfolio perspective, we see strong resilience in our NBFC exposure, both in our equity and fixed income funds.

    We ourselves are not dismissing the market risk and we do believe that the Indian market for both equities and bonds could be exposed to some market volatility in the near term, at least until the latest COVID spike is brought under control. However, in the context of a pan-Asian view, we continue to believe that there is still benefit in maintaining exposure to Asia’s third largest economy on diversification grounds, provided single name positions are carefully managed and monitored.

    Meanwhile regarding the sovereign rating itself, Fitch this week affirmed its BBB- investment grade rating for India following a similar action from Moody’s two weeks ago. While the outlook from both agencies remains negative, it has removed one potential near term risk. In their affirmation rationale, Fitch did acknowledge the recent spike in COVID cases but did not think it could derail the economic recovery of the country.  It remains to be seen if Fitch and indeed market valuations are complacent in looking through the near-term headwinds to focus instead on medium term growth. The next few weeks will be critical to assess the real economic impact of the human catastrophe that is unfolding before us.

    Disclaimer

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. The opinions expressed by the author are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. Published by JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.

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    news-2389 Tue, 27 Apr 2021 14:05:08 +0200 FED’s cautious optimism: no rush to move, no specific guidance on tapering /en/who-we-are/news/detail/fed-s-cautious-optimism-no-rush-to-move-no-specific-guidance-on-tapering/ The Federal Reserve (FED) is expected to maintain its dovish monetary policy stance at the Federal Open Market Committee (FOMC), April 27-28 meeting. We expect the committee to upgrade its assessment of the current state of the economy after strong incoming data over past weeks (on employment and on sectors most adversely affected by the pandemic) and thanks to the acceleration of the pace of vaccinations. 

    That being said, we expect the Federal Reserve to stay behind the curve notably because of the level of uncertainty regarding the public health crisis. Chairman Powell will reiterate that members need to see “substantial further progress” on both employment and inflation before normalizing policy. 

    We do not expect the FED to change its communication or offer a guidance on the timing of the taper of their treasury & Agency mortgage-backed security (MBS) asset purchases before the second half of the year (June meeting at the earliest, most likely at Jackson Hole symposium in August). Mr. Powell will also emphasize that Quantitative Easing completion is a necessary condition before the Fed considers rate hikes. 

    All in all, we expect a more optimistic tone, but we do not think it will have a significant impact on markets except if Mr. Powell signals that the time to taper is approaching. But again, we do not see that happening at this meeting.


    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2388 Mon, 26 Apr 2021 10:25:24 +0200 ESG Is Here to Stay /en/who-we-are/news/detail/esg-is-here-to-stay/ Investors’ increased emphasis on environmental, social and governance (ESG) practices has inspired many companies to make changes that make the world a better place. Will the collective efforts of investors pay off? Weekly and Cumulative Flows into ESG Funds

    • Investors have increased their ESG investments considerably, as shown above. According to Bank of America, $4 of every $10 of global equity inflows go to ESG. Additionally, nearly 80% of the respondents the bank surveyed are interested in considering ESG in their investments while 29% of 1,000 investors in 2020 said the pandemic has made them believe even more strongly that ESG issues are important.
    • Investors worldwide are adopting or considering ESG integration in a number of ways. One is at the asset management firm level. Another involves excluding investments based on their poor ESG scores. Other investors are engaging in thematic ESG investing in companies with strong ESG practices or impact investing in companies seeking to spur specific ESG change. Importantly, some investors are engaging directly with companies to urge them to improve their ESG practices.
    • With academic research suggesting that negative ESG incidents can predict weaker profits and lower risk-adjusted stock returns, investors may be able to do good for society and their portfoliosbat the same time by allocating to ESG-focused investments.1

      1 Simon Glossner, “ESG Incidents and Shareholder Value,” University of Virginia – Darden School of Business, February 17, 2021
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    news-2385 Fri, 16 Apr 2021 15:58:33 +0200 China’s state-owned asset management sector is unsettled by a surprise delay in China Huarong results /en/who-we-are/news/detail/china-s-state-owned-asset-management-sector-is-unsettled-by-a-surprise-delay-in-china-huarong-results/ by Marcus Weston, Fixed Income Senior Portfolio Manager, JK Capital Management Ltd., a La Française group-member company In 1999, following the Asian Financial Crisis, the Chinese government created four nationally owned asset management companies (AMCs), namely China Huarong AMC, China Cinda AMC, China Great Wall AMC and China Orient AMC, to focus on managing distressed debt accumulated in state owned banks. These entities which were each attached to one of the “Big-4” Chinese banks were initially mandated to acquire and rehabilitate non-performing loans in the Chinese financial system leaving their affiliated banks to focus on their core deposit taking and lending role. This “bad bank” model has been seen successfully applied across the world in both developed and emerging countries and has proved to be extremely effective as a policy of economic risk management.

    China Huarong Asset Management Corporation was incorporated in November 1999 under the Ministry of Finance (MoF). In 2000 it began to purchase Non-Performing Loans (NPL) of Industrial and Commercial Bank of China (ICBC). In 2014, the government introduced strategic investors as shareholders of the company and listed China Huarong AMC on the Hong Kong stock exchange in 2015 although, to this day, the China MoF has maintained a majority ownership and policy control of the entity (63% shareholding). 

    As a result of the economic boom after the 2008 financial crisis, NPL growth in China remained relatively contained while other parts of the domestic financial economy such as shadow banking, private equity and tradable securities markets have seen explosive growth. China’s AMC have therefore seen an opportunity and indeed a need to diversify their mandate beyond the core distressed debt management role to maintain growth. No entity has been more aggressive in this trend than China Huarong which has used inexpensive funding in the domestic and international bond markets to rapidly grow its balance sheet. In 2014 just ahead of its listing, the company’s balance sheet total assets stood at RMB600bn, in mid-2020 that number had grown to RMB1.7trn.

    For the most part, the market has remained relatively unconcerned by this growth. The general market assumption that a 60% MoF-controlled financial institution with a central policy role would always enjoy state backing underpinned its investment grade rating. It allowed the company to raise over USD14bn worth of bonds in the dollar bond market alone in recent years. Even a fraud scandal related to Huarong’s Chairman in 2018 has done little to significantly affect market appetite for Huarong bonds. Its aggressive nature has seen the Huarong curve trade wider than other AMCs. As such it has long been thought of as a cheap way to hold China Quasi-Sovereign risk. 

    However, sentiment seems to be changing. As we have previously mentioned on several occasions in our commentaries, in recent years the government has been explicitly trying to change market assumptions about the domestic SOE sector. Specifically, the government wants investors to understand that all government entities would not enjoy a central bailout if they got into financial difficulties. Historically, it was assumed that non-strategic entities held by local governments would be the only ones impacted by reduced support. However, after the surprise default of some central government owned issuers in 2020 including university issuers owned by the Ministry of Education, the market started to realise that the line in the sand had moved. The concept of strategic importance to the economy has become less clear cut.

    On April 1, 2021, China Huarong surprised the market by announcing that its FY20 results would be delayed. Its shares were, and still are suspended as a result. The reason given for the delay is that the auditors need more time to assess a financial transaction that is still being finalised. Given the unusual nature of such a delay, particularly given that Huarong is one of the largest financial institutions of China, this has led to a large amount of rumours and speculation, mostly surrounding a potential restructuring of the company. It is no secret that Chinese policy makers would like to rein in the risk-taking expansion of Huarong and to consolidate its business back to its core distressed debt management roots. Apart from some anonymous “insider” reports, there have been no official announcements of an impending restructuring, let alone what form it would take. The information vacuum has understandably created a huge amount of volatility in Huarong bonds with the curve falling between 20-40pts since the start of the month. The Investment Grade (IG) nature of the issuer and the existence of leveraged positions in the securities have no doubt added to this volatility. Given the widely held distribution of the bonds, this has had a significant impact on China IG market sentiment in April, with related names such as other AMCs and Chinese financial issuers trading weaker throughout the month. 

    What is really behind the Huarong suspension is still unclear. In our view it would not be surprising if the company did announce some major assets write-downs in their balance sheet considering the volatile economic environment. Similarly, we would not be surprised if the company did announce some form of business restructuring to refocus its operations back to its core strengths. Does this imply Huarong really faces the prospect of central government abandonment and a massive write down of its dollar bonds curve? At this stage we see this as unlikely. As much as a “too big to fail’ moniker in China is less powerful than it used to be, the government has bailed out financial institutions that are much less strategically important to the economy over the past few years. We believe the pragmatic policymakers in China are aware of the economic and reputational damage a failure of an entity as large and important as Huarong would have. Nevertheless, until the government or the company comes out with a clarification on the issue, the sector will continue to trade with significant volatility and we maintain a defensive positioning on Chinese SOE’s in the near term. 

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. The opinions expressed by the author are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. Published by JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.

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    news-2384 Fri, 16 Apr 2021 15:43:16 +0200 Cybersecurity to the Rescue /en/who-we-are/news/detail/cybersecurity-to-the-rescue/ In the age of remote working, a cybersecurity program is more important than ever. Internet crime is one of the fastest growing security threats, providing a large and growing market for cybersecurity companies. Companies’ Future Cybersecurity Investments as a Result of the Pandemic

    • In the three years prior to the pandemic, nearly 800 million sensitive records were exposed in the U.S., almost triple the number from a decade ago. However, the issue is even bigger now with remote workers accessing an increasing volume of sensitive material from multiple devices. The majority of companies surveyed by Cisco report a more than 25% increase in cyber threats since the pandemic. As a result, many companies plan to increase cybersecurity investment.
    • A cybersecurity program utilizes people, processes and technology to protect against risks. We believe the most promising solutions to protect critical data are those that leverage cloud computing to be scalable and agile. They can efficiently process massive amounts of data using machine learning and artificial intelligence, thus giving cybersecurity programs an edge.
    • The most successful security companies are those that offer a wide array of offerings by either developing their own products or acquiring other companies. The ability to consolidate several platforms with a single vendor is easier to manage, more cost effective and conducive to analyzing data.

     

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    news-2382 Fri, 16 Apr 2021 09:52:51 +0200 Wait-and-see mode in April before the challenging June meeting /en/who-we-are/news/detail/wait-and-see-mode-in-april-before-the-challenging-june-meeting/ We expect the European Central Bank (ECB) to confirm the current monetary policy course during the April 22 council. The ECB will likely confirm the measures taken in March to accelerate the purchase pace under the Pandemic Emergency Purchase Programme (PEPP) knowing that this pace will be reviewed in June with the updated economic forecasts. Financial conditions have not tightened since the previous meeting, but the general council will keep a close eye on the bank lending survey that will be published on April 20th. 

    Christine Lagarde will keep a very accommodative tone because of the subdued medium-term outlook for inflation despite rising near-term pressures. To keep a broad consensus within the board, she is likely to communicate strongly on the flexibility of the PEPP if financial conditions change significantly in the near future. 

    On the near-term economic outlook, the general council will probably maintain a cautious tone because of high COVID-19 infection rates and the associated lockdowns in various European countries. Looking ahead, the ECB might have a more optimistic view as a result of better economic indicators, the ongoing vaccination campaigns and the brighter international environment. 

    As usual, President Lagarde is expected to highlight the key role of the Next Generation EU package and the importance of it becoming operational without any delay.

    Overall, we do not think this meeting will have a significant impact of financials markets.


    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-2381 Thu, 15 Apr 2021 09:39:00 +0200 Equity Markets continue on their upward trend /en/who-we-are/news/detail/equity-markets-continue-on-their-upward-trend/ Markets continued their way up, with the US leading the way (and trading at all-time highs) and emerging markets lagging. Due to partial profit taking and some jitters due to the slow vaccine rollout outside the US and the UK, the value rotation partially reversed as the Technology sector outperformed while Energy lagged  (S&P +4.1%, Nasdaq +5.1%, MSCI ACWI +3.1%, Eurostoxx50 +1.2%, Stoxx600 + 1.4%, Nikkei +1.2%, MSCI China +0.3%)

    Earnings season kicks off this week and companies have a lot to prove : Contrary to what we usually see, analysts have been continuously revising estimates up since the beginning of the year, highlighting an overall optimism on the recovery. 

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-2380 Thu, 15 Apr 2021 09:41:00 +0200 China’s state-owned asset management sector is unsettled by a surprise delay in China Huarong results /en/who-we-are/news/detail/chinas-state-owned-asset-management-sector-is-unsettled-by-a-surprise-delay-in-china-huarong-results/ by Marcus Weston, Fixed Income Senior Portfolio Manager, JK Capital Management Ltd., a La Française group-member company In 1999, following the Asian Financial Crisis, the Chinese government created four nationally owned asset management companies (AMCs), namely China Huarong AMC, China Cinda AMC, China Great Wall AMC and China Orient AMC, to focus on managing distressed debt accumulated in state owned banks. These entities which were each attached to one of the “Big-4” Chinese banks were initially mandated to acquire and rehabilitate non-performing loans in the Chinese financial system leaving their affiliated banks to focus on their core deposit taking and lending role. This “bad bank” model has been seen successfully applied across the world in both developed and emerging countries and has proved to be extremely effective as a policy of economic risk management.

    China Huarong Asset Management Corporation was incorporated in November 1999 under the Ministry of Finance (MoF). In 2000 it began to purchase Non-Performing Loans (NPL) of Industrial and Commercial Bank of China (ICBC). In 2014, the government introduced strategic investors as shareholders of the company and listed China Huarong AMC on the Hong Kong stock exchange in 2015 although, to this day, the China MoF has maintained a majority ownership and policy control of the entity (63% shareholding).
     
    As a result of the economic boom after the 2008 financial crisis, NPL growth in China remained relatively contained while other parts of the domestic financial economy such as shadow banking, private equity and tradable securities markets have seen explosive growth. China’s AMC have therefore seen an opportunity and indeed a need to diversify their mandate beyond the core distressed debt management role to maintain growth. No entity has been more aggressive in this trend than China Huarong which has used inexpensive funding in the domestic and international bond markets to rapidly grow its balance sheet. In 2014 just ahead of its listing, the company’s balance sheet total assets stood at RMB600bn, in mid-2020 that number had grown to RMB1.7trn.

    For the most part, the market has remained relatively unconcerned by this growth. The general market assumption that a 60% MoF-controlled financial institution with a central policy role would always enjoy state backing underpinned its investment grade rating. It allowed the company to raise over USD14bn worth of bonds in the dollar bond market alone in recent years. Even a fraud scandal related to Huarong’s Chairman in 2018 has done little to significantly affect market appetite for Huarong bonds. Its aggressive nature has seen the Huarong curve trade wider than other AMCs. As such it has long been thought of as a cheap way to hold China Quasi-Sovereign risk. 
    However, sentiment seems to be changing. As we have previously mentioned on several occasions in our commentaries, in recent years the government has been explicitly trying to change market assumptions about the domestic SOE sector. Specifically, the government wants investors to understand that all government entities would not enjoy a central bailout if they got into financial difficulties. Historically, it was assumed that non-strategic entities held by local governments would be the only ones impacted by reduced support. However, after the surprise default of some central government owned issuers in 2020 including university issuers owned by the Ministry of Education, the market started to realise that the line in the sand had moved. The concept of strategic importance to the economy has become less clear cut.

    On April 1, 2021, China Huarong surprised the market by announcing that its FY20 results would be delayed. Its shares were, and still are suspended as a result. The reason given for the delay is that the auditors need more time to assess a financial transaction that is still being finalised. Given the unusual nature of such a delay, particularly given that Huarong is one of the largest financial institutions of China, this has led to a large amount of rumours and speculation, mostly surrounding a potential restructuring of the company. It is no secret that Chinese policy makers would like to rein in the risk-taking expansion of Huarong and to consolidate its business back to its core distressed debt management roots. Apart from some anonymous “insider” reports, there have been no official announcements of an impending restructuring, let alone what form it would take. The information vacuum has understandably created a huge amount of volatility in Huarong bonds with the curve falling between 20-40pts since the start of the month. The Investment Grade (IG) nature of the issuer and the existence of leveraged positions in the securities have no doubt added to this volatility. Given the widely held distribution of the bonds, this has had a significant impact on China IG market sentiment in April, with related names such as other AMCs and Chinese financial issuers trading weaker throughout the month. 

    What is really behind the Huarong suspension is still unclear. In our view it would not be surprising if the company did announce some major assets write-downs in their balance sheet considering the volatile economic environment. Similarly, we would not be surprised if the company did announce some form of business restructuring to refocus its operations back to its core strengths. Does this imply Huarong really faces the prospect of central government abandonment and a massive write down of its dollar bonds curve? At this stage we see this as unlikely. As much as a “too big to fail’ moniker in China is less powerful than it used to be, the government has bailed out financial institutions that are much less strategically important to the economy over the past few years. We believe the pragmatic policymakers in China are aware of the economic and reputational damage a failure of an entity as large and important as Huarong would have. Nevertheless, until the government or the company comes out with a clarification on the issue, the sector will continue to trade with significant volatility and we maintain a defensive positioning on Chinese SOE’s in the near term. 
    Note that JKC Asia Bond 2023 fund has no exposure to the AMC sector. We would wait for a lot more clarity on the situation before we would consider picking up investment opportunities in the segment. 
     

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    news-2379 Wed, 14 Apr 2021 16:21:33 +0200 China’s “Three Red Lines” policy initiative drives credit improvement across Chinese HY property bonds /en/who-we-are/news/detail/china-s-three-red-lines-policy-initiative-drives-credit-improvement-across-chinese-hy-property-bonds/ by Eric TSO, Fixed Income Analyst, JK Capital Management Ltd., a La Française group-member company For much of 2020, one of the dominant themes for the Asian HY market was the government’s introduction of the Three Red Lines (or TRL) policy for Chinese property companies. After many years of robust growth in the sector, the government realized that the systemic importance of real estate companies for both the domestic economy and the health of the financial system meant ensuring stability for the sector was a key priority for policy makers. As we previously reported here, the idea behind the TRL initiative was to persuade the sector to improve its balance sheet health and debt coverage capabilities. Three key performance tests were introduced and for property developers to continue to enjoy free access to debt funding markets they would need to bring their financials in line with these metrics. The policy was first announced in August 2020 and therefore the 2H20 earnings reports have given us the first glimpse to how this policy may have actually impacted financial performance and management discipline. Hence this year’s reporting season has given the market significant insight into the trajectory of the sector for the medium term.

    We have closely scrutinized the financial performance of key China HY property holdings in our JKC Asia Bond 2023 portfolio which represent some of the largest and most systemically important property companies in the country. Our conclusion is not only that there has been a clear observable improvement in credit health in 2H20 but that we believe this can be directly linked to the TRL introduction.

    The main idea of the TRL policy was to reduce leverage, improve debt coverage and increase liquidity. The study of our portfolio holdings’ 2H20 results shows some interesting trends. Firstly, there was a strong acceleration in contract sales which is arguably the first leading indicator of operating cash flows. Admittedly contract sales in the sector has been on a growth path for several years, however the rate of growth in 2020 was particularly strong and impressive considering the 1H saw significant disruption from COVID shutdowns.

    A second observation is across the sector we saw a material decline in gross margin.  Of course, margin compression is not normally positive as it generally indicates land prices have risen faster than average selling prices and certainly the depressed performance of property companies’ equity prices in recent months reflects this. However, while historically lower margins would usually cause managements to slow down their contract sales (to protect their profitability), in 2020 this does not appear to be the case. A combination of strong contract sales and lower margin trends together indicates a broad-based acceleration of the liquidation of land banks and prioritization of cash flow over earnings. For credit investors and particularly those holding short duration paper this is positive as it significantly improves near term debt service liquidity. Furthermore, we also saw many developers slow down their new land capex in 2020 again to the benefit of free cash flows.

    So what has been the impact of these trends on the sector’s overall balance sheet gearing and, more importantly, performance against the TRL policy test? As the tables below show, the execution of credit improvement has been broad-based, in our view.  For the first TRL test (Adjusted liabilities / assets) 90% of the companies saw an improvement between June 2020 and December 2020. For the second test (net debt/equity) 81% saw and improvement and for the third test (unrestricted cash/ST debt) 86% saw improvement. In terms of the TRLs themselves - which are measured from green (passing all three tests) to yellow (passing two), to orange (passing one) and red (passing none) – 10 of the 21 companies under our study saw an improvement in ranking by at least one notch and 4 companies (namely Sunac, Powerlong, Ronshine and Hopson) improved by two notches.  It is perhaps unsurprising therefore that March was the first month, since the COVID crisis that rating upgrades in the China property sector exceeded downgrades.

    Admittedly there has been some underperformers, (Yuzhou and China Aoyuan some notable examples) and we have seen some volatility in those bonds as a result. However, over the long term we continue to believe these trends should prove to be credit-positive as they demonstrate the developers’ willingness to follow government policy to reduce leverage in the sector even if it means some short term impact on earnings growth. We also welcome the fact that some of the most highly geared developers in the sector, such as Evergrande, Kaisa, Sunac and Guangzhou R&F have been some of the most aggressive in reducing debt.

    Our positive view has been shared by S&P, who in their recent report “S&P Global Ratings: Chinese Developers’ Discipline is Policy Induced” drew the similar connection between improving debt growth levels and liquidity position to the “Three Red Lines” policy. According to the report, it is projected that more than 90% of developers will be able to fulfil two of the three requirements by the end of 2021, with at least half fulfilling all three of the red lines.

    China property, given its scale and volatility, will always be a highly sensitive sector for Asian HY investors however as the sector has traded cheaply in recent weeks, we continue to see this as an opportunity for the market as fundamentals continue to improve.

    Table 1: Change in “TRL” credit metrics for key property developers in our portfolio (between June 2020 and Dec 2020)

    Portfolio Company

    Change in Adjusted liabilities/assets

    Change in Net debt/Equity

    Change in Unrestricted cash/ST debt

    Evergrande Group

    -1.9%

    -46.0%

    0.11

    China SCE Group Holdings

    -7.7%

    -10.0%

    0.33

    China Aoyuan Group

    -2.0%

    3.0%

    -0.12

    Shimao Group Holdings

    -2.3%

    -5.0%

    0.1

    Future Land Development

    -2.0%

    -4.0%

    0.56

    Guangzhou R&F Properties Co.

    -1.5%

    -47.0%

    0.16

    Sunac China Holdings

    -3.5%

    -53.0%

    0.47

    KWG Group Holdings

    -2.2%

    3.0%

    0.16

    Yuzhou Group

    -1.9%

    18.0%

    -0.15

    Ronshine Group

    -3.9%

    -22.0%

    0.23

    Kaisa Group Holdings

    -4.3%

    -34.0%

    0.54

    Central China Real Estate

    -0.8%

    -21.0%

    0.16

    Times China Holdings

    1.0%

    -7.0%

    0.53

    Logan Group Company

    -6.2%

    -6.0%

    0.4

    Powerlong Real Estate Holdings

    -3.3%

    -6.0%

    0.24

    Agile Group

    1.1%

    -12.0%

    0.14

    Fantasia Holdings Group

    -3.0%

    -4.0%

    -0.14

    Hopson Development Holdings

    -0.8%

    -12.0%

    0.4

    Modern Land (China) Co.

    -1.4%

    -11.0%

    0.09

    Redco Properties Group

    -0.5%

    12.0%

    0.41

    Zhenro Properties Group

    -0.6%

    -7.0%

    0.03

    Source: Citi Research

    Table 2: Change in “TRL” rating for key property developers in our portfolio           
    (between June 2020 and Dec 2020)

    Portfolio Company

    June 2020

    Dec 2020

    Evergrande Group

    Red

    Red

    China SCE Group Holdings

    Yellow

    Green

    China Aoyuan Group

    Yellow

    Yellow

    Shimao Group Holdings

    Yellow

    Green

    Future Land Development

    Yellow

    Yellow

    Guangzhou R&F Properties Co.

    Red

    Red

    Sunac China Holdings

    Red

    Yellow

    KWG Group Holdings

    Yellow

    Yellow

    Yuzhou Group

    Yellow

    Yellow

    Ronshine Group

    Orange

    Green

    Kaisa Group Holdings

    Orange

    Yellow

    Central China Real Estate

    Yellow

    Yellow

    Times China Holdings

    Yellow

    Yellow

    Logan Group Company

    Yellow

    Green

    Powerlong Real Estate Holdings

    Orange

    Green

    Agile Group

    Orange

    Yellow

    Fantasia Holdings Group

    Yellow

    Yellow

    Hopson Development Holdings

    Orange

    Green

    Modern Land (China) Co.

    Orange

    Yellow

    Redco Properties Group

    Yellow

    Yellow

    Zhenro Properties Group

    Yellow

    Yellow

    Source: Citi Research

    ————————————————————————————————————

    Associated risks: capital loss, counterparty, default, liquidity, operational, country-risk-China, Credit, currency, derivatives, emerging markets, interest rate, investment fund, management, market.

    The investment objective of JKC Asia Bond 2023 is to achieve high income, over an investment period of 7 years from the launch date of the sub-fund. Synthetic Risk and Reward Indicator: 4 on a scale of 1 to 7, seven representing the highest risk / rewards profile

    Associated risks: capital loss, counterparty, default, liquidity, operational, country-risk-China, Credit, currency, derivatives, emerging markets, interest rate, investment fund, management, market.

    The investment objective of JKC Asia Bond 2023 is to achieve high income, over an investment period of 7 years from the launch date of the sub-fund. Synthetic Risk and Reward Indicator: 4 on a scale of 1 to 7, seven representing the highest risk / rewards profile.

    Informative Document for professional investors only as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. The opinions expressed by the author are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. Prospective subscribers are urged to carefully and independently review the legal and business documentation, including the latest prospectus (which should be read prior to investing), Key Investor Information Document (KIID) and the annual and semi-annual reports, particularly with regards to the risks involved, and to seek appropriate professional advice where applicable (including regulatory and tax aspects) in order to determine the ability of the product to achieve predefined investment objectives. Published by JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.

    JKC Asia Bond 2023 is a sub-fund of La Française Lux (a Luxembourg SIVAV). The prospectus of La Française LUX was approved by the CSSF (www.cssf.lu) on 2021-03-05.

    In relation to the investment strategy mentioned in this document, the latest prospectus, the KIID and the annual and semi-annual reports (whose latest versions are available free of charge on www.la-francaise.com or from our local paying agents (see below) have been published containing all the necessary information about the product, the costs and the risks which may occur.

    Spain: Agent, Allfunds Bank SA, Calle de Los Padres Dominicos, 7 28050 Madrid Spain
    Italy: BNP PARIBAS Securities Services, Via Ansperto no. 5 20123 Milan, Italy


    This is a marketing communication. In Switzerland, the representative is ACOLIN Fund Services AG, Leutschenbachstrasse 50, CH-8050 Zurich, whilst the paying agent is NPB Neue Privat Bank AG, Limmatquai 1/am Bellevue, P.O. Box, CH-8024 Zurich. The basic documents of the funds offered in Switzerland as well as the annual and, if applicable, semi-annual reports may be obtained free of charge from the representative. Past performance is no indication of current or future performance. The performance data do not take account of the commissions and costs incurred on the issue and redemption of units. Please be aware that this communication may include funds for which neither a representative nor a paying agent in Switzerland have been appointed. These funds cannot be offered in Switzerland to qualified investors as defined in art. 5 para 1 FinSA.

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    news-2374 Thu, 08 Apr 2021 14:14:51 +0200 Under scrutiny: China after-school tutoring /en/who-we-are/news/detail/under-scrutiny-china-after-school-tutoring/ by Steve Zhou, CFA, Senior Analyst, JK Capital Management Ltd., a La Française group-member company China’s after-school tutoring sector has been under increased scrutiny from regulators recently. On 27th March, China's Ministry of Education commented that regulating after-school tutoring activities and reducing students' heavy burden resulting from after-school tutoring will be their top priority.  The comment followed the release of China's 14th Five-Year Plan (2021-25) which included regulating the after-school tutoring sector, and, perhaps more importantly it came after President Xi specifically mentioned during the Two Sessions meeting in early March the need to reduce the burden imposed on students by excessive after-school tutoring.  

    More specific policies came in early March as local governments in Chaoyang and Changping, two districts of Beijing, asked after-school tutoring companies operating there to temporarily suspend offline activities. Local authorities also conducted compliance checks of after-school tutoring institutions including teacher certificates. Currently, most of the after-school tutoring institutions have resumed operations but new requirements were imposed on them including having a custodian bank as a third party to hold the advanced payments of students. Tuition fees will only be transferred to the after-school tutoring institutions when students confirm their attendance.  

    The after-school tutoring sector last saw major tightening of regulations in 2018 which focused on the overall quality of the teachings by strictly imposing that teachers be properly qualified, by imposing rules about the design of facilities, by regulating working hours etc… The current ongoing tightening, even though at this stage lacking specifics, focuses more on reducing the excess academic burden on students. More detailed policies are likely to come out in the near future. 

    Such policies are likely welcome as the burden on students has been increasing over the years to get into the country’s top schools and universities. One of the reasons is the system itself which is purely exam-based. Succeeding on the day of the exams conditions the pupils’ future. A recent survey of 4,000 parents by the state-backed newspaper China Education Paper found that 92% enrol their children in extracurricular classes and that half of families spend more than RMB 10,000 (USD1500) each year on such classes. The pressure on children seems to be constantly mounting. Regulating the after-school tutoring sector is certainly one answer but one cannot help to wonder if the reform should not also be focused on the availability of good schools and universities or on the entire selection process that is extraordinarily selective.  
     

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    news-2371 Thu, 08 Apr 2021 08:58:00 +0200 La Française REM confirms its commitment to sustainable investing /en/who-we-are/news/detail/la-francaise-rem-confirms-its-commitment-to-sustainable-investing/ La Française REM has set a goal of reducing CO2 emissions in accordance with the Paris Agreement to actively participate in the fight against global warming Real estate, as a real asset, has a vital role to play in the transition to a more sustainable economy and a greener world. It plays a pivotal role in the fight against global warming and the energy transition. 

    Aware of its responsibility as leader in the open-ended real estate funds market in France (Source IEIF: in terms of capitalization as at 31.12.2020), notably through its real estate portfolio of more than 4,000,000 m², La Française REM is committed to pursuing sustainable development. The active management of its existing portfolio and a selective investment policy aim to offer its investors financial performance and sustainability, synonymous with the protection of the value of assets over time.

     “While the challenges of ESG (Environmental, Social and Governance) might have been considered (very) long term issues to many players just a few years ago, they are now part of a vision compatible with the horizon for holding real estate assets.  The resilience of real estate assets must be anticipated " says Virginie Wallut, Director of Real Estate Research and SRI.

    Following the signing of the Paris Agreement, France defined a roadmap to combat global warming in the National Low Carbon Strategy. La Francaise REM intends to play its part in the national ambition by setting a target of reducing CO2 emissions from its portfolio compatible with a 1.5°C climate trajectory. Thus, it is committed to meeting the regulations in force and preparing for future regulations. 

    The adopted strategy is that of ARC (Avoid, Reduce, Compensate). The best way to limit CO2 emissions is to focus on avoiding them in the first place. If CO2 emissions cannot be fully avoided at a reasonable cost, the remaining volume should be reduced by minimization solutions such as the implementation of energy renovation work, the adaptation of energy systems and the adoption of Multi-Year Work Plans (green MYWP).  As a last resort, compensatory measures  will be  taken to finance carbon capture.

    "To strive to follow a pathway means working now to maintain the value of our assets in the long term" stresses Marc-Olivier Penin, Managing Director of La Française REM who adds "The cost of inaction is increasing exponentially. If actions to improve the sustainable characteristics of assets are carried out regularly while respecting their life cycle, the additional cost remains very marginal compared to the loss in value incurred by assets managed without taking ESG criteria into account."

    And Philippe Depoux, President of La Française REM, concludes “As a long-term investment manager on behalf of third parties, La Française REM pays particular attention to the consequences that its investments will have on the society of tomorrow and therefore on the conditions under which this investment capital can be used."

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    news-2367 Thu, 01 Apr 2021 14:59:03 +0200 Autonomous Driving Is Near /en/who-we-are/news/detail/autonomous-driving-is-near/ n the early 2000s, Google announced that autonomous vehicles (AVs) would be available to the general public in 2017. We’re four years past that target and still waiting. How distant is a future that contains AVs?

    • Consumers have grown more comfortable with the expected safety of AVs in some very large  economies. This bodes well for the future adoption of owned and hired AVs. 
    • AVs are operating as robotaxis (autonomous taxis) in parts of Phoenix and Las Vegas. One major auto company has said it will have AVs by the end of 2021 and a trucking start up plans to test autonomous trucks this year. Furthermore, a rideshare company says it will incorporate AVs into its fleet by 2023. 
    • Personal vehicles are not expected to begin adopting fully autonomous systems until 2030 or later due to the costs associated with this capability. And yet AVs will have major implications. Given that more than three quarters of American workers drive alone to and from work for nearly an hour a day, we believe AVs could save the equivalent of hundreds of billions of dollars annually. 
    • With six million auto accidents and 39 thousand related deaths in the U.S. per year, an Insurance Institute for Highway Safety study estimates that AVs could eliminate a third of crashes by reducing human error and another 40% by eliminating speeding and other violations. Interested investors might consider sensor providers, computing platforms, semiconductors and software.
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    news-2362 Fri, 26 Mar 2021 14:12:06 +0100 The Surprising Cost of Energy /en/who-we-are/news/detail/the-surprising-cost-of-energy/ As technology improves, renewable energy continues to become more affordable. The current cost of various forms of energy may surprise you, with potential implications for your portfolio. Levelized Cost of Energy

    • The so-called levelized cost of energy (LCOE) allows us to compare the costs of various energy sources over the lifetime of equipment that generates power. It provides an apples-to-apples cost comparison per unit of energy output, incorporating not only the ongoing expense of energy generation but the capital costs as well.
    • Solar systems operated by utility companies and wind energy are now less expensive on average than traditional sources of energy such as natural gas and coal. This has changed over time due to advancement in technology, as Lazard estimates the LCOE of wind and solar have declined 27% and 43%, respectively, over the past five years. We believe further declines are likely.
    • We believe that opportunity exists in companies exposed to renewable energy growth such as producers of wind turbine blades, biofuels, inverters, batteries, and companies that install solar equipment.
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    news-2358 Fri, 19 Mar 2021 14:01:07 +0100 Leading Indicator Soars /en/who-we-are/news/detail/leading-indicator-soars/ With large amounts of stimulus and expectations for the pandemic to recede, leading indicators of economic growth are improving. What does that mean for corporate earnings and the stock market? ISM Manufacturing Augurs Significant Economic Growth

    • The ISM Manufacturing Index is considered by many to be one of the best metrics to forecast economic growth. It is based on a survey of U.S. purchasing and supply executives and a reading above 50 indicates that the economy is generally expanding with higher numbers indicating faster growth.
    • Recently, the ISM Index hit its highest level in over 16 years with respondents indicating that manufacturing needed to accelerate. One respondent said, “A sense of urgency is being felt regarding new orders” and another commented “Supply chains are depleted.”
    • Historically, there has been about an 80% correlation between the ISM Manufacturing Index and the S&P 500 earnings per share (EPS) year-over-year change. The index has led changes in earnings by about seven months and we believe its recent elevated level may imply 20%-40% growth in S&P 500 EPS to as much as $200 per share, potentially providing support for the stock market.
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    news-2357 Fri, 19 Mar 2021 10:00:00 +0100 Crash 2020, lessons and perspectives? /en/who-we-are/news/detail/crash-2020-lessons-and-perspectives/ The Covid-19 crisis that we have been experiencing for a year now has had and will continue to have many repercussions The technological transition underway has been greatly accelerated due to the need to find new ways of making our economies function while the de industrialisation that has been in place for decades in most European countries has brought to the fore our dependence on large production centres in emerging countries.

    Beyond these realizations, this crisis has seemingly shattered the Brussels dogma on budget deficits. What the European Central Bank has been raising the alarm about for many years is now a reality with budget support on an almost unprecedented scale. This is true in the vast majority of developed countries, with the United States leading the way. Another dogma that did not survive the crisis is the one concerning the mutualization of debt in the Euro zone.  Indeed, the “Next Generation EU recovery fund” will participate in the European recovery by targeting the areas most affected by this crisis, to the chagrin of certain Nordic countries.

    Thanks to the extremely strong government action (much stronger than at the exodus from 2008), the macroeconomic situation is now clearly improving, with global growth expected at around 6% in 2021. Also in terms of health, the situation is improving with vaccinations whose pace is accelerating, which should allow a gradual reopening of economies between the 2nd and 3rd quarter. And if consumer savings are considered, there is a good chance that these growth forecasts will improve further in the coming months. This good news has logically had a significant impact on the financial markets, with equity markets growing strongly, commodities also rising sharply and bond markets which have seen their rates rise in the last several weeks. 

    The big question today is whether or not the increase in inflation expectations will be sustainable. Inflation will increase sharply in 2021, in tandem with very positive base effects (Q2 in the USA, Q4 in the Euro zone), but beyond the temporary effects, what will the price dynamics be in the service sectors when they reopen? Will the relocation of industries be real and will it lead to inflation? It is difficult to answer these questions today and it is difficult to have a clear opinion on the valuation of breakeven inflation points. 

    In this context, the outlook for equity markets seems favourable to us, with a clear preference for “value” sectors which benefit from the rise in interest rates (including banks). We are more cautious about technology stocks whose valuation levels will be increasingly difficult to justify. We are also cautious about government interest rates and good quality credit because interest rates are still low, particularly in the United States. European bonds should fare better (much less inflationary pressure in the Euro zone, less fiscal stimulus, less growth, etc.). Assets with wide spreads (especially high yield speculative securities) should benefit from the macroeconomic improvement, with a spread tightening effect that will offset the negative effect of the rise in rates. Finally, we are very negative on real American rates: with a growth of 7% in 2021, a fiscal stimulus of 10% of GDP (not counting the one voted on in December) and an emboldened consumer, the Federal Reserve (FED) does not in our opinion need to maintain financial conditions that are so accommodating. 

    Source: La Française AM


    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997

     

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    news-2355 Wed, 17 Mar 2021 15:45:33 +0100 Carbon reduction targets : from ambition to impact /en/who-we-are/news/detail/carbon-reduction-targets-from-ambition-to-impact-1/ Listen to Roland Rott, CFA, Head of Sustainable Investment Research about the latest issue of the Carbon Impact Quarterly Report. Why are carbon reduction targets an important topic? Why investors should differentiate between corporate ambition and real-world impact. A view on carbon offsets. Examples of leaders and laggards. The important role of the finance sector in the transition to the net zero economy.

     

    La Française · Carbon Reduction targets : from ambition to impact

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    news-2352 Tue, 16 Mar 2021 14:54:25 +0100 Confirmation of the FED dovish bias: higher rates? No worries! /en/who-we-are/news/detail/confirmation-of-the-fed-dovish-bias-higher-rates-no-worries/ On March 17, we expect the FED to keep its dovish monetary policy bias in particular due to the substantial gap in the labor market. The Federal Open Market Committee (FOMC) is expected to reiterate that its current policy stance is appropriate.

    The FED will continue to monitor financial conditions which remain easy. We do not believe that they will adopt any steps such as WAM (weighted average maturity) extension geared towards capping long-term yields.  Hence, they will likely continue asset purchases at the current pace, at least $80bn of Treasuries and $40bn of mortgage-backed securities (MBS) per month

    In the press conference, Chair Powell will also repeat that the FED is not worried about runaway inflation. He should also stay open to a more active reaction due to the already strong momentum in macro signals, the vaccination roll out and stimulus fiscal bills. Talks around adjustments to its asset purchase program will be the key subject. At this meeting, we believe the FOMC will emphasize tapering is still premature.

    We expect the SEP (Summary of Economic Projections) to indicate better growth notably in 2021 (6% vs 4.2%). Inflation figures could also be revised slightly upwards, especially in 2022, with projections moving up from 1.9% to 2% in 2022 and from 2% to 2.1% in 2023.    

    On the “dot plot” side, we expect the majority of the committee members to position one hike in 2023 vs no hike in December. We do not think markets will overreact following this change considering how front-end pricing has turned hawkish since the FOMC last met.

    All in all, we expect this meeting to be a confirmation of the FED’s dovish bias, which could be slightly negative for longer maturity bonds.

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    news-2349 Mon, 15 Mar 2021 09:44:21 +0100 The Life of a Digital Dollar /en/who-we-are/news/detail/the-life-of-a-digital-dollar/ With the rise of digital payments, the economics of credit and debit transactions has been a hot topic as investors try to figure out the best places to invest in the payment ecosystem. So where does your digital dollar go? Mechanics of a $40 Credit Card Transaction

    • ​​​​​​​When a retailer sells an item for $40 via a credit card transaction, it typically pays out $1 or 2.5%, which is known as the merchant discount. That 2.5% goes to a number of companies, creating a tightknit network of counterparts in the digital payment experience.
    • The financial success of these players is levered to the growth of digital payments, which are increasing significantly faster than the broader economy. The two largest drivers of this growth, e-commerce, i.e., buying goods or services via the internet, and mobile payments, i.e., smartphones used to process transactions using wireless communication or scanning QR barcodes, are increasing at a mid-teens percentage.
    • In addition to these parts of the digital payments ecosystem, we believe that other players stand to reap substantial benefits from growing digital payments such as platform and wallet providers like PayPal and chip providers like NXP Semiconductor. We believe digital payments is a robust corner of the market that may hold many potential opportunities for investors.


    1A credit card issuer might be a large bank.The merchant acquirer, which is the organization that signed up the retailer to a card acceptance agreement, might be a business like Bank of America Merchant Services. The payment processor may be a
    company like Fiserv.

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    news-2348 Mon, 15 Mar 2021 09:37:18 +0100 China policy: the “two sessions” meeting convenes /en/who-we-are/news/detail/china-policy-the-two-sessions-meeting-convenes/ by Guillaume Dhamelincourt, Business Development–Product Specialist, JK Capital Management Ltd., a La Française group-member company dated March 8, 2021 Last week (week of March 1st) the annual “two sessions” meeting started in Beijing. The six-day conference is a high point of Chinese policy with thousands of National People’s Congress (NPC) deputies and Chinese People’s Political Consultative Conference (CPPCC) members converging on Beijing’s Great Hall of the People for China’s largest annual political event. The meeting is usually when many announcements are made, and targets set. This year was particularly important as the 14th Five-Year plan was announced and published during the event. Although the meeting is not over yet, there are several things that can be already commented on.

    The one that caught most commentators’ eyes was the GDP growth target for 2021 announced at “above 6%”. Many thought the practice of announcing GDP targets would be abandoned as the government wants to focus on qualitative growth rather than meeting a hard number, but they were still surprised to see such a low number considering that everyone expects the 2021 GDP to be high, catching up the missed growth of 2020. The loose “above 6%” target likely means the number is less important than the quality of the growth. It may also be interpreted as a signal that no major monetary policy change will be made and little to no stimulus to the economy is to be expected with the Covid crisis now apparently in the rear-view mirror. More indication of this no thrill policy can be seen in the budget. The budget deficit target has been lowered from “at least 3.6% of GDP” in 2020 to “around 3.2%” this year. Meanwhile, the quota for local special bond issuance, which takes place outside the general budget, was lowered from RMB 3.75trn (3.7% of GDP) to RMB 3.65trn (3.4% of GDP). The budget report also ruled out a repeat of last year’s sovereign special debt issuance and social security waivers, which together were worth 2.5% of GDP. All told, this points to fiscal tightening of at least 3.0% of GDP this year.

    On Friday (March 5th), the 148-page summary of the 14th Five-year plan was released. The tradition of the Five-year plans is very important and gives strong indications on future policies as well as the mindset of the leadership. For the first time it did not mention any average growth target for the coming five years, which is more in line with the aim to focus on quality growth as mentioned above and to set the right policies for the long term prosperity of China. As an official summarised the plan: China is aiming to lift its economic, technological, and national strength to a new, higher stage in the next five years, under a sweeping blueprint that puts heavy emphasis on improving domestic economic conditions, boosting technological innovation and national security, while leaving sufficient room to cope with mounting risks and challenges. 

    Security was one of the key new features of the plan with a special section aiming to bolster national security systems and capabilities and setting arrangements to ensure food, energy and financial security. The plan also aims to implement a "dual circulation" development strategy that focuses on boosting the domestic market, enhancing technological self-efficiency and independence with significant increase in R&D, and promoting environmental protection through investments in renewable energy.

    Other noticeable, though expected, elements of the plan aimed at promoting urbanisation with a target of reaching a 65% urban population (Hukou reforms are expected to facilitate it), increasing expected life of Chinese citizens by 1 year, keeping urban unemployment below 5.5% and pursuing the high-quality development of the belt and road initiative.
    Altogether nothing particularly surprising came out from the meeting so far. Only a confirmation of the long-term goals of the Chinese leadership and the means attached to them. Such stability and aim give us confidence in the Chinese market beyond the tumultuous volatility of the recent weeks.

    Source: JKC Internal Research

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.

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    news-2347 Mon, 15 Mar 2021 09:33:09 +0100 A missed payment in Chongqing raises volatility in the LGFV sector /en/who-we-are/news/detail/a-missed-payment-in-chongqing-raises-volatility-in-the-lgfv-sector/ by Marcus Weston, CFA, Fixed Income Senior Portfolio Manager, JK Capital Management Ltd., a La Française group-member company Recently, Asian USD bonds saw a rare event in fixed income markets: The default of an investment grade rated issuer. Chongqing Energy Investment Group (CHQENE), whose USD bonds are rated BBB by Fitch, announced it was late in payment on onshore CNY commercial bills. As a Local Government Financing Vehicle (LGFV) 100% owned by the Chongqing city government, this default exacerbates market speculation that Chinese state-owned entities are seeing reduced support from their government backed shareholders. Unsurprisingly the CHQENE 2022 USD bond price fell sharply after the news while simultaneously creating an increase in volatility across certain segments of the Chinese LGFV and SOE sectors, as market participants try to interpret the evolving policy landscape. It should be noted however that the LGFV sector as a whole remains critical to China’s overall funding landscape particularly in local markets and we believe local government and state-owned entities will remain well supported by government policy.

    In the specific case of the CHQENE it appears the default has been triggered by an isolated dispute between the company and its government parent regarding its energy assets. Earlier this year it was announced the company was being forced to close its Chongqing based coal mines this year as part of the government supply side reforms. Although accounting for only 11% of the company’s assets, this raised uncertainty regarding employee compensation, asset coverage and caused some of its coal-based creditors to demand improved securitisation of their loans. Although CHQENE which, as an LGFV, runs tight balance sheet liquidity has typically enjoyed municipal government support to ensure timely payment of obligations, or at the very least promote refinancing support by local banks, clearly this dispute has created near term uncertainty for the company as it led to the missed payment. At this stage it is not inconceivable that the default becomes resolved in the coming weeks. Chongqing is a financially strong local government, and a company representative has reportedly signaled the issuer will continue to service USD bond coupons until the issue is remedied. However, the often followed playbook of default first and resolve later does not help support market sentiment on the sector in the near term.
     
    This, however, is not a new phenomenon. Since the deleveraging campaign of 2018, Chinese authorities have been regularly sending signals to the market that investors should not assume government backed entities would always receive rapid support at times of stress. Trying to install moral hazard into the local currency bond market, the Chinese government has already allowed some CNY bonds issued by State Owned Enterprises to fail in recent years and we believe this is a continuation of that policy. 

    Source: JKC internal research,

    Informative Document for professional investors only as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.

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    news-2344 Fri, 12 Mar 2021 09:22:03 +0100 The quality approach of La Française Sub Debt reinforced by French SRI Label /en/who-we-are/news/detail/the-quality-approach-of-la-francaise-sub-debt-reinforced-by-french-sri-label/ La Française AM is pleased to announce that its flagship subordinated debt fund La Française Sub Debt – with close to €1 billion in assets under management* – has obtained the prestigious SRI (Socially Responsible Investment) Label, backed by French public authorities and awarded by EY France, a certification organisation approved by French accreditation body COFRAC. La Française Sub Debt is a diversified portfolio comprising approximately 130 subordinated debt securities with an average Investment Grade issuer rating of A- (Source: La Française, as of 26/02/2021), co-managed by Paul Gurzal, Head of Credit, and Jérémie Boudinet, Credit Portfolio Manager.

    The Fund, which falls within the scope of Article 8 of the Sustainable Finance Disclosure Regulation - SFDR, aims to achieve an annualised performance of more than 7% over a recommended investment horizon of more than 10 years through exposure, in particular, to subordinated debt securities with a specific risk profile different from that of conventional bonds and to do so by investing in a portfolio of issuers screened in advance according to Environmental, Social and Governance (ESG) criteria.

    The Fund's management approach has remained unchanged since its inception in 2008 and is based on three fundamentals: liquidity, diversification and quality. Security selection now includes an in-depth extra-financial analysis, carried out by La Française Sustainable Investment Research (the Group's ESG research centre) based on a proprietary model. In consultation with the management team and thanks to a continuous dialogue, the ESG criteria of public and private issuers in the European Union, Switzerland, United Kingdom and Norway contribute to enrich the credit analysis and the selection of issuers. The Fund's historical management strategy remains unchanged, as it is aligned with the ESG selectivity approach implemented since 10 March 2021.

    Jean-Luc Hivert, President and Global Head of Investments, La Française AM, commented, "La Française has been fully committed to sustainable investment since 2008. We believe finance will play a role in this transition, and our strategy is thus to market a range of 100% sustainable open-ended funds by the end of 2022. Obtaining the label for La Française Sub Debt was essential for us and natural for an asset class that is certainly very specific but perfectly reflects La Française AM's long-standing, top-notch expertise in the bond market. This is a new step forward in our commitment to sustainable finance. La Française AM now has 7 labelled funds (equities, credit and money market), underlining our leading position in sustainable strategies, particularly low-carbon strategies, developed in equities, credit and government bonds. We are currently implementing our sustainable strategy across all our asset classes to offer a sustainable multi-asset range."

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    news-2339 Wed, 10 Mar 2021 14:39:00 +0100 Information on Disclosure Regulation - article 6 /en/who-we-are/news/detail/information-on-disclosure-regulation-article-6/ We are writing to you with regard to the application, on 10 March 2021, of Regulation (EU) 2019/2088, known as the "Disclosure Regulation" or "SFDR" adopted by the European Parliament and the Council of the European Union on 27 November 2019, relating to the publication of information on sustainability‐related disclosures in the financial services sector. It concerns the following products: LA FRANCAISE MULTI-ASSET INCOME,LA FRANCAISE PROTECTAUX,LA FRANÇAISE RENDEMENT EMERGENT 2023,LA FRANCAISE RENDEMENT GLOBAL 2022,LA FRANCAISE ALLOCATION, LA FRANCAISE GLOBAL COCO,LA FRANCAISE GLOBAL FLOATING RATES,LA FRANCAISE RENDEMENT GLOBAL 2025,LA FRANCAISE ,RENDEMENT GLOBAL 2028 PLUS,LA FRANCAISE RENDEMENT GLOBAL 2028

    The Disclosure Regulation imposes new reporting obligations on financial actors, inspired by Article 173 of the French energy transition law of 2015 and establishes harmonised rules at European Union level in terms of transparency and communication of non-financial information.

    This regulation requires financial actors to establish: 
    -    the manner in which sustainability risks are integrated into their investment decisions;
    -    the possible adverse impacts of their products and how they are assessed; 
    -    the characteristics of the financial products that they present as sustainable.

    La Française Asset Management, in its capacity as a management company, is bound by the Disclosure Regulation. 

    The application of this regulation entails the classification of the funds managed by La Française Asset Management into one of the three categories detailed below:

    • Article 8: concerns products that promote, among other characteristics, environmental and/or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made apply good governance practices;
    • Article 9: concerns financial products that pursue a sustainable investment objective;
    • Article 6: concerns financial products that do not promote environmental and/or social characteristics and which do not have a sustainable investment objective and do not meet the definition of Articles 8 and 9.

    Regardless of the classification chosen, the pre-contractual documentation of the funds must include a description of the sustainability risks, or explain in a clear and concise manner why their application to the fund is not relevant.

    Sustainability risks are defined as follows: environmental, social or governance event or situation which, if it occurs, could potentially or effectively have a material adverse effect on the value of the investment of the financial product. 

    The management company has identified and actively manages the following sustainability risks to reassure you that their occurrence, and the financial impact should these risks arise, is limited. 

    The management company identifies these risks around three main families:

    1.    Physical risks linked to climate change
    2.    Transition risks linked to climate change
    3.    Risks linked to biodiversity 


    Having taken into account the management process implemented in your fund, we would like to inform you that the classification applicable to your fund, as adopted by the management company, is as follows: Article 6. 

    Therefore, as of 10 March 2021, your fund is managed using an investment process that incorporates ESG factors, but does not promote ESG characteristics, and has no specific sustainable investment objective.

    More information on the inclusion of ESG (environmental, social and governance quality) criteria in the investment policy applied by the management company, the charter on sustainable investment, the climate and responsible investment strategy report, the engagement and exclusion policy can be found at the following address: https://www.la-francaise.com/fr/nous-connaitre/nos-expertises/linvestissement-durable
     

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    news-2328 Tue, 09 Mar 2021 18:43:03 +0100 Sustainability-Related Disclosure: JKC Fund - La Française JKC China Equity - La Française JKC Asia Equity /en/who-we-are/news/detail/sustainability-related-disclosure-jkc-fund-la-francaise-jkc-china-equity-la-francaise-jkc-asia-equity/ Article 10 of Regulation (EU) 2019/2088 Transparency of the promotion of environmental or social characteristics and of sustainable investments on Websites 1. Financial product referred to in Article 8(1) and Article 9(1), (2) and (3): 
    (a) a description of the environmental or social characteristics or the sustainable investment objective; 
    (b) information on the methodologies used to assess, measure and monitor the environmental or social  characteristics or the impact of the sustainable investments selected for the financial product, including its data  sources, screening criteria for the underlying assets and the relevant sustainability indicators used to measure 
    the environmental or social characteristics or the overall sustainable impact of the financial product; 
    (c) the information referred to in Articles 8 and 9; 
    (d) the information referred to in Article 11. 
    The information to be disclosed pursuant to the first subparagraph shall be clear, succinct and understandable  to investors. It shall be published in a way that is accurate, fair, clear, not misleading, simple and concise and in  a prominent easily accessible area of the website. 

    2. The ESAs shall, through the Joint Committee, develop draft regulatory technical standards to specify the  details of the content of the information referred to in points (a) and (b) of the first subparagraph of paragraph 
    1, and the presentation requirements referred to in the second subparagraph of that paragraph. 
    When developing the draft regulatory technical standards referred to in the first subparagraph of this  paragraph, the ESAs shall take into account the various types of financial products, their characteristics and  objectives as referred to in paragraph 1 and the differences between them. The ESAs shall update the  regulatory technical standards in the light of regulatory and technological developments. 
    The ESAs shall submit the draft regulatory technical standards referred to in the first subparagraph to the Commission by 30 December 2020. 
    Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical  standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulations (EU) No 1093/2010, (EU) No 1094/2010 and (EU) No 1095/2010.

    This document covers the Sub-funds “La Française JKC China Equity” and “La Française JKC Asia Equity”, two compartments of JKC Fund SICAV. 
    By promoting, among other characteristics, environmental and social characteristics, these sub-funds fall under the definition of Article 8 of regulation (EU) 2019/2088 mentioned above.
    For more information about the two Sub-funds, the prospectus of JKC Fund can be accessed through the following link: https://jkcapitalmanagement.com/documentation/

    Read more, click here

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    news-2327 Tue, 09 Mar 2021 15:12:11 +0100 No new measures, but a very dovish tone /en/who-we-are/news/detail/no-new-measures-but-a-very-dovish-tone/ The ECB will hold its press conference on March 11. The outcome could put the ECB’s credibility at risk. The Governing Council will most likely maintain a very accommodative tone to preserve easy financing conditions and ensure that low rates are passed on to the real economy in order to support the recovery and the convergence of inflation across European countries towards the 2% objective.

    We do not expect new measures.  We do not anticipate that theECB will increase the PEPP (Pandemic Emergency Purchase Programme) envelope (EUR1850bn).

    Mrs. Christine Lagarde is expected to communicate strongly on the ECB’s new mantra, namely “holistic and multi-faceted” approach to judging financial conditions. Despite the slowdown in PEPP purchases, she could signal action to battle the threat of a sharp rise in yields, with all options open. It is likely that she will also reaffirm the importance of the PEPP’s flexibility. 

    Furthermore, the central bank will update their macro-economic projections. We do not expected changes on growth (+3.9% in 2021, +4.2% in 2022). Headline inflation could be revised up significantly in 2021 (+1%) due to recent inflation surprises and the higher price of oil. We do not expect major revisions to the core inflation profile (1.4% in 2023) given the unchanged view on the current degree of slack in the economy.  

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    news-2317 Mon, 08 Mar 2021 14:00:00 +0100 La Française AM aligns its sustainable range of funds with the disclosure regulation /en/who-we-are/news/detail/la-francaise-am-aligns-its-sustainable-range-of-funds-with-the-disclosure-regulation/ 10 March 2021 marks the entry into force of the Disclosure Regulation (Sustainable Finance Disclosure Regulation - SFDR). This regulation, which applies to the marketing of funds in the European Union, lays down the obligations in terms of the publication of information on sustainability in the financial sector in order to provide greater transparency and a basis of comparison for end-investors. In light of these new regulations, La Française AM, a La Française Group asset management company, offers an extensive product range of sustainable open-ended funds. At the end of January, 76% of open-ended funds currently marketed met sustainable criteria. As of 10 March, La Française AM will have made further progress with:

    • 87% of assets (according to assets under management as at 28/02/2021) aligned with "Articles 8 or 9", according to the Disclosure Regulation. 
      “Article 9" products have defined and quantifiable objectives in terms of ESG (Environmental, Social and Governance) risks. These are products with a social or environmental objective, that meet the definition of sustainable investments. For their part, “Article 8” products do not have a specific ESG objective but take ESG criteria into consideration when constructing their portfolios.

    From 10 March 2021, La Française AM investors will have access to better communication on sustainability, as required by the Disclosure Regulation. This additional information will give clients, whether private or institutional, key reference indicators regarding the sustainability of each investment fund.

    La Française AM has set itself the objective of marketing a range of 100% sustainable open-ended funds by the end of 2022. Building upon this first step, the La Française AM is continuing the process of transforming its funds in order to achieve this objective.

    Glossary:
    Regulation (EU) no. 2019/2088 SFDR/Disclosure

    • Objectives-> Establish standardised transparency rules for financial market stakeholders in terms of sustainability.
    • All funds must comply with Article 6 which aims to provide transparency in the integration of sustainability risks
    • Fund classification option:
      > All discretionary management funds or mandates "where a financial product promotes, among other characteristics, environmental or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices". (Article 8)
      >  All discretionary management funds or mandates "where a financial product has sustainable investment as its objective”. (Article 9)
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    news-2315 Fri, 05 Mar 2021 15:06:51 +0100 The New Normal Could Support Market Leaders /en/who-we-are/news/detail/the-new-normal-could-support-market-leaders/ Barbecue ribs are increasingly finding a spot in aircraft cargo bays and wine is more likely to appear in a local delivery person’s hands. It’s all part of the many surprising twists and turns in the economy resulting from economic shutdowns and stay at home orders implemented to slow the spread of Covid 19. These actions have driven rapid growth for companies like online retailers and home delivery services, as well as remote office and virtual conference technology providers.

    As countries ramp up their Covid 19 vaccination programs, some investors have grown fearful that beneficiaries of the pandemic, such as providers of virtual conference technology or other services that enable social distancing, could experience a deceleration of demand for their products. However, we believe that significant shifts in supply chains, logistics and consumer and business behavior have positioned leading companies for potentially strong growth even after the pandemic is contained and we return to a new normal.

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    news-2306 Wed, 03 Mar 2021 15:23:54 +0100 Chinese property update /en/who-we-are/news/detail/chinese-property-update/ by Steve Zhou, CFA, Senior Analyst, JK Capital Management Ltd., a La Française group-member company According to various local media news, 22 cities in China (including 4 tier-1 cities as well as 18 key tier-2 cities such as Nanjing, Suzhou, Hangzhou, and Xiamen) are expected to split their annual residential land sales in no more than three batches each year through open market auction. These 22 cities are expected to issue the details of implementation of this policy soon and give a clear plan about how the full year land supply will be organised. Prior to this policy, the land supply was done through scattered auctions throughout the year. 

    We believe this policy will change how developers manage their cashflow, as land purchases will be more concentrated within certain timeframes as opposed to being scattered. Developers will need to have enough cash available to take advantage of these
    land banking opportunities each time they occur. The impact will be less for developers that have the most diversified land banks. In general, major developers have 40% of their
    land bank exposed to these 22 cities. 

    The policy will likely bring about a more stable property development sector on the land banking front, as the land banking process will now be more transparent. Large land premiums are unlikely to be as frequent as previously seen. This also fits the central government’s goal to see the land prices stabilise and in turn home prices and market expectations stabilise as well. Nevertheless, good projects in good cities are unlikely to see less land premium as competition for them will remain fierce. Developers with strong balance sheet, superior land market assessment capability and strong management ability will benefit from this policy. 

    On the business side, Chinese property developers reported stellar contracted sales for February 2021, with the top-100 developers’ contracted sales growing by 156% YoY in February 2020, and 64% higher compared to February 2019 (which is a more meaningful measure as February 2020 was impacted by the Covid crisis). For January and February 2021, which eliminates the Chinese New Year effect that either falls in January or in February and therefore distorts monthly year-on-year comparisons, the growth number for the top-100 developers was 102% YoY (2020), and 56% higher compared to January and February 2019.

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    news-2284 Fri, 05 Mar 2021 09:00:00 +0100 Notice: "La Française Rendement Global 2025" sub-fund of the "La Française" SICAV governed by French law. /en/who-we-are/news/detail/notice-la-francaise-rendement-global-2025-sub-fund-of-the-la-francaise-sicav-governed-by-french-law-6/ We would like to inform you that the management company "La Française Asset Management" has decided to make some clarifications to the “La Française Rendement Global 2025” sub-fund of the “La Française” SICAV concerning so-called “hedged”* share categories of the sub-fund, as follows: “H units hedged* against the reference currency of the sub-fund may be over- or under-hedged during certain periods. This may lead to a continued residual exchange risk for these shares in relation to the sub-fund's reference currency. This hedging will generally be provided by means of over-the-counter forward contracts, Fx forward, Fx swaps, but may also include options on currencies or standardised futures contracts."

    *This share class is not authorized to be marketed in Germany

    This modification does not require authorisation from the French Financial Markets Authority and will come into force on 10 March 2021. The regulatory documentation will be amended accordingly.
    The other features of the sub-fund remain unchanged.

    We wish to underline the need and importance of reading the key investor information document of the "La Française Rendement Global 2025" sub-fund, which is available at www.la-francaise.com.
    Potential investors should read all key investor information documents before making any decision to invest.

    The Prospectus, the Key Investor Information Document, the articles of association and the latest financial reports are available free of charge, in paper form at the registered office of the SICAV and at the German paying and information agent BNP Paribas Securities Services S.C.A. Zweigniederlassung Frankfurt am Main.

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    news-2272 Mon, 01 Mar 2021 14:44:00 +0100 Asian Bond Market, February figures and outlook /en/who-we-are/news/detail/asian-bond-market-february-figures-and-outlook/ by Marcus Weston, CFA, Fixed Income Senior Portfolio Manager, JK Capital Management Ltd., a La Française group-member company It was a soft month for Asian USD bonds in February as a sharp steepening of the US Treasury bond yield curve pushed cash prices lower, particularly for long duration paper. While investment Grade spreads did remain largely stable throughout the month and high yield debt saw modest gains, this was not sufficient to offset the underlying curve weakness. The US Government 10-year bond ended the month yielding 1.41% an increase of 34bps compared with the level at the end of January, hitting a 1 year high of 1.53% intra-month. Given short-term rates remained unchanged, this increase was almost fully on account of curve steepening with long duration bonds particularly underperforming. In fact, the 2yr to 30yr yield spread of 210bps has reached its highest premium since 2015 in the past week.
     
    Undoubtedly, inflation concerns have been the main catalyst of the recent curve move with CRB food and industrial metal price indices spiking during the month, hitting multi-year highs in both cases. Similarly, energy prices, as indicated by the Brent crude oil price, jumped 20% in February returning to pre-COVID levels. Given these commodity price gains appear to be largely fuelled by global inventory restocking as western consumers see greater optimism of a post COVID economic rebound, the sustainability of this trend likely remains highly dependent on the success of global vaccine rollouts and suppression of new virus infections. However, while the timing of this virus progression may remain uncertain, clearly less ambiguous is central bank reaction to the latest moves as Fed Chairman Powell on February 24th reiterated his intention to maintain loose monetary policy and QE support for market liquidity. This, in combination with President Joe Biden’s aggressive push of his fiscal agenda, should keep current positive growth drivers in place and corresponding pressure on both the UST and USD markets in the near term. 

    Within Asian IG bond markets, relative performance last month largely reflected duration as long maturity sectors such as Indonesia/Philippines sovereigns, Malaysian/Thai Energy companies and Chinese internet names all saw the biggest declines. Perhaps the one exception was Chinese state oil company CNOOC which helped by the positive oil price move saw a strong rebound in its bonds after weakness in Dec and Jan following the US investment ban. High Yield Bonds outperformed IG although relative performance within HY was mixed as Pakistan, Mongolia and India/Indonesia commodity companies all outperformed while perennial high beta play, Sri Lanka, was once again the biggest drag on the market. Meanwhile within China HY the dominant property sector ended the month broadly flat as high coupon gains across the sector were offset by weakness in a handful of names such as Greenland (GRNLGR), Sichuan Languang (LGUANG) and Rise Sun (Rissun) which experienced softening investor sentiment following the China Fortune Land (CHFOTN) default. 

    Outlook

    In terms of macro fundamentals, the next major focus for the Asian bond market will be corporate earnings season as most regional companies (with the exception of India) report their full year results in March. 2H20 results will give a strong indication on the level of recovery Asian corporates achieved after regional economies reopened following the 1H20 COVID lockdown and whether the strong macro numbers translated into similarly strong performance at the micro level. Separately, for the China property sector it will also be the first chance to observe progress made in improving balance sheets after the introduction of the ‘three red lines’ leverage policy last year.

    Meanwhile, inflation numbers both in and out of Asia will need to be closely observed in March to see the extent recent commodity price spikes have translated into CPI and PPI reports while, as always, COVID case numbers and vaccine rollout progress will be key to predicting the sustainability of this recent sentiment driven rally. 

    Typically, after Chinese new year, the Asian USD bond market sees a significant pick up in new issue volumes, however given the recent sharp increase in long dated treasury yields, this has clearly negatively weighed on issuer sentiment and supply has so far remained lackluster over this period. The longer this continues this may have a corresponding effect on the market as investor demand for a smaller availability pool of new paper should positively impact credit spreads. In our view this should remain favorable for risk positioning down the credit curve, albeit remaining in short duration exposures. 

    Source: Bloomberg
     

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    news-2269 Mon, 01 Mar 2021 14:11:41 +0100 The Importance of Investor Sentiment /en/who-we-are/news/detail/the-importance-of-investor-sentiment-2/ Increased optimism about the economy, excitement for new technologies, such as 5G, the Internet of Things and autonomous driving, and very low interest rates have created enthusiasm for equities. But is investor sentiment too high? Equity Put / Call Ratio

    • Investor sentiment is the highest it has been in many years. As the chart above shows, the ratio of bearish put buying protection relative to bullish call buying bets is the lowest it has been since the technology bubble around the turn of the century.1
    • Additionally, margin debt has surged recently, up 34% in the past year as investors speculate more with borrowed funds. This data, along with increased retail investor involvement in the stock market, supports the notion that investor sentiment leans far more toward the greed end of the spectrum than its fear counterpart.
    • We believe strong investor sentiment should make investors cautious, but it doesn’t preclude solid returns. Take the IPOs of the euphoric late-1990s, for example. After underperforming significantly, they have outperformed over the past two decades. However, there has been great dispersion with some filing for bankruptcy (e.g., eToys) while others have gone on to change how we work and live (e.g., Amazon). The current optimistic environment may ultimately produce similar dispersion and therefore calls for more due diligence. Fundamental, bottom-up research can potentially help investors uncover durable investments that contribute to lasting innovations and identify short-lived sensations to avoid.

    1 A call is an option contract giving the owner the right, but not the obligation, to buy a specified amount of an underlying security
    at a specified price within a specified time. A put is an option contract that gives the owner the right, but not the obligation, to sell
    a certain amount of the underlying asset at a set price within a specific time.

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    news-2261 Tue, 23 Feb 2021 15:19:32 +0100 Investors need to hold companies accountable /en/who-we-are/news/detail/investors-need-to-hold-companies-accountable/ Institutional investors will play a pivotal role in tracking carbon reduction progress. At present, there is no formal enforcement mechanism to ensure that companies deliver on carbon reduction. Target setting and reporting of carbon data is largely voluntary. There is no sanction for a lack of success. Given the short-termism inherent in financial markets, investors should proceed carefully when assessing companies’ long-term climate goals. CEO turnover reached a record high in 2018, with less than 1-in-5 CEOs remaining in their position for 10 or more years[1]. Put differently, four out of five CEOs are not likely to be at their company long-enough to see through their carbon targets to 2030, let alone 2050. This issue is compounded by the lack of verification and accuracy in reported carbon data. Investors need to assess carbon reduction targets with at least the same care and rigour that they do financial targets. 
    Therefore, investors should play an active role in ensuring that companies set and deliver carbon reduction targets. Investors are well-equipped to perform this task. For example, carbon reduction requires capex and questions about capex are typical of meetings with corporate management. Investors increasingly have expertise in integrating environmental data within their investment process. Additional guidance for companies on progress reporting is expected to be released in 2021 by the SBTi (Science-based Targets Initiative) and CDP (Carbon Disclosure Project). The SBTi is currently working on a process to track companies’ progress on their targets. These are positive developments that can help investors overcome some of the challenges of carbon reporting. However, as with financial targets, investors will still need to frequently monitor progress. Carbon footprinting is not sufficient as headline emissions numbers will only give a partial view on what is going on and does not capture the corporate planning for reaching the next milestone. The latter requires ongoing assessment of material developments as well as a clear understanding of the business model.

    Many asset management firms maintain close interaction and engagement with company management. Engagement can also take the form of collaborations like Climate Action 100+. Engagement action could comprise the proposal or support of shareholder resolutions, for example, requesting major oil companies to take the first step and set more stringent targets considering all emission scopes in order to reach Net Zero by 2050. Investors that engage with company management act as enforcement agents in the delivery of carbon reduction. 

    1 PriceWaterhouseCoopers (2019). CEO Turnover at record high, click here

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. 

     

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    news-2260 Tue, 23 Feb 2021 14:47:53 +0100 Tracking Carbon reduction progress /en/who-we-are/news/detail/tracking-carbon-reduction-progress/ The last twelve or so months have seen a flurry of corporate commitments and a huge ramp-up in ambition to reduce carbon emissions. It has been estimated that almost one quarter of global CO2 emissions and more than half of global GDP were covered by Net Zero commitments by June 2020(1). However, the gap between ambition and reality can often be very significant, for example, due to a lack of standards(2). Global warming and the role of GHG emissions is a well-established fact(3). In response, carbon reduction efforts in the private sector have been made for decades. Such carbon reductions were reported, for example, as part of energy efficiency programmes (4). The goalposts have shifted in recent years due to the urgency of the climate crisis. Global warming has gained worldwide attention not least due to the Paris Agreement in 2015. Countries are now strengthening their commitments through setting Net Zero targets. Six countries have enshrined Net Zero reduction in law, five countries and the EU have proposed legislation, fourteen countries have targets in policy documents, while many more are discussing Net Zero targets (5).
    In the private sector, carbon reduction has since become a strategic objective for many businesses and has evolved well beyond the isolated environmental targets of the past. Today, carbon reduction is a priority for many companies and their stakeholders - including shareholders and creditors. Yet, the voluntary nature of most efforts means that targets can be set through arbitrary parameters. What is needed to solve the climate crisis are commitments to reduce GHG emissions that are aligned with scientific global warming scenarios. A study of companies with science-based targets shows that these companies reduce emissions at far greater rates relative to emissions trends in the wider global economy (6).

    1 These estimates include targets set by cities, regions, universities, investors and companies under the ‘Race to Zero Campaign’. See UN Framework Convention on Climate Change (2020). click here 
    2 Financial Times (2020). The problem with zero carbon pledges.
    3 William D. Nordhaus (1976). Economic Growth and Climate: The Carbon Dioxide Problem. Yale University.  
    4 See, for instance, Unilever’s ‘Environmental Performance 2000’ report which shows CO2 reductions from 1995 due to energy saving measures.
    5 See Energy & Climate Intelligence Unit for a detailed breakdown of country Net Zero commitments: click here 
    6 See SBTi (2021). From Ambition to Impact: Science Based Targets Initiative Annual Progress Report 2020.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française.

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    news-2259 Mon, 22 Feb 2021 09:39:45 +0100 This Is What Matters /en/who-we-are/news/detail/this-is-what-matters/ With the proliferation of different takes on equity investing, ranging from algorithmic trading to retail investors utilizing chat rooms, it may be easy to lose sight of one of the first principles of investing. It’s not about what’s hot now–which stock is moving or what technology is most anticipated. It’s about future earnings. Earnings Growth Drives Long-Term Price Appreciation

     

    • Over the past 120 years, the S&P 500’s price has increased 5.3% annually, driven by a 5.0 compound annual growth1 rate in EPS. In other words, 95% of stock market price appreciation has been driven by earnings growth.
    • This relationship reinforces the old quote from Warren Buffett’s mentor, Ben Graham: “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” That means that while shifting sentiment may drive variations in stock prices in the short term, long-term changes in equity prices have historically reflected actual corporate results.
    • With news stories about stock prices being driven up based on short interest or other nonfundamental considerations, investors may want to get back to first principles and embrace research and sound decision making. After all, the stock market is the ultimate corporate fundamental weighing machine.
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    news-2257 Wed, 17 Feb 2021 14:31:54 +0100 Green Bonds, what are they all about? /en/who-we-are/news/detail/green-bonds-what-are-they-all-about/ Interview with Marie Lassegnore, Credit Portfolio Manager & ESG Director for Fixed Income and Cross Asset, La Française AM. Why invest in Green Bonds and what are the advantages? 

    The first advantage of green bonds is the visibility over the allocation of capital through the ‘use of proceeds’. The green bonds market has been set up around this use of proceeds element which differs from the ‘general corporate purposes’ of traditional issuance. This allows investors to elect which types of projects they are willing to finance. Not only does this introduce a new power in choosing the types of projects but it also comes with a higher level of transparency over the selection and allocation of proceeds and their underlying impacts (through the dedicated impact reports).

    Since the early days of the green bond market, which was initially only supported by SSAs (Sovereigns, Supranationals & Agencies), the universe only expanded to utilities and banks a couple of years ago. The lack of corporate diversification had long been an obstacle to replicating an allocation to the corporate market, but we think the latest developments will encourage the arrival of new issuers and further reduce the gap with traditional credit indices. 

    Green, Social and Sustainable bonds market: breakdown by sector 

    Source: Bloomberg, La Francaise AM, as at 31/01/2021

    With regards to the valuation of green bonds, the market has definitely shown resilience in times of volatility. We can see it when comparing the levels of spreads between the euro green bond market and the euro investment grade one throughout the COVID market stress period from February to July 2020. The green bond indices have held up much better reflecting a somewhat stickier investor base as well as a stronger underlying credit quality protecting the market from the fallen angels wave. The market has also shown increasing signs of a “greenium” which really differs in magnitude from one issuer to another and is not consistent on all maturities of the same issuer. We think that this is the natural result of a market which is still distorted by a greater amount of demand than available supply.

    Finally, going beyond the technical aspects behind the opportunities to invest in this market, one should bear in mind that the green bond market, and more widely, the sustainable bond market (which includes Social, sustainable, transition and sustainability-linked denominations), has created a new channel of communication between bond issuers and investors. This is not to be undermined as historically bond investors have had little room for engagement with companies given their lack of voting rights. 

    Why the recent interest in green bonds? 

    The reasons behind the recent exponential growth of the market are twofold: the uptick in SSA involvement and the broadening of ESG-labelled debt for corporate issuers. We expect this trend to continue in 2021 and moving forward.

    On the government and government related market, the EU has been a driving force of the recent uptick in SSA issuance with their pandemic related social bond program called SURE (Support to mitigate Unemployment Risks in an Emergency). The EU has already issued more than 50 billion euros out of the 90 billion granted to member states. The very strong demand behind the SURE issuance (latest issuance was 9 times oversubscribed) and the view that the ECB would be a persistent buyer in the secondary market has led to a tightening of EU bonds relative to other SSAs.

    The 2021 funding outlooks from European countries has also shed light on government issuance, with repeat issuers (like France and Germany) coming into this market or newcomers like Spain or Italy.

    The second growth driver comes from the increased adoption of impact bonds by corporates. A wider range of corporate issuers consider raising ESG-labeled capital. Reaching this market has the advantage from the corporate’s perspective, to diversify its investor base, reduce its funding costs risks and message their sustainable strategy. Indeed, fewer green bonds are issued opportunistically nowadays, most of the projects financed by the green/social bonds are part of a much bigger picture of improving the company’s sustainable profile. Another market development which allows the arrival of new issuers, but mainly new industries, is the appearance of Sustainability-linked bonds (SLBs). These bonds are not restricted to use of proceeds but their coupon payment (often the coupon steps up or down) is based on a specific sustainability target. To tie this up with the wider EU green agenda, the ECB has even made those bonds eligible for its buying programs if the targets are environmentally related (usually linked to an emission reduction objective). In our view, this opens the door for companies in carbon intensive industries to finally enter the ‘impact bonds’ market (the first example coming from an SLB issuance from the cement industry).

    Do they really represent an opportunity or just a trend?

    This is clearly not a trend but an opportunity to participate in the growth of what is to become a structural market for decades to come. The European Commission has put everything in place to normalize this market (EU green bond taxonomy and standard) and will drive green finance indirectly through reporting requirements imposed on European investors (committing and disclosing ESG assets, performance and products). The trend is not limited to Europe as major participants of domestic green bond markets are aligning with international standards (specifically China and Russia) and can bring a new range of issuers.

    On the supply side, as explained earlier, corporates have every incentive to catch this train if they do not want to miss the ESG investing wave that is currently ongoing and has shown itself in big numbers in 2020 with investment flows into ESG fixed income funds outpacing the broader market by more than 25% on average. (Source: Bloomberg)

    Finally, as long-term investors are looking to invest in companies that ride and survive cycles while improving their credit profiles, one cannot ignore the necessity to look at the way a company is addressing the sustainability challenge. The pandemic has rightly triggered an awakening in the necessity for urgent societal action. It is not about pretty corporate sustainability reports but about understanding the underlying shifts in consumer demands, the potential threats of the energy and social transition (with the increasing regulatory scrutiny) and how it will affect a business’ future competitiveness. Green, Social and sustainability-linked instruments make it possible to identify those companies that commit themselves to a strategic business transformation while giving us, investors, the tools to challenge them on their ambitions and pace of progress.


    Disclaimer
    This commentary is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-2256 Wed, 17 Feb 2021 10:23:33 +0100 What is your outlook on gold for 2021? /en/who-we-are/news/detail/what-is-your-outlook-on-gold-for-2021/ Gold has enjoyed an impressive year in 2020 (+25% in dollar terms) thanks to the dramatic monetary and fiscal easing that occurred globally. While we do not anticipate such an impressive performance to be repeated in 2021, we are constructive on the outlook for gold. The first driver is the dollar, which should continue to weaken. This currency is overvalued when we look at its long-term real effective exchange rate. What’s more, the new administration will probably be less aggressive regarding tariffs. The upside on the dollar is therefore curtailed.

    Another positive feature for gold is that many investors, especially on the retail side, worry about an inflation surge. Historically, they tend to buy gold to hedge against it so we could expect additional flows in gold this year.
    Last, monetary policy should remain very accommodative in the US. We do not anticipate a Fed tapering in 2021: the Fed already said it would not react to the inflation surge we will see in the coming months, as it should be temporary.

    Monetary base should therefore continue to rise rapidly, which should help gold to perform well in dollar terms.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2254 Mon, 15 Feb 2021 09:17:28 +0100 Too Hot to Handle? /en/who-we-are/news/detail/too-hot-to-handle/ With rising temperatures and increasing weather events, governments, corporations and consumers are putting more emphasis on sustainable production of all kinds, with important consequences for investors. Global Land and Ocean Temperature Anomalies

    • As the chart above shows, temperatures have been warming for the past several decades. 2020 was the second warmest on record with 2016 being slightly hotter. But the trend is clear: the earth is heating up.
    • According to most scientists, the way forward, of course, is to reduce carbon emissions. This reduction may have to be quite rapid to keep global warming under 2°C. In fact, scientific studies suggest emissions would need to fall by nearly half over the next 20 years to adhere to that cap.
    • Biden recently signed climate-related executive orders, including accepting the Paris Climate Agreement, which could bolster sustainability. Additionally, pandemic stimulus has extended federal tax credits for solar energy investment for another two years, further supporting emissions reductions.
    • We believe companies that may help the world reduce emissions could provide attractive investment opportunities. This includes makers of electric vehicles, companies that produce inverters that convert DC to AC power, manufacturers of wind blades for windmills and even those that produce raw materials necessary for battery manufacturing.
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    news-2252 Fri, 12 Feb 2021 10:33:12 +0100 Carbon reduction targets: from ambition to impact /en/who-we-are/news/detail/carbon-reduction-targets-from-ambition-to-impact/ It has been estimated that almost one quarter of global CO2 emissions and more than half of global GDP were covered by Net Zero commitments by June 2020. However, the gap between ambition and reality can often be very significant, for example, due to a lack of standards. In this report we address that ambiguity.

    Global warming and the role of GHG emissions is a well-established fact. In response, carbon reduction efforts in the private sector have been made for decades. Such carbon reductions were reported, for instance, as part of energy efficiency programmes. The goalposts have shifted in recent years due to the urgency of the climate crisis. Global warming has gained worldwide attention not least due to the Paris Agreement in 2015. Countries are now strengthening their commitments through setting Net Zero targets. Six countries have enshrined Net Zero reduction in law, five countries and the EU have proposed legislation, fourteen countries have targets in policy documents, while many more are discussing Net Zero targets.

    In the private sector, carbon reduction has since become a strategic objective for many businesses and has evolved well beyond the isolated environmental targets of the past. Today, carbon
    reduction is a priority for many companies and their stakeholders – including shareholders and creditors. Yet, the voluntary nature of most efforts means that targets can be set through arbitrary parameters. What is needed to solve the climate crisis are commitments to reduce GHG emissions that are aligned with scientific global warming scenarios. A study of companies with science-based targets shows that these companies reduce emissions at far greater rates relative to emissions trends in the wider global economy.

    This report focuses predominantly on non-financial companies covering Scope 1, 2 and 3 GHG emissions. We also take the perspective of the finance sector, where financed emissions (Scope 3) are key. Banks, underwriters, and investors have an intrinsic motivation to manage climate risks in their portfolios. Looking ahead, we expect that a new set of Scope 3 reporting standards will allow the financial sector to catch up with the non-financial sector in setting carbon reduction targets. This will reinforce the pressure on the corporates held within portfolios to deliver realworld environmental impact through carbon reductions.

    Chapter 1 introduces the common terminology relating to carbon reduction targets and the implications for investors. Chapter 2 examines the economic benefits for companies that reduce GHG emissions and illustrate the steps they need to take in setting a target. Chapter 3 discusses how investors can assess the different aspects of carbon reduction at the company level and the role of investors in holding companies accountable. Chapter 4 showcases examples from different sectors of companies and their ambition to make a real-world impact.

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    news-2250 Wed, 10 Feb 2021 18:11:31 +0100 La Française AM targets a range of 100% sustainable open-ended funds /en/who-we-are/news/detail/la-francaise-am-targets-a-range-of-100-sustainable-open-ended-funds/ La Française Asset Management (LFAM – a La Française Group asset management company) is pleased to announce its ambition to offer a range of 100% sustainable open-ended funds by the end of 2022. This objective is in line with La Française Group's strategy. 73% of LFAM open-ended funds already meet sustainability criteria and seven are labelled (as at 31/12/2020). La Française Group began modelling its unique ESG (environmental, social and governance) approach in 2008 and since then, has achieved significant milestones. The group is currently rolling out its sustainable strategy across all of its asset classes and, as such, will be able to offer a sustainable multi-asset product range.

    La Française Group has invested in the means and resources necessary to achieve these objectives, in particular through its proprietary ESG research centre based in London: La Française Sustainable Investment Research (LF SIR). Its teams have worked on the implementation of innovative methodologies for measuring and forecasting carbon emissions. 

    "We have strong ambitions. Fully committed since 2008, LFAM will continue to meet clients' expectations in terms of sustainable investment through a complete range of solutions representative of all our asset classes", explains Jean-Luc Hivert, Global Head of Investments and Chairman of LFAM. 

    “Our commitment highlights a new juncture in our transition towards sustainable investment. The rigour of our methodologies and the acquired expertise of numerous specialists within the Group are proof of our dedication to transforming La Française AM into a committed stakeholder", adds Laurent Jacquier-Laforge, Global Head of Sustainable Investing, La Française Group.
     

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    news-2246 Thu, 11 Feb 2021 09:00:00 +0100 Roland Rott appointed Head of ESG & Sustainable Investment Research for La Française Group /en/who-we-are/news/detail/roland-rott-appointed-head-of-esg-sustainable-investment-research-for-la-francaise-group/ La Française Group began developing its innovative ESG (Environmental, Social & Governance) strategy in 2008 and has achieved significant milestones since. In 2014, the group established its multi asset ESG research center that has recently been renamed La Française Sustainable Investment Research (LF SIR) . Today, the group is pleased to announce that Dr Roland Rott, CFA, Managing Director of LF SIR, has been appointed 
    Head of ESG & Sustainable Investment Research for La Française Group.

    La Française Group manages over 10 billion euros (as at 31/12/2020) in sustainable investments, all asset classes included. As Head of ESG & Sustainable Investment Research, Roland Rott will continue to work in close collaboration with Laurent Jacquier-Laforge, Global Head of Sustainable Investing for La Française Group, in defining and implementing the group’s ESG strategy. 

    Roland leads sustainable investment research and engagement activities with a team of five ESG analysts. Furthermore, he is responsible for ESG data and methodologies, steering of ESG change projects and engaging in ESG product development and marketing with investment and distribution teams across group entities.
    Roland joined La Française Group in 2016 and was promoted to Managing Director of the ESG research center in 2018. Under his leadership La Française Sustainable Investment Research, located in London, has become the group’s center of expertise in sustainable investment, covering all asset classes: equities, fixed income and real estate securities. 

    Roland Rott, Head of ESG & Sustainable Investment Research for La Française Group, commented, “Moving forward, I will focus on our sustainable investment research and the sustainable investment strategy of La Française group-member entities. Over the past couple of years, the LF SIR team has been instrumental in designing ESG investment solutions and has developed a suite of proprietary ESG and climate risk management tools, which we will continue to expand across all asset classes.”

    Laurent Jacquier-Laforge, Global Head of Sustainable Investing for La Française Group, concluded, “Roland’s appointment to Head of ESG & Sustainable Investment Research for La Française Group ensures consistency in the quality of research provided to our portfolio management teams. Furthermore, Roland’s contribution will be instrumental for successfully transforming La Française AM’s open-ended funds to a 100% sustainable product range by end of 2022.” 

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    news-2242 Tue, 09 Feb 2021 09:27:09 +0100 Are we transitioning to an economy dominated by monetary policy to fiscal policy? /en/who-we-are/news/detail/are-we-transitioning-to-an-economy-dominated-by-monetary-policy-to-fiscal-policy/ By François Rimeu, Senior Strategist, La Française AM The support offered by central banks since the 2008 crisis has been tremendous. 

    It all began in November of 2008 when the US Federal Reserve introduced quantitative easing. Since then, central banks across the globe (European Central Bank, Bank of England, Bank of Japan, etc.)  have launched a series quantitative easing polices of various sizes (QE 2, QE 3…), implemented on a variety of financial assets (Government bonds, corporate bonds, Equities…). Without the monetary support offered by central banks, no one knows how the 2008 or 2011 crises would have evolved. Quantitative easing certainly has flaws, but it has allowed some developed countries to run fiscal deficits without fearing a spike in their long-term interest rates.

    It has been clear for some time that monetary policy has accomplished everything it could. No further large-scale purchases will make a significant difference. The European Central bank has been saying this for years and more recently, so has the US Federal Reserve. 
    Now is the time for fiscal intervention. Actually, it was already the case before the Covid-19 crisis, but it is even more true now. 

    In the coming years, we will probably witness central banks maintaining their lose policy stances and governments running higher fiscal deficits. Before the Covid-19 crisis, governments were somewhat reluctant to run very large fiscal deficits, fearing inflation or a potential inability to repay their debt. Those reasons do not appear to be valid anymore, with inflation below target for the past several years and central banks adjusting their bond-buying programs to adapt to new bond issuance. 

    More importantly, in the current environment, it would be political suicide for any party to pledge a reduction in fiscal spending. Unemployment is high and rising, services businesses are still negatively impacted by the pandemic and uncertainty remains very high. This is not the time to reduce fiscal spending, the population would not understand it, and it could eventually lead to social turmoil, which would be very difficult to handle in the current situation.  
    As of now, nobody knows to what extent we can limit fiscal stimulus. Until we have the answer, loose fiscal policy will continue.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2241 Mon, 08 Feb 2021 18:38:02 +0100 How to Play Economic Dispersion /en/who-we-are/news/detail/how-to-play-economic-dispersion/ It isn’t difficult to understand where Americans have been spending their money throughout the Covid-19 pandemic. Many people have invested in hobbies or fixing up their homes. They haven’t been traveling much, nor spending on leisure or entertainment. We believe some of these lagging areas are due to rebound when a vaccine is widely available, but we believe that it is important to gain exposure to those end-markets with high quality, innovative companies.

    •  Areas such as spectator sports, live entertainment and movie theaters have been hardest hit by pandemic considerations. Games, toys and hobbies, furniture and furnishings and pets and related products have prospered.
    • Some investors believe picking stocks right now is a question of growth vs. value, with value equating to cyclical stocks, i.e., those whose price is affected by macroeconomic or systematic changes in the overall economy. At Alger, we believe value stocks have structural headwinds. Still, we believe there is a sweet spot to be found in growth equities.
    •  We believe the most potential returns lie in gaining exposure to innovative growth companies that are taking market share, have high return on capital and have exposure to some of the markets we think may potentially rebound. Examples of innovative growth companies include, in our view, digital travel platform company Booking.com, commercial real estate information services business CoStar, automobile voice services company Cerence and energy technology company Core Laboratories.

    By Brad Neuman, CFA, Director of Market Strategy, Alger – a La Française partner firm

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    news-2237 Tue, 09 Feb 2021 09:00:00 +0100 La Française collective real estate investment vehicles acquire first The Hague-based asset /en/who-we-are/news/detail/la-francaise-collective-real-estate-investment-vehicles-acquire-first-the-hague-based-asset/ Three La Française collective real estate investment vehicles, represented by La Française Real Estate Managers, have acquired an office building in the central business district of The Hague from an Institutional Investor. The property is located at 69/71 Anna van Saksenlaan, in close proximity to the “Laan van NOI” train station and the A12 motorway.

    The six-storey office building, which was completed in 2003 and recently refurbished by the tenant, offers 9 324 m2 of floor space and 55 indoor (basement) and 52 outdoor parking spaces. The building and its equipment fully integrate sustainability requirements: A-energy label building, ample bicycle storage, electric charging points and a beehive on the roof top.

    The high-quality office property is fully let to FMO, the Dutch entrepreneurial development bank, for their headquarters.

    Jens Goettler, Managing Director of La Française Real Estate Managers - Germany said, “We are delighted to secure a fourth property in Randstad, the central economic engine of the Netherlands. This acquisition is perfectly in line with our investment strategy which associates financial and ESG (Environmental, social and governance) criteria. Located in a city renown for the abundance of its green spaces and rated among the top cities in the Netherlands to offer such a balanced work and life environment, we are confident in the long-term attractivity of the property. Furthermore, Beatrixkwartier is transforming into a mixed-use development with offices, childcare facilities, a health club, a conference center etc. and drawing in a variety of international organizations and large corporates.”

    La Française Real Estate Managers was advised by DLA Piper Netherlands on legal aspects and by Savills Netherlands on technical Due Diligence and as buy-side advisor.
     

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    news-2231 Thu, 04 Feb 2021 09:52:03 +0100 Difficult tasks lie ahead for Mario Draghi /en/who-we-are/news/detail/difficult-tasks-lie-ahead-for-mario-draghi/ Mario Draghi agreed to the request from Italian president Sergio Mattarella to form a government and will now begin discussions with the leaders of the different political parties. The question is obviously if it will change anything for Italy, both in terms of political stability and in terms of future economic developments. 

    Assembling a new coalition will be very challenging, even for someone as respected as Mr. Draghi. Lega and right-wing allies have no interest in helping him, with Mr. Salvini saying he would prefer an election. Will 5 stars agree to collaborate? They have declined a lot in popularity since the Conte led coalition was formed in June 2018 so yes, it is conceivable, but the coalition will not be very stable. In the end, the coalition will rely on the support of a disparate selection of smaller parties and will have at best a small majority in parliament. In the end, it will be the same coalition as Mr. Conte, and difficulties will come back very quickly on how Italy should spend the €209bn it will receive over the next few years from the European Union.

    Italy is required to present its “recovery and resilience” plan to Brussels by April in order to get the first payment and will have to respect some criteria to secure the release of subsequent tranches. Some of those criteria (not fully disclosed yet) will rely on structural reforms like taxation or pension schemes, which is very controversial in Italy and which could lead to the collapse of the newly formed coalition. 

    The task of Mr. Draghi is very difficult to say the least. He will have to use his influence to persuade European partners to ease the different conditions on future disbursements and push for some more lenient reforms domestically. We are not sure that Mr. Draghi will be able to really make a difference over the long term, but he could probably give Italy some stability in 2021.  

    by François Rimeu, Senior Strategist, La Française AM.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-2229 Tue, 02 Feb 2021 11:46:24 +0100 Covid-19 resurfaces in China: a very different Lunar New Year ahead /en/who-we-are/news/detail/covid-19-resurfaces-in-china-a-very-different-lunar-new-year-ahead/ by Guillaume Dhamelincourt, Business Development–Product Specialist, JK Capital Management Ltd., a La Française group-member company From the summer of 2020 until the end of the year China has enjoyed a long Covid 19 free period, thanks to its drastic handling of the crisis early on. This allowed the economy to recover and grow while the rest of the world was having hard times getting the pandemic under control. However, over the past few weeks, China has seen a resurgence of locally transmitted infections. It started with some cases in Beijing and it spread to a few provinces where clusters have been reported. Between 2nd and 28th January, more than 2,600 new cases were confirmed in northern China’s Hebei and northeast China’s Heilongjiang and Jilin provinces. This put the authorities on high alert as the timing could not be worse with the Chinese New Year (CNY also called Lunar New Year) holidays starting on 12th February.

    CNY is the most important holiday and most celebrated event of the Chinese calendar. It is a week-long celebration during which families assemble and celebrate. For many of China’s 300 million migrant workers, this is when they do their once-a-year trip back home to celebrate. CNY is often seen as the biggest human migration in the world, year after year. In 2019 it was a total of 3 billion journeys that had been carried out during CNY. It is typically a week of high consumption and often an opportunity to assess the consumer morale.

    But not this year. In light of the spreading infection, the government has recently re-imposed strict lockdown measures on cities/districts that are exposed to virus outbreaks. A number of regions in Northern China have entered into a “wartime mode” since early January 2021. For instance, on 7th January, Shijiazhuang, Hebei’s capital city with 11m residents imposed a lockdown and banned all residents from leaving the city. On 9th January, Xingtai, a city in Hebei province with a population of 7.4m also imposed a lockdown. For policymakers, the virus containment is clearly a much higher priority than economic growth in the near term, and they are now very proficient at mobilising administrative powers to reduce population mobility and to tighten social distancing rules. 

    The State Council issued a call to the public on 25th January for people to “celebrate in place” and avoid non-essential trips during the Lunar New Year period. In addition, interprovincial travellers will have to present a negative Covid-19 test result from the preceding seven days starting 28th January. The cabinet also urged people to practice 14 days of home quarantine upon arrival and not to attend large gatherings. The phrasing of this last part reflects the softer tone taken by the Central government lately as it tries to set up more normalised approaches for virus control to reduce the impact on social and economic activities. But for many localities which do not have the means of a softer approach that larger cities do (mass testing often requires logistics that smaller cities and villages typically do not have), the guidelines given by the Central government often translates into locally-enforced drastic quarantine measures as such smaller cities and towns feel under a lot of pressure to contain any spread.

    With such measures in place, few will attempt to travel. The latest estimates are that only 1.1bn journeys will be taken during this CNY, down from 3bn in 2019 and 1.5bn in 2020 when the first wave was in full strength. The actual number may likely be even lower. The hospitality and transport sectors will no doubt be impacted together with several other discretionary spending areas. On the other hand, industrial activity will be stronger than usual as workers are being asked to remain in their factories at a time when many of these factories are operating at full capacity. Several cities have offered RMB500 to RMB1000 as compensation to each migrant worker who has decided to stay. Furthermore, overtime work during Chinese New Year is typically paid three times more than under normal circumstances. 

    The overall GDP growth of the quarter will likely reflect these exceptional measures. The YoY comparison will also be impacted by last year’s low base.  

    China’s objective remains similar to what it was in 2020: To eliminate all domestic cases, whatever the cost. It is the reason why it is implementing once again aggressive and strict measures with little regard for celebrations, domestic spending or economic growth. The 2020 waves proved this was the right approach for the country as it shortened the length of the pandemic and allowed for a speedy economic recovery. The authorities hope to repeat this success this year.


    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.

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    news-2228 Mon, 01 Feb 2021 18:04:20 +0100 High Yield in 2021 – the positive trend should continue /en/who-we-are/news/detail/high-yield-in-2021-the-positive-trend-should-continue/ By Akram Gharbi, Head of High Yield Investment at La Française AM.
  • US High Yield and EM High Yield expected to develop more strongly than European High Yield; however, uncertainties for EM High Yield to be considered;
  • Fallen Angels, strong “BB+” rated issuers in sectors impacted by Covid-19 and “B” rated issuers in sectors not affected by Covid-19 could offer opportunities
  • High Yield has not suffered as much in 2020 as other asset classes. Even though the positive trend should continue in 2021 on a global perspective, investors have to consider geographical differences. “We favour the US High Yield over European High Yield because we are expecting a strong economic recovery in the US, lower political risks, a larger decline in default rates compared to 2020 and a lower net supply. In EM High Yield we expect the highest total return with attractive valuations in Asian High Yield. However, there are uncertainties regarding the net supply of Asian companies due to significant refinancing needs and the default rates of Chinese companies”, explains Akram Gharbi, Head of High Yield Investment at La Française AM.

    Positive 2021 outlook for High Yield markets and favourable technical signals

    Only 5% of the global Fixed Income market offers 4% yield or higher (Hedged in euros). This includes the High Yield market and the AT1 market. “The main driver for High Yield market flows will remain Investment Grade funds, especially in Europe”, states Gharbi. A 1% increase in EUR Investment Grade funds implies €28 billion of net inflows into High Yield which represents 7% of the total asset class in Europe. “This trend should continue as there is a lag of opportunities to get yield in an environment where the average sovereign rate in Europe is about zero percent”, says Gharbi. 

    The fundamentals are expected to be especially strong in the US and stable in Europe as well as in the EM. “We expect a strong momentum for the US High Yield market with an almost 50% decrease in default rate compared to 2020”, explains Gharbi. The main reason being a strong recovery of the US economy which will most likely not be the case in Europe due to the slow roll-out of the vaccine programmes. The massive government support of European companies which are in difficulty could be a swing factor for default rates in Europe as well. For EM, the situation is slightly different. The default rate should remain stable, but there is a lot of uncertainty. “Asian issuers, especially Chinese companies that are the biggest contributors to the Asian High Yield Index, have a huge amount of debt. The same is true for some Argentinian companies that are one of the biggest contributors to the Latin American High Yield Index (8% on the index). The question is whether there is enough liquidity to roll-out the debt.”... 

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    news-2227 Mon, 01 Feb 2021 14:46:44 +0100 Asia High Yield: Market outlook /en/who-we-are/news/detail/asia-high-yield-market-outlook/ After the frenzy of new issues in January, we expect market activity will slowdown in February as we approach the Chinese New Year break. Furthermore, the recent stabilization of the UST yield curve has likely removed urgency for Asian corporates to rush their bond issuance. This should bring some much needed relief for the Asian bond market which is beginning to show signs of primary market indigestion. 

    With Trump political volatility now somewhat out of the picture, we expect more traditional macro signals to re-emerge as the key drivers for the bond market. In other words, attention will focus back to the interplay of the economy and fiscal/monetary policy. In this regard, COVID remains the greatest sensitivity and clearly much of the COVID vaccine optimism at the start of the  year appears to have been premature as  cases  continue to soar while vaccine rollouts disappoint. While this may pause the recent curve steepening trend, we believe higher UST yields and USD weakness is inevitable given Biden will still want to push forward his fiscal agenda while he maintains  control of the Senate and House. 

    In the Asian region, the key consideration regarding COVID will be the extent to which the Chinese authorities’ suppression of people movement over the Chinese new year holiday  creates a headwind on consumption demand. We are already starting to see some sensitive sectors such as tourism and retail names trade cautiously ahead of the holidays although it is the property sector that will inevitably have the biggest impact on our markets. That said, last year property names demonstrated incredible resilience as recent announcements of full year sales suggest, companies were able still to achieve impressive growth despite lockdowns. In our view, as demand for the sector remains robust it will continue to be government policy that drives bond performance and while recent tightening measures, such as the new three-red-line rule, may raise some concerns on volatility, this is ultimately positive for the stability of the sector, in our view. It is very telling that despite the recent sharp drop in the bonds of large scale issuer CHFOTN, we have not yet seen this translate into a major sell off across the rest of the sector indicating Chinese property bonds remain attractive to domestic investors.

    Disclaimer
    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. Under no circumstances should this information or any part of it be copied, reproduced or redistributed. JK Capital Management Ltd. - a limited company - Rm 1101 Chinachem Tower, 34-37 Connaught Road Central - Hong Kong – company number AEP547 - regulated by the Securities and Futures Commission of Hong Kong.

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    news-2226 Wed, 27 Jan 2021 14:47:28 +0100 The Cleanest Energy? /en/who-we-are/news/detail/the-cleanest-energy/ Electric vehicles convert energy to motion three times more efficiently than internal combustion engines do with gasoline. However, charging them requires energy generation that usually emits carbon. But it’s possible we may be able to use hydrogen as a net zero emission fuel for transportation and industrial applications. Over the long term, hydrogen could help reduce carbon emissions and produce attractive investment opportunities along the way.

    • Hydrogen has tremendous potential as a clean fuel. The Fuel Cell & Hydrogen Association estimates that the industry’s revenue could rise to $140B by 2030, multiples of the current level. Additionally, by 2050 that estimate is $750B, accounting for 3.4 million jobs and 14% of
    final energy demand.
    • But what is hydrogen? It isn’t a source of energy so much as an energy carrier like electricity. It is used in industrial applications but has huge potential in transportation. Currently, it is mainly produced from natural gas as so-called gray hydrogen. As a fuel source for trucks and buses, it eliminates tailpipe emissions and significantly reduces overall greenhouse gas pollution as compared to diesel or gasoline. So-called blue hydrogen, which captures carbon from traditional energy production, and green hydrogen, which is produced from wind or solar using electrolysis, can be net zero emission fuels.
    • As the global investment in hydrogen increases by the day, there are more and more industry participants for investors to evaluate, from hydrogen suppliers to electrolyzer manufacturers to fuel cell manufacturers. We believe one interesting supplier is Air Products, which strives to capitalize on the hydrogen opportunity and has been a leader in hydrogen for quite some time.

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    news-2225 Tue, 26 Jan 2021 14:20:48 +0100 FOMC expected to provide dovish message /en/who-we-are/news/detail/fomc-expected-to-provide-dovish-message/ We expect the Federal Open Market Committee to repeat the Fed’s existing dovish message despite recent taper discussions. In our view, Mr. Powell will be very cautious as to how and when to manage the tapering topic after what happened in 2013. 

    Given the recent progress (resilient growth, rising vaccine distribution and fiscal stimulus) on one hand and the worsening public health situation on the other, the communication should be balanced and prudent. The FED will remain focused on reaching its long-term growth and inflation goals. Janet Yellen’s appointment as US Treasury Secretary will probably help future discussions between the Federal Reserve and the government.    

    Lastly, the upcoming FOMC meeting should be a non-event with no new economic forecast and no update on the “dots plot”. We anticipate no changes to the statement and the FED to continue asset purchases at the current pace, at least $80bn of Treasuries and $40bn of MBS per month. 
     

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    news-2224 Tue, 26 Jan 2021 13:40:36 +0100 Shortages in the semi-conductor industry /en/who-we-are/news/detail/shortages-in-the-semi-conductor-industry/ by Gun Woo, Senior Analyst, JK Capital Management Ltd., a La Française group-member company Lately the price of semiconductor chips has been rising due to the imbalance between the limited supply and robust demand. The trend started at the end of 2020 when the Power Management Integrated Circuits (PMIC) supply came under a huge shortage, so much so that even Apple was having trouble sourcing them. Afterwards, DDIC (Display Driver Integrated Circuits) prices started spiking as DDICs are produced in the same manufacturing facilities as PMICs. Some reports showed DDIC prices going up 100% QoQ in Q4 2020, Samsung raised its CMOS Image Sensor (CIS) price by 40% early 2021. DRAM (Dead Random Access Memory) prices also went up more than 20% in January. As for GPUs, they have become impossible to source, even for companies that had standing orders, as no supplier has any inventory. Stories like this can be found for many other types of chips, but why is the semi-conductor market suddenly facing such tight conditions?

    It all stems from the tech sector trade-war between China and the US which started three years ago. The uncertainty of the fast-changing trade environment lead IT companies to delay their capacity expenditure schedules. It does not mean they made no spending but most of the investment during the last 3 years was either maintenance capex or technology investment such as the development of the 7nm or 5nm processes. Barely any investment was done to expand existing facilities, such as the ones doing the 50nm or 60nm processes – precisely the ones producing PMIC, DDIC and CIS. 

    Meanwhile, the demand is still robust. On the smartphone side, Xiaomi, Oppo and Vivo are making big orders to capture the biggest market share in the wake of Huawei’s expected market share loss in 2021 due to US ban. The Covid-19 situation also led to increased demand in the work-from-home segment for servers and PCs. On top of these, a new PlayStation and Xbox were launched last year after 7 years without new products. And all of these are without mentioning the demand for electric vehicles, internet of things, and 5G network upgrades which are growing.

    Although capex for existing technology has increased lately, it is still shy and the capex trough period that preceded was quite long so we expect shortages will continue throughout the year. More and more equipment spending is nevertheless expected in this year by the semi-conductor producers. This trend could be structurally beneficial for equity holdings in the IT sector such as Koh Young and Chroma ATE, as they are the IT equipment suppliers for the semiconductor industry. Leeno Industrial and Hansol Chemical could also benefit from the increased IC production as they supply the consumables and materials to the producers.

    Sources: DRAMeXchange, Digitimes

    Informative Document for professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. Under no circumstances should this information or any part of it be copied, reproduced or redistributed.

     

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    news-2222 Wed, 20 Jan 2021 14:45:38 +0100 Why High Equity Valuations Are Justified /en/who-we-are/news/detail/why-high-equity-valuations-are-justified/ The earnings resilience of the S&P 500 has been quite amazing. With equity markets having performed so well in 2020, many of our clients are asking us about valuations and whether they’ve gone too far. We think the answer is no; they have not.  

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    news-2221 Wed, 20 Jan 2021 14:40:01 +0100 The Biggest Balance Sheets /en/who-we-are/news/detail/the-biggest-balance-sheets/ Central bank balance sheet expansion has had huge effects on economies and markets. Will they swell or decline in coming years and what does that mean for investors? Massive Monetary Expansion Supporting Valuations?

    • The balance sheets of the major developed central banks in the United States, European Union, Japan and England have swelled an unprecedented $8 trillion over the past year. This dramatic flood of money makes the $2 trillion expansion during the 2008 Global Financial Crisis look paltry.
    • While we believe multiple factors have driven equity P/E expansion, central bank balance sheet growth and its impact on liquidity and interest rates has played a significant role, in our view.
    • Fortunately for investors, central banks do not appear likely to tighten anytime soon, with Evercore ISI expecting a nearly $3 trillion expansion in global central bank balance sheets over the next year. We believe keeping the spigot of liquidity on should help support equity valuations.
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    news-2219 Wed, 20 Jan 2021 09:19:46 +0100 The ECB should reiterate that “Fiscal policy” is the answer! /en/who-we-are/news/detail/the-ecb-should-reiterate-that-fiscal-policy-is-the-answer/ The ECB will hold its press conference on January 21st. Expectations are very low following December announcements (Pandemic Emergency Purchase Programme - PEPP size increase, new Targeted longer-term refinancing operations - TLTRO terms…), therefore do not expect too much from this event:

    • Mrs. Lagarde will likely keep a very accommodative tone but will not discuss changing the ECB’s monetary policy tools.
    • The recent fall of the Euro vs the US dollar lowers the pressure on the ECB to comment the exchange rate movements. Still, after last year’s appreciation of the Euro, they may reiterate that they will “continue to monitor developments in the exchange rate”.
    • The ECB will most likely not comment on the political “noise” in the Netherlands, Germany or Italy (especially not in Italy).
    • Additionally, the ECB will likely reaffirm that fiscal policy must be the main response to the current economic situation.

    Overall, we do not expect any meaningful market reaction from this ECB meeting.


    Disclaimer

    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-2217 Tue, 19 Jan 2021 10:00:00 +0100 La Française collective real estate investment vehicle acquires Cologne-based asset /en/who-we-are/news/detail/la-francaise-collective-real-estate-investment-vehicle-acquires-cologne-based-asset/ A La Française collective real estate investment vehicle, represented by La Française Real Estate Managers, has acquired a mixed-use property in Cologne, Germany from Primus Siebte ImmoInvest GmbH, a group-member company of the project developer WvM Immobilien + Projektentwicklung. The property is located at 310-316 Venloer Str. in the Ehrenfeld submarket, a strong retail location in the greater Cologne area, which is the most important economic center within the North Rhine-Westphalia region. With the Venloer Str. metro station just 170 meters away, the asset is ideally situated and easily accessible. 

    The three-storey mixed-use property, built in 1965 and fully refurbished as of mid-year 2020, offers 30 meters of storefront, 2 824 m2 of retail space, 790 m2 of office space, 482 m2 of storage space and 63 indoor parking spaces (basement level). 

    The property is fully let to three tenants: a food retailer (Rewe Markt GmbH), a drugstore (DM-Drogerie Markt GmbH + Co. KG) and a co-working supplier (Unicorn Workspaces).

    Jens Goettler, Managing Director of La Française Real Estate Managers - Germany said, “Located in a very vibrant and densely populated part of Cologne City, this storefront property, given its unique visibility and access to foot traffic, should offer a stable and secure income to the fund and benefit from demographic changes within the area.”

    La Française Real Estate Managers was advised by Clifford Chance Deutschland LLP on legal aspects and by TA Europe Real Estate GmbH on technical Due Diligence.  The asset was introduced by JLL. 
     

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    news-2214 Thu, 14 Jan 2021 09:25:26 +0100 A Small Opportunity /en/who-we-are/news/detail/a-small-opportunity/ We highlighted the opportunity in small caps in a previous Alger On the Money called Small Caps for the Recovery in the spring of 2020, noting that small caps historically tend to outperform as the economy emerges from recessions. That scenario has transpired with the Russell 2000 outperforming the S&P 500 by 20% since the piece was published on May 13 through the end of last year, but is there more room to run in small caps?

    • Small cap stocks historically traded at a price-to-earnings premium to their large cap cousins.This makes sense to us, given that small cap stocks typically grow faster. However, recently U.S. small cap equities have traded at an unusual discount to large capitalization U.S. stocks.
    • This valuation anomaly comes even though small cap company earnings are expected to grow faster than large cap earnings in both 2021 and 2022.
    • 50 years of history demonstrated that the small size factor has generated nearly 1% of annual outperformance.
    • We believe this setup may help correct the past several years of underperformance of the small size factor. 
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    news-2211 Mon, 11 Jan 2021 09:47:03 +0100 Reshaping of the real estate risk premium: the move towards segmentation of the real estate market /en/who-we-are/news/detail/reshaping-of-the-real-estate-risk-premium-the-move-towards-segmentation-of-the-real-estate-market/ By Virginie Wallut, Director of Real Estate Research and Sustainable Investment at La Française Real Estate Managers Despite the unprecedented shock caused by the health crisis, real estate is still as attractive as ever thanks to a high real estate risk premium, i.e., the difference between the rental yield on real estate assets upon their acquisition and the risk-free rate. With the sovereign bond rate close to zero in Europe, the European real estate risk premium stood at 316 bps (1) at the end of September, which is 68% higher than its long-term average which stands at 188 bps. European monetary policy should prolong the low levels of sovereign rates in 2021, and therefore maintain the attractiveness of real estate.

    A new perception of the risks related to the holding of real estate assets is however emerging and it should lead to the reshaping of the risk premium in a way which is specific to each asset. Consequently, it will no longer be possible to talk of the real estate market as a whole. Significant divergences in trajectories are expected to appear between real estate asset classes and within each asset class.
    Whereas up until 2019 the additional return on secondary assets diminished as the rates of return on core and secondary assets converged (Graph 1), the health crisis should bring a new hierarchy of rates in its wake, highlighting the polarization of the markets between core assets and secondary assets. At the end of the third quarter of 2020, the additional return offered by secondary assets remained at a low level of 50 bps compared to a long-term average of 145 bps.

    (1) Q3 2020 data, PMA  

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    news-2209 Wed, 06 Jan 2021 14:09:58 +0100 China’s energy dilemma: How to decarbonise while keeping up with industrial demand? /en/who-we-are/news/detail/china-s-energy-dilemma-how-to-decarbonise-while-keeping-up-with-industrial-demand/ Recent power cuts prove that doing both simultaneously is not an easy task by Fabrice Jacob, CEO, and Aravindan Jegannathan, Senior Analyst, JK Capital Management Ltd., a La Française group-member company During the last days of 2020, China faced energy blackouts in various provinces for the first time in probably more than a decade. Yiwu and Changsha were among the Chinese cities that imposed power rationing following a surge in power demand as increased demand from a recovery in manufacturing and wintertime heating worsened the supply shortage of power. Multiple cities in Zhejiang, Hunan, Jiangxi, Shaanxi, and Guangdong provinces have imposed limits on off-peak electricity use for factories since mid-December. 

    Week-long blackouts were announced in several parts of Shenzhen. Lighting of multiple landmark structures in Changsha, the capital of southern China’s Hunan province, were turned off during November as Chinese authorities tried to manage power supply. As per media sources, electricity restrictions are expected to be imposed in the eastern province of Jiangsu as well.

    Being one of the first countries to recover from the lockdowns amidst the pandemic, China’s industrial production revived rapidly as exports reached a record high in November 2020, growing at 21.2% YOY. China’s power consumption in November stood at 646.7 billion KWH, a 9.4% YOY growth, the highest in 27 months. In addition, China is going through a particularly cold winter as power consumption exceeded the summer months for the first time in ten years. Despite the shutdown of the economy at the start of the year, power consumption in China grew by 2.5% YOY over the first 11 months of the year.

    While the power blackouts in different parts of China came as a surprise, it also highlights deeper structural problems that the country is facing as it is going through the difficult balancing act of achieving energy security while decarbonising its fuel forms to meet its clean energy targets, two goals that appear to be mutually exclusive as achieving one objective probably has the impact of delaying the other. 

    China in its march towards decarbonisation is aiming at becoming carbon neutral by the year 2060. It has been trying to achieve this goal by modifying its energy mix through an increase of the relative proportion of wind and solar-generated power in its production of electricity. It is also trying to increase the proportion of natural gas which is a relatively cleaner form of fossil fuel. In the recently announced updated national climate targets for 2030, the leadership announced plans to reduce the CO2 intensity of GDP by more than 65% from its 2005 level. The previous target was to cut it by 60 to 65% by 2030. 

    The target for non-fossil energy share which includes renewables and nuclear generated power is to reach 25% of the energy mix compared with an earlier target of 20%. The focus on wind and solar remains strong with an expected increase of ~800 GW over the next ten years as the Nationally Determined Contribution (NDC) targets for installed capacity of wind and solar power generation is to increase it from the current 415 GW by end of 2019 to 1,200 GW by the end of 2030. The share of non-fossil-based energy rose from 12% in 2015 to 16% in 2020. We believe the country is on track to reach 25% by 2030. 

    While China continues to subsidise gas-based power production, it has now largely stopped providing national-level subsidies to wind and solar projects and is implementing reforms to its feed-in-tariff system, moving to replace it with auctions in which wind and solar power must compete on an equal footing with fossil fuels. However, we believe this is not a dampener for clean energy adoption as the rapid fall in panel prices for solar modules is helping the adoption of renewable energy without having to rely on government subsidies as the cost of producing power using renewable energy is fast approaching grid parity. 

    Domestic coal supplies have been squeezed by production halts following a series of mining accidents, a plunge in imports and a broader campaign to cut coal-fired power generation to fulfil the country’s emissions commitments. Curbing coal-based power production without being able to offset the shortfall with alternative energy sources at a time when industrial activity is at its peak has resulted in the current supply shortage situation. 

    The cut in domestic coal supplies has pushed domestic coal price to shoot up from its 52-week low of RMB464/ton on 6th May 2020 to currently surpassing RMB700/ton, well beyond the upper band level of RMB600/ton allowed by the National Development and Reform Commission (NDRC). A coal price in excess of RMB600/ton is considered as a red flag that prompts the NDRC to take measures to cool the price down. The NDRC has now required power operators to coordinate the supply of coal among their power plants and has stipulated that coal purchases should under no circumstances exceed RMB640/ton. Power plants are now under very close scrutiny by the government.

    While China remains focused on increasing its proportion of renewables in the energy mix, such a gradual switch exposes China’s energy security to risks associated with renewable energy such as seasonal fluctuations. For instance, 45% of electricity consumed in the Hunan province is generated from hydropower plants which typically witnesses shortages of water during summer flooding and massive icing amidst the current winter. The situation has only gotten exacerbated as coal supplies from Shanxi and Shaanxi provinces were cut this year following mining accidents. Experts believe that the situation will get even worse in late January as the weather gets colder.

    To make things worse, Beijing has taken strong retaliation measures against Australia. Australian imports, including coal, are now either banned of heavily tariffed after Australia pushed for an investigation into the origin of the coronavirus. Australia also criticised China’s human rights records and the national security legislation recently implemented in Hong Kong. 

    Australian coal accounts for roughly 25% of thermal coal imports. China’s imported thermal coal accounted for about 7% of domestic supply in 2019.  While several Chinese media sources deny any relationship between recent electricity cuts and restrictions on Australian coal imports by arguing that the coal import ratio from Australia is only 2% of total coal consumption, it certainly adds to the ongoing crisis. Lifting the ban could provide some interim relief in the short term. Over the medium term, China can ramp up coal imports from Mongolia, Indonesia and Russia while expanding its local production. 

    Another key issue to address is the pricing regime. While coal prices are driven by the market, electricity tariffs remain under government control. Power generation companies need to keep electricity tariffs at low levels which leads them to be often loss-making as they supply power when the coal price is as high as it is now. Currently, the more power the plants generate, the more money they lose which discourages them from adding coal inventory and from producing more.  Official data reveal that provincewide inventory of coal for power generation in Hunan declined by 18.5% as at the end of November vs last year’s level. Aligning the power tariffs with demand and supply would ensure energy being used in a more efficient way. Currently, Chinese households pay flat subsidised tariffs that are much lower than those paid by industrial users as the pricing system does not reflect the true costs of power generation. As China’s power needs keep on growing, the pricing of power has to be more market-driven. 

    The recent power outages highlight multifarious issues that China needs to address if it wants to march towards energy security and carbon neutrality without having to manage power cuts such as those experienced at present. 

    Conclusion: 

    China shut down several coal mines in the Shanxi province, the coal mining hub of China following 13 accidents in the first 11 months of 2020 that resulted in the death of 26 workers. Coal production in Inner Mongolia that accounts for one third of China’s coal output has also been disrupted with ongoing corruption probes launched during the year regarding the opening of mines over the past two decades. China has also retaliated against Australia for political reasons by blocking the delivery of Australian coal. These measures have resulted in a short supply of coal and a sharp surge in coal prices, coal still accounting for more than 55% of China’s power production. 

    While China is in the process of decarbonising its fuel, it also faces the huge task of achieving energy security which has been supported by fossil fuel. Commenting on the recent outages, China’s electricity council said that China’s overall power supply is adequate while there are short term shortfalls emerging at certain hours in certain regions, hence dismissing that the current outages are a grave concern. 

    While we agree that the current outages cannot be considered as a big issue it serves as a warning bell for China to investigate its energy policy with respect to achieving decarbonisation without compromising its energy security. The current situation clearly highlights how difficult it is for a large industrial developing country to move towards decarbonisation and increase its use of renewable energy while keeping electricity prices low for consumers and safeguarding the financial stability of power producers without which no industrial company could operate.  

    Sources:

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    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. Under no circumstances should this information or any part of it be copied, reproduced or redistributed.

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    news-2208 Mon, 21 Dec 2020 11:43:50 +0100 Alger Insights that Helped Our Clients Navigate the 2020 Storm /en/who-we-are/news/detail/alger-insights-that-helped-our-clients-navigate-the-2020-storm/ At Alger. We use in-depth fundamental research to seek attractive investment opportunities among companies with potentiel for gererating earnings growth throughout economic cycles.  

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    news-2207 Mon, 21 Dec 2020 11:30:29 +0100 The Internet Circa 1996? /en/who-we-are/news/detail/the-internet-circa-1996/ The Dow Jones Industrial Average was under 7000 and Mariah Carey, LL Cool J and Alanis Morrissette ruled the music charts; 1996 was a long time ago. But that is how far back we must go in the evolution of the internet to find a comparable point in the growth of the new asset class of “cryptoassets” (e.g., Bitcoin, Ethereum, etc.). If that comparison is fair, we believe there may be considerable growth ahead in cryptoassets.

    Early in Cryptoasset Adoption?

     

     

     

     

     

     

     

     

     

     

     

     

    • In 1996, three years after initial adoption, there were about 75 million internet users globally out of a population of 5.8 billion, implying a penetration rate of 1.3%. In 2020, crypto user penetration is at the same approximate level.
    • According to data from Cambridge University, the compound annual growth rate of cryptoasset users is 70% over the past two years, totaling over 100 million users today. If crypto follows the growth of the internet, the number of crypto users seven years from now would be over 1 billion.
    • Ultimately, the internet has grown to 4.8 billion users. Imagine the potential for crypto if it has a similar growth trajectory.
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    news-2205 Fri, 18 Dec 2020 09:48:42 +0100 FOMC Meeting outcome: Will the average maturity of ongoing bond purchases be extended? /en/who-we-are/news/detail/fomc-meeting-outcome-will-the-average-maturity-of-ongoing-bond-purchases-be-extended/ Please find below what we expect from the upcoming December 16 FOMC Meeting:
  • We expect the average maturity of ongoing bond purchases to be extended even if several regional bank presidents have recently called into question the need to take any further action to support the economy. This is a close call
  • We do not expect the FOMC to link the end of the asset purchases to any kind of event or timing. We note that some participants would like to indicate that Quantitative Easing is not here forever, but we think they will wait for more clarity on the fiscal and virus front before doing so.
  • We expect the SEP (Summary of Economic Projections) to indicate better growth and employment numbers in 2020 and 2021. We doubt the updated numbers will indicate meaningfully higher inflation figures.
  • We expect the “dot plot” to show that a few more participants could anticipate a hike before the end of 2023 but that the median participant will continue to expect no hike throughout the next three years.
  • Overall, we expect long term rates marginally lower and no change on the front part of curve. 


    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2204 Thu, 17 Dec 2020 15:39:34 +0100 What to expect for Chinese equity markets in 2021 /en/who-we-are/news/detail/what-to-expect-for-chinese-equity-markets-in-2021/ by Fabrice Jacob, CEO JK Capital Management Ltd., a La Française group-member company As we are approaching the end of the year, it is time for us to stick our neck out and make some predictions for 2021, especially for our key investment universe that is China, which has been a star performer for the second year in a row (MSCI China gained 20.4% in 2019 and so far this year, as at 11th December 2020, another 23.3%).

    The Chinese economy keeps on rebounding fast with a GDP growth in the third quarter of +4.9% YoY. November macro numbers were very strong, and all signs are pointing to another good month in December. But at some point growth will start plateauing as the post-COVID recovery of China has to come to an end. This plateau however may come later than initially foreseen as Europe and the US are fighting a difficult battle against the latest wave of infection. This is having a positive impact on Chinese exports. The same happened in the first half of the year when numerous European factories had to shut down.

    Chinese exports jumped last month, from +11.4% YoY in October to +21.1% YoY in November in USD terms. China’s trade surplus was USD75bn in November (or USD63bn when seasonally adjusted), its highest ever. One can easily draw the conclusion that all the trade tariffs imposed by the US against China did not have much of an impact on Chinese exports, if any at all. 

    This staggering acceleration of exports seen in 2020 and that can be visually observed in the graph below cannot last forever, especially as COVID vaccines will be made available next year and as the world will hopefully return to a steady state. 

    Li Keqiang, the Chinese premier said on 24th November that “[China] wanted to achieve a balance of trade and will absolutely not pursue a trade surplus”. This is telling us that China will likely not prevent its currency from appreciating if there is indeed further upside pressure. 

    Why would the RMB keep on appreciating? And what would be the impact on Chinese equity markets? It largely depends on China’s monetary policy on one hand and on the US’s fiscal policy on the other hand.

    There is no clear consensus among economist when it comes to anticipating China’s monetary and fiscal policy in 2021. A minority of them believes that China should keep on running a loose fiscal policy as the economy needs further stimulation. The COVID crisis is not over, local clusters of infection still appear here and there, and certain sectors are still not fully back on track (transportation, hospitality). 

    Other economists seem to be equally split between those who believe in a status quo of the current monetary and fiscal policy stance and those who argue for China tightening in the first half of 2021. We tend to be more receptive to the latter camp.

    Looking at the latest inflation numbers, we think there are reasons to believe in a forthcoming rise in interest rates. The consumer price index dropped to -0.5% YoY in November, but it was entirely driven by the very volatile price of pork and the high base effect a year ago when China was hit by swine flu. Pork price that is the largest component of the CPI index dropped by 12.5% YoY. In fact, core consumer prices are rising at the pace of +0.5% YoY. The production price index that is an indicator of CPI’s future trend rose by 0.5% MoM in November, its fastest acceleration since September 2018. In other words, despite misleading headline YoY numbers, inflation is indeed picking up in China, and is expected to accelerate further in the coming months. This will give reasons to the Chinese government to raise interest rates in 2021 which will help the trade surplus come down by pushing up the RMB. As an early sign, the Chinese government has already started pouring cold water on the overheating property sector by forcing the most overleveraged developers to sell inventory.
    Why are we highlighting the US’s fiscal policy? Because the left-leaning policies Joe Biden wants to implement and that revolve around the fight against climate change and improving social welfare will most likely deepen the fiscal deficit of the US and be negative for the US dollar and provide further upside pressure on the RMB’s exchange rate. Whether Joe Biden will succeed largely depends on him taking control of the Senate. The answer will come from the state of Georgia on 5th January 2021. If he does, we can expect the RMB to steepen its rise in 2021 and China to attract even more capital, especially as China remains massively under-owned in the vast majority of investment portfolios. 
    The combination of interest spreads between the western world and China being at its widest ever with continued upside pressure on the RMB may push Chinese equities up for a third year in a row. An endless flow of liquidity looking for a home and driven by western Central banks’ unprecedented quantitative easing is the obvious other driver. 
    The MSCI China currently trades at 15.1x 2021 expected earnings when profits in China are expected to grow by 19.3% in 2021 (Source: Bloomberg). 
    Bloomberg consensus for China’s GDP growth stands at +2.0% in 2020 and +8.2% in 2021.

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. Under no circumstances should this information or any part of it be copied, reproduced or redistributed.
     

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    news-2201 Mon, 14 Dec 2020 14:03:51 +0100 Home Country Bias /en/who-we-are/news/detail/home-country-bias/ People tend to gravitate to what they know. In investing, this phenomenon is known as home country bias. Americans generally invest in U.S. companies, Europeans invest in their own region and so on. Could this be an easily correctable mistake? Investors Gravitate to Their Own Country

    • While U.S. investors have over $3 trillion of holdings in international stock mutual funds and ETFs, that pales in comparison to the nearly $10 trillion of U.S. equity mutual funds and ETFs that they own. This 74% allocation to U.S. equities stands in stark contrast to the 27% of global GDP that the U.S. economy comprises.
    • The result is that most investors own a disproportionate amount of stock in their home country. For Americans, the biggest underweighting may be in emerging markets, which comprise 40% of global GDP. Markets such as China, India and Brazil are also growing much faster than developed markets with potential GDP growth of 4.4% as compared to only 1.4% for developed markets, according to J.P. Morgan.
    • This may be a good time for investors to address their home country bias given that non-U.S. stocks are trading at a relatively large historical discount to U.S. stocks (see page 18 in Alger’s Autumn 2020 Capital Markets: Observations and Insights). We believe prevailing discounts in non-U.S. equities make them attractive complements to U.S. equities.
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    news-2199 Mon, 14 Dec 2020 09:00:00 +0100 European CoCos, a safe haven ? /en/who-we-are/news/detail/european-cocos-a-safe-haven/ By Jérémie Boudinet, Credit Fund Manager, La Française AM
  •  Yields on global subordinated debt, and especially CoCos, are very attractive in absolute and relative terms; 
  • Banks worldwide benefit from unprecedented regulatory and liquidity support;
  • Risks on European CoCos have never been so low.
  • The impact of Covid-19 is unprecedented in terms of speed and significance. “We have never seen such a sharp shock especially on subordinated debt indices benchmarked in Euro”, says Jérémie Boudinet, Credit Fund Manager, La Française AM. But despite the sharp market correction in March, subordinated debt indices, especially CoCos, have recovered quickly compared to other asset classes and offer very attractive yields. The YTW is 3.98% for EUR-denominated CoCos and 4.88% for USD-denominated CoCos (figure 1). Boudinet expects the rally to continue even in case of worsening macroeconomic conditions.

    Figure 1: Market yields of different types of fixed income instruments

    Sources: Bloomberg, Bank of America. Data as of November 12, 2020. Past returns are not a reliable indication of future results. Indices: 10Y Germany = GTDEM10Y ; 10Y France = GTFRF10YR ; 10Y Spain = GSPG10YR ; 10Y Italy = GBTPGR10 ; Insurance Sub =EB1N ; Corporate hybrids = ENSU ; EUR HY = HE00 ; US HY = H0A0; COCOs =  CCEUTOYC. EM IG Corporate = EMHG. EM Government Debt = JPM EMBIGD

     “Central banks and regulators will stay accommodative which benefits European CoCos. In fact, we are back to pre-2008 regulatory thinking: banks must not die and should be too big to fail”, summarises Boudinet. Furthermore, the investment expert expects further easing.  “There could be more lenient rules for coupon distribution if capital ratios fall below required levels. Regulators in the UK and in the US have already relaxed rules about CoCo coupon payments – so called MDA limits. We expect the ECB to follow through”, says Boudinet. In this environment Boudinet favours EUR-denominated European CoCos because they are the cheapest on average and profit from the stability within the Eurozone. 

    Performance of CoCos versus high yield bonds
    Although we have seen significant volatility during the last few month, liquidity was much better than during former crises. “Even this past March, we were able to sell or buy bonds. In fact, it was more difficult to trade high yield bonds than to trade CoCos”, explains Boudinet. “However, investors should keep in mind that liquidity has been different for CoCos depending on the currency in which they were traded. The performance of USD-denominated bonds has recovered more quickly than EUR-denominated bonds”, states Boudinet. There are three reasons for this development: The broader investment space for EUR-denominated CoCos, an overweight of peripheral European banks (Italian, Spanish, Irish and Portuguese) in EUR-denominated indices and the lower cost of hedging USD bonds. Though the investment expert observes a similar path of recovery for EUR and USD high yield markets, he sees a clear trend towards CoCos. “On CoCos, the last nominal LTM default rate was zero for quite some time while on the high yield side the US high yield issuer-weighted LTM default rate was close to 7% and in EUR it was close to 2%. Liquidity is also different as it is much easier to trade a single CoCo than to trade a single high yield bond as Cocos have higher outstanding amounts.”      
    Hunt for yield continues
    EUR- and USD-denominated AT1-CoCos have outperformed the high yield market while USD-denominated AT1-CoCos recovered faster. Regarding EUR-denominated investment grade bonds the trends are quite similar though. “EUR-denominated AT1-CoCos trade quite wide versus investment grade bonds on a historical basis. We view investment grade bonds as an anchor for the spread.” The hunt for yield will continue because central banks need to stay accommodative. “We have never seen such a high amount of fixed income assets trading with a yield below zero percent”, says Boudinet. Yields are still very low, especially in the Eurozone, while at the same time the ECB is buying investment grade bonds to impact the outlook for yield (figure 2). “In terms of returns, CoCos, and subordinated debt as a whole have impressive results. Because of the accommodative stance, we are sticking with European CoCos, as the macroeconomic impact of Covid-19 remains, and central banks will still limit fixed income market yields.” 
     

    Figure 2: The hunt for yield is set to continue

    Source: La Française, Bloomberg, Citi Research (October 2020). Data as of end-August, 2020, for the graph on the left. Past returns are not a reliable indication of future results.

     

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    news-2196 Tue, 08 Dec 2020 13:55:33 +0100 PEPP and TLTRO announcements widely expected by the market /en/who-we-are/news/detail/pepp-and-tltro-announcements-widely-expected-by-the-market/ Difficult for the ECB to surprise on the dovish side
  • On the PEPP (pandemic emergency purchase programme), we expect the envelope to be increased by around €500bn and the timeframe to be extended from mid-2021 to year-end 2021. The reinvestment horizon could also be extended beyond the current end date of December 2022.
  • We do not expect any merging of the PEPP and the APP (Asset Purchase Programme). Furthermore, we do not expect the APP temporary envelope to be renewed.
  • We expect TLTRO (Targeted longer-term refinancing operations) with attractive terms: LT maturities (at least 3 years), low rates (-1%), tiering multiplier at 8-9x (vs 6x) and maybe some changes on borrowing allowances and lending benchmark.
    - On both the PEPP and the TLTRO, we expect the focus to be on duration more than on intensity of asset purchases.
  • The ECB will also update its macro-economic projections:
    - We could see growth upgrades in 2020 following meaningful upside surprises in Q3 but the outlook for early 2021 has weakened in light of the virus containment measures. 
    - We could see inflation downgrades following the rise in the Euro.
    - Bear in mind that we will also have the 2023 projections for the first time. We expect the inflation forecast by 2023 to be, again, below the objective (around 1.4% core inflation)
  • We expect comment about the strength of the Euro, but there is nothing the ECB can do. 
  • We expect the overall tone to be clearly dovish to maintain favourable financial conditions.
  • Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2195 Tue, 08 Dec 2020 09:43:06 +0100 Dan Chung: Pandemic Boosts Extended Reality Demand /en/who-we-are/news/detail/dan-chung-pandemic-boosts-extended-reality-demand/ Innovation is a relentlessly disruptive force that sometimes grows in surprising places. The technology of extended reality vision and displays, which includes augmented reality (AR) and virtual reality (VR), is a trend that has accelerated as a result of the Covid-19 pandemic in a number of uses in the business world, breaking out of its consumer entertainment and gaming base. Companies such as Microsoft, Facebook and Google are developing platforms for the technology across the business enterprise while semiconductors and other computer hardware within the extended reality (XR) market are projected to grow at a compound annual growth rate of 48.3% over the next 10 years, according to research by P&S Intelligence.

    Manufacturers Embrace AR
    Consider the example of medical ventilators that were in dangerously short supply for treating Covid-19 patients. Governments worldwide launched incentives to ramp up manufacturing of ventilators, but the complex nature of the devices created a shortage of employees with appropriate factory skills to build them, with many companies having only newcomers to the manufacturing of ventilators and expertise only in other non-medical categories, such as building cars.

    The Ventilator Challenge UK, a consortium of Ford, GKN, McLaren, Airbus, Meggitt and Siemens UK, has addressed this issue by creating AR instructions for manufacturing workers who may have never seen a ventilator prior to the pandemic.

    The organization uses Microsoft’s HoloLens headset and PTC’s Vuforia Expert Capture, which supports the creation of content. In developing the digital manufacturing expert, the consortium recorded step-by-step assembly instructions, thereby allowing for the “virtual placement” of a ventilator specialist instead of using an in-person instructor, which could be difficult due to social distancing requirements. The organization is also using Microsoft’s Azure cloud platform for the AR software.

    Well before the Covid pandemic, many industrial companies were exploring and using XR technologies in their service and repair functions. Think of the millions of mechanical components and the electrical equipment that power our electrical grid or a remote power plant. Through AR, field technicians can refer to complex manuals to diagnose and repair equipment while looking at the actual installation and equipment; when assistance is needed, expert technicians can be looped in to consult remotely. The cost savings and efficiency gains are significant.

    Shop from Home with AR
    The adoption of AR in retailing is also accelerating. Rather than being viewed as a convenient way for shoppers to explore products, AR has become a tool to engage customers as stores have been shut down or are reopening with government-imposed restrictions. Additionally, omnichannel retailers, or retailers with both brick and mortar stores and e-commerce operations, are viewing AR as an attractive option for consumers who may be apprehensive about visiting traditional stores or malls. Indeed, a survey by Vertebrae found that 48% of shoppers do not believe it’s safe to shop in stores.

    Seek XR, which provides AR for a variety of industries, is a beneficiary of these concerns, having experienced a 600% increase in usage of its platform through customers’ websites since March.

    Hat retailer Tenth Street Hats and sports sunglass company Goodr are examples of companies embracing XR. They recently turned to Vertebrae to provide AR try-ons of their products. The technology allows users to view themselves wearing different hats and sunglasses, so consumers can avoid entering brick and mortar stores. MAC Cosmetics also launched virtual try-on service by tapping YouCam technology from Perfect Corp., which lets consumers see how they look with various shades of lipstick or eye shadow.

    The Next Stage in Digitizing Health Care
    The health care industry is also being transformed by AR and VR. Telemedicine has already grown dramatically as doctors and patients embrace alternatives to meeting in person, but AR and VR are being developed to expand upon the services that can be delivered digitally.

    XRHealth provides VR-based physical therapy and treatments for hot flashes, memory decline, pain management and mental health, including stress management, and has qualified for Medicare reimbursement. XRHealth launched its first virtual clinic in February with health care practitioners that are licensed in eight states and is working to expand throughout the U.S.

    Extended reality is also being embraced for training, including for doctors seeking to learn new surgical skills. At a time when some states or countries are imposing self-quarantine requirements on visitors from areas with high rates of Covid-19, it is difficult for trainers and trainees to travel to learn new medical procedures. With those concerns in mind, Immertec is promoting its VR Medoptic platform that lets doctors virtually enter surgical rooms to complete training. In addition to eliminating travel requirements, the technology reduces the need for personal protective equipment and eliminates the potential for spreading infections.

    As in past crises and periods of economic upheaval, innovation and adaptation produce positive growth and opportunities for investors. XR is just one example of a technology that is innovating and evolving, even during this period of extreme economic uncertainty. At Alger, we understand that the best investment opportunities are often born of change forced by crisis, creating new secular drivers for the growth of innovative services, products, technologies and companies adjusting to the new conditions in our economy and society.

    disclaimer

    The views expressed are the views of Fred Alger Management, LLC (FAM) and its affiliates as of November 2020. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by FAM. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.

    Risk Disclosure: Investing in the stock market involves risks, including the potential loss of principal. Growth stocks may be more volatile than other stocks as their prices tend to be higher in relation to their companies earnings and may be more sensitive to their companies’ earnings and may be more sensitive to market, political, and economic developments. Technology and healthcare companies may be significantly affected by competition, innovation, regulation, and product obsolescence, and may be more volatile than the securities of other companies. Past performance is not indicative of future performance. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments.

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    news-2194 Tue, 08 Dec 2020 09:42:04 +0100 Vaccine hopes /en/who-we-are/news/detail/vaccine-hopes/ With Covid-19 cases increasing globally, investors and the rest of society have their hopes pinned on an eventual vaccine. Will the optimism about a vaccine ultimately prove warranted and which investments might benefit?

    • Data from Pfizer and Moderna show their Covid-19 vaccine at over 90% efficacy, above expectations. More recently, AstraZeneca’s data implied 62%-90% efficacy of its vaccine. The FDA would have required a minimum 50% efficacy for introduction to the public, boding well for speedy approval by the regulator. These Covid vaccines’ efficacy ratios are relatively high compared to many others, most notably the flu vaccine.
    • In fact, two thirds of investors surveyed by Deutsche Bank believe this vaccine will get us back to normal “slightly” or “much quicker” than expected. While Pfizer aims to have 50 million doses initially and Moderna 20 million, the U.S. hopes to have enough supply to vaccinate the U.S. population by around mid-year.
    • We believe companies that directly benefit from the production of a vaccine are interesting. However, indirect beneficiaries, those that lie at the intersection of growth and economic reopening, may be more interesting. Many traditional travel-related companies, such as cruise lines, may benefit though they are not attractive to us because they do not meet our long-term growth standards. We think a better way to create exposure to these end-markets would be with digital travel platforms. 

    Alger is committed to sustainability and is a signatory to the PRI.

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    news-2193 Tue, 08 Dec 2020 09:17:03 +0100 Podcast: Ringing in the eCommerce Holiday Season! /en/who-we-are/news/detail/podcast-ringing-in-the-ecommerce-holiday-season/ All of the ecommerce companies are at max capacity. I also think we'll see the holiday shopping period elongated. Senior Analyst Ben Reynolds gives an update on what investors might expect from ecommerce companies during a very busy holiday season.

    ALEX BERNSTEIN: Hello, I’m Alex Bernstein and you’re listening to The Alger Podcast, Investing in Growth and Change.  Alger Senior Analyst Ben Reynolds was one of the first people I interviewed way back in March of this year, when the Covid crisis had just started.  Ben, who covers the tech sector, is usually extremely upbeat.  But at that time – with the unprecedented market turbulation – he told me he felt like he was working out of a foxhole under heavy fire.  Well, here to catch up with me and give me an update on the tech sector, some eight months later, is Ben Reynolds.  Ben, thanks so much for talking with me this afternoon.
     
    BEN REYNOLDS: Thanks, Alex.  Thanks for having me back on.

    ALEX: So, Ben, the last time we talked was right at the beginning of the crisis with –

    BEN: Just twenty minutes of me sobbing, right?

    ALEX: Not quite!  But just going back to that foxhole analogy.  How do you feel now some eight months later?

    BEN: I still feel like I’m in a foxhole, maybe not being shot at as much in relation to COVID, still feel like my companies are being shot at by various government regulatory agencies.  But, look, it’s been constant change all year.  I mean if we walk through it, since the start of COVID, there was effectively indiscriminate selling.  It didn’t matter what the company was, it didn’t matter what industry.  It didn’t really matter, it was just sell it, sell it now, and by the way, if they don’t make money, or have negative free cash flows, sell even further because there’s a chance it could go out of business.

    I think after about a month of that, people poked their heads up and said okay, let’s think about who’s actually going to survive and who’s actually possibly going to thrive in this new world and that’s when you started to see the e-commerce companies, the streaming companies, the companies like that rebound much more quickly than some of the other stocks.  From the tech side, you saw certain software companies and teleconference companies do the exact same.  But everything was sold at first.  And then you had the winners get picked. 

    And now, as we’re getting news of vaccines and it’s sort of a focus back to old economy stuff, we have to be as nimble as possible without losing our growth focus and try to pick the winners that are going to continue to succeed in a post COVID world. 

    ALEX: It seems like the e-commerce sector was one of the beneficiaries of the crisis?  What happened to that sector this year?

    BEN: So, if you go back just to the beginning of the year, so call it January or February before there were any known cases of COVID in the United States.  The economy was actually roaring, and e-commerce was performing well.  Pretty much all my companies, be it e-commerce, or digital advertising, everybody had had a great two months.  

    But when the crisis happened, you saw initially a panic of a couple of weeks, people not really knowing what to do, and then just this seismic behavior shift from going to stores to purchasing things online.  And so much to the point where many of the bigger e-commerce firms couldn’t even fulfill all the demand at the end of March and beginning all the way through April, really.  You had such a large shift of demand and then partially, that was because for a while, in many states, all the stores were closed, right.  You literally couldn’t, besides a grocery store, you couldn’t go somewhere to buy something.  So, things like home furnishings and staples, clothing, et cetera, it all shifted online once people decided they were going to start buying things. 

    You also had stimulus checks come in, really before most of the economy is reopened.  So, you had this influx of money, really only a few places to spend it, and so we saw this massive spike in e-commerce from about 15 percent growth in the first quarter to 44 percent in the second quarter.  And that number would have been higher had these e-commerce companies been prepared for such a spike.

    And then what we saw after that is really the trend is largely sustained.  You obviously had some purchasing, like stocking up behavior right at the beginning of COVID.  But after that, you had really just a strong maintenance of the overall e-commerce growth and it shifted to other categories, so not just food and toiletries, but it went toward clothing, home goods were especially strong with people staying at home and deciding they were going to redecorate or spruce things up, home electronics, all sorts of things like that, really pretty much every category actually saw increasing growth coming out of Q2.  

    And that’s largely sustained; there’s been a few things that have slowed growth.  There was no prime day in July this year, but basically the overall trends have basically maintained even through now, and then we’ve noticed most recently, in November, with this most recent surge, e-commerce growth has actually ticked up again, headed into the holiday season.  So really, I mean, for a crisis like this, we think it’s really the perfect industry to be in, for better or for worst.  

    ALEX: So, you’re expecting a strong holiday season for e-commerce? 

    BEN: So, for the holiday season for e-commerce, I think it’s going to be extremely strong.  I think we have a couple of things, several things in its favor and maybe one thing going against it.  But you have the typical secular trend, right, which is just a shift towards e-commerce in all facets.  And that’s usually about a point of share it takes a year.  

    On top of that, this year, of course, we still have COVID, with rising cases right now, people less likely to go into stores, so that’s been a tailwind.  And we’ve got a third tailwind here that theoretically could reduce maybe overall gift giving but should actually significantly increase e-commerce gift giving.  And that is the fact that few people are going to travel out of state or out of their city to do holiday gathering.  

    Most years, a lot of people will travel to go visit their parents or their kids or whatnot, and you give your gift giving in person.  Now, you may have purchased that gift online or not, but you may not have.  In this case, where people are going to be not traveling to see each other as much as they did in prior years, you basically have to mail a gift if you’re going to give one. And yes, you could go to the store and buy a gift and then take it to the mailbox, but it’s much easier to go on a website, buy it, and have it delivered directly to your parents or your kids or whatnot.  So, I think that’s going to be an extra tailwind for holiday gift giving. 

    I also think we’ll see the holiday shopping period elongated.  It’s really already started.  It really started back with prime day in October and it’s continued and you’re seeing deals across pretty much every e-commerce site right now going straight into the holidays.  So, I think we’ll see a really strong October, November, the actual holiday period, Black Friday, Cyber Monday period might look a little bit weaker just because people bought their gifts earlier this year.

    I think one thing that could hamper the growth is just literally the network and logistics capability of all the carriers.  That could create a problem that people just can’t get their packages delivered in time, but I really think that’s the only issue e-commerce is going to have to slow it down.  So, I actually think e-commerce growth could be faster in Q4 than it was in Q3.  

    ALEX: You don’t think they’re all ramping up their delivery services now? 

    BEN: Oh, they absolutely are.  I mean, everybody is at max capacity.  You’ll see some of the major carriers in uniform, so you know who they are, but they’re in a non-labeled truck because they’ve rented it from U-Haul or somebody.  You’re already seeing that.  So, they’re absolutely ramping it up, but there’s only so many people and only so many trucks.  And these companies don’t build, they don’t build their infrastructure five years out, they try to build it as they need it to go.  So, there could be a problem.  

    So far, I’ve noticed some shipping delays, but nothing egregious. We’ll have to see how it plays out

    ALEX: Within e-commerce, online grocery sales seem to have surged this year. How did that come about?  

    BEN: Yes. So, one of the tailwinds e-commerce has that I think extends the growth into next year, is just the massive ramping in grocery this year.  We believe that online groceries of both delivery and pickup curbside is maintaining triple digit growth essentially since the start of COVID. It bounces around. It’s slowed a little bit, but definitely over 100 percent growth this year.  

    And I think it’s a real sea change. It took the powers that be a decade to get penetration of grocery in an online manner up to just low single digits.  And now we’re just seeing an explosion, because obviously, people are afraid to go to stores. Here’s the thing though. I don’t think people’s behavior on this reverts back next year. I think once they’re used to getting their groceries delivered or picking it up outside, I think that behavior sticks.  They’ll get used to the produce may not being exactly what you wanted to pick, but I don’t think this changes. I think this is a sea change and this is the catalyst really to push grocery penetration, which again, was low single digits into similar penetration as the rest of e-commerce.  

    ALEX: Ben, with some potential vaccines now on the horizon, investors are beginning to consider life beyond Covid.  In your sector, who do think might start to accelerate first?

    BEN: So, a couple of trends as we start to come out of this.  One I think is about to happen, and that’s I think is actually set up pretty well, is cloud computing.  

    But we believe that coming out of this all the companies are going to have to maintain a larger digital presence, they’re going to have to maintain a more remote work presence and they’re going to have to shift towards the cloud, because it’s more scalable, you can scale it up, you can scale it down.  It’s your fixed costs.  These are things that in the COVID world, a lot of companies would like to have.  And so, I think that cloud computing is actually set to accelerate here in the next few quarters because as the new companies come back online, it’s effectively going to accelerate their shift to the cloud.  So, I think that’s going to be a pretty big beneficiary in the coming quarters. 

    Secondly, most of the companies in my space that aren’t event based did pretty well.  But obviously online travel agents and the ride share companies were hit really hard.  I think as we head into next year, obviously, there’ll be lapping the declines, but I think those companies should start to see their fundamentals regain.  And I think in the case of ride sharing, I think they’ll actually see pretty strong growth and probably come back before the online travel agents as far as the fundamentals go.

    As we come out of this, you are going to start to see more mobility, but I think people will be a little shy on returning to mass transit, so I think you’ll be seeing a bigger adoption of ride sharing in bikes and scooters and that sort of thing.  
     
    ALEX: Ben, outside of work, how have you been keeping sane this past year? Have you been doing deep meditation or – 

    BEN: Well, so I haven’t been keeping sane, so let’s just forget about that one.  But no, I mean keeping things to very small groups or no, just the family unit.  That’s been a lot of it in the Reynolds household.  

    ALEX: Ben, thanks so much for talking with me this afternoon.

    BEN: Thanks, Alex.  It’s been great talking to you.

    And thank you for listening. For more Alger Insights, please visit www.alger.com.

    The views expressed are the views of Fred Alger Management, LLC (“FAM”) and its affiliates as of December 2020. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by FAM. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.

    Risk Disclosures: Investing in the stock market involves risks, including the potential loss of principal. Growth stocks may be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political and economic developments. Technology companies may be significantly affected by competition, innovation, regulation, and product obsolescence, and may be more volatile than the securities of other companies. Please visit www.alger.com for additional risk disclosures. Past performance is not indicative of future performance. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments.

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    news-2189 Tue, 01 Dec 2020 15:30:29 +0100 The Changing Face of the U.S. Economy: Business /en/who-we-are/news/detail/the-changing-face-of-the-us-economy-business/ by Dan Chang, CFA, CEO, CIO Porfolio Manager

    There is wide experimentation and adoption among businesses right now. We have systems that allow for e-signature, paperless document editing and document approval. Social media is more efficient than ever. I believe it’s important to remember that the digital revolution is not just about technology but also its ubiquity and the comfort of businesses and consumers in using it.

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    news-2187 Fri, 27 Nov 2020 16:47:47 +0100 SRI: the urgent need for action can no longer be overlooked /en/who-we-are/news/detail/sri-the-urgent-need-for-action-can-no-longer-be-overlooked/ by Virginie Wallut, Director of Real Estate Research & SRI and Marc-Olivier Penin, Managing Director, La Française Real Estate Managers The world is changing. Environmental and societal risks are proliferating and so are the initiatives to address them. At La Française our goal is to provide solutions. We are making our contribution to the community of trailblazing stakeholders who are working to improve the resilience of towns and cities and to create the best possible conditions for “living together”. We are adapting our real estate assets in line with the transitions that are needed to tackle climate change and societal challenges so as to ensure that our tertiary-sector and residential assets will be responsive to future trends.

    At La Française we pride ourselves on firm convictions and concrete actions

    Our ESG (Environmental, Social and Governance) convictions are strong and long-established. They are shared by all the entities of the La Française Group at both management board and general management levels. The method of implementing them varies between the different asset classes, and they are backed up by research and expertise centres that discuss the best practices for each specific class of assets. Real estate assets have a special role to play. Through the active management of these real assets, the management company is able to exert a tangible and quantifiable impact. In 2019 the various measures taken enabled La Française Real Estate Managers to reduce the GHG emissions of its portfolio  by 2.5%, on the heels of a 4.8% reduction in 2018.

    Time is running out. The impacts of climate change are accelerating – we're seeing more forest fires, heatwaves, droughts and floods, as well as increased negative effects in relation to health and the erosion of biodiversity. While these issues may have seemed (very) long-term concerns to many stakeholders just a few years ago, they can now be addressed within the same general timeframe as the investment horizon for real estate asset holders. The resilience of real estate assets must be future-proofed. La Française's investment philosophy is to support the transition of its assets under management in order to continuously improve their long-term sustainable positioning. This policy certainly comes at a cost, but if the actions are carried out gradually and at the opportune moment for each of the assets this cost remains very marginal compared to the valuation losses suffered by assets which are managed without taking ESG criteria into account. The gradual tightening of national and European regulations not only promotes the emergence of green added value, it will almost inevitably result in a write-down of non-sustainable assets, which will be classified by most people (tenants and investors) as being unfit for their current use. 

    The changes needed throughout the real estate business

    There is a woeful lack of ESG data in relation to real estate – in particular for the tertiary sector – compared to the availability of data relating to financial assets. Aware of its position as a key player in the French real estate markets due to the extent of its assets under management, La Française Real Estate Managers is working with a number of French and European market organisations to achieve three goals: (i) to highlight the specific characteristics of real estate assets compared to transferable securities (ii) to harmonise the various national and European regulatory approaches so that ESG management is not just synonymous with data reporting, and (iii) to establish common metrics in order to facilitate the comparison of different management companies' approaches. Therefore, after three years of intense reflection within the ASPIM (French association for real estate investment companies) working group, we welcome the publication of the decree extending the SRI label to real estate funds.

     
    In concrete terms, La Française Real Estate Managers has been carrying out sustainability audits alongside technical audits since 2009. The management company relies internally on a team of three people working together within the Real Estate Research & SRI Department. This team works in close collaboration with the Investments Department, which takes ESG criteria into account right from the pre-assessment of assets. The final ESG evaluation phase is analysed and validated by the Real Estate Research & SRI Department.

    This final ESG evaluation phase is entrusted to specialised consultancies which are trained in the use of a tool that has been developed internally by the IT department. This unique tool makes it possible to assess the sustainable characteristics of an asset and its ability to meet future requirements. The consultancies define areas for improvement within the framework of the current ESG management policy and, as applicable, for the obtaining of an SRI label. The asset management teams, when they then take over, are responsible for improving asset occupancy rates, but also for implementing improvement measures that have been identified for each asset during the acquisition phase. The ESG assessments as well as the improvement plans are accessible to all employees via La Française's internal IT platform.

    “Sustainability” is everyone's business

    La Française Real Estate Managers pays particular attention to its central role in uniting all the stakeholders (both external and internal) around its ESG approach. We are making significant efforts to educate those involved with our assets in order to augment the beneficial effects of our approach. Because the use (occupancy) of assets can represent up to 30% of energy consumption/GHG emissions, it is vital to get tenants involved in helping us to achieve our objectives. To this end, La Française Real Estate Managers has developed a tool for collecting and reporting energy consumption data which will benefit not only us as the owner but also our tenants by enabling them to meet the requirements of the tertiary-sector eco-energy plan (e.g. tertiary decree). To give another example, after modifying its electricity supply contracts to secure a 100% renewable energy supply for energy consumption in the common areas of the assets of one of the group's open-ended real estate funds, La Française Real Estate Managers will offer its tenants the opportunity to extend the use of renewable energies to privately occupied areas. Special consideration is being given to residential assets, which present more of a challenge however owing to the multiple tenants and non-professional nature of the occupancy.

    In order to ensure that our suppliers support our approach and to encourage them to adopt a sustainable approach as well, we are putting in place ESG criteria which will serve as a basis for the selection of our service providers. We have explained our sustainability approach which is structured around three key points – reduction of GHG emissions, reintroduction of nature into towns and active engagement in a more inclusive urban environment – to all of our Property Managers so that they can adapt the day-to-day management of our assets accordingly and work with us to achieve these objectives. 

    Internally the idea of extending training to a wide range of employees will be encapsulated in an unprecedented training plan which is scheduled to last for one year and will involve more than 200 employees from 18 different departments (ranging from Asset Management to Human Resources and IT). This plan will be tailored to the participants' individual needs. Another innovation is that this training will be provided on the basis of internally-developed expertise.


    INFORMATIVE DOCUMENT FOR PROFESSIONAL INVESTORS ONLY AS DEFINED BY THE MIFID II DIRECTIVE.
    It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by the author are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals.
    Published by the portfolio management company La Française Real Estate Managers which received AMF accreditation under No. GP-07000038 on 26 June 2007 and AIFM accreditation under Directive 2011/61/EU on 24/06/2014 (www.amf-france.org).

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    news-2186 Fri, 27 Nov 2020 09:27:40 +0100 La Française Lux-Inflection Point Carbon Impact Global distinguished with FNG-Label /en/who-we-are/news/detail/la-francaise-lux-inflection-point-carbon-impact-global-distinguished-with-fng-label-1/ La Française, an international asset management group with assets under management in excess of €51 billion and a recognized forward looking carbon impact methodology, developed by the group’s integrated sustainable investment research center, is proud to announce that La Française Lux-Inflection Point Carbon Impact Global has received the Forum Nachhaltige Geldanlagen (FNG) two-star Label for sustainable mutual funds, valid for the year 2021. The FNG-Label is the quality standard for sustainable investments on the German-speaking financial markets: Germany, Austria, Liechtenstein and Switzerland. It was launched in 2015 after a three-year development process involving key stakeholders. The sustainability certification must be renewed annually. 
    Successfully certified funds pursue a stringent and transparent sustainability approach, the application of which has been checked by the independent auditor University of Hamburg.

    The quality standard comprises the following minimum requirements:

    • Transparent and easy-to-understand presentation of the fund’s sustainability strategy in the context of the Eurosif Transparency Code and the FNG Sustainability Profile
    • Exclusion of armaments and weapons
    • Exclusion of nuclear power (including uranium mining)
    • Exclusion of coal (mining and significant power generation)
    • Exclusion of fracking and oil sands
    • Exclusion in cases of systematically and / or severe violation of the principles of the UN Global Compact
    • The fund’s entire portfolio is checked against sustainability criteria (social and environmental responsibility, good corporate governance, United Nations Sustainable Development Goals or others).

    La Française Lux-Inflection Point Carbon Impact Global was awarded two out of three possible stars for its particularly ambitious and comprehensive sustainability strategy, which gained it additional points in the areas of institutional credibility, product standards, and selection and dialogue strategies.

    La Française LUX – Inflection Point Carbon Impact Global: The fund aims to contribute to the transition to a low carbon economy while achieving long-term capital growth

    Laurent Jacquier-Laforge, La Française Global Head of Sustainable Investing, concluded, « The FNG label is in our opinion one of the most selective that exist today and we are proud that our investment approach has been recognized with the two-star label. The FNG-Label and French SRI Label, also awarded to the fund, attest to the quality of the fund’s sustainability strategy and will provide guidance in the search for solid, professionally managed sustainability funds.» 

    Disclaimer

    The FNG-Label and French SRI Label may under no circumstances be interpreted as a guarantee of performance or security or an invitation to invest in the fund.
    PROMOTIONAL DOCUMENT FOR NON-PROFESSIONAL INVESTORS AS DEFINED BY MIFID II IN FR, DE & LU. 
    The information and material provided herein do not in any case represent advice, offer, solicitation or recommendation to invest in specific investments. Issued by La Française AM Finance Services, home office 128, boulevard Raspail, 75006 Paris, France, regulated by the “Autorité de Contrôle Prudentiel” as investment services provider under the number 18673 X, affiliate of La Française. Internet information for the regulatory authorities : Autorité de Contrôle Prudentiel et de Résolution www.acp.banque-france.fr, Autorité des Marchés Financiers www.amf-france.org, Commission de Surveillance du Secteur Financier (CSSF) www.cssf.lu.

    The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Where La Française has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions are nonbinding and may differ from those of other investment professionals. La Française Asset Management, approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st 1997. 

    The group’s responsible investment policy is available here :
    https://www.la-francaise.com/fileadmin/docs/CharteInvestissementResponsableLaFrancaiseEN.pdf
    The group’s transparency code is available at: 

    The prospectus of La Française LUX was approved by the CSSF on 9 March 2020. The SICAV Lux was incorporated on 28/10/1998 (under the name "global strategy"). The sub-fund, La Française Lux-Inflection Point Carbon Impact Global was created in 2015. 
    For more detailed information about the investment fund, please refer to the prospectus and the Key Investor Information Document (KIID), which must be read before any investment. The latest prospectus, the key investor information document and the annual and semi-annual reports are available upon request to contact-valeurmobilieres@la-française.com or in electronic format to our Paying Agent. Said documents have been published containing all the necessary information about the product, the costs and the risks which may occur. Do not take unnecessary risk.

    • Germany: BNP PARIBAS Securities Services S.A. – Zweigniederlassung Frankfurt am Main, Europa-Allee 12, 60327 Frankfurt am Main)
       

     

     

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    news-2184 Wed, 25 Nov 2020 12:06:05 +0100 Investing Beyond FAANG /en/who-we-are/news/detail/investing-beyond-faang/ FAANG: Facebook, Apple, Amazon, Netflix and Alphabet’s Google

    The FAANG companies have created large opportunities for themselves and they continue to successfully exploit them. But we are very excited about this simultaneous wave of innovation that’s reshaping the global economy. Client Portfolio Manager Kevin Collins discusses the recent observation that Alger’s Large Cap Strategies have been underweight FAANG stocks and why that may be beneficial for investors.
     


    ALEX BERNSTEIN: Hello, I’m Alex Bernstein and you’re listening to The Alger Podcast, Investing in Growth and Change.  Innovation and change are typically buzz words here at Alger and never more so than in the past year as we’ve seen the continuing trend of rapid digital transformation. So, we were a little surprised when some of our internal analyses showed that our large cap strategies have actually been underweight FAANG stocks year to date.  Here to clarify why that idea may be important to investors is Alger Client Portfolio Manager Kevin Collins.  Kevin, thanks so much for joining me today.

    KEVIN COLLINS: Thanks, Alex. 
     
    ALEX: So, just to start off, Kevin:  For the investors who don’t know what we’re talking about, what are the FAANG stocks?

    KEVIN: The acronym FAANG stands for Facebook, Apple, Amazon, Netflix and Google. FAANG is a moniker that was coined probably five to ten years ago that represents some of the very largest tech platform companies.  These five stocks comprise about 25 percent of the Russell large cap growth indexes.  And their market share is so large because these companies have created very large opportunities, large markets, to which they sell their products and services.  

    ALEX: Not only have these names come to dominate the markets over the past 20 years, they’ve really changed the direction of our economy.  
     
    KEVIN: Yes, that’s absolutely true, Alex.  And I think that represents the power of aligning with change and it shows you how powerful the opportunity set, or the investment philosophy of investing in Positive Dynamic Change can be, that these companies, many of which are 20 and fewer years old, now represent such a substantial portion of the American economy and stock market.  

    And that speaks to the concept of digitization and the changing nature of the American economy that’s now represented so much more by intellectual property and intangibles than it is in productive brick and mortar type factory production companies. 

    ALEX: So, what you noticed, is that Alger, which has been so focused on change and investing in innovation and has certainly invested heavily in the FAANG stocks at one point or another, has been surprisingly underweight FAANG in our large cap portfolios for some time now? 

    KEVIN: Yes, these companies, their prominence has risen substantially in line with their effect and presence in the economy.  It hasn’t been a surprise though when we talk about the relative exposure in the Alger large cap growth portfolios to FAANG.  Our weightings to these companies through the years have gone from an overweight over the last five years to an underweight currently.  And that’s not because we’re not excited about these companies and their growth prospects, because we could conceivably, in the coming quarters move to an overweight.  

    But currently, we are very, very excited about this simultaneous wave of innovation that’s reshaping the global economy, that’s recasting whole industries.  And those changes include 5G, artificial intelligence, cloud computing, cloud software, genetic-based medicines and testing, e-commerce, autonomous vehicles, electric vehicles and digital payments.  And these innovations are happening across the economic spectrum and all at once.  

    So, we believe no industry is immune and Dr. Ankur Crawford told our clients that this wave of innovation is revolutionary; it’s not evolutionary.  We’ve got a great white paper called The Age of Connected Intelligence that supports that notion.  Patrick Kelly, the co-manager of these large cap growth strategies, for 15 years, he’s witnessed this personally, the evolution of these innovations.  He’s saying that spending on innovations is no longer discretionary.  It is table stakes.  So corporate America is digitizing and board room executives that can’t or won’t digitize, I think they’re jeopardizing their companies’ survival and their own job security.  

    And coronavirus has actually accelerated the adoption of innovations, both in a distributed workforce environment and as we all sit at our homes.   

    ALEX: Kevin, some investors might be wondering–what might be the benefit of being underweight these names?  

    KEVIN: Well, we are active managers and I believe we are discovering very exciting opportunities outside of FAANG.  

    Within the portfolio, we’ve got digital payments companies, 5G wireless carriers.  We have very exciting significant software companies that enable corporate America to turn their data, and you’ve heard the expression “data is the new oil”, into more productive solutions via cloud software that allows these companies to insulate their business from digital entry and competition and technological obsolescence. 

    We also have very exciting semiconductors that support this vast data crunching and the computer power behind that and life sciences tools companies as well, which enable this wave of spending on drug discovery to be employed in a productive fashion and increase the probability of positive healthcare outcomes.  So, we’re very excited by the FAANG companies, but we do see those tremendous opportunities outside of FAANG as well.  So, our current underweighting in these FAANG names is more about the beneficial exposure to other powerful innovators that we just talked about.  

    ALEX: Kevin, can you give us a couple examples of non-FAANG companies that the large cap portfolios might be interested in?  

    KEVIN: Absolutely.  And stocks don’t need to replace FAANG in order to be successful and have a beneficial impact on Alger’s investors.  So, these innovations don’t necessarily have to replace FAANG or become as large as FAANG.  Many of these companies are smaller today by orders of magnitude but we  believe have very bright growth futures and are still large enough to have a sizeable presence in the Alger portfolios.  

    One company, which is a very large telecommunications company, has yet to be even included in the Russell 1000 Growth Index and our bottom up fundamental analysts have identified this company as a primary beneficiary of the dynamic change associated with 5G.  I think they’ve got a unique raw material in the form of their wireless spectrum that allows them an advantage position to grow in this new 5G world.  

    Additionally, I think a life sciences tools company with a leading industry position in tools that are utilized for drug discovery has an avenue of growth ahead of it that is quite attractive.  

    ALEX: And I’m guessing there’s an abundance of names to consider at this point?  Is that right? 
     
    KEVIN: Yes, I think that you’ve encapsulated it quite nicely, Alex, that there is an abundance of opportunity that we see out there.  While FAANG companies typically capture the headlines and garner a lot of attention, many of the companies that we’ve discussed today possess very exciting growth futures and it is our hope that our clients will benefit from their association with them.
       
    ALEX: Do you think we’re likely to be overweight FAANG again, at some point?

    KEVIN: I wouldn’t discount that.  The FAANG companies are quite exciting.  They’ve created large opportunities for themselves and they continue to successfully exploit them.  

    ALEX: Kevin, one last question.  It’s certainly been a long, complicated year for everyone.  How have you been holding up with all of the changes?  

    KEVIN: Well, nearly eight months into my quarantine, I’m still married.  I view that as an accomplishment.  And further, I did get to spend a lot of time with my kids before they went back to school late this summer, so it was nice to reconnect with them over the period of a few months and so it was really nice to be around my family. 

    ALEX: Kevin,great talking with you.  

    KEVIN: Alex, thanks a lot.  It’s always a pleasure to speak with you.  

    ALEX: And thank you for listening.  For more information on Alger large cap strategies and for more of our latest Insights, please visit www.alger.com.

    Risk Disclosures: Investing in the stock market involves risks, including the potential loss of principal. Growth stocks may be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments. A significant portion of assets will be invested in technology and healthcare companies, which may be significantly affected by competition, innovation, regulation, and product obsolescence, and may be more volatile than the securities of other companies. Investments in the Consumer Discretionary Sector may be affected by domestic and international economies, consumer’s disposable income, consumer preferences and social trends. Foreign securities involve special risks including currency fluctuations, inefficient trading, political and economic instability, and increased volatility.   Short sales could increase market exposure, magnifying losses and increasing volatility. Leverage increases volatility in both up and down markets and its costs may exceed the returns of borrowed securities.  Assets may be focused in a small number of holdings, making them susceptible to risks associated with a single economic, political or regulatory event than a more diversified portfolio. Active trading may increase transaction costs, brokerage commissions, and taxes, which can lower the return on investment. Please visit www.alger.com for additional risk disclosures. Past performance is not indicative of future performance. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments.

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    news-2178 Mon, 23 Nov 2020 17:03:24 +0100 Investing on the Edge /en/who-we-are/news/detail/investing-on-the-edge/ How do we make the internet faster to support the fast-growing Internet of Things? We need to change the architecture of the internet if we want to support increasingly quick connections. This way we can analyze and respond to the vast amount of data that the growing number of connected devices is producing. The key enabling technology: edge computing. Dollars Spent Worldwide on Edge Computing-Related Services, Hardware and Software

    • Edge computing is about moving resources to the edge of the internet network to enable faster or lower latency communications (latency is the lag between a user’s action and a web application’s response). Rather than wait for content to travel halfway around the world to and from a central data center, edge computing helps put equipment and content in closer proximity to the user.
    • Examples of equipment on the infrastructure edge of the network include regional data centers, where switching equipment, which allows connected devices to share information and communicate, is deployed, as well as access sites that house cellular radio base stations.
    • The global market for edge computing is expected to grow quickly at 12.5% annually over the five years ending 2024 and reach over $250 billion. Drivers of this growth include applications like content delivery/streaming services, augmented and virtual reality, autonomous vehicles and remote monitoring, which allows IT personnel or machines to observe and interact with networked devices.
    • Beneficiaries of the move to edge computing may include content delivery networks, such as Cloudflare. Other beneficiaries may include communications infrastructure companies like wireless

    tower companies, data centers and fiber companies, as well as semiconductor manufacturers.

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    news-2176 Tue, 17 Nov 2020 14:04:57 +0100 Shining Bright /en/who-we-are/news/detail/shining-bright/ There is an increased emphasis on implementing renewable technology and we believe the trend toward solar energy has never looked brighter.The combination of decreasing technology costs and the desire for lower carbon emissions may potentially drive strong solar adoption in the years to come.  Solar Adoption Expected to Continue to Grow Rapidly

     

    • Solar capacity is projected to grow at a double-digit annual rate over the next decade, reaching more than 1.7 million megawatts worldwide. While that encompasses massive growth, it would still be a minority of worldwide installed power capacity, which is currently approximately 8 million megawatts.
    • As with many technologies, the cost of solar energy is falling, leading to increased adoption. According to Goldman Sachs estimates, the cost of solar energy has declined an amazing 68% in the past five years, making it competitive with other energy sources (depending upon geography).
    • Solar penetration is highest in Europe, specifically in Italy and Germany. Japan and Australia are also large adopters relative to the rest of the world.
    • Corporate winners of increased solar energy usage may include companies that produce inverters, which convert DC power to AC power and adjust voltage levels for home use. Additionally, battery makers, which can help users store solar energy and make it more reliable, may also stand to benefit.
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    news-2175 Fri, 13 Nov 2020 15:26:21 +0100 The resumption of the pandemic /en/who-we-are/news/detail/the-resumption-of-the-pandemic/ The resurgence in Covid-19 cases in Europe has prompted governments to adopt new restrictive measures to contain the epidemic and ease pressure on health care services. Thus, France, the United Kingdom, Ireland, Wales and Greece have opted for a second lockdown. Other countries such as Spain, Italy, Belgium and the Netherlands have favored more targeted measures such as the closure of restaurants, bars and advanced curfews.

    Markets reacted negatively to these announcements with European and U.S. stocks declining by 7.5% and 5.6% respectively during the last week of October1. Credit spreads also widened by +30 bps2 and the United States and Europe underperformed (+36 bps and 31 bps respectively).

    What are the market impacts?

    "Can we expect a credit market reaction similar to that of March, with a spread widening of about 550 bps? »
    The current situation is different from that of March 2020 for various reasons.

    Firstly, at the sanitary level:

    • Scientists now have a better understanding of the virus, resulting in faster recovery and discharge times.  
    • Significant progress has been made in developing a vaccine: 13 candidate vaccines are in phase 3 (last phase of approval) and scientists expect results by the end of the year (e.g. Moderna and Astra Zeneca with the University of Oxford 3).

    Then at the economic level:

    • Lockdown measures are more flexible than they were the first time:
      More geographically localized: affect some European countries and not 90% of the world's economies as in March (with the major emerging economies, the United States and Europe)
      - More focused in terms of sector: industry, construction and other sectors are not affected this time around.  
    • Companies have completed most of their refinancing programs for 2020 and Q1 2021. As a reminder, the volume of primary issues on the U.S. High Yield market reached $300 billion since the beginning of the year (twice as much as the average issuance over the last 5 years) and issuances for the High Yield Euro are € 60 billion. Thus, the element of surprise and the risk of a liquidity crisis will be less significant than during the first lockdown4.    
    • Debt repayment over the next two years will be relatively limited in both Europe and the United States, following major refinancing operations and the extension of bond maturities in recent years:
      - In Europe, around € 50 billion of High Yield bonds is due by the end of 2022 (of which € 20 billion in 2021 and 80% on "BB" issuers with easier access to the market), which represents less than 15% of the total European High Yield market size. 
      - In the United States, nearly $170 billion of High Yield bonds are due by the end of 2022 (of which less than $60 billion in 2021 and 50% on "BB" issuers), which also represents less than 15% of the total outstanding US High Yield market5.

    As a result, we estimate that these low maturities with a 2-year horizon (<15% of outstanding in both Europe and the United States) limit the refinancing risk for issuers and consequently the prospective default risk in the European and US High Yield markets. Indeed, despite the impact of the COVID-19 pandemic on the credit ratios of most High Yield issuers, we believe that they will be able to operationally recover over the next two years in order to be able to refinance themselves on the market under better conditions.

    "What about corporate defaults? Will these new sanitary measures have an upward impact on default expectations and thus on short to medium-term spreads (3-6 months)?”

    Impacts from new sanitary measures will depend on two parameters: the generalization of these new measures to other regions/countries in the world and their duration.

    • If the lockdown is of short duration (4/6 weeks) and is not generalized ->  impacts on companies will be relatively small. We anticipate a widening of High Yield spreads from 70 to 100 bps which remains localized in certain sectors (retail, catering, hotel, leisure ...) and without significant impact on default rates in the medium term.
    • If the lockdown is longer than expected (2 to 3 months) and extended to other countries/regions ->the impact on businesses will be greater. Spreads could widen by 100 to 300 bps. The entire High Yield market would then be affected by a more significant increase in default rates in the most sensitive sectors (retail, catering, hotels, leisure ...)

    In conclusion, it is still too early to draw definitive conclusions on the impact of the new health measures in Europe. Uncertainty about the evolution of the pandemic remains high. 

    The health consequences of a second wave will probably be weaker than the first one, thanks to medical progress and the ability of the population and the medical community to better understand the pandemic. 

    On the economic level and the solvency of companies, the consequences on the credit market are not expected to be similar to those of the first wave (+ 550 bps) due to the support already put in place by central banks, the current liquidity situation of companies which have largely covered their cash needs for the end of the year and Q1 2021, and the choice of governments to better target health measures.

    1 Source : Bloomberg, indices Eurostoxx 50 et S&P 500
    2 Source: Source : Bloomberg, BofAML, indice global (HW00), euro (HE00), US (H0A0), 30/10/2020
    3 Source : Bloomberg, 30/10/2020
    4 Source : Bloomberg, 30/10/2020 
    5 Source : Bloomberg, 30/10/2020 

    Our convictions
    At this stage, it is necessary to be attentive to sector exposure, issuer quality and capital structure to be able to deal with the two aforementioned scenarios. 

    Thus, we remain very cautious in our allocation to the sectors that are the most impacted by this pandemic, notably: non-food retail, restaurants, hotels, commercial and tertiary real estate (offices, retail), leisure (travel, games, sports, cinema, theater, amusement parks), air transport and all related sectors (rental, airport services, etc.). 

    We also pay close attention to the quality of the issuers and to our position in the capital structure of issuers operating in these sectors. 

    In these sectors that we consider to be sensitive, we are mainly exposed to Investment Grade/Fallen Angel or BB issuers. Our exposure to pure High Yield issuers is in the form of Senior/Secured bonds. 

    Disclaimer

    Main risks include: capital loss, interest rate, credit risk, default risk.
    COMMENTARY IS INTENDED FOR PROFESSIONAL INVESTORS ONLY WITHIN THE MEANING OF MIFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals.Under no circumstances may La Française Group be held liable for any direct or indirect losses resulting from the use of this document or the information contained therein. This document may not be reproduced, transmitted or distributed to third parties, in whole or in part, without the prior written consent of La Française Group. Published by La Française AM Finance Services, located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, nº 18673 X, subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997. For more information, check the websites of the authorities: Autorité de Contrôle Prudentiel et de Résolution (ACPR) www.acpr. banque-france.fr, Autorité des Marchés Financiers (AMF) www.amf-france.org.

     

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    news-2172 Mon, 09 Nov 2020 17:10:55 +0100 The Internet of Things Has Arrived /en/who-we-are/news/detail/the-internet-of-things-has-arrived/ The Internet of Things (IoT) has been a topic of innovation for some time but now we believe it is more relevant than ever. This explosion in internet-connected devices allows for the transmission of valuable and actionable information. Data Volume of IoT Connected Devices Worldwide

    • Data volume of IoT-connected devices worldwide is expected to quintuple by 2025. Applicationsare extremely diverse; they include industrial monitoring and automation, health care, security, agriculture, inventory management, smart cities (urban areas that use electronic methods and sensors to collect data and derive insights), utility metering and connected cars.
    • When devices themselves are connected to the internet, the potential benefits abound. There are a number of drivers behind IoT spending, including security, data analytics, efficiencies, competitiveness, reliability, customer service, improved return on investment and compliance abilities.
    • Companies that may benefit from enabling IoT include sensor/chip manufacturers, such as Impinj, as well as solution providers utilizing cloud-based approaches, such as Microsoft. In our view, early adopters of this technology may benefit as this new layer of information serves to enhance the productivity of businesses and makes our personal lives more convenient.
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    news-2170 Thu, 05 Nov 2020 16:26:48 +0100 Have economic support measures curtailed risks associated with Additional Tier 1 capital? /en/who-we-are/news/detail/have-economic-support-measures-curtailed-risks-associated-with-additional-tier-1-capital/ By Jérémie Boudinet, Credit Fund Manager, La Française AM In the wake or face of Covid-19, are banks in a financially sound position to cope with deteriorating balance sheet metrics and what are the implications for Additional Tier 1 Contingent Convertibles (CoCos) bondholders? 
    Following the 2007-2008 financial crisis, banks spent over a decade building up their capital buffers until at year-end 2019, it was estimated that globally, banks held approximately US$5 trillion of capital in excess of  Pillar 1 regulatory requirements (Source: Bank of International Settlements, May 2020). Now regulators and authorities are relaxing capital buffer requirements, allowing banks to operate temporarily below the level of several required liquidity and capital buffers (Pillar 2 Guidance, capital conservation buffer, liquidity coverage ratio…). The European Central Bank even asked banks to stop paying dividends or buying back shares until at least the end of 2020, preferring to redirect capital to lending and to support their balance sheets. But there is growing concern about the implications of such a set of measures on AT1 Cocos.

    Is coupon nonpayment a major concern? 
    One could argue that the primary risk looming in the AT1 market is the nonpayment of coupons. We on the other hand would disagree. We believe that there is very little chance that authorities will put pressure on banks to cancel coupons and this is clearly supported by a number of factors including several statements from the European Central Bank’s Prudential Supervisory Board. Andrea Enria, EU Bank Supervisor said, “The ECB doesn’t plan to suspend coupon payments on subordinated bank bonds, even after guiding lenders to suspend dividends to preserve capital.” Additionally, the potential savings associated with suspending coupon payments on AT1 is insignificant compared to the suspension of dividends, whereas the implications of such an action on investor confidence and a bank’s access to financing would be disastrous. This view has been confirmed by the European Parliament in November 2020, which stated in a report about capital buffers that “The coupons on the instruments qualifying as AT1 capital should not be restricted."
    The Q2 and Q3 2020 earnings seasons were also quite reassuring, as almost all European banks have proven that they were able to bolster comfortable and higher solvency ratios than at the end of 2019, thanks to the dividend suspension, prudential easing and national measures on loan guarantees to support the economy. 

    With the benefit of hindsight, we view the European banking sector as being partially “administered” by regulators. Regulators limit dividend distribution and can control banks’ access to unlimited and cheap central bank liquidity in order to cope with the current very-low rate environment. Regulators are also pushing for more consolidation, with significant M&A moves, such as the mergers between Bankia and CaixaBank and UBI Banca with Intesa Sanpaolo. A few years ago, banks were supposed to avoid being too-big-to-fail. Now, the opposite is true, which in our view is positive for the stability of the banking system and, thus, for the continuation of AT1 coupon payments.

    Disclaimer    

    Subordinated debt & Contingent Convertibles are suitable for professional investors as defined below. Execution only services can only be provided to professional investors. Retail investors are excluded from the positive target market.
    Professional Investors have the following characteristics:

    • Good knowledge of relevant financial products and transactions
    • Financial industry experience 

    Subordinated debt & Contingent Convertibles are not suitable for retail investors unless they have professional investment advice AND the investment is for diversification purposes only or have signed a discretionary portfolio mandate.

    THIS DOCUMENT IS INTENDED FOR PROFESSIONAL INVESTORS ONLY WITHIN THE MEANING OF MIFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel et de Résolution (www.acpr.banque-france.fr) as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF (www.amf-france.org) under no. GP97076 on 1 July 1997.
     

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    news-2167 Mon, 02 Nov 2020 17:44:06 +0100 Mind the gap! /en/who-we-are/news/detail/mind-the-gap/ While no one wants to live through a difficult recession, there may be a silver lining. The deeper the decline, the further the economy is operating below its potential. That large gap between economic output during this pandemic and our potential at full employment is quite large, indicating the potential for a long duration of expansion ahead.

    • The output gap measures the difference between actual economic output and potential output. Negative numbers imply the economy is operating below its potential. Positive numbers indicate the economy is operating above its most efficient pace.
    • Historically, U.S. recessions occurred after the output gap turned positive, i.e., the economy produced beyond its potential, which often leads to higher inflation, higher interest rates and eventually slower or negative growth.
    • However, as a result of the Covid-19 economic shock, the U.S. output gap is extremely negative,?indicating that the economy is operating well below its potential and has much room to expand in?our view. In fact, the Congressional Budget Office estimates the gap will be materially negative for?several more years, implying a long period of economic expansion until we reach our potential.
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    news-2165 Thu, 29 Oct 2020 17:02:47 +0100 The US election won’t be a significant game changer /en/who-we-are/news/detail/the-us-election-won-t-be-a-significant-game-changer/ By Nina Lagron, CFA Head of Large Cap Equities While the world is focused on the outcome of the US election, a quick look at the past shows that it does not matter significantly who sits in the White House for financial markets, that are mostly driven by macro and micro realities. 

    But, does politics matter when it comes to sectors?
    Again, the answer is quite straightforward as illustrated by the two times-series which display the performances of various sectors during the Obama and Trump eras. The change of presidents made little difference to S&P’s sector return ranking.

    • Under Obama and Trump, the three best performing sectors were identical: consumer discretionary, technology and healthcare.
    • Also, during both administrations, the two worst performing sectors were financials followed by energy

    This sector breakdown discredits conventional expectations, held at the start of the Trump presidency:

    • At the time, hopes were high in the financial sector that a wave of deregulation would boost returns. Yet, financials finished next to last, again.
    • With all of Trump’s promises to “make America great again”, bring manufacturing jobs home and impose tariffs on “unfair” competition, investors expected the industrial sector to thrive under Trump. However, industrials finished in sixth place, just as they did under Obama.
    •  With a former property developer in the White House, many expected a better performance from the real estate sector. Real estate, despite benefitting from extremely low interest rates, slipped from just short of the podium in the Obama years, to eighth place under Trump.
    • Big Tech, openly hostile to Trump, expected to suffer from a vindicative president unleashing regulatory hell on players, but not much happened.
    • Fossil energy returns were bad in the Obama years, but at least they were positive. In the Trump years, energy was the only sector to deliver negative returns; an unusual outcome under a Republican administration, especially one that proudly cut regulatory burdens for fossil energy extractors.

    The first four points can be relatively simply explained by citing former President Bill Clinton’s “it’s the economy, stupid” i.e. meaning that long-term fundamental macro trends cannot be displaced. However, the last point concerning energy, is worth a more in-depth analysis, in particular from a sustainable investment standpoint:
     

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    news-2163 Tue, 27 Oct 2020 12:24:37 +0100 ECB: Still a wait and see approach ? /en/who-we-are/news/detail/ecb-still-a-wait-and-see-approach/ On Thursday, the European Central Bank is likely to maintain the wait-and-see mode adopted in September and buy time to collect data ahead of the December meeting and the new staff projections. Nevertheless, the risks to the European economic outlook and disparities across countries are rising again with a strong increase in new infections and renewed containment measures. In addition, latest inflation data have been disappointed. 

    Hence, the central bank should signal that it stands ready to provide additional easing if the crisis worsens. We think the ECB will let all the options opened until the next meeting. We also expect Mrs. C. Lagarde to emphasize the importance of the coordination between fiscal and monetary policy and push government to do more to lift the euro area economy.

    All in all, this meeting shouldn’t have material impact on financial markets.
     

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2161 Mon, 26 Oct 2020 15:59:37 +0100 Digital Payments Soar /en/who-we-are/news/detail/digital-payments-soar/ The multitrillion dollar payments market is changing rapidly, providing growth for companies, convenience for consumers and opportunities for investors. As digital payments gain penetration, driven by greater e-commerce and mobile usage, how should investors be positioned? Global Digital Transactions

    • Digital payments comprise digital commerce, i.e., buying goods or services via the internet, and mobile payments, i.e., smartphones used to process transactions using wireless communication or scan QR barcodes. Both operations are expected to proliferate over the next few years, increasing at a compound annual growth rate of 16.5% through 2024.
    • Currently China has the largest volume of digital payments and its lead is expected to widen, driven by mobile payments. Already, mobile payments have penetrated 28% of the market in China compared to only 13% in the U.S.
    • We believe this trend will grow beyond the next few years because of its ease and convenience. Companies that may potentially capitalize on digital payments include payment networks such as Visa or Mastercard, payment processors, the businesses that help complete each transaction on the back-end, hardware companies that make the devices or chips to facilitate digital transactions, and software companies that create the interfaces to accept payments
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    news-2160 Mon, 26 Oct 2020 12:06:51 +0100 Investors shouldn’t only focus on the US election /en/who-we-are/news/detail/investors-shouldn-t-only-focus-on-the-us-election/
  • Alger doesn’t expect major impact on markets
  • We believe innovation and fundamentals are driving markets
  • Regardless of the winner, we believe - cybersecurity and infrastructure expected to profit and pharma to lose
  • The US election and its impact on the markets are currently the subject of heated debate. More than 83% of the Americans state that the election is very important to them compared to 75% in 2016 (Source: Pew Research). However, the election is less important to the portfolio over the next four
    years than investors currently assume, says Brad Neuman, Director of Market Strategy at Fred Alger Management.

    Economic indicators and sympathy values had an impact on US elections in the past
    According to market predictions the presidential debate and the corona illness of the current president have shifted the odds clearly in favour of Joe Biden (65%) instead of Donald Trump (42%) (Source PredictIt as of 4 October 2020). Neuman states that there are some indicators that have emerged from previous presidential elections which allow conclusions to be drawn about the chances of a candidate. First, the economy has historically been a good indicator of whether the incumbent will be re-elected. If the economy is growing and there is no recession in the two years leading up to the election, the incumbent has been the winner (e.g. Barack Obama, George W. Bush, Bill Clinton). However, if there has been a recession in the two years preceding the election, then there has been a change in the oval office (e.g. George H. Bush, Jimmy Carter, Gerald Ford). The US has recently suffered from a recession which means that according to this metric, a change in the Oval Office may be likely. Second, approval ratings of higher than 45% have historically led to re-election but history is ambiguous at 40-45% levels. Currently Donald Trump’s approval rating is at 40-45%. Thus, a prediction is hardly possible. Third, due to the Electoral College system in the United States an incumbent can win the election without winning the popular vote. In 2016 Trump was elected with less than 50% of the popular vote. This is why a focus on the popular vote is not as meaningful as a state-by-state focus. In 2016 there were only four states that determined the outcome (Florida, Michigan, Pennsylvania, and Wisconsin). Donald Trump won these states by 1% or less. This is why such states are “battleground states.” Now they are important, again. Based on current polling, Joe Biden needs to add only three states (Pennsylvania, Ohio and Michigan) to win the election as he is in the lead with 222 votes compared to Donald Trump with 125 votes (Source: Real Clear Politics as of September 2020). 

    Impact of the US election on the markets
    Historically, US equity returns have been higher under a split government (12%) than under a sweep government (9%). Brad Neuman explains that in a split government there is less uncertainty as it is less likely that new legislation will be passed. Investors are prepared and they feel like they know the rules as no new legislation likely will be passed that has an impact on the markets. Though, the odds towards a Democratic sweep (all under one party) is a real possibility in the eyes of the betting market. This means that meaningful legislation like a change in taxes and higher spending would be more likely. Currently, there is growing consensus in both parties that fiscal stimulus, either through lower taxes or higherspending, which results in larger deficits is acceptable and even desirable. Neuman analysed that chances are good that this may benefit the entire stock market more than many expect. As you can see in graph 1 it seems to be the case that especially in 2020 budgets do not matter anymore (e.g. interest rates and inflation will stay low). Higher deficits have been associated with better stock markets returns – more spending on lower taxes have improved corporate earnings. This may benefit the stock market more than many investors appreciate. The proposals of Biden’s group go in the same direction – the spending would be much greater than revenues. According to many economists Biden’s proposals could speed up economic growth by 200 bps. Neuman states that while the two parties may have divergent ideologies, there are also areas of policy commonality that investors should recognize, e.g. lower drug costs, onshoring and infrastructure. Higher income and capital gains tax rates may have a negative impact on equity valuations but much less than economic drivers such as inflation. According to the analysis of the investment specialist, a Democratic government would likely benefit alternative energy and infrastructure-related companies and hurt those in traditional energy as well as health insurance and banking. Neuman is convinced that the market has already priced in a Democratic win and that it differentiates between stocks that would benefit from a Democrat in office compared to those from a Republican in office. But Neuman has also identified certain groups that he believes may win or lose regardless of who is in power. Potential winners on both sides will be small and mid-growth companies, cybersecurity and infrastructure; pharma is a potential loser on both sides.

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    news-2157 Mon, 19 Oct 2020 17:43:37 +0200 Priorities along Party Lines /en/who-we-are/news/detail/priorities-along-party-lines/ The Democrats and Republicans have very different priorities right now, some of which are in direct contradiction of one another. However, there is one area on which both parties are in perfect agreement. How will this impact investors?

    • There is growing consensus in both parties that fiscal stimulus, either through lower taxes or higher spending, which results in larger deficits, is acceptable and even desirable.
    • This may benefit the entire stock market more than many people realize. Historically, budget deficits have helped lift stocks. Higher government spending and/or lower taxes have historically meant higher GDP, which boosted corporate sales and profits. According to data from Strategas, average S&P 500 performance in large deficits has been 17.9% compared to only 9.9% in small deficit or surplus years.
    • This shared interest in deficit spending may help support the stock market regardless of which candidate wins the November election.
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    news-2154 Mon, 19 Oct 2020 15:44:00 +0200 Books La Française LUX - Sustainable Real Estate Securities 30/06/2020 /en/who-we-are/news/detail/books-la-francaise-lux-sustainable-real-estate-securities-31-06-2020/ news-2148 Tue, 13 Oct 2020 11:36:47 +0200 The fourth Sustainable investment and Climate Report /en/who-we-are/news/detail/the-fourth-sustainable-investment-and-climate-report/ Our report underlines our intent to carry out our asset management role in a different way, based on our conviction that only a sustainable investment can be a long-term profitable investment. Our Group has been driven for many years by the ambition to be a responsible investor, to offer our clients profitable solutions that are tailored to their needs and to act in the interest of living well together.

    From its inception in 2008, La Française Group recognised the link between the economic, political, social and environmental worlds; it realised that the winners of tomorrow would be those who are able to anticipate and innovate and that the integration of ESG criteria into investment decisions would be a source of long-term value.

    From the start we built up internal resources, a research centre and experts to deal with an holistic analysis to appreciate the impact that ESG factors have on economic performance. This influence continues to grow stronger and we firmly believe it is more essential than ever to integrate these factors into our decision-making processes. The climate crisis is a reality - we have already consumed a significant portion of our natural resources. On top of this, the COVID 19 pandemic has further strengthened our awareness of social and health issues. These issues represent significant changes that offer opportunities to re-imagine the future and to turn the act of saving into a means of action.

    In this report you will discover how, in a very concrete way, that we are committed to innovation and sustainability ; they drive our investment solutions and allow each one of us to act individually and collectively and to engage.

    Patrick Rivière CEO of La Française

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    news-2147 Mon, 12 Oct 2020 16:49:07 +0200 Will the Election Focus on the Economy? /en/who-we-are/news/detail/will-the-election-focus-on-the-economy/ The upcoming election throws a multitude of conflicting issues into focus. Taxes, tariffs, crime and health care are just a few. One matter that is a concern for both parties is the economy. Will it define the election? History Suggests Recessions Lead to Change in Oval Office

    • According to elections dating back to 1932, the economy is a good indicator of whether the incumbent will be reelected. A recession in the preceding two years has historically indicated a change in the Oval Office.
    • The unprecedented Covid-19 pandemic drove the nationwide business shutdowns that caused this year’s recession. The downturn began in March 2020. Trump motioned to open up local economies as quickly as possible but do voters view those reopenings favorably?
    • The economy continues to recover; the S&P 500 has shrugged off the impact of the pandemic and the unemployment rate has come down. The question of whether Trump is responsible for the recession or mishandled the economy in the face of it remains to be seen in the outcome of the election. 
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    news-2146 Mon, 12 Oct 2020 11:32:54 +0200 Low carbon economy : post COVID green stimulus and sustainable recovery /en/who-we-are/news/detail/low-carbon-economy-post-covid-green-stimulus-and-sustainable-recovery/ It is largely known that each economic crisis represents a deep breath for the planet, but this comes at the expense of companies'financial health, employment, wages, social well-being, global growth, and the list can go on. However, who says crisis calls a cycle which loops with a recovery: when the deep breath in which greenhouse gas have dropped is offset by the new emissions related with the kickstart of the economy. For instance, CO2 emissions decreased by 1.4% the year after the 2008 financial crisis but they increased by 5.1% in 2010 when the economy activity started to recover

    But awareness has evolved since the last global crisis, particularly since 2015 after the COP21 meeting leading to the Paris agreement. This was a huge step towards a new paradigm, in which the possibility of having a more ecological way of producing became a real target and in which quantifiable goals were set down. Today’s society is fighting against the Covid-19 pandemic and its negative economic implications.

    The Covid-19 crisis has been very brutal, unprecedented, and striking in its worldwide spread. While most of the world’s population was in lockdown in their homes, we followed the terrifying news of this pandemic spreading fast, impacting the lives of millions of families, and putting pressure on many countries health’s infrastructure capacity. Yet we also noticed the unexpectedly fast, positive impacts on the environment: clean air and clear skies thanks to airborne particulate matter levels dropping in big cities.

    Indeed, during lockdown, coal consumption has dropped massively as electricity demand fell and according to the IEA, we have seen the largest worldwide decline in coal consumption since World War II. Overall, 2.6billion metrics tons of CO2 will not be emitted as we expect global energy demand to drop by -6% in 2020 which is seven times worse than what we saw following the 2008 crisis.

    Today, policymakers may see this pandemic as an opportunity to integrate the environment into the economic recovery and finally set down new rules in order to kickstart the economy, while integrating and considering the impact it may have on the planet. We will focus on the stage of this progress and whether we can combine economic recovery with the investments necessary to limit global temperatures from rising.

    1 – What would a sustainable recovery look like?
     

    No one yet knows the full extent of the COVID induced crisis and its impact on our economy and society. The current consensus however is that, without significant intervention and internationalcooperation, our GDP growth outlook is not going back to positive territory by the end of the year nor by the end of 2021. But further away from the cold economical aspects of this crisis, the health and social hazard is as threatening. The health care helplessness, the rise of unemployment and further increase in inequalities is at the heart of the concern. The environment is today the only area which has benefited from this pandemic.

    One could think that climate change emergency might be put to the background with the pressing issues to address. That is exactly what should not happen. We have had the tremendous opportunity to curb CO2 emissions and if we managed to crystallize this into a structural drop, we would still have a chance to reach our Paris Agreement objectives.

    A – Fiscal stimulus mechanisms available

    The International Energy Agency, which monitors and forecasts energy demand and related emissions to support international discussions around climate mitigation (like the UN Conference of Parties on Climate Change -COP-), has published an exceptional report in the midst of the COVID-19 crisis, to address the idea of a green recovery linked to the economic one, when governments around the world are thinking about their stimulus packages.

    The report named “Sustainable Recovery” finds that the spending need of the plan envisaged would be of roughly $1Tn per year over the next 3 years. As stated in the report, “this represents about 0.7% of global GDP today, and includes both public spending and private finance that would be mobilized by public policies. The public spending required would be equivalent to less than 10% of fiscal expenditure in recovery plans announced to date; after the 2008-09 financial crisis, green measures accounted for around 16% of total stimulus measures”.

    Governments, depending on their political wing or current economical state, could choose different levers to implement a recovery plan:

    • Traditional targeted government spending
    • Financial incentives such as subsidies, grants and loans
    • Tax incentives whether through a tax relief or burden
    • Recovery through the labor market: job creation, hiring incentives, reconversion programs
    • “Green Strings attached”: conditions entangled with government support
    • Not a fiscal stimulus measure, but a potential global game changer: Carbon pricing mechanism

    The means are manifold and so diverse that there is no unique route to THE ultimate solution, but the green stimulus should be readily implementable to boost consumption, preserve and create new jobs while contributing to greenhouse gas emissions reductions.

    B – Possible recovery

    The immediate response to the crisis has been through Central Banks intervention. They have lowered interest rates and ensured liquidity and access to the capital market for companies (through quantitative easing programs such as the e1,350bn PEPP – Pandemic Emergency Purchase Program- from the ECB).

    From a company standpoint, in economies where central banks have the above monetary power, this helps decreasing cost of capital and improves the economics of new, capitalintensive, projects such as large-scale renewable energy development or large-scale sustainable infrastructures. But it mainly favors companies of such a size that they can access capital markets.

    For the smaller companies, banks are expected to help pass down the stimuli. Indeed, part of the ECB’s easing mechanism is to facilitate liquidity access for the financial sector as well as alleviate the capital requirements burden.

    But governments’ interventions need to be more sector specific and access all layers of the economy. Here is a snapshot of the most carbon intensive sectors and what developments would currently be available to them with existing technologies, as indicated in the IEA Sustainable Recovery report.

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    news-2144 Fri, 09 Oct 2020 10:34:22 +0200 Responsible Investment labels: welcome to the jungle! /en/who-we-are/news/detail/responsible-investment-labels-welcome-to-the-jungle/ By Perrine Dutronc, Sustainable Investing Specialist, Groupe La Française. There is no common definition of “sustainable finance”, which leaves ample room for interpretation when referencing sustainable investments. 

    Sustainable investment strategies can be based on environmental or social themes like climate change or human capital, exclusions based, best in class, best in progress or future potential progress…

    Sustainable investments can also differ largely in terms of objective and allocation. Amidst the variety of terminology: sustainable, responsible, SRI (Socially Responsible Investing), ESG (Environmental, Social, Governance), green, climate, eco, transition, most investors are ill-equipped to understand the growing responsible investment offer.

    Labels have been developed to answer that lack of clarity and make sustainable financial products easier to understand. They attest to the quality of the process.

    But labels cannot streamline what is already fragmented. Moreover, they are viewed as a tool to influence standards, regulations and potentially a future European ecolabel. Many EU countries are now racing to be at the forefront, so they can impose their view of responsible or green investments and set the standard.

    Across Europe, we have inventoried no less than nine different labels and 800 labelled funds in a total universe of 60,000 funds (as at Dec. 31, 2019). Though that represents just 1% of the total market, the number of labelled funds doubled in a single year. 

    Of the nine labels, five can be qualified as ESG (Environmental, Social and Governance) and four as “Green”. However, the boundary between ESG and Green labels is blurry. For example, the ESG labels include the “E” of environment and therefore also examine green criteria whereas the Green labels require a minimum of ESG criteria/standards. Between both types of labels, it is a question of proportion and focus rather than a fundamental distinction in the approach, as illustrated in the following below. 

    In the jungle of labels, two, the French “SRI label” and the Belgian “Towards Sustainability”, are leading the pack, with approximatively 300 labelled funds each, representing close to three-quarters of the total number of labelled funds and 90% of the total assets under management of labelled funds.
     

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    news-2138 Tue, 06 Oct 2020 09:52:48 +0200 This november, don't choose /en/who-we-are/news/detail/this-november-don-t-choose/ Many investors are now studying polls and trying to guess who will win the presidential election so they can position their portfolios strategically. But what does history say about investing based on politics?

    • Investors would not have been well served by choosing to invest alongside only certain political parties. Since 1968, which many people consider the beginning of the modern political party alignment, portfolios that were invested only during either Republican or Democratic presidencies have dramatically underperformed a buy and hold strategy.
    • Historically, the best performing portfolio is one that bought stocks and held them throughout Democratic and Republican administrations. An investment of $10,000 invested irrespective of which party controlled the Oval Office outperformed the “partisan” portfolios by over a million dollars.
    • We rarely look back on stock market returns and attribute them to political parties. Investors may potentially benefit from history’s lesson: get out and vote at the polling booths with your pens but don’t vote with your portfolios. 
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    news-2131 Tue, 29 Sep 2020 09:33:05 +0200 Deep transition through innovation /en/who-we-are/news/detail/deep-transition-through-innovation/ By Apolline Brilland, Analyst / Portfolio Manager - Global Equities, La Française AM. ZEROe – paving the way to large scale decarbonization in the aviation industry

    "Flygskam" or Flight shaming' is a Swedish-born movement that calls for curbs to air travel due to its environmental impact. And the movement is gaining traction. The number of passengers who flew through Swedish airports dropped by four percent in 2019 due to a notable decline in domestic traffic according to Swedish state-owned airport operator Swedavia. This movement which has spread across Europe in line with the Friday for Future movement, might be seen as anecdotal, but it highlights how consumer behavior impacts global warming. Consumers are becoming more and more climate conscious and we believe that sustainability will play an increasing role in user behaviour. 

    Whilst globally, transport of all sorts, including road travel, contributes to around one fifth of all emissions, the aviation industry represented a total of 1Gt of CO2 emissions worldwide, the equivalent of about 3% of total global CO2 emissions from fossil fuel combustion1.  However, due to evolving consumer habits and increasing intercontinental mobility, emissions from air travel have grown rapidly over the past decades. 

    Currently, climate conscious travelers have only two choices: fly or not fly (and use an alternative means of travel). However there have been interesting initiatives in the airplane construction industry over the past decade which have led to the first developments of electric planes, mostly focused on relatively small carriers and so far allowing for only very short distances. 

    Harbour Air’s Seaplane to e-plane initiative made its commercial maiden flight last December. Equipped with a magniX 750-horsepower fully electric propulsion system, this 6 passenger Havilland Beaver marks the start of a new era in aviation: the electric age. However, the weight of the batteries and the long charging times make battery driven planes unsuitable for larger range flights or passenger numbers over ten.

    With electric aviation still decades away from becoming mainstream, Airbus has been working for years on a hydrogen / fuel cell powered propulsion system, more suitable for larger capacities. In February 2020, La Française’s equities investment team had the opportunity to talk to Guillaume Faury, CEO of Airbus, at an Industrial Conference about opportunities for large scale decarbonization in the aviation industry.

     * Source International Energy Agency, 2019

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    news-2130 Tue, 29 Sep 2020 09:13:31 +0200 WFH /en/who-we-are/news/detail/wfh/ Working from home or WFH used to be frowned upon in some industries. But no more. One of the most powerful, lasting changes of the coronavirus pandemic may be increased WFH. The investment implications could be significant.

    • Many business leaders are embracing work from home, driven by a newfound appreciation of the productivity benefits of having employees work remotely. A recent Microsoft study found that with the remote work environment, employees are working four hours more per week. In fact, Schroders, a large multinational asset management firm, announced it that it is permanently adopting flexible working in order to provide a “huge shot in the arm” for the firm’s productivity. The chart above shows many companies will be implementing similar strategies. Already, Twitter, J.P. Morgan and Shopify have made comparable moves.
    • People whose job involves handling or using information are finding working from home preferable to being in the office in many cases. The benefits of reduced commuting, more flexible schedules, casual attire and more time with friends and family are the big drivers, according to a recent survey from Clutch.
    • Companies impacted positively from this potential long-term trend include cloud platforms, desktop virtualization software, collaboration tools and cybersecurity solutions. Those on the losing side may include office real estate investment trusts, which could see rent and occupancy pressures persist in the future.
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    news-2128 Fri, 25 Sep 2020 14:00:30 +0200 A strong performance for the Chinese economy /en/who-we-are/news/detail/a-strong-performance-for-the-chinese-economy/ by Fabrice Jacob, CEO JK Capital Management Ltd., a La Française group-member company The recent Macro numbers released by the Chinese government over the past two weeks have surpassed estimates made by macroeconomists and have contributed significantly to the very strong appreciation of the RMB against all other major currencies.

    Industrial value-added has accelerated from +4.8% YoY in July to +5.6% YoY in August. Over the same time frame, capital spending rose from +6.0% YoY to +7.6% YoY, property investments from +11.6% YoY to +12.1% YoY, and retail sales have turned positive for the first time since the COVID-19 outbreak and rose from -1.1% YoY to +0.5% YoY. Sales of properties and cars have risen spectacularly to the point that China has introduced very strict measures to force property developers to deleverage their balance sheets, pushing one of the largest, Evergrande, to cut its selling prices across all its projects by 30% to reduce its debt, the steepest discount it has ever offered.

    This strong activity at the time when the rest of the world is still struggling with the economic impact of COVID-19 has led to a very strong growth in import volumes (+9.5% YoY in August) but also in a drop in import value (-2.1% YoY in August, down from -1.4% YoY in July) as a result of a strong drop in global commodity prices over the past twelve months. Exports on the other hand kept on surging, up from +7.2% YoY in July to +9.5% YoY in August, still driven by masks and medical equipment, but also because many emerging countries that could be seen as manufacturing alternatives are still in lock-down or some form of lock-down (Indonesia, Thailand,  India, Philippines) whereas China has resumed all industrial activities. This has led to a trade surplus of over USD50bn per month, a level it only reached once, in 2015. Capital Economics now forecasts the current account in 2020 to reach a surplus of USD360bn, or 2.5% of China’s GDP. Our readers will remember that the community of economists was forecasting China to record a current account deficit this year prior to the outbreak of COVID-19.

    As an anecdote, we came across a statistic that is an illustration of China’s consumption rebound: According to the Federation of the Swiss Watch Industry, Swiss watch exports fell 11.9% YoY to CHF1.34bn in August despite exports of watches to China having risen by +44.9% YoY in August, reaching CHF211.6m. 

    Another data point we wanted to share and that also relates to consumption, and more specifically to the hospitality sector is as follows: China’s biggest hotel operator, Shanghai-based Huazhu Group that operates more than 6000 hotels and 600,000 rooms under 25 different brands (including Novotel, Mercure and Ibis for our French readers) reached an occupancy rate of 69% during the second quarter of the year, a level that is comparable to its pre-pandemic level. During the same quarter, Marriott International Inc. had a global occupancy rate of 14% and Hilton Worldwide International Inc. 22%.

    The logical impact of a current account surplus hitting new highs is a strong appreciation of the RMB, the Chinese currency, that gained 2.8% against the euro over the past four weeks, 5.8% against the USD since the end of May and 2.9% against the yen since the end of July. 

    Source of figures: Bloomberg

    Informative Document for professional investors only as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report.

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    news-2121 Thu, 24 Sep 2020 09:00:00 +0200 La Française collective real estate investment vehicles acquire third Amsterdam asset /en/who-we-are/news/detail/la-francaise-collective-real-estate-investment-vehicles-acquire-third-amsterdam-asset/ Three La Française collective real estate investment vehicles, represented by La Française Real Estate Managers, have acquired, on an off-market basis, an office building in the city of Amsterdam from Avignon Capital. The property is located at 16 Danzigerkade on the IJ waterfront in the dynamic Houthavens area, the up and coming “live-work” creative hub in the northern part of the central business district of Amsterdam. The area promotes mixed-use zoning with soon to be 2.700 residential dwellings and aims to be recognized as a sustainable and climate neutral zone within Amsterdam. 

    The six-storey office property, completed in 2018, offers 6.812 m2 of floor space and 55 parking spaces (of which 49 are indoor) and is fully let to five tenants including an advertising agency, a distributor of timepieces, an instant film camera manufacturer and distributor, a coworking space supplier and a full-service production company. 

    Jens Goettler, Managing Director of La Française Real Estate Managers - Germany said, “We are delighted to secure a third property in Amsterdam with such efficient and flexible office space. Houthavens, where most of the stock is already let, is one of the few areas in Amsterdam City where new developments are still possible. This investment is perfectly in line with our ESG real estate strategy which favors acquisitions in mixed-use developments.”

    La Française Real Estate Managers was advised by Houthoff on legal aspects and by Savills Netherlands on technical Due Diligence

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    news-2120 Mon, 21 Sep 2020 11:37:22 +0200 Winning the Game /en/who-we-are/news/detail/winning-the-game/ Electronic gaming has come far since early home computer games such as Donkey Kong and PAC-MAN emerged in the 1980s. Today’s games have been developed to run on a wide array of platforms and technologies and include features such as location-based capabilities, augmented reality and multiplayer features. Can investors win at this game?
     

    • Gaming is a growing industry. That is especially true this year during the coronavirus pandemic. With more people staying home, worldwide gaming growth has accelerated dramatically, more than doubling from 5% last year to an estimated 11% this year, according to Statista.
    • Mobile gaming has been growing rapidly with more people spending more time on their phones. There are about 1.5 billion mobile gamers globally, spending about $35 per year per person. Additionally, console gaming could see a resurgence as the next generation of consoles comes out later this year.
    • Free-to-play games with in-game transactions (e.g., to buy supplies or capabilities) is a fast-growing segment of the industry. Fortnite is a good example with an estimated 350 million users, up from 125 million two years ago, generating a forecasted $5 billion in revenue this year.
    • Investors can gain exposure to gaming in several different ways. The large platform companies that operate app stores generate billions of dollars of high-margin revenue from mobile games–with mobile gaming revenue on Apple’s App Store and Google Play exceeding $35 billion in the first half of this year alone, according to SensorTower. Outside the U.S., companies like Tencent have huge gaming franchises. Additionally, content developers like the big game publishers have been not only producing profitable hit titles, but they have been finding new ways to monetize their user base.
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    news-2119 Mon, 21 Sep 2020 11:28:22 +0200 Euro stimulus has broad implications for investors /en/who-we-are/news/detail/euro-stimulus-has-broad-implications-for-investors/ The unprecedented levels of stimulus launched worldwide to combat the recession triggered by economic shutdowns and stay-at-home orders to contain the COVID-19 pandemic have garnered much attention from investors and the media. The impact from the more than $11 trillion in fiscal stimulus and massive amounts of central bank liquidity will aid many suffering economies and people. Among all the programs launched, one of the most interesting is the European Union’s (EU) 750-billion euro Recovery Fund, part of a broader “Next Generation EU” recovery effort. This Next Generation stimulus package marks an inflection point for the region and is likely to have far ranging consequences, including:

    • Greater unity among EU countries
    • Narrowing the valuation discount between European equities and other developed market equities
    • Advancing initiatives outlined in the Green Deal
    • Accelerating digitization across the EU

    Stimulus Proposal Passes Important Hurdles
    After intense negotiations, the 27 EU member states in late July agreed to a stimulus plan of 750 billion euros or $875 billion, which is equivalent to approximately 4% of 2019 EU gross domestic product (GDP). A key difference from previous stimulus initiatives is that funding will be provided to countries as a mix of grants (390 billion euros) and loans (360 billion euros) rather than just loans. The recovery fund will be financed through bonds issued by the European Commission with maturities of up to 30 years and backed by future contributions of EU members. The majority of the grants will be distributed from 2021 to 2023 to the member states depending on their specific national recovery plans. Of the 360 billion euros in loans, countries are expected to begin repayment in 2027 based on the amount received, with the entire debt settled by 2058. The stimulus plan calls for the 390 billion euros of grants to be repaid initially by the EU from funds received through a new tax on plastic waste, with a future focus on green and digital taxes.

    Cash will be directed to countries based on need rather than contributions made to the EU budget, thereby supporting countries that were the hardest hit economically by the pandemic and also having high debt levels and limited financial flexibility. Under the current plan, countries including Italy, Spain, Portugal and Greece will be among the largest beneficiaries and will be able to access funds financed by the European Commission’s triple A rating instead of their own lower ratings.

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    news-2117 Mon, 21 Sep 2020 09:00:00 +0200 Notice: "La Française Rendement Global 2028" sub-fund of the "La Française" SICAV governed by French law /en/who-we-are/news/detail/notice-la-francaise-rendement-global-2028-sub-fund-of-the-la-francaise-sicav-governed-by-french-law-1/ Following an analysis of the current condition of the target markets, the management company has decided that it would be in the interests of shareholders to reduce the minimum amount of assets under management below the level at which the fund is invested in money market securities. As a consequence, the fund will be invested in money market securities until the amount of assets under management reaches 5 million euros rather than the previous level of 7 million euros, in order to allow shareholders to benefit from the current market conditions market.

    This change will come into force on 25 September 2020.

    The other features of the sub-fund remain unchanged.

    We wish to remind you of the need and importance of reading the key investor information document for La Française Rendement Global 2028, which is available at www.la francaise.com.

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    news-2110 Thu, 17 Sep 2020 09:18:00 +0200 La Française streamlines its real estate division /en/who-we-are/news/detail/la-francaise-streamlines-its-real-estate-division/ La Française, international asset management group with total assets under management of 50 billion euros as at 30/06/2020, has streamlined its real estate division, which represents close to 25 billion euros in assets under management, a figure that has increased four-fold over the past ten years. In the wake of COVID-19, La Française Real Estate Managers is pursuing and accelerating its development. The asset manager has recorded close to 900 million euros in fundraising YTD as at 30/06/2020 and closed 17 acquisitions, for a total investment volume of c.a. 930 million euros. More recently, the asset manager finalized the acquisition of two office buildings, in London and Amsterdam. Despite the challenging global environment, La Française Real Estate Managers is actively reinforcing its investment teams and overall infrastructure in order to successfully meet the needs of its clients, which have increasing appetite for real estate.

    Moving forward, all real estate activities will be marketed under a single brand, La Française Real Estate Managers, replacing La Française Real Estate Partners International in the UK and in Germany. Additionally, two sub-divisions have been created and will co-exist to better serve the diverse needs of its investor base:

    • The Institutional division, under the supervision of David Rendall, currently Managing Director of La Française Real Estate Partners International and soon to be named Managing Director of La Française Real Estate Managers, is responsible for adhoc real estate investment solutions specifically designed for institutional investors on Core/Core+, Value Added and Opportunist strategies. He is supported by a team of qualified investment professionals who have expanded their expertise beyond the three primary European real estate markets (France, Germany and the UK, including Ireland) to include Luxembourg, Netherlands and Belgium:
       
      • Jens Goettler, Managing Director, La Française Real Estate Managers-Germany

    Jens Goettler has accompanied the group in its international expansion since the opening of the Frankfurt based real estate investment center in 2014. Just six years later, under his responsibility, the group has experienced considerable expansion and is now dealing out of Frankfurt, Hamburg and more recently Munich. The German branch is thus capable of covering the seven primary German office markets (Berlin, Cologne, Düsseldorf, Frankfurt, Hamburg, Munich and Stuttgart) from these three strategic locations.

    • Peter Balfour, Director of Investments, La Française Real Estate Managers-UK

    Peter Balfour has been working hand in hand with Jens Goettler and David Rendall for fifteen years and was present at the founding of the group’s real estate investment center in London in 2014.

    • Leslie Villatte, newly appointed Director of Investments and Institutional Real Estate Business Development - France Leslie Villatte recently joined La Française Real Estate Managers and will be working in close synergy with her foreign counterparts, Jens Goettler and Peter Balfour.
       
    • The Retail division, under the supervision of Marc-Olivier Penin, Managing Director of La Française Real Estate Managers, covers all real estate investment solutions and services specifically targeting retail investors, including the group’s wide range of French collective real estate investments vehicles. La Française Real Estate Managers is in fact the leading manager of French collective real estate investment vehicles in terms of capitalisation (Source: IEIF as at 30/06/2020) and has collected 670 million euros YTD (30/06/2020) in such vehicles.
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    news-2108 Mon, 14 Sep 2020 18:04:48 +0200 The FED, expected to clarify the impacts of the average inflation target on its monetary policy. /en/who-we-are/news/detail/the-fed-expected-to-clarify-the-impacts-of-the-average-inflation-target-on-its-monetary-policy/ Here is what we expect from the September 16th FOMC meeting:
  • They will leave rates unchanged;
  • The SEP (summary of economic projections) is likely to show upward revisions to growth and employment forecasts.
  • However, median projections will still show an unemployment rate modestly above the longer-run rate and inflation just below 2% even at the end of the forecast horizon in 2023.
  • The dot plot is likely to continue to show a baseline of no rate hikes through the end of the forecast horizon, though we do expect a few participants to show hikes by 2023.
  • The Fed is likely to clarify its guidance by signaling that future rate hikes will be linked to reaching an average inflation target of 2% as discussed at the Jackson Hole Summit. In our opinion, they have left a lot of work undone, including a description of how they will use their tools to achieve their goal.
  • Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2106 Mon, 14 Sep 2020 11:38:15 +0200 It’s All Happening /en/who-we-are/news/detail/it-s-all-happening/ Wireless carriers across the globe have already launched or will soon launch 5G networks that will likely revolutionize how we use mobile devices, a vital component of nearly every business model. 5G is poised to overhaul the technology sector and drive economic growth. How might this take shape?

    • We are on the precipice of a sea change in wireless communication technology. Given that mobile broadband is such a prevalent technology with over six billion subscriptions worldwide and it is critical to how society functions, any change in technology is impactful. 5G, or the fifth generation of wireless technology, will likely be adopted in scale over the next several years. As the chart above shows, 5G could account for nearly two billion mobile subscriptions by 2024. Developed Asia and North America are expected to see penetration rise fastest.
    • 5G will provide significant benefits relative to existing 4G technology. They include faster speeds, increased capacity, much lower latency and more efficient spectrum utilization.1 5G will enable the Internet of Things (IoT). IoT means devices operate with constant internet connection, which may help drive health care applications that work off of the real-time monitoring of patient details. IoT may also help drive autonomous driving applications that require communication between entities on roadways, such as cars and traffic lights.
    • Investors can gain exposure to 5G in a variety of ways. Tower companies may benefit from increased demand for wireless infrastructure to power 5G deployments. Companies that produce 5G chipsets are likely to see strong volume growth. Wireless carriers may see increased demand for new data services. Finally, smartphone vendors may see a robust replacement cycle that boosts shipments, as consumers feel the desire to upgrade to the latest technology.

     

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    news-2101 Wed, 09 Sep 2020 16:14:00 +0200 What options does the ECB have left to stimulate recovery? /en/who-we-are/news/detail/what-options-does-the-ecb-have-left-to-stimulate-recovery/ The ECB will hold its press conference on Thursday September 10th. Here is what we expect:

    • They will update their macro-economic projections. We do not expect material changes (ECB projections are already low), however we believe that they could lower both their GDP and Inflation forecasts, hence sending a dovish signal to the market.
    • The Euro has rallied significantly over the summer, which is boosting the case for more monetary stimulus (especially with very low inflation and core inflation). Even if we do not anticipate the announcement of such actions, Mrs. Lagarde will have to introduce potential actions before year-end. What are the ECB’s options?
      • Policy makers know that their “words” can have an effect on markets, so they may “talk” about the Euro in the context of monetary policy. Mentioning that the strength of the euro is an issue for the ECB, is an easy and cheap way to intervene. But if that does not work, it can put the ECB’s credibility at risk.
      • Asset purchases: They could increase the size of the current programs, merge them, increase the length…
      • The ECB could communicate that cutting the deposit rate is an option, perhaps coupled with new TLTRO (or better terms) in order to counterbalance the negative effects on banks.
      • The ECB could also announce a higher inflation target or flexibility regarding a potential inflation overshoot. However, to be efficient, the ECB has to be credible, which is not the case anymore on the inflation front.

    The ECB is in a very difficult situation: very low core inflation, negative headline inflation, appreciating Euro…Historically speaking, these developments would have led to a very dovish and immediate response from the ECB. The issue here is that the ECB is almost out of options: they could cut the deposit rate, but what would be the impact of going from -0.5% to -0.6%? They can increase the size of the programs, and they will at some point, but again, the impacts on inflation and the Euro are not obvious. The ECB may be worried about the appreciation of the Euro and very low inflation, but that does not mean it can do much about it.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-2095 Fri, 04 Sep 2020 15:56:10 +0200 Rethinking style diversification /en/who-we-are/news/detail/rethinking-style-diversification/ Investors frequently blend value and growth stocks with other assets, such as bonds and real estate, to potentially improve the risk and return profiles of their portfolios. Since the performance of different types of assets or investing styles may not be correlated, the impact upon a portfolio of certain securities declining in value may possibly be offset by other securities generating gains. We believe that prudent diversification is important but based on the results of the past 10 or more years, we think the role of value equities in potentially improving a portfolio’s risk and return profile should be reevaluated.

    The issue is particularly timely because investors have made substantial investments in value stocks. Of the approximately $9.3 trillion in U.S. equity mutual funds and exchange traded funds, only $2.9 trillion is allocated to pure growth equities with the remainder of assets being allocated to value or blended portfolios, according to Morningstar data.

    The strong emphasis on value investing, however, has yielded disappointing results. During the past 10 years, diversifying into value equities would have achieved the opposite goal of diversification—a portfolio with both lower absolute returns and a less attractive risk and return profile. Value equities dramatically underperformed during the 10-year period, a result, in part, of various flaws in the value “philosophy” in our view. First, there is a reliance on valuation metrics, which are often based on outdated accounting practices that form the foundation of the definition of “value.” Second, and more importantly, investing according to “value” metrics tends to fail to appreciate the fundamental drivers of a company’s business. Value companies may be the victims of “dynamic change” in our economy and their industries. As a result, investors in the value style category often are heavily skewed toward companies with legacy business models and stagnant management and product strategies.

    Value investors thus become investors in areas such as brick and mortar retailing, print and TV advertising companies or oil and gas energy that in the real world, where business fundamentals of growth and innovation come first (not financial valuation metrics), are becoming victims of change: the disrupted not the disruptors. We believe this dynamic change is being accelerated by the Covid crisis as well as other ongoing trends and will continue to hurt the performance of value stocks.

    “La Française is the privileged distributor in Europe of ALGER SICAV's sub-funds. La Française AM Finance Services is in the process of finalizing an agreement with Alger Management Ltd, whereby La Française AM Finance Services is authorized to distribute Fred Alger Management Inc. products in Europe.”

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    news-2089 Thu, 03 Sep 2020 09:00:00 +0200 La Française announces the appointment of Philippe Depoux as Chairman of la Française Real Estate Managers /en/who-we-are/news/detail/la-francaise-announces-the-appointment-of-philippe-depoux-as-chairman-of-la-francaise-real-estate-managers/ La Française is pleased to announce the upcoming appointment of Philippe Depoux as Chairman of La Française Real Estate Managers, in a move aimed at further developing the group's real estate strategy. He will take over from Marc Bertrand and will also become a member of the Executive Board of the La Française group. These appointments will be submitted at the next Supervisory Board meetings of the two entities as of 30 September 2020.

    By refocussing its business on real estate and financial assets, La Française is placing real estate - which currently represents 50% of total assets under management - at the heart of its development strategy. Over the past ten years, the Group's real estate assets have more than quadrupled to reach 25 billion euros, thanks to its proven leadership in France and its international expansion. La Française intends to pursue and speed up this development in an asset class that has become crucial for all investors against the current backdrop of persistently low interest rates and in the wake of the COVID-19 pandemic, which has created a new wave of investment challenges. 

    A graduate of Sup de Co Rouen (NEOMA), Philippe Depoux, 58, has spent the bulk of his career since 1986 in the world of French and international institutional real estate. Initially responsible for acquisitions, sales and appraisals at GAN Immobilier, GROUPAMA Immobilier, and subsequently Global Head of Transactions at Axa REIM, he became CEO of Société Foncière Lyonnaise in 2006, and assumed the same role at GENERALI Immobilier France in 2009 and Gecina in 2013. Since 2017, he has been the Managing Director of Compagnie Lebon. Director of the IEIF, the Club de l'Immobilier and the NGO PUI, Philippe Depoux has been awarded four Pierres d'Or over the course of his career.

    In joining La Française, Philippe Depoux will continue to develop and diversify the group's real estate offer under a single brand, "La Française Real Estate Managers" in France and internationally. He will oversee all real estate business line activities as well as the Group's innovation platform and will represent La Française when dealing with real estate market authorities. 

    “It is an honour for me to join La Française. This highly reputed group has successfully developed a real estate business geared towards excellence and strength under the leadership of Marc Bertrand, a friend whose work I hold in the utmost regard. I am eager to use my experience working for La Française and its shareholder in order to continue and accelerate its growth in real estate", says Philippe Depoux. 

    As part of this new governance, Philippe Depoux will be supported by an experienced management 

    team:

    • Marc-Olivier Penin, Managing Director, La Française Real Estate Managers, in charge of real estate for private clients, notably including the Sociétés Civiles de Placement Immobilier (SCPI);
    • David Rendall, newly appointed Managing Director, La Française Real Estate Managers, in charge of the management of real estate mandates specifically for institutional clients on Core/Core+, Value Added and Opportunist strategies.

    “Marc Bertrand has worked for the Group for over 20 years and has broadened the scope of its real estate expertise. In particular, he has provided a professional and pragmatic approach to this development and I would personally like to thank him for the commitment he has displayed throughout these years. The arrival of Philippe Depoux is a major milestone for our Group. I am convinced that his knowledge of the various real estate sectors and his international experience will enable us to draft a prosperous new chapter for La Française and its real estate activities", states Patrick Rivière, Chairman of the La Française Group Executive Board.
     

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    news-2087 Thu, 27 Aug 2020 10:36:38 +0200 The EU Taxonomy. Transitioning our way out of the climate crisis /en/who-we-are/news/detail/the-eu-taxonomy-transitioning-our-way-out-of-the-climate-crisis/ By Nina Lagron, CFA, Head of Large Cap Equities, La Française AM. The EU taxonomy is a tool to help investors understand whether an economic activity is environmentally sustainable, and to navigate the transition to a low-carbon economy. Setting a common language between investors, issuers, project promoters and policy makers, it helps investors assess whether investments are meeting robust environmental standards and are consistent with high-level policy commitments such as the Paris Agreement on Climate Change.

    In December 2019, the European Commission presented the European Green Deal, an overarching framework and program of actions to transform the European economy. A key component of the Green Deal is the proposed ‘Climate Law’ embedding a legal commitment for the EU to achieve climate neutrality by 2050. The EU put a more ambitious strategy on adaptation to climate change on the table, building from the 2013 strategy and the adaptation current key targets are at least 40% cut in greenhouse gas emissions (from 1990 levels), at least 32% share for renewable energy and at least 32.5% improvement in energy efficiency – but more ambitious targets are currently being considered.

    Other core components of the Green Deal are strategies and actions on supplying clean, affordable and secure energy, biodiversity, zero pollution, a circular economy and sustainable food production. These overarching objectives are addressed through financial and real-economy policy, across the public and private sectors.

    The adoption of the Taxonomy Regulation in June 2020 marks the final step of the legislative process for creating the world’s first green classification of sustainable economic activities.

    By re-orienting private sector investments to green technologies and businesses, this piece of legislation will serve as guidance for the EU to reach climate neutrality by 2050.

    It transforms the European Green Deal into an actionable roadmap for investors to be in line with the COP 21 targets and therefore it aims to decarbonize high emitting sectors and grow low carbon sectors.

    The EU taxonomy is one of the most significant developments in sustainable finance and will have wide ranging implications for investors and corporates in the EU and worldwide.

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    news-2086 Tue, 11 Aug 2020 13:51:27 +0200 Hong Kong China Bond Connect – How to get exposed to the second largest bond market in the world /en/who-we-are/news/detail/hong-kong-china-bond-connect-how-to-get-exposed-to-the-second-largest-bond-market-in-the-world/ by Eric Tso, Fixed Income Analyst, JK Capital Management Ltd., a La Française group-member company History of Bond Connect
    In May 2017, the People’s Bank of China (PBoC) and the Hong Kong Monetary Authority (HKMA) jointly announced the Bond Connect initiative, with the program officially commencing on 3 July 2017. Like the Stock Connect, it aims to provide mutual market access for bond investors between Mainland China and Hong Kong, allowing foreign investors to gain access to the RMB denominated domestic bond market. Currently, only Northbound Trading (i.e. overseas investors buying/selling Chinese onshore bonds) is allowed.

    Prior to Bond Connect, the channels for overseas investors to participate in China’s onshore bond market were limited in scope and had their own restrictions. They include QFII, RQFII and China Interbank Bond Market. With Bond Connect being the fourth channel, it aims to enhance operational efficiency for overseas investors, particularly regarding account opening and trade settlement. Another aim for the Bond Connect was to encourage potential inclusion of China onshore bonds into major global indices. This was achieved in 2019 when Bloomberg included Chinese Government Bonds and policy banks bonds into the Bloomberg Barclays Bond Index (with a 6% weighting) as well as JP Morgan which included several highly liquid Chinese Government bonds into several bond indices. 

    Overview of Bond Connect: How does Bond Connect work?
    Under Bond Connect, investors send settlement instructions to the Hong Kong Central Moneymarkets Unit (CMU), which acts as the nominee holder of these securities and settles with onshore clearing houses. 

    As such, overseas investors do not have to open an onshore account but instead are allocated a CMU account number for the settlement process. The CMU can provide certificates as proof of investors’ bond holdings which are recognized by PBoC. 

    To buy and sell bonds, investors need to send a request for quote (RFQ) to selected participating onshore dealers on offshore trading platforms (e.g. Bloomberg or Tradeweb) and subsequently lift/hit the most favourable price quote. These offshore trading platforms are connected to the onshore trading platform CFETS (China Foreign Exchange Trade System). Once a trade is completed, CFETS sends the trade information to two onshore central securities depositories: Shanghai Clearing House (SHCH) and China Central Depository & Clearing Co. Ltd. (CCDC) 

    The funding currency can be either offshore Renminbi (CNH) or foreign currencies. Investors can choose to exchange foreign currencies or CNH for onshore Renminbi (CNY) using prevailing exchange rates through offshore banks. Note that the repatriation currency should always be the same as the funding currency...
     

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    news-2085 Mon, 10 Aug 2020 09:11:00 +0200 Portfolio Insights: Alger Dynamic Opportunities Strategy /en/who-we-are/news/detail/portfolio-insights-alger-dynamic-opportunities-strategy/ Greg Adams and George Dai recently provided a portfolio update for clients in the Alger Dynamic Opportunities strategy. The call was hosted by Tyler Foster, a senior vice president and director of business development in our distribution organization. Please note, this transcript is from a call on July 22, 2020 and it has been edited for clarity and brevity.

    Tyler Foster: Thank you for joining us. I’m joined by Greg Adams and George Dai today, two portfolio managers on the Alger Dynamic Opportunities strategy.

    Today's call will follow a Q&A format, which I will moderate, and we will have a couple of segments when we take questions from the audience.

    George is senior managing director & co-chief investment officer. He
    also serves as an analyst for the Weatherbie team, covering diversified business services, health care, and technology. George has been at Weatherbie for almost 20 years.

    Greg is senior vice president, portfolio manager, and director of quantitative and risk management at Alger. Greg has been with Alger for nearly 15 years and has over 30 years of experience.

    And with introductions now covered, let's kick things off and dive into the conversation. Greg, our first question goes to you. Can you provide your views of the long/short equity asset class as a whole and how you see Alger’s strategy fitting in among its peers in the alternatives category?

    Greg Adams: The equity long/short category has a number of different flavors, from pure quantitatively driven strategies to more macro driven ETF-based strategies. Alger Dynamic Opportunities is a classic fundamental, research driven equity long/short strategy.

    The strategy comprises two roughly equal sleeves. The Weatherbie team, which is George along with Josh Bennett and Dan Brazeau, manages one sleeve and focuses on small and smid cap names. The Alger team, which is myself and Dan Chung, our firm's CEO and chief
    investment officer, manages the other sleeve, and we have more exposure to mid and large cap names. The net result is a fairly all-cap portfolio...
     

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    news-2084 Thu, 06 Aug 2020 14:23:52 +0200 Crisis Drives Investable Behaviors /en/who-we-are/news/detail/crisis-drives-investable-behaviors/ The coronavirus has impacted all of our lives, created new behaviors and shifted old patterns at work and at home, some of which will last even after the virus recedes. How can investors use these new trends to their potential advantage?

     

    • The chart demonstrates how various activities and habits have changed in three large economies since the start of the coronavirus pandemic. Respondents in Germany, the U.K. and the U.S. have clearly stayed at home more. They have also visited stores less, shopped online more and worked from home more.
    • Many of these new behaviors are investable. E-commerce, digital payments and cloud computing driven by work and entertainment at home are some of the areas that investors may wish to consider.
    • With e-commerce still a minority of total retail sales and cloud computing accounting for less than half of company workloads, we believe these trends may have much further to go even after the pandemic ends. Potential beneficiaries of their growth may include e-commerce platforms where small firms can sell products and vertically focused online retailers that concentrate their business in one area. Additionally, we believe digital payment providers and networks, as well as cloud computing platforms and their infrastructure providers, may potentially benefit.
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    news-2083 Thu, 06 Aug 2020 14:16:41 +0200 Where to turn post Covid-19? /en/who-we-are/news/detail/where-to-turn-post-covid-19/ By Gilles Seurat, Multi Asset Fund Manager, La Française AM In a post Covid world, there are plenty of unknowns, especially about the virus itself: when will we develop a vaccine, will the world face a second wave, etc.? These are all very sensitive topics that continue to drive investors’ risk appetite – each news article referencing a vaccine is literally cheered by financial markets. Unfortunately, it is extremely difficult to get an edge on these issues – even doctors seem puzzled.

    However, there are some things we do know that can contribute to building our asset allocation.

    Governments seem to be spending as much money as possible. Deficits are widening to record highs: for 2020, -9.6% forecasted for the Eurozone as a whole, -17.4% for the US, -13% for the UK. (Source: Bloomberg) And it looks like this is only the beginning. Just as central bank quantitative easing has been extended/increased multiple times, governments will probably spend more in the future if growth disappoints.

    Today’s spending clearly translates into a significantly higher debt to GDP ratio tomorrow. This extra debt will have to be paid back eventually, and it will certainly weigh on future growth. This means monetary tightening is not an option, as governments just will not be able to afford higher rates.

    Before the COVID-19 crisis, we already considered that rates were capped due to long-term trends such as digitalization and ageing populations. Now, the picture is even clearer: get used to negative yields, because they are here to stay. In the current context, long-term Australian government debt, where the yield curve is steep, is an option.  

    Currencies are also affected. The US dollar has lost its shine – carry is now minimal with deeply negative real interest rates. This bear trend means that inflation expectations will continue to recover from the deeply depressed levels we observed during the crisis. We are therefore positive on breakeven inflation in Europe and in the US.

    Regarding risky assets such as stocks, there is an ongoing tug-of-war between terrible economic performance and dramatic fiscal and monetary easing. However, investor positioning gives us a clearer signal regarding investor sentiment. While investor sentiment has improved, it remains relatively weak compared to historical data: cash levels are high, systematic strategies such a “volatility targeting” funds are running low levels of risk and even the hedge fund beta relative to the S&P500 is on the low end of the range. To us, this means that the “pain trade” is higher for risky assets, which all other things equal, are bound to creep higher. We favor financial subordinated debt (AT1s), as well as corporate credit (both investment grade and high yield). Bonds have underperformed derivatives during the crisis and therefore have room to catch up. In the periphery of Europe, we follow closely Greek bonds, which exhibit an attractive risk/reward profile and are now purchased by the ECB in the PEPP.

    In equities, our preference goes to large caps which have suffered far less than their small cap peers. The bear dollar trend should mean better returns, on a currency hedged basis, from US stocks.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.
     

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    news-2082 Wed, 05 Aug 2020 16:53:02 +0200 Teleworking: A Short-Term Solution to the Detriment of Innovation /en/who-we-are/news/detail/teleworking-a-short-term-solution-to-the-detriment-of-innovation/ by Virginie Wallut, Director of Real Estate Research and Sustainable Investment at La Française Real Estate Managers The health crisis will bring about changes in the real estate market and more specifically with regards to office space, expediting the obsolescence of some assets that cannot comply with new conventions. 

    The COVID-19 lockdown has validated the possibility of teleworking. However, teleworking has its limitations for employees and business development. From the employee's perspective, there is nothing more unequal and exclusive than a company where everyone works at home at their computer confined to their own living and housing conditions. 

    With respect to businesses, looking at teleworking simply from the financial aspect and only considering cost savings as a result of fewer workspaces, takes away from the office’s main role of business development. Looking at the first teleworking analyses following the lockdown lifting, standard operations gain in productivity in the short run whereas innovation, the brainchild of tomorrow, becomes more problematic. Advocating 100% teleworking is akin to having a short-term outlook on business development. 

    COVID-19 has shifted the teleworking balance. Whereas employees had asked for it in the beginning, some businesses would now like to impose teleworking on their employees. We believe that it is possible and even probable that legislation in France will impose employer compensation for their employees. Under current legislation, businesses cannot impose teleworking. Employees must be compensated if they refuse to telework. Owing to a lower number of rented office spaces, cost reductions would be partially offset by teleworking compensation.  

    We predict that a proliferation of businesses will set up a hybrid system to combine on-site work with teleworking. Many components would play a key role in the attractiveness of office assets. The office should make employees and clients want to come in and thus:

    • Be a unifier. Embody the corporate identity/culture for employees and clients and a powerful symbol that creates a sense of belonging;
    • Be comfortable and abundant in services in order to create an experience, encouraging employees to feel at home and want to come back to the workspace;
    • Be a hyper-communication spot. Workspaces must be flexible and reconfigurable, increasing possibilities for employees to work and communicate with each other

    Office assets must facilitate teleworking, i.e.:

    • Offices must be central, accessible, and close to intermodal transit hubs.
    • Offices must be connected to give each employee equal access to information (those working on site and those teleworking).

    Despite current fears of physical distancing, the attractiveness of major cities in terms of economic opportunities, connections, and social relationships will determine demand in the long run. Ongoing shifts in cities prior to COVID-19 will continue to bring about change in quality of life and sustainable features in cities and buildings. 


    THIS COMMENTARY IS INTENDED FOR NON-PROFESSIONAL INVESTORS WITHIN THE MEANING OF MIFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Real Estate Managers was approved by the “Autorité des Marchés Financiers” under N GP07000038 on June 26th 2007, approval (i.e. the Carte professionnelle) granted by the Paris Ile-de-France “Chambre du Commerce & de l’Industrie” under CPI N 7501 2016000 006 443 – Transactions on Buildings and Business Assets and Real Estate Management.

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    news-2080 Tue, 04 Aug 2020 15:54:44 +0200 The Opportunity in Small and Mid Cap Stocks /en/who-we-are/news/detail/the-opportunity-in-small-and-mid-cap-stocks/ Amy Zhang, CFA Executive Vice President Portfolio Manager Amy Zhang recently provided a portfolio update for clients in the Alger Small Cap Focus and Alger Mid Cap Focus strategies. To kick off the call, Alger’s Market Strategist Brad Neuman, CFA, shared his insights on the markets and economy. The call was hosted by Matt Goldberg, a senior vice president and divisional manager in our distribution organization.

    Please note, this transcript is from a call on July 8, 2020 and it has been edited for clarity and brevity.

    Matt Goldberg: Welcome to today’s call with Alger on the topic of small and mid cap investing with Amy Zhang, who is the portfolio manager of both the Alger Small Cap Focus and the Alger Mid Cap Focus strategies. And in addition to Amy and myself, we’re also joined by Alger’s Director of Market Strategy Brad Neuman. He’s instrumental in helping to create our intellectual capital and he works extensively with our portfolio managers and analysts.

    Brad Neuman: Thanks, Matt. I’m going to give a brief update about where we are in the economic outlook and why we’re excited about small and mid cap stocks. So the U.S. economy is obviously in a deep hole right now. But we believe it is recovering albeit not as fast as some Asian countries like China. U.S. GDP was down 5% in the first quarter. And it’s estimated to decline about 30% here in the second quarter.

    However, I believe in May, we technically exited the recession that we now know began this past February. Retail sales grew 18% in May month over month. The unemployment rate declined in May and June from 15% to 11%. And manufacturing grew in May and likely grew further in June. Additionally, housing has been improving with a large homebuilder just this morning reporting record sales for June up stunning 94% year over year.

    Now, I know that a lot of investors are concerned with the resurgence and new virus case growth and what it may mean for the economic outlook. The interesting thing is that we’re seeing new cases well correlated with mask use. Early adopters of mask policy, such as Delaware, Maryland, New Jersey, New York and Pennsylvania, had fared better than others that have not mandated mask policies.

    In fact, new cases per million people were recently reported to be only 65 in states where patrons and employees were required to wear masks in certain businesses and more than double that, or 149 new cases per million, in states where masks were not mandatory. More recently, California, Nevada and Texas have instituted mandatory mask policies as well as areas of Arizona and Florida providing some hope that cases will flatten out.

    For a broad market perspective, it does look expensive on traditional metrics. But we believe that when factoring in low interest rates and a higher free cash flow generation of companies today relative to earnings, that makes stocks look much more reasonable. But we’re not here to talk about the broad stock market. We’re here to talk about the outlook for small and mid cap stocks and of course Amy Zhang’s portfolios specifically. But let me give you some highlights.

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    news-2079 Tue, 04 Aug 2020 15:44:10 +0200 To the Rescue /en/who-we-are/news/detail/to-the-rescue-1/ During recessions, real personal income typically declines or stagnates. But during the current recession, U.S. personal income has risen. What is driving this and what are the implications? Despite a Severe Recession, Income Has Risen

    • Recessions have historically been marked by weakening income. During the Global Financial Crisis, U.S. real disposable personal income per capita fell nearly 1% over a year and a half. However, during the current recession, it has risen a robust 6%.
    • The growth in income has been driven by unprecedented fiscal stimulus. Government social benefits have surged, adding over $2 trillion in annualized income to U.S. pocketbooks. This has easily offset the less than $1 trillion-decline in wages and salaries.
    • Real personal income per capita is typically a good economic benchmark because as people earn more, they spend more and vice versa. However, many consumers have not spent the government assistance they recently received. That may be due to the economy having been shut down. As a result, the savings rate, which was 8% last year, jumped to an average of 28% in April and May.
    • We believe the increase in personal income and the savings rate bodes well for future consumption. Given that consumption is over two thirds of U.S. economic activity, this data lays the foundation for a potentially significant rebound in GDP in the coming months.
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    news-2077 Mon, 03 Aug 2020 14:18:01 +0200 In hindsight, what were the winning and losing investment strategies during lockdown? /en/who-we-are/news/detail/in-hindsight-what-were-the-winning-and-losing-investment-strategies-during-lockdown/ By François Rimeu, Senior Strategist, La Française AM Following closely Central Bank policies and understanding the true power of their actions is what made the difference. Facing a major global recession, central banks have unleashed almost unlimited funding, pushing nominal rates even lower and increasing inflation expectations. Central banks wanted, and still want, to push real rates even lower. 

    Looking back at the winning investment strategies over the past six months, they are all consistent with a very low real interest rate environment.

    Winning investment strategies:

    • Precious metals, with gold and silver skyrocketing; historically, there is a strong negative correlation between gold/silver and real interest rates.
    • Equities: when real rates drop, financial conditions improve which is generally positive for equities but there are significant discrepancies depending on the sector. The sectors that outperformed were those with a “long duration” bias such as high growth stocks and those with a tech / healthcare bias. The correlation between the P/E ratio of the technology sector and real rates is above 90%, meaning that investors are willing to pay more and more when real interest rates decrease.
    • Developed government bond markets (including peripheral bonds) and investment grade bonds, thanks to central bank actions.

    Losing investment strategies:

    • Equity markets again, with the hospitality, aeronautics, financial and energy sectors underperforming. The underperformance of financials was partly due to the very dovish monetary policies of central banks.
    • Some emerging sovereign debt markets, i.e.  Ecuador, Argentina for example with a limited ability to raise capital on financial markets.
    • At present, the lower-rated high yield bond segment has not yet normalized, as opposed to the better-rated high yield segment.
    • The US dollar, at least compared to G7 currencies. For years, the positive interest rate differential between the US and other developed countries has contributed to the strength of the dollar. However, with central bank stimulus, the gap has narrowed, pushing the US dollar to drop. 

    Disclaimer

    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2071 Mon, 27 Jul 2020 14:23:57 +0200 FOMC meeting, nothing new but stay tuned for Jackson Hole /en/who-we-are/news/detail/fomc-meeting-nothing-new-but-stay-tuned-for-jackson-hole/ The FOMC will be meet this coming July 28th and 29th. Here is what we expect:

    • Dovish forward guidance, reaffirming that rates will be held low for a long period of time.
    • The Fed will confirm the continued expansion of their balance sheet at the current pace and conserve flexibility.
    • They will maintain their support to credit markets.
    • They will not increase their accommodative stance: Uncertainty remains high, but the economy has recovered faster than most economic forecasts (Retail sales, employment, etc.).
    • They will reaffirm their opposition to negative rates.
    • They will not implement yield-curve control. The topic is still under discussion, but we believe Fed members will prefer to wait for more macro-economic clarity before acting.
    • They will communicate that their strategic review on inflation is still ongoing but provide no further information. The Jackson Hole conference (August 28) might be a good place to introduce some of the conclusions. 

    All in all, it should be a non-event for financial markets.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.
     

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    news-2068 Thu, 23 Jul 2020 10:56:07 +0200 COVID will have brought some good too! /en/who-we-are/news/detail/covid-will-have-brought-some-good-too/ Interview with Marie Lassegnore, Credit Fund Manager, La Française AM Has the coronavirus pandemic had any impact of environmental issues?

    While most of the world's population was confined to their homes, we witnessed catastrophic news related to the pandemic. However, we also witnessed the positive impacts of lockdown on the environment: cleaner air and clearer skies due to lower levels of airborne particles in major cities.

    According to the International Energy Agency, global demand for energy is expected to fall by 6% in 2020, seven times the drop experienced following the crisis of 2008. Lower demand and global awareness about air pollution (and health implications) are two factors that will inevitably lead to the end of the coal era.

    Indeed, during containment, coal consumption dropped because of the decrease in demand for electricity; some countries no longer required back-up power capacity. We are witnessing the most significant fall in demand since World War II (IEA, Global Energy Review, 30/04/2020). The United Kingdom went two months without coal (between 11 April and 15 June); the longest period ever recorded, according to the National GRID ESO. And the United States has used more renewable energy. By way of comparison, 10 years ago in the United States, 50% of electricity was generated by coal (Bloomberg New Energy Finance).

    This trend is expected to continue as the operating costs of renewable energy decrease. 


    How can government regulation regulate carbon emissions? 

    The governments of the world's 50 largest economies have committed over $12 trillion in emergency aid for the health crisis. So far, only $54 billion have been spent on post-carbon economic priorities. A sum which could be considered as moderate, but which nevertheless represents as a positive sign. (Bloomberg New Energy Finance).

    In France, for example, the €7 billion in aid granted to Air France is subject to environmental commitments, including a cut in the number of domestic flights, which can be substituted by rail. The development of the aeronautics sector will have to be in line with the growing consumption of alternative fuels in order to achieve carbon neutrality.

    Another example is Canada where the government announced the creation of 10,000 jobs in its oil industry to carry out clean-up operations of inactive wells and thus support their environmental objectives. Canada has also put in place funding opportunities for large companies in exchange for energy transition actions. 

    In China, the $800 billion stimulus package will largely finance new infrastructure such as electric vehicle charging stations, 5G and rail systems. The package also includes a $1.4 billion plan to promote electric vehicles.

    Closer to home, and in response to the COVID crisis, the European Commission has adopted a €750 billion recovery package called "Next Generation EU" in addition to the long-term budget (2021-2027) of more than €1,000 billion. The package includes grants to help the countries and companies most affected by the crisis. Grants will be awarded for specific projects and on condition that the investments do not undermine the climate and environmental objectives set out in the Green Deal. If the plan is ratified by the European Parliament, 30% of the aid, i.e. more than €500 billion, will be allocated to the fight against global warming and the achievement of energy transition objectives. This is a very positive dynamic for the future deployment of green assets in Europe. Currently, the Green Deal accounts for around 25% of the EU budget, enabling the financing of clean transport, the renovation of buildings and the development of renewable energies. 

    PROMOTIONAL DOCUMENT. THIS COMMENTARY IS INTENDED FOR NON-PROFESSIONAL INVESTORS WITHIN THE MEANING OF MIFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. The opinions expressed by the author are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2066 Wed, 22 Jul 2020 16:44:27 +0200 Is this time different ? /en/who-we-are/news/detail/is-this-time-different/ EM EQUITIES, LOOKING FORWARD The lens of history combined with an understanding of how economies across the globe are changing can provide valuable insight for emerging markets (EM) investors seeking long-term capital growth. EM have historically rebounded strongly after periods of crisis. The repetition of this pattern, in its initial phase, appears to have started during the first half of this year with EM equities rallying in response to growing optimism about the potential containment of Covid-19.

    Whether this optimism continues is hard to predict, with many epidemiologists anticipating increasing numbers of new Covid-19 cases as economies continue to re-open. Nevertheless, we believe the first half of 2020 reinforces our thesis that EM often repeat a pattern over long-term periods in response to crises. In this commentary we explore this pattern and explain how economic changes in developing countries may bode well for EM equities.

    Emerging Markets Rally After Dropping Dramatically

    The MSCI Emerging Markets Index dropped approximately 33.9% from January 17 to March 23 in response to fears over an anticipated global recession resulting from the pandemic. While the decline was similar to that of the S&P 500 and MSCI EAFE (Europe, Australia and the Far East, or developed markets ex U.S.), several EM countries experienced sharper falls with Brazil and Russia declining more than 50%. After reaching a low in late March, the MSCI Emerging Markets Index rebounded 31.2% as of June 30. With the pandemic still expanding rapidly in many
    developing countries–specifically Brazil and India–but appearing to moderate in the U.S. and other developed countries, the S&P 500 and MSCI EAFE indices outpaced EM, generating 38.5% and 31.5% returns, respectively, as of June 30.

    Understanding Market Cycles

    The pattern of EM securities rising more sharply than the U.S. and other developed markets (DM) after a major crisis is not unusual. For EM, a crisis can cause investors to flock to the safety of the U.S. dollar, treasuries and other safe havens, such as the Swiss franc. During the stampede, certain EM assets–equities, debt, and currencies-can experience reduced marketability and liquidity, thereby exacerbating price declines. Additionally, many developing countries are leveraged to global growth and trade flows and are reliant on external funding and direct investment. These factors, in turn, can reinforce negative news regarding global growth and other factors, which sustains a negative feedback loop.

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    news-2065 Wed, 22 Jul 2020 16:19:38 +0200 There are no shortcuts /en/who-we-are/news/detail/there-are-no-shortcuts/ In the media and the investment marketplace, we often hear about “valuations.” The statistics quoted are invariably multiples of earnings, sales or a similar measure. These figures are often invoked to support a bullish or bearish thesis. But are these metrics meaningful? They may be insightful for the market in aggregate, but for growth companies and particularly for small growth companies, they can be misleading. We argue that returns for these kinds of companies are driven much more by fundamentals than shorthand valuation metrics.

    Lazy Valuations

    What passes for “valuation” on factsheets and investor commentaries is nothing more than an abbreviated version of real analysis. The intrinsic value of a stock is the net present value of all its future cash flows. Shorthand valuation metrics like price-to-earnings (P/E) have major drawbacks. First and foremost, they are static and only look at a snapshot in time. For mature companies that don’t grow, that may be just fine, but for small and medium-sized high-growth companies, P/E multiples are often inflated as companies grow in step-functions. Concur, which provides expense management, travel and invoice software, is an example. In the decade before it was bought by SAP, its average P/E was over 50x, but that turned out to be justified as its earnings per share quadrupled, driving a 30% annualized return in its stock price.

    Second, valuation metrics should and do vary widely based on the quality of the businesses. We define quality as the level and sustainability of the return on invested capital that businesses may generate. The former is impacted by a company’s value proposition to its customers and its business model while the latter is driven by competitive advantage.

    Lastly, the amount of debt a company has may dramatically impact a metric like P/E as investors pay less for more highly leveraged companies because of heightened risk, all else being equal.

    In addition to being impacted by growth, quality and risk, P/E multiples are also impacted by accounting. Growth companies recognize a much greater proportion of their investment for the future in the income statement than old-economy companies. This is because investment in intangible assets like research and development on software algorithms or new drugs are expensed, serving to depress earnings. By contrast, investments in tangible assets like property or plant and equipment are capitalized and hit income slowly over time.

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    news-2062 Mon, 20 Jul 2020 14:06:43 +0200 Opportunity in Dispersion /en/who-we-are/news/detail/opportunity-in-dispersion/ While the daily headlines may have us believe that the economy is one entity moving in one direction at any given time, the reality is different. The economy comprises many different businesses in various industries that are experiencing divergent trends, potentially providing opportunities for investors. Corporate Sales Dispersion Has Jumped

     

    • Researchers at the Federal Reserve, Stanford and the University of Chicago have recently developed a statistic that measures the level of sales dispersion within the economy. The greater the difference between firms that are growing and those that are shrinking, the higher the statistic rises. In the current pandemic, it is over five times as high as its three-year average.
    • This dispersion is something we see in our research at Alger. Even within an industry like multiline retail where store closures are surging and companies are fighting for their lives, some companies with strong value propositions, such as Ollie’s Bargain Outlet, are still able to grow their sales in this environment. Additionally, various e-commerce businesses are experiencing exploding growth.
    • As the tide goes out on economic growth and innovation accelerates, the corporate winners and losers are more differentiated than ever, potentially providing a fertile environment for stock pickers.

     

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    news-2061 Wed, 15 Jul 2020 14:19:04 +0200 Too soon for the ECB to tighten financial conditions /en/who-we-are/news/detail/too-soon-for-the-ecb-to-tighten-financial-conditions/ No major policy changes are expected at the upcoming ECB meeting.
  • No change in the Pandemic Emergency Purchase Programme (PEPP). Expectations have been building about a potential increase, later this year, in the size of the PEPP, but recent communication by ECB members (Isabel Schnabel, François Villeroy de Galhau) may mean that an expansion of the PEPP is not warranted. This might require careful communication from Mrs. Lagarde between now and the end of the summer to avoid tightening financial conditions.
  • No change on the Quantitative Easing (QE) side, but QE expansion might be needed later this year if the ECB does not increase the size of the PEPP. 
  • The ECB could start buying “fallen angels”, especially after the latest bank lending survey which showed tightening credit conditions for households. That being said, communication has not been very strong on this subject recently (only Mr. Panetta has recently spoken of it). Therefore, it would come as a surprise if the ECB decides to include junk-rated debt into its purchase programme. Nevertheless, it is a possibility.
  • No change on the deposit rate.
  • Overall, this ECB meeting should be a “non-event”. Macro-economic and inflation figures have been bouncing back a bit more quickly than expected, but it is way too soon for the ECB to tighten financial conditions.
     

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    news-2058 Mon, 13 Jul 2020 08:54:55 +0200 La Française collective real estate investment vehicle acquires a second UK asset /en/who-we-are/news/detail/la-francaise-collective-real-estate-investment-vehicle-acquires-a-second-uk-asset/ A La Française collective real estate investment vehicle, represented by La Française Real Estate Partners International, has acquired its second UK asset from Pencross Assets Limited. The property is located at 17-18 Haywards Place EC1, which is considered to be a prime Clerkenwell location in close proximity to Farringdon Thameslink and London Underground station. The station is shortly to be enhanced by the opening of the Elizabeth Line (Crossrail), becoming one of the few stations in London to provide an interchange between the north / south Thameslink service and the Elizabeth Line, as well as the London Underground network through the Circle, Hammersmith & City and Metropolitan Lines.

    The warehouse style building was subject to a back to shell refurbishment and extension in 2018 and now provides 11,000 sq.ft. of grade A offices across six floors. The property is fully let to four tenants.

    The agreed purchase price was £15.56m and purchase reflects a net initial yield of 4.22%. Crossland Otter Hunt represented La Française Real Estate Partners International and Cyril Leonard represented the Seller.

    David Rendall, CEO of La Française Real Estate Partners International said, “We are delighted to secure a second property in the UK so quickly after the acquisition of 90 Bartholomew Close in April 2020.”

    Peter Balfour, Investment Director of La Française Real Estate Partners International - UK said, “17-18 Haywards Place follows the theme of focusing on buildings that are attractive to modern occupiers and which benefit from improvements to the transport infrastructure in London.”

    About La Française Global Real Estate Investment Managers

    The real estate activities of La Française have been united under the brand La Française Global Real Estate Investment Managers (GREIM). This umbrella brand covers La Française REM, La Française Real Estate Partners and La Française Real Estate Partners International.

    La Française REM is the French leader in collective real estate investments in terms of capitalisation (as at 31/12/2019, IEIF). A specialist in third-party investment and asset management, it is present across all French real estate markets. It has also developed a platform for real estate mandates, offering dedicated solutions for institutional investors with investment strategies ranging from Core/Core+ to Value Added and Opportunistic within the La Française Real Estate Partners structure.

    La Française Real Estate Partners International provides a complete investment management service in both direct and indirect real estate investments for a wide range of international clients across continental Europe, the UK and Asia. It operates from offices in London, Frankfurt and Seoul. The platform is a recognized specialist in core and core-plus real estate investment strategies throughout Europe.

    La Française GREIM has close to €25bn in assets under management (as at 31/05/2020) and offers a complete range of tailored real estate solutions to investors across the globe.

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    news-2054 Thu, 09 Jul 2020 09:18:56 +0200 As the US Presidential campaign heats up, what can be expected on the markets front /en/who-we-are/news/detail/as-the-us-presidential-campaign-heats-up-what-can-be-expected-on-the-markets-front/ By François Rimeu, Senior Strategist, La Française AM The Covid-19 crisis has put President Trump in a somewhat difficult situation, which has led some people to question his chances of reelection in November. Indeed, considering what President Trump has accomplished during his term in favor of the corporate sector, there is good reason to worry if some of the measures he put in place were to be cancelled in the event of a Biden victory. But is it that simple?

    Just as important to consider is how congress will be divided.

    Let us consider some of the main features of Mr. Biden’s project:

    • Raise taxes on corporations, from 21% to 28%, and wealthy households; 
    • Increase the minimum wage (from $7.5 to $15 an hour);
    • Provide $1,700bn in funding for infrastructure and Green New Deal.


    In the event of a Biden win, there would no doubt be less political tension across the world, which would be positive.

    As far as financial markets are concerned, a Biden win is associated with both positive and negative market impacts. At the time of writing this article, the global perception is that Biden’s program would have a negative impact on equity markets (both in the US and Europe). The main point being that higher corporate taxes could have, according to market estimates, a -20% impact on US equities over his term due to lower earnings. (Source: JPM)

    However, for Biden to be able to adopt his program after his election, he will have to obtain a clear majority at congress, otherwise, republicans will most likely block it. As of now, in our opinion, the most likely scenario and the one that markets are currently pricing is a Biden victory with no majority. This scenario is not negative for equity markets, it is broadly neutral but leaves Biden very little room for maneuver.  Even if the Democrats sweep the US presidential election, it remains to be seen how much of those corporate tax reversals will be implemented: Biden’s program was structured before Covid-19 and given the current economic context, business recovery and job growth are likely to be prioritized. 

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, an invitation or a recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française AM are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2053 Wed, 08 Jul 2020 16:18:55 +0200 New PM on Weatherbie Specialized Growth /en/who-we-are/news/detail/new-pm-on-weatherbie-specialized-growth/ Alger is thrilled to announce that Edward Minn, CFA, has been added as a portfolio manager on the Weatherbie Specialized Growth strategy. Here he discusses the team’s approach to research and investing, including investing in a software company that has been critical during the pandemic.

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    news-2051 Mon, 06 Jul 2020 17:08:18 +0200 All this liquidity needs to find a home /en/who-we-are/news/detail/all-this-liquidity-needs-to-find-a-home/ by Fabrice Jacob, CEO JK Capital Management Ltd., a La Française group-member company The very strong performance of Chinese equity markets in June did not come to us as a total surprise. The measures taken by the Chinese government to prevent any "second wave" of coronavirus from hitting the economy were drastic and, admittedly, efficient. We saw how entire neighborhoods of Beijing were put in full lock-down in the middle of June when approximately 100 new cases were identified in the vicinity of a food market. 

    More recently, the Anxin county of Hebei province that is located 150km from Beijing completely locked down its 400,000 residents after only 18 new cases were reported. 

    The prevailing rule across Asia has been to re-open the local economies without letting people in and out of any country. Borders remain tightly sealed with quarantine procedures being strictly enforced for returning nationals. Even within the small triangle that consists of Hong Kong, Macau and Shenzhen where we are based, there is no sign that borders will reopen anytime soon despite none of these three cities having had new cases for weeks, if not months. 

    This policy seems to have worked well, judging by the macro numbers, China being at the forefront of the recovery alongside Taiwan and Korea: The official manufacturing PMI of China rose from 50.6 in May to 50.9 in June, beating the Bloomberg consensus of 50.4. The non-manufacturing PMI showed the same trend, up from 53.6 in May to 54.4 in June (Bloomberg consensus was 53.5). The Caixin manufacturing PMI also showed an acceleration in the turnaround in June with a 51.2 reading, up from 50.7 in May (the Bloomberg consensus was 50.5). Industrial production was 4.4% higher in May 2020 than it was in May 2019, industrial profits were 6.0% higher than they were a year ago. Retail sales were still 2.8% lower in May 2020 than they were in May 2019, but it was still a marked improvement from the -7.5% recorded in April. It is widely expected that the June sales numbers will show an increase year-on-year as the pace of recovery is accelerating.

    As the macro picture of China is improving, we expect to see a positive spill-over effect on the rest of Asia as trade resumes. China will most likely play once again its role of economic locomotive for the region. 

    The only country under our coverage that remains worrying is India where the number of new Covid-19 cases keeps on rising day after day, in sharp contrast with all other countries of Asia. Furthermore, military tension in Ladakh, at the border of China and India, left at least 20 soldiers dead earlier this month and opened up a new period of tension between the two countries at the worst possible time. The macro outlook of India is dire with Moody's now anticipating a -3.1% drop in GDP this calendar year while Crisil, the Indian subsidiary of S&P is anticipating a 25% drop in GDP for the April to June quarter.  

    Back to China, the macroeconomic picture is one reason for the outstanding performance  of Chinese markets this month. The other reason is the injection of liquidity by western Central banks that is finding its way towards emerging markets. According to Bloomberg, foreign investors were net buyers of mainland Chinese "A" shares (listed in Shanghai and Shenzhen) to the tone of USD7.4bn in June. We believe this flow of liquidity will not stop here as China is actively opening its financial markets to foreign investors - banks and insurance companies can now have their own 100%-controlled operations in China. 

    As onshore financial markets open up wider, we expect MSCI to increase further its weighting of A shares in its indices. By moving step by step, so far MSCI has only included 20% of what it ultimately wants to include in A shares, thus leaving room for five times more weighting in all its global and emerging markets indices.

    The ongoing quantitative easing by the Fed and the ECB is not going to end anytime soon despite being already truly mindboggling: As the Covid-19 keeps on spreading in the West, even more liquidity injection is to be expected. To put numbers in perspective, Gavekal, a macroeconomic research firm, calculated that the current Covid-19 program of government spending by the United States, already adding up to USD3.7 trillion, is equivalent in today's dollars to almost 4 times the cost of the Vietnam war, 24 times the cost of the entire Apollo space program by NASA and 20 times the cost of the Marshall Plan that rebuilt Europe after World War II. 

    All this liquidity needs to find a home at a time when interest rates are either negative or close to zero across developed countries. Emerging markets, and especially Chinese markets that run particularly deep, are the logical beneficiaries, together with luxurious properties and collectible items. 

    Having adopted a prudent fiscal and monetary policy during the Covid-19 outbreak, PBoC kept Chinese interest rates at an attractive level: a 10-year Chinese government bond currently yields 200bps more than its US equivalent and 330bps more than its German equivalent.

    Finally, the Hong Kong market saw a strong bout of activity during the month of June with the listing of Netease and JD.com. These two companies acted in a pre-emptive way ahead of the possible forced delisting of their ADRs from the New York Stock Exchange, alongside all other Chinese ADRs that the US Congress wants to see delisted. This is potentially USD1.5 trillion of market value spread over approximately 250 companies that are likely to be transferred from New York to Hong Kong, Shanghai or Shenzhen within the coming two to three years. *

    Source of Figures: Bloomberg

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. These opinions expressed by the author may differ from those of other investment professionals. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. JK Capital Management Ltd. is a limited company regulated by the Securities and Futures Commission of Hong Kong, with its registered office at Rm 1101 Chinachem Tower, 34-37 Connaught Road Central, Hong Kong.

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    news-2046 Wed, 01 Jul 2020 16:11:26 +0200 Dangerous Debt? /en/who-we-are/news/detail/dangerous-debt/ Even before the coronavirus pandemic, global debt stood at record levels. Now with fiscal stimulus pouring in around the world, debt is surging. What are the implications?

    • Worldwide debt reached $191 trillion at the end of 2019, according to the Bank for International Settlements. That represents 6% year-over-year growth and pushed global debt-to-GDP to 243% from 233% as compared to the prior year. U.S. debt hit approximately $55 trillion or 254% of GDP, including the government, corporate and household sectors.
    • These debt levels are increasing rapidly given the global fiscal response to coronavirus, which Cornerstone Macro estimates at over $11 trillion. For the U.S., this debt issuance along with large deficits may cause government debt to expand quickly, with Goldman Sachs estimating that U.S. federal debt held by the public relative to GDP will hit 150% by 2030, up from 79% in 2019.
    • While the absolute levels of debt paint a bleak picture, debt service (the amount of interest and principal amortization) relative to income looks more manageable. For example, according to the Bank for International Settlements, U.S. household and corporate debt service relative to income is below the 20-year average; the same is true in Italy, the U.K., Spain and Japan. Overall, debt expansion is likely to slow as stimulus dries up, weighing on economic growth rates. This will potentially put a premium on companies that can outgrow the industries in which they compete in a lower growth environment.
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    news-2045 Wed, 01 Jul 2020 15:44:28 +0200 The Disparity Between Winners and Losers /en/who-we-are/news/detail/the-disparity-between-winners-and-losers/ By Brandt Blimkie, Vice President Analyst Alex Bernstein :  Hello, I’m Alex Bernstein and you’re listening to the Alger Podcast, Investing in Growth and Change. At Alger, many of our recent thought leadership pieces have focused on the wide disparity between the types of companies that are winning and losing in the current market environment, and the role that tech might play with those companies. To try to understand this disparity a bit more, I’m talking with Alger Tech Analyst Brandt Blimkie. Brandt, thanks so much for joining me this afternoon.

    Brandt Blimkie :  Thanks, Alex.

    Alex :  Brandt, can you tell me a little about this disparity between companies?

    Brandt :  So, there are certainly beneficiaries and losers in this environment. There are companies that are helping transition the economy to work from home, the digitization of different aspects of our work. Think of online grocery delivery or e-commerce, videoconferencing so we can hold this conference online with different salespeople. So, there are companies that are benefiting in this environment as well as companies that are struggling, certainly the ones that are struggling are ones with more physical locations based on physical foot traffic where maybe people are more reluctant to travel. So, there’s certainly been a discrepancy in those who are benefiting in this environment from those who are getting hurt.

    Alex :  Where are you seeing some of the biggest discrepancies?

    Brandt :  So, there’s a discrepancy right now, we think, between high growth tech companies and value tech companies. We think the discrepancy is pretty wide in terms of valuation. And this is not just recent with COVID-19 – but over the last five to ten years we’ve seen just this big discrepancy between value tech and growth tech as the winners have become larger and the losers and laggards have continued to trail. Now, a lot of legacy tech that is considered value tech, some of those companies are levered. Some of those companies have products that are in secular decline, and so the argument to invest in one of those companies is that the economy is going to recover smoothly, and then these products, these companies, won’t have leverage issues, liquidity issues, and so the valuations are too cheap for where they’re trading. That’s contrasted with some of the higher growth software companies and other tech companies that are benefitting in this environment. Where the debate now is, are these priced too high for fundamentals that could eventually slow once the economy recovers? For example, will we use as much videoconferencing if everybody goes back to work? Have we purchased as much security products as we need to secure our employees? Will we need as many of those services if we return to a normal, or are we just going to be in a “new normal” where we’re utilizing just more of those services going forward?

    Alex :  And what do you think the answer to that is?

    Brandt :  I think this is another time in our economy where we’re seeing significant structural changes take place, and certainly a lot of companies we talk to, particularly in the tech space, are talking about more efficient ways of doing things, now that they found that it’s actually not that bad having their employees work from home. Now, we’ll have to see if once the economy reopens if that holds true, but right now companies are saving significantly on travel costs. That’s made it more efficient for salespeople to talk to the customers and sell products if they don’t have to get on a plane to talk to the customer. They can land a deal of similar value and you’ve significantly increased the value delivered to your company. It might be harder to land that deal over a videoconferencing tool. So, I think that part of the equation still remains to be seen.

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    news-2043 Fri, 26 Jun 2020 15:06:31 +0200 An exceptional rebound /en/who-we-are/news/detail/an-exceptional-rebound/ Following a historic fall, both in terms of duration and magnitude, an equally exceptional rebound has been observed on the markets. While this rebound initially disconcerted many investors because of its decorrelation with the real economy, it is now well explained and understood.

    Two months ago, we were in a situation where the rating agencies, which had been largely criticized for the slow adjustment of their ratings in the wake of the 2008 crisis, took the opposite stance and massively downgraded companies in record time and without any distinction.

    Rating agencies assessed the impact of the crisis on business fundamentals before central banks and governments announced their accommodative measures.

    As a result, rating agencies, and part of the market, anticipated an extremely large number of upcoming defaults. For example, in March, S&P Global Ratings stated that the default rate for high-yield bonds was heading towards 10% over the next 12 months, more than triple the 3.1% rate that was recorded at the end of 2019. Similarly, Fitch Ratings1 forecasted a 17% default rate for the US energy sector.

    Over the last month, however, markets have been able to refine this analysis and recognize that the picture has fundamentally changed. This exceptional situation has had an equally exceptional response, never observed throughout previous crises:

    • Central Banks, which had taken four years to react to the 2008 crisis, injected substantial amounts of liquidity into financial markets to contain the situation.
    • Governments put aside public deficit concerns to help national companies and preserve employment.
    • At the same time, the month of May, which was particularly eventful with a large number of high-yield companies releasing their Q1 results, gave investors a little more insight into the situation of the second quarter and reassured them about the financial health of many highyield companies.

    1Source: Bloomberg, March 2020

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    news-2038 Tue, 23 Jun 2020 18:24:00 +0200 Covid-19 : Real Estate market assessment /en/who-we-are/news/detail/covid-19-real-estate-market-assessment/ By Virginie Wallut, Director of Real Estate Research and Sustainable Investment at La Française Real Estate Managers 1. As a result of lockdown and Coronavirus, have you witnessed any liquidity issues in the real estate markets or with certain sub-asset classes? 

    Property markets are decoupling. On the one hand and with regards to the prime office segment, logistics and residential real estate, we have not witnessed any liquidity issues. On the contrary, since the end of lockdown and judging by the first wave of tenders, transaction activity is robust and reflects strong investor sentiment and appetite for this income generating asset class. Low interest rates for even longer should support a strong rebound in investment activity and ensure the liquidity of these segments.

    On the other hand, and with regards to the retail sector, hotels, secondary office assets, liquidity can be challenging due to uncertainties surrounding future cash flows. However, we think that less intense competition on these assets could make room for opportunistic plays. 


    2. How do you assess the situation in the office market?  Is remote working having any tangible effects on the market? 

    Prior to lockdown, central locations were suffering from supply shortages as evidenced by vacancy rates of less than 3% in central business districts such as Paris, Lyon, Berlin, London and Hamburg. Thereafter during lockdown, these markets, given their fundamentals, were in a favorable position to absorb the temporary drop in demand. 

    The sanitary crisis simply accelerated workplace trends that in fact had emerged in recent years. However, we do not believe in the benefits of remote work on a permanent long-term basis. Some companies see remote working as an opportunity to cut costs. We however believe that any savings could be outweighed by a decrease in productivity and the implications of potential new legislation that could modify the compensation of remote workers. 

    We believe that companies will have to define flexible work policies that associate physical presence in the company office and remote working. In this case, offices would:

    •  Be places of hyper communication with vast and multiple collaborative spaces; office space would be modular and flexible; 
    • Be centrally located and easily accessible from the new living spaces of employees, and
    • Be hyper connected so as to provide all employees (present physically or working remotely) equal access to information.

    At La Francaise, we have developed a range of solutions that allow companies to gain in flexibility, i.e. space solutions capable of welcoming a varying number of staff.


    3. Are there regional positive or negative trends that emerged or gained in momentum due to the Covid-19 lockdown?

    The financial viability of tenants should become the primary indicator of risk assessment in commercial real estate leasing.

    The Covid-19 lockdown has generated many uncertainties regarding the future rental flows of retail and hotel assets, which make their pricing difficult and requires specific expertise.

    In the office sector, some markets are expected to fare better than others due to the diversification of their economies. For example, given its diverse user base, the Grand Paris region appears better positioned than other markets that are dependent on the automobile or aeronautics industries.


    4. ESG is playing an increasing role in illiquid asset classes, what about the real estate market?

    ESG is everywhere and initiatives to harmonize methodology and make everyone's approach more transparent are multiplying across Europe. In France and for La Française, the SRI label seems a particularly interesting initiative because our investment philosophy is not to exclude assets with the lowest ESG scores, but rather to help these assets manage their transition and ultimately improve their sustainability credentials. 

    Real estate is a particularly interesting asset class for ESG because, unlike liquid asset classes, the asset owner actually controls the underlying real estate asset and can therefore make the greatest impact.


    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Real Estate Managers was approved by the “Autorité des Marchés Financiers” under N GP07000038 on June 26th 2007, approval (i.e. the Carte professionnelle) granted by the Paris Ile-de-France “Chambre du Commerce & de l’Industrie” under CPI N 7501 2016000 006 443 – Transactions on Buildings and Business Assets and Real Estate Management

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    news-2037 Wed, 24 Jun 2020 10:15:44 +0200 Tensions flare at the China-India border /en/who-we-are/news/detail/tensions-flare-at-the-china-india-border/ by Aravindan Jegannathan, Senior Analyst, JK Capital Management Ltd., a La Française group-member company Over the past week, the border tensions between China and India in the Ladakh region reached a new high that had not been witnessed in decades. It was reported that at least 20 Indian soldiers were killed in a face-off with Chinese troops at the Galwan Valley near Ladakh with a similar number of Chinese troops reportedly killed during the clashes. The Ladakh border dispute is one of the oldest disputes India has had with China, dating back to the 19th century. It has continued to remain contentious since the formation of Independent India in 1947. 

    To give some historical context, border reconciliation talks happened in 1960 between the then Chinese Premier Zhou Enlai and Indian Prime Minister Jawaharlal Nehru and ended up in a failure. It was followed by the Indo-China war in 1962 when China asserted its control over Aksai Chin which borders Ladakh, the Line of Control (LAC) acting as the separating line. It is an uninhabited high-altitude wasteland crossed by the Xinjiang-Tibet Highway with the border running 3500 kilometers long. 

    The current tensions are due to Chinese troops crossing the Line of Control and moving into the Indian territory according to the Indian army. The Chinese foreign ministry spokesman said India had crossed the border twice, "provoking and attacking Chinese personnel, resulting in serious physical confrontation between border forces on the two sides". The LAC is poorly demarcated. The presence of rivers, lakes and snowcaps makes the lines shift and soldiers on either side frequently come face to face which makes this region highly sensitive. The recent construction of roads by India in Ladakh is also said to have increased Chinese aggression as India’s decision to develop infrastructure in that region seems to have infuriated Beijing.  

    Confrontations along the border have remained tense since May, resulting in some physical scuffle that developed into the current stage. At present the situation continues to remain tense and India’s defense minister is said to have changed the rules of engagement with the Chinese at LAC, empowering the Indian army field commanders to use firearms under ''extraordinary'' circumstances. As revealed by Indian army sources on late Monday night (22nd June) both armies were blocked in top-level military talks to discuss the Galwan face-off and other points of dispute that lasted for more than 11 hours. 

    While the situation continues to remain edgy, we believe there is a high likelihood that it dies down and not escalate into something big given that India is battling a recession amidst Covid-19. A war at this juncture would be unbearable. 

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report.

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    news-2034 Thu, 18 Jun 2020 09:31:00 +0200 Notice: La Française Rendement Global 2025 sub-fund of the La Française SICAV governed by French law /en/who-we-are/news/detail/notice-la-francaise-rendement-global-2025-sub-fund-of-the-la-francaise-sicav-governed-by-french-law-5/ The measures to support the economy implemented by the central banks in the wake of the health crisis reinforce the management company in the conviction that the rates will remain low for a long time. The measures to support the economy implemented by the central banks in the wake of the health crisis reinforce the management company in the conviction that the rates will remain low for a long time. In this context, the Fund's maturity strategy in the high-yield bond markets continues to be widely acclaimed.

    The management company, after analysing the conditions on the target markets, considered that it was in the shareholders' interest to extend the Fund's marketing period by 3 months in order to take advantage of the potentially attractive yield levels that they offer.

    The Fund will thus be closed for subscription on 30 September 2020 and not 30 June 2020.

    This change will come into force on 24 June 2020.

    Other sub-fund characteristics remain unchanged.

    We wish to remind you of the need and importance of reading the key investor information document for La Française Rendement Global 2025.

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    news-2031 Mon, 22 Jun 2020 11:03:56 +0200 Simulation Enhances Product Cycles /en/who-we-are/news/detail/simulation-enhances-product-cycles/ How are manufacturers able to deliver high quality products on rapid timelines, even as products become increasingly complex and the world experiences an unprecedented pandemic? One way is through the adoption of software simulation.

    • Software simulation is the process of imitating real-world phenomena based on computer algorithms. The simulation market is expected to grow 12% - 15% annually through 2026. Manufacturing companies are increasingly using sophisticated simulation software to reduce time-tomarket, improve the quality of products and lower costs. Not only are companies using software simulation in product design, but also in ideation and manufacturing.
    • The increasing complexity of products is the key driver of growth in simulation. To reduce the disastrous consequences of improperly functioning products, higher levels of simulation are needed to ensure products work safely, reliably and as intended.
    • During the Covid-19 pandemic, research and development budgets are likely to be constrained and simulation will allow manufacturers to get more impact from tighter budgets. Simulation can give engineers the ability to evaluate multiple design options in parallel, making it more cost efficient. Additionally, simulation often eliminates the need for expensive physical testing.
    • Consumers will benefit from enhanced, more elaborate products and faster product lifecycles. Investors can consider opportunities among the companies providing this novel technology.
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    news-2030 Tue, 16 Jun 2020 11:00:00 +0200 American Express enters the Chinese RMB payment market /en/who-we-are/news/detail/american-express-enters-the-chinese-rmb-payment-market/ By Guillaume Dhamelincourt, Business Development–Product Specialist, JK Capital Management Ltd., a La Française group-member company Last week American Express received the approval from the Chinese authorities to start bank card clearing services in China. The US company became the first foreign payments network to be allowed to process RMB transactions in China. The license was granted by People’s Bank of China, China’s central bank, to American Express’s China joint venture, Express (Hangzhou) Technology Services. Under the terms of the approval, the company must start operations within 6 months.

    In 2018 China’s bank card clearings was a USD 27tr market with USD 8.4tr of online transactions. Express (Hangzhou) Technology Services intends to operate both online and offline payment transactions, but it will probably be far from easy. Competition will be tough for the new entrant. On the physical card side China UnionPay already dominates the market. In the online space, American Express’s JV partner LianLian Group is a relatively small player in China’s third-party mobile payments industry where WeChat Pay and Alipay have more than a 90% combined market share. Fees will also be a challenge as they are much lower in China than they are anywhere else. The card-clearing fee rate is 0.065% for domestic banks and the acquiring fee rate ranges from 0.5% to 1%. American Express typically charges between 1.4% and 3.5% in the US so it will have to sacrifice its margins if it wants to gain a meaningful market share in China. (Source: Bloomberg.com)

    The approval is part of phase one of the US trade deal signed earlier this year by the US and China in which China made a commitment to open up its USD 45tr financial markets to foreign firms. Other US card companies may soon follow American Express. Mastercard received its initial approval in February while Visa’s progress has been slower. The opening envisaged under the phase one deal does not limit itself to payments as it also includes insurance, asset management and investment banking services.

    Some cynics will say that opening now the payment market to foreign companies is not a big sacrifice for China since this market is already well developed and dominated by local players. Nevertheless, the same is often true when Chinese companies want to set foot in the US. 


    China’s openness to business is more than just a posture. The country is moving towards opening up its financial markets and is fast changing rules accordingly. For instance, since 1st January 2020 any foreign insurance company can set up business in China through wholly owned subsidiaries, no longer needing a local partner.

    When it comes to new bond issuances and IPOs in Hong Kong, we can already see that international banks, and more specifically American banks, have the favour of state-owned issuers.

    This trend goes beyond financial markets as China has been welcoming US investors in many sectors - Tesla having built a large factory to cater to the local market is a good example - and Foreign Direct Investment from the US into China remains strong. At the same time, measures taken by the US administration against Chinese investments on US soil have led to a collapse of such investments. 

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report.

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    news-2029 Fri, 19 Jun 2020 10:40:11 +0200 Stay Focused on the Long Term /en/who-we-are/news/detail/stay-focused-on-the-long-term/ When stocks suffer a significant decline in near-term earnings or cash flows, not unlike the current period, investors may instinctively worry about whether they should sell. However, cash flow modeling demonstrates why you may want to hold on to a quality portfolio for the long term.

     

    • The chart above demonstrates that a hypothetical investment whose earnings or cash flows decline 40% in the first year may not see a large reduction in value over a long-term time horizon.
    • This scenario could potentially play out this year, as earnings in 1H20 are under significant stress for many companies. In our view, this data shows that focusing on high-quality companies— ones that we believe have durable business models that produce stable long-term cash flows in the long run and have strong management teams, competitive advantages and innovative products—may overcome short-term earnings or cash flow stress.
    • While a significant decline in aggregate earnings can be scary and potentially move stock prices violently, we believe that a portfolio of strong companies may retain its value over time as the market recognizes the stability of companies’ cash flows in the long term. 
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    news-2026 Tue, 16 Jun 2020 17:37:39 +0200 Dispersion Is the Great Alpha Generator /en/who-we-are/news/detail/dispersion-is-the-great-alpha-generator/ By Brad Neuman, CFA Senior Vice President Director of Market Strategy When we listen to the TV or read on the internet about the economy, it is almost always in aggregate terms. Here are some recent headlines:

    America’s Awful Economy In The First Quarter Was Even Worse Than We Thought (CNN)

    For Economy, Worst of Coronavirus Shutdowns May Be Over (Wall Street Journal)

    Good Economic News is Coming and That’s Bad (Bloomberg)

    But the economy isn’t one entity moving in one direction at any given time. It comprises many different businesses in various industries that are experiencing divergent trends. In other words, it has winners and losers.

    Can there really be winners in a catastrophic environment like the coronavirus pandemic with soaring unemployment and precipitously declining spending?  Yes, there are companies bursting at the seams with growth, companies that cannot hire fast enough and  cannot keep up with their orders.

    Hiring Amidst Mass Layoffs?
    Everyone knows the economic picture has been atrocious this year with over 20 million jobs lost, according to the Bureau of Labor Statistics.i But just as the aggregate economy sheds jobs, some companies are hiring. Over 2 million jobs have been lost in the retail industry but WalMart plans to hire 150,000 individuals, Amazon 100,000, and Lowe’s 30,000.ii The transportation industry lost nearly a million jobs but Instacart plans to hire several hundred thousand employees.iii This is part of the reallocation of resources in the economy as e-commerce and big box retail share gains accelerate. However, research suggests that the biggest driver of dispersion is not industry exposure but idiosyncratic or firm-specific factors. For example, in the restaurant industry hundreds of thousands of restaurants are under financial duress while stronger restaurants, like Wingstop, have been able to achieve double-digit same-store sales growth during the pandemic.
    There is a way to quantify the changing fortunes and churn within the economy—the so-called job reallocation rate measures the shifting employment opportunities across firms.iv The statistic looks at the sum of expected job gains at companies that expect to hire plus job losses at companies that expect to fire, relative to aggregate employment. The higher the number is, the more reallocation of human resources exists. In the current economic environment, the job reallocation rate is the highest it has been in years as the dynamic U.S. economy shifts jobs to those sectors and companies benefitting from demand trends, and takes jobs away from business models that may be failing (see figure 1)

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    news-2025 Tue, 16 Jun 2020 17:17:20 +0200 The Resilience of the Consumer /en/who-we-are/news/detail/the-resilience-of-the-consumer/ By Leeanne Su, CFA Vice President Analyst Alex Bernstein: Hello, I’m Alex Bernstein. And you’re listening to The Alger Podcast: Investing in Growth and Change. In our last couple of podcasts, we’ve been looking at some of the industries and sectors that have been hit harder during the COVID-19 crisis, and where investors might look within those industries for opportunities. Today, we’re turning to the Consumer Discretionary sector and speaking with Alger Analyst

     Leeanne Su: Thanks, Alex

    Alex: And Leeanne, you actually joined Alger just a few months before this crisis started?

    Leeanne: Yes, pretty much. I think I started working from home in early March. So, yes about half the time  I’ve been here I’ve been remote.

    Alex: Leeanne, the Consumer Discretionary sector was doing well at the beginning of the year, when all of this
    began. How did you react when you first heard of the virus?


    Leeanne: So, we had seen this happening I guess in China starting in February with some of the companies I follow. I think initially people underreacted to the risk of COVID spreading to the rest of the world.
    So I think initially we were just very concerned about our companies with exposure to China, and then as the virus began to spread, we looked across our coverage and really tried to figure out, okay, if things get bad in the U.S. and they would get bad in Europe, which companies will be the most impacted? Who could actually be some of the winners? That’s how we went about it. 

    Alex: And your sector was hit pretty hard.

    Leeanne: The consumer sector was hit particularly hard by the COVID disruption, so we still see attractive opportunities out there, companies that have lagged in terms of the share price recovery.

    Alex: Can you tell us about some of the opportunities you’re seeing in your sector?

    Leeanne: So, ecommerce obviously has been one of the big winners during the disruption. What we see generally is a lot of these trends that have been occurring for a few years now, the disruption only accelerated it, and that’s an example with ecommerce.
    For instance, we had an investment in a tech company that essentially operates as an operating system to help merchants set up ecommerce businesses and run their online platforms and, in addition to that, the company also provides payment services, shipping and fulfillment.
    What we saw was, as brick-and-mortar retailers and restaurants and service businesses started having to shut down their physical locations, there was a rush to sign up for online accounts and set up their storefronts digitally. So, these companies who facilitate ecommerce and provide software-priced services have seen a really strong sign-up in terms of customer growth. So that’s one way we’ve been playing the theme.

     

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    news-2024 Tue, 16 Jun 2020 15:47:57 +0200 Could the dollar lose its status as World Currency? /en/who-we-are/news/detail/could-the-dollar-lose-its-status-as-world-currency/ By François Rimeu, Senior Strategist, La Française AM. Tension in the Unites States is palpable. As the Covid-19 death toll continues to rise and anti-racism protests are held across the country, investors are asking a question: is it plausible that the dollar lose its status as the World Currency? François Rimeu, Senior Strategist, La Française AM, provides insight:

    For the USD to collapse, investors would have to believe that a viable alternative exists. And at the present time, we just do not see a currency strong enough to play that role. The next most popular currency after the USD is the EURO. However, as of the end of 2019, the EURO only represented 20.54% of the official foreign exchange reserve vs 60.89% for the USD. This breakdown has been more or less stable over the last 20 years, so there is no “momentum” in favor of the EURO. Some parties have suggested the Bitcoin as an alternative to the USD, but we strongly disagree with that option as there is no transparency, no central bank, high volatility, etc. 

    Additionally, countries like China and Japan, that are in a position to make the USD weaker given their excessive holdings in USD, are not keen on doing so as they are big exporters to the United States.  They are however slowly diversifying their economies, but it will require time to achieve economic decoupling with the US. 

    That being said, we could see the value of the USD decreasing over the medium term given the general economic context:

    • The USD is currently judged expensive if judging by classic metrics, i.e. Real Effective Exchange rate;
    • The United States is running a persistent current account deficit, which is negative for the USD.
    • Real interest rates have been steadily decreasing in the United States, touching zero in March 2020;
    • Market positioning appears to be long the USD.


    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, an invitation or a recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française AM are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-2023 Tue, 16 Jun 2020 11:24:22 +0200 ALGER Sicav-Alger Small Cap Focus Fund /en/who-we-are/news/detail/alger-sicav-alger-small-cap-focus-fund/ By Amy Zhang, CFA, Senior Portfolio Manager, Alger, a La Française partner firm 1. You were able to master the crisis well with your fund. What measures had you taken to avert a "deeper fall"?

    Since the beginning of the year, I felt as though the COVID-19 virus could spread to the U.S. Also, I felt this could be the “year for health care.” To that extent, I positioned the portfolio in a very defensive way and in a more recession-resilient sense, looking for company specific drivers that are idiosyncratic, that I believe may not be affected by macro. I was proactive and raised more cash before the correction in March, which enabled me to take advantage of volatility based on risk/reward potential.

    2. Even before the crisis, the Healthcare sector was already a key component of the portfolio. Did you give this sector an even higher weighting during the crisis?  If so, which companies are you currently focusing on in particular?

    Our largest sector weighting is still health care, which has been since the end of last year, as I thought this would be the year for health care, even before the pandemic. Diagnostic companies continue to do well, and medical devices company will be the fastest to snap back in our opinion. Specifically, we have some companies that are part of the solution doing diagnostic testing for COVID and flu testing. One example that is one of our top holdings is Quidel Corporation. Quidel is a diagnostic testing company that has a very broad platform, but really specializes in respiratory testing and the bulk of that is flu testing. They also launched COVID-19 testing recently. Overall I believe we are very well positioned with our healthcare holdings as they are both defensive and high growth, with strong fundamentals.

    3. The fund has been performing at a high level since its launch. What do you do better than other fund managers who invest in US small caps?

    I think our strong performance is a testament of our unique investment process which is very resilient, as we demonstrated outperformance both in the up market and down market. It’s an alpha generation strategy and I believe our greatest strength is stock selection with in-depth bottom up research. We invest in companies that we believe have the potential to save lives, reduce costs and improve efficiency and productivity for corporate America. A common theme of our holdings is innovation and turning data into actionable information. Our major themes include aging population for high quality health care, humanization of pets, cloud computing, 5G, automation e-commerce. We also constantly try to unearth new investment themes. I think anything that's levered to digital transformation will continue to do well in the “new normal” environment. 
     
    Another unique aspect of our strategy is that we invest in what we believe are high growth and high financial quality companies that are less economically sensitive and driven by long term secular growth. I think growth will be more scarce in this market because many companies are having negative growth. We look for companies with durable revenue growth that can continue to expand margins because we are long term and for us, it's about still investing in compounding over 3 to 5 years and beyond. We invest in what we believe are exceptional small companies that have potential to become exceptional large companies. We let our winners run so they are compounders over the years. 


    Disclaimer:
    Associated risks include: exchange rates, volatility, market fluctuations, political, social and economic risks, currency risk, risks associated with investing in smaller, newer issuers, capital risk loss

    PROMOTIONAL DOCUMENT FOR PROFESSIONAL INVESTORS ONLY AS DEFINED BY MIFID II. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments. Past performances do not guarantee future performances. Investment products referenced in this presentation are not directed at and suitable for all types of investors. Potential subscribers are requested to carefully and independently assess the legal and commercial documentation provided and notably the risks entailed and the fees. Investors are to make their own risk analysis and not rely solely on the information that has been provided to them. The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.  Where Alger has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Issued by La Française AM Finance Services, home office 128, boulevard Raspail, 75006 Paris, France, regulated by the “Autorité de Contrôle Prudentiel” as investment services provider under the number 18673 X, affiliate of La Française. 

    The prospectus of Alger Sicav (Luxembourg SICAV) was approved by the CSSF on April 17, 2020. The management company is La Française Asset Management. La Française Asset Management is a management company authorized by the AMF under the number GP97076 on July 1, 1997.
    In relation to the investment fund mentioned in this document, the latest prospectus, the KIID and the annual and semi-annual reports have been published containing all the necessary information about the product, the costs and the risks which may be incurred. The latest versions of these documents are available at: www.la-francaise.com, www.fundinfo.com, with our paying agents: BNP PARIBAS Securities Services, Via Ansperto no. 5 20123 Milan, Italy; Allfunds Bank SA Calle Estafeta 6-Complejo Plaza de la Fuente, Edificio 3, La Moraleja, Spain;; Erste Bank der oesterreichischen
    Sparkassen AG, Graben 21, 1010 Vienna Austria.

    This is an advertising document. The state of the origin of the fund is Luxembourg. In Switzerland, this document may only be provided to qualified investors within the meaning of art. 10 para. 3 and 3ter CISA. In Switzerland, the representative is ACOLIN Fund Services AG, Leutschenbachstrasse 50, CH-8050 Zurich, whilst the paying agent is NPB Neue Privat Bank AG, Limmatquai 1/am Bellevue, P.O. box, CH-8024 Zurich. The prospectus, the key information documents or the Key Investor Information Documents, the articles of association, as well as the annual and semi-annual reports may be obtained free of charge from the representative. Past performance is no indication of current or future performance. The performance data do not take account of the commissions and costs incurred on the issue and redemption of units

    Internet information for the regulatory authorities Autorité de Contrôle Prudentiel et de Résolution www.acp.banque-france.fr, Commission de Surveillance du Secteur Financier www.cssf.lu 
     

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    news-2022 Fri, 12 Jun 2020 17:58:49 +0200 Flash Subordinated Debt /en/who-we-are/news/detail/flash-subordinated-debt/ What is the outlook after the rebound? Subordinated debt issued by banks, insurance companies and non-financial companies has logically been very strongly impacted by the health and economic crisis of recent months, but has seen its valuations recover significantly in recent weeks, as per the equity and high-yield bond markets.

    On closer inspection, the picture is becoming more complex, however, with various issues relating to subordinated structures: suspension of coupon payments, exercise of call options, changes in banking regulations and legislation.

    Here we consider current market valuations, as well as issues specific to subordinated bonds and the
    fundamental trends of issuers.

    Change in total return, normalized as at the end of 2014, of the iBoxx subordinated debt indices (total
    return; in %)


    Sources : Markit, Bloomberg, La Française AM. Data as at June 10, 2020.

    As can be seen on the above graph, the performance of subordinated debt indices was quickly and heavily affected by the spread and consequences of Covid-19. Additional Tier 1 (AT1, also known as CoCos) bank bonds suffered an unprecedented 29% decline between February 21 and March 19, compared to -16% for subordinated insurance debt, -15% for non-financial corporate hybrid debt and -11% for Tier 2 bank debt over the same period (iBoxx € indices taken as a reference). The significant underperformance of the AT1€ is due to several factors, including a "High Beta" characteristic compared to other segments, higher exposure to Italian and Spanish issuers and massive repricing of the issues according to the call probability of the securities. However, during this period, we once again observed that CoCos remained more liquid in times of stress than other subordinated debt segments, and even more liquid than parts of the Investment Grade segment, despite their potentially more volatile nature.

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    news-2020 Wed, 10 Jun 2020 15:45:55 +0200 Asian Emerging Market USD credit: Liquidity vs Fundamentals /en/who-we-are/news/detail/asian-emerging-market-usd-credit-liquidity-vs-fundamentals/ By Marcus Weston, Portfolio Manager, JK Capital Management Ltd. a La Française group-member company In the second week of March this year, global credit markets went into a tailspin. As the reality of the COVID pandemic began to dawn on global investors culminating in the ominous headline that even actor Tom Hanks had contracted the virus, bond markets panicked sending the US investment grade bond market into a 6.3% drop in 10 days (as per the Bloomberg Barclays Indices), the sharpest price drop since the 2008 financial crisis. After tinkering with monetary and fiscal policy in the preceding weeks, the US acted finally decisively on March 15th with Fed chairman Powell announcing a 100bps cut in interest rates to zero and the launch of a new aggressive QE program with reportedly ‘no limit’ on its scale. With subsequent announcements of further large scale fiscal and monetary programs across the developed world, the global bond market effectively set its floor. 

    For Asia credit investors the critical question was to what extent such stimulus might translate into demand for Emerging Markets (EM) bonds? Although the Fed’s aggressive bond buying program would not be extended for foreign issuers, previous rounds of QE had clearly shown such liquidity injections often translate into a melt up scenario for EM credit. Complicating the matter in 2020, however, was that the cause of the market crisis, i.e. the COVID outbreak was still highly unpredictable. As the disease ravaged developed market economies in March and April there remained much uncertainty to what extent the outbreak would affect poorer countries with weaker healthcare systems and more fragile external liability positions. Indeed these fears were realized in April and May as, despite a stabilization of the virus in many developed countries, the outbreak significantly accelerated in EM with Brazil, Russia and India, in particular, showing an alarming growth in infections. Leading data indicators also pointed to a severe impact on EM domestic economies with India for example posting an astonishing service PMI number of just 2 for April. 

    In such an environment, one could naturally expect a bifurcation of the market with wealthy developed countries, bolstered by huge monetary stimulus significantly outperforming their poorer EM cousins with further saber rattling from the US over China’s alleged blame for the virus further dampening EM sentiment. In reality however, EM markets did the opposite with the Bloomberg Barclays dollar EM bond index gaining 7.3% over April-May compared to a 6.9% gain in US corporate bonds. Within Asia, EM sensitive countries like Indonesia and India outperformed to an even greater extent with bonds issued by the ravaged Indian economy, gaining as much as 10.9% over the same two month period. Of course not all EM performance can be celebrated with Argentina defaulting in May while closer to Asia, low rated Sri Lankan bonds massively underperformed the rebound. However a key lesson remains the continued trumping of liquidity over fundamentals and just as US stock markets have rallied to record highs during a period of economic and civil unrest so Asian bond investors should be careful not to ignore the stimulus train which has once again superseded economic reality.

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. JK Capital Management Ltd. is a limited company regulated by the Securities and Futures Commission of Hong Kong, with its registered office at Rm 1101 Chinachem Tower, 34-37 Connaught Road Central, Hong Kong.

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    news-2019 Tue, 09 Jun 2020 16:37:56 +0200 Quo Vadis "After the rebound" /en/who-we-are/news/detail/quo-vadis-after-the-rebound/ By Nina Lagron, CFA, Head of Large Cap Equities, La Française AM. The health crisis is gradually easing in the Western world, in the United States and particularly in Europe where the situation is drastically improving. With regard to the economy, the damages caused to the private sector are evident in most segments.

    However, the interventions of historic magnitude conducted by central banks and governments supported markets and enabled a significant recovery of all risky assets. The losses recorded in 2020 on the main equity indices are not comparable to those of major economic crises. This rebound is evidently supported by the inflow of liquidities, but also by the substantial decrease in interest rates in the US, and by the conviction that central banks and government will not limit the scope of their interventions to deal with the current situation and potentially upcoming corrections.

    This ‘’macro’’ approach will now need to be confirmed by the real economy and constitutes, in our view, a new phase of the financial aspect of the Covid-19 crisis.

    A financial crisis of historic proportions – phases I to III 
    Equity markets recorded their sharpest fall, with a 33.8 % drop on the € MSCI World Net TR between 19/02/2020 and 23/03/2020 . 
    Significant interventions by central banks helped stabilize the financial markets, which strongly recovered (most significant rebound ever observed, +43.5% on the € MSCI World Net TR between 23/03/2020 and 08/06/2020) once investors were convinced that government support packages were sufficient to save the economy.


     

     

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    news-2017 Tue, 09 Jun 2020 10:14:17 +0200 FOMC meeting: Market expectations may be too high and there could be a negative reaction, rising US long-term rates. /en/who-we-are/news/detail/fomc-meeting-market-expectations-may-be-too-high-and-there-could-be-a-negative-reaction-rising-us-long-term-rates/ The Federal Reserve will hold its FOMC meeting this coming Wednesday June 10th. Please find below what we expect:
  • The target range for the federal funds rate is likely to be left at 0 - 0.25%. Fed members have expressed several times their opposition to negative rates.
  • No change regarding the IOER (interest on excess reserve). 
  • No yield Curve control announcement: If it the committee’s intention to make such a meaningful announcement, we believe that their communication would have been a lot stronger and clearer. But we also think that they will leave this option open for upcoming meetings.   
  •  A worsening of macro-economic projections with a very prudent tone, continuing to note “considerable risks” to the outlook. The inflation forecast will be below target (2%) until end of 2021 at least. 
  • A dovish “dots plot” with a median dot showing no hike before the end of 2022. This is a “close call”.
  • A “wait and see” approach regarding unconventional monetary policies. We believe they would like to wait until September and for more macroeconomic clarity before committing to any new stimulus plans.
  • We have the feeling that market expectations are maybe a bit too high on this event and we would not be surprised to witness a negative market reaction on US long term rates (rates higher) during / after the committee. 


    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française AM are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-2015 Mon, 08 Jun 2020 10:33:42 +0200 As the US electoral campaign heats up, more market volatility to be expected /en/who-we-are/news/detail/as-the-us-electoral-campaign-heats-up-more-market-volatility-to-be-expected/ by Fabrice Jacob, CEO JK Capital Management Ltd., a La Française group-member company Is Donald Trump a paper tiger? This is the growing sentiment in Asia as we are witnessing his daily diatribe against the Chinese government which looks more and more like an electoral strategy to defeat Joe Biden in November than anything else. The growing aggressivity towards China, which contrasts strikingly with a lack of reaction by Beijing makes us wonder what action Trump can take against China that would hurt China enough to make it yield to Trump’s requests? And by the way, what is Trump asking from China? It is far from being clear, other than reforming its political system which, obviously, is wishful thinking. 

    One action taken in May targeted Huawei. However, the sanctions taken against Huawei had been flagged well in advance to the point that the company had plenty of time to stock up the US chips it needs to produce 5G telecom equipment. Given the damages that China and the US can do to each other if China was to react to the Huawei sanctions by banning all exports to China of US chips, we believe an agreement will likely be reached before Huawei runs out of US supplies. The fact that Huawei’s chip maker TSMC announced on the same day that it would build a $12bn fab in Arizona to manufacture chips, including most likely chips destined to Huawei, is not a coincidence. Beijing had threatened for months to roll out a list of “unreliable entities”, i.e. US companies that it was prepared to blacklist from China, and used state-controlled newspapers to whisper the names of Boeing, Apple, Cisco and Qualcomm. 

    Facing adversity from the US administration, China’s strategy is, interestingly, to adopt an open-arm policy towards US corporates. Indeed, US Foreign Direct Investments (FDI) into China are quite systematically approved and have remained remarkably stable at approximately USD15bn every year. A good example is Tesla that opened in October last year its USD5bn Shanghai factory with substantial financial incentives provided by the Shanghai municipality. On the other hand, Chinese FDI unsurprisingly collapsed from USD46bn in 2017 to USD5bn in 2019. 
     
    On the Hong Kong issue for which Beijing decided this month to promulgate a National Security law, the reaction of the Trump administration was also very vociferous, but lacking substance. Punishing Hong Kong, where 1200 American companies operate, and its 7 million inhabitants who, if anything, are more victims than perpetrators would miss Trump’s real target that is China. And hitting directly at China could backfire on the US should China take actions against US interests on its soil. In other words, China is not Iran or North Korea. China and the US need each other more than they ever did, which is the reason why we do not subscribe to the theory widely spread by media these days of a new Cold War between the two countries. 

    If Trump wanted to inflict real pain on China, there is, in our view, only one decision to make: Cut off all Chinese banks from the US dollar system. This would have a catastrophic impact on China and the Chinese economy, and it would most likely trigger a global crisis, if not a real war. As long as Washington hard-liners do not even mention this “nuclear” option, we see the ongoing anti-China rhetoric as nothing more than electoral gesturing.

    In other words, between now and November, we anticipate more and more such noise and market volatility as the US electoral campaign heats up. Nevertheless, the geopolitical context is not going to influence our bottom-up investment approach, nor will it distract us from the macroeconomic analysis we do of each country within our universe. And on that front, the post-COVID recovery is underway. Car sales in China in April were up 4.4% YoY in April and are expected to have grown by double-digit in May. Property sales in April were only down 2.1% YoY in volume, basically back to their level a year ago. During the annual National People’s Congress China announced a RMB4tn fiscal stimulus package that will bring the total financial package to approximately 4% of GDP, roughly similar to what it had been during the Global Financial Crisis of 2009. In his closing speech Li Keqiang, China’s premier made it clear that monetary stimulus was to be expected through cuts in interest rates and acceleration of credit growth. Large banks are requested by the Central government to lend 40% more this year to small and medium enterprises than they did last year. 

    Outside of China we saw interest rates cut in May by 25bps in Korea (down to 0.50%) and by 40bps in India (down to 4%). We were surprised by the Indonesian Central bank’s decision to keep its interest rates unchanged at 4.5% despite the impact COVID-19 is having on the economy. This was perhaps the reason behind the strong rebound of the rupiah. The currency gained 3.3% against the USD in May, bringing its gain over the past two months to 10.7%.  

    Source of Figures: Bloomberg

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. JK Capital Management Ltd. is a limited company regulated by the Securities and Futures Commission of Hong Kong, with its registered office at Rm 1101 Chinachem Tower, 34-37 Connaught Road Central, Hong Kong.

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    news-2009 Wed, 03 Jun 2020 12:01:11 +0200 Resilience in the face of a crisis should be anticipated /en/who-we-are/news/detail/resilience-in-the-face-of-a-crisis-should-be-anticipated/ The Covid-19 outbreak has changed perceptions of sustainability risks, broadening the conversation beyond just climate-related risks and their growing significance over time. Given the immediacy of their impact, health risks have become a major topic of debate. Surely, this newly sparked interest in the social aspects of ESG serves as confirmation that the resilience of our cities is a matter of concern for everyone. Resilience to a crisis cannot be fully known in advance, but it can – and should – be anticipated. As an asset manager with a long-term investment approach, we carefully consider the consequences that our investments may have on tomorrow’s society.

    Our responsibility is not only to manage real estate investments, but also to create the conditions for a shared future, notably bringing about the transition needed in the face of climate change and other key societal challenges.

    Real estate gives our cities their material structure and forms the very essence of urban society. It can be both the problem and the solution. To deliver returns which are both useful and long-lasting, La Française has drawn up a roadmap with social and environmental levers as the driving force at the heart of its strategy.


    We have set three clear priorities for our real estate division:

    • To reduce greenhouse gas emissions by promoting large-scale adoption of renewable energy and limiting our ownenergy consumption in accordance with the new requirements set out in the décret tertiaire (regulation relating to energy consumption reduction in the tertiary building sector in France).
    • To bring nature back into our cities in order to mitigate the adverse impact that ever-increasing human activity has on biodiversity and ecosystems– the probable cause of the current Covid-19 pandemic and previous cases of zoonotic diseases.
    • To make cities more inclusive by fostering the principle of “Living Together”, upon which any democratic society should be built.

    At La Française, our investment philosophy is not to exclude assets with the poorest ESG performance, but rather to help these investments manage their transition and ultimately improve their sustainability credentials. We make decisions to engage based on our assessment of the asset’s capacity to adapt and innovate, welcoming new work styles.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Real Estate Managers was approved by the “Autorité des Marchés Financiers” under N GP07000038 on June 26th 2007, approval (i.e. the Carte professionnelle) granted by the Paris Ile-de-France “Chambre du Commerce & de l’Industrie” under CPI N 7501 2016000 006 443 – Transactions on Buildings and Business Assets and Real Estate Management.

     

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    news-2008 Wed, 03 Jun 2020 11:28:11 +0200 Upcoming ECB meeting: Will it be a buy the rumors sell the facts event? /en/who-we-are/news/detail/upcoming-ecb-meeting-will-it-be-a-buy-the-rumors-sell-the-facts-event/ The European Central Bank will hold its press conference on Thursday June 4th Please find below what we expect:

     

    • We expect no change in the deposit rate.
    • We expect the size of the PEPP to increase from € 750bn to €1000-1250bn. This decision is the most important as markets may interpret it as a confirmation of the central bank’s independence. The size of the PEPP is important but communication will be decisive.
    • We expect to have some details about reinvestments coming from the PEPP. One could say that the PEPP is not a long-term instrument (contrary to typical QE) and that purchases should not be reinvested forever, but we do not think it is the ECB’s intention to send such a “hawkish” message considering current uncertainties.
    • We expect the ECB to include fallen angels in the PEPP; it is a close call.
    • We do not expect TLTRO terms to be changed; the tiering multiplier will remain as is. 
    • We expect macro-economic projections to be revised downwards, as already indicated by Mrs. Lagarde last week. 

    Following speeches from Mr. Villeroy and Mrs. Lagarde, market expectations have dramatically risen over the last 10 days, so it might be a “buy the rumors, sell the facts” central bank event but positioning still appears to be on the low side so we would lean towards a moderately bullish response from markets.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-2007 Tue, 02 Jun 2020 10:31:42 +0200 Small Caps for the Recovery /en/who-we-are/news/detail/small-caps-for-the-recovery/ How can investors position themselves to potentially profit from an eventual stock market recovery? We believe that small caps may outperform their larger peers on the way up.

     

    • Small caps have historically led market recoveries. Looking at the past three recessions from the market low and forward twelve months, the Russell 2000 Index has risen about 38% while the S&P 500 Index has only returned 22%, as indicated in the chart above.
    • While small caps have dramatically underperformed year to date as investors have sought out the relative safety and liquidity of larger caps, their valuations have become depressed, making them potentially attractive.
    • Small caps have underperformed so much that while they typically trade at a premium to large caps, they currently trade at a discount. That discount is the lowest it has been in two decades based on price-to-trailing earnings.
    • Investors seeking to play offense in the eventual recovery may want to consider high-quality small caps.
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    news-2006 Fri, 29 May 2020 15:24:58 +0200 Hong Kong and its National Security law: the view of a Hong Kong based fund manager /en/who-we-are/news/detail/hong-kong-and-its-national-security-law-the-view-of-a-hong-kong-based-fund-manager/ by Fabrice Jacob, CEO JK Capital Management Ltd., a La Française group-member company The recent events in Hong Kong are making headlines and have become a political tool in the hands of the Trump administration. Trying to stay as rational as possible, we wanted to share our views as a fund manager on the ground. 

    Let’s start with the background. The National People’s Congress (NPC), the legislative body of China, is about to promulgate a National Security law to become part of the Basic Law, the mini-constitution of Hong Kong. The National Security law’s purpose is to criminalise acts of sedition, secession, treason and terrorism, which is something that most sovereign countries have in their own constitution. For instance, in the U.S., treason is covered by Article III, Section 3 of the U.S. Constitution, and sedition by Title 18 of the U.S. Code of Laws. The reality in Hong Kong, however, is that when Chinese and British negotiators drafted the Basic Law, it was agreed and written black on white in Article 23 that the Hong Kong government would have to pass such a law after the handover of Hong Kong in 1997. A first attempt in 2003 to do so failed following large scale protests, and the matter was postponed sine die. In other words, twenty-three years after the handover, the city still does not have any law in place to arrest and put on trial anyone accused of such acts. 

    In mid-2019, the Hong Kong government took the initiative to draft a controversial extradition bill which led to severe chaos in the streets of Hong Kong, even after the proposed bill was finally shelved. During that period, some protesters openly fought for Hong Kong to become independent from China, some of them carrying the U.S. and British flags. The street violence also kept on escalating with some extremists taking possession of firearms and ammunitions and manufacturing explosives. Since then, many in Hong Kong were expecting the Hong Kong government to re-open the Article 23 issue to introduce a law against sedition, secession, treason and terrorism. Without warning, Beijing initiated the process during its annual NPC meeting.
     
    The method Beijing chose may look abusive as it is a promulgation by the NPC, the legislative body of China, and not the work of the Hong Kong legislature. But Beijing actually used a specific provision of the Basic Law (Article 18) that allows the NPC to bypass the Hong Kong legislature under “special circumstances”. 

    Some may argue that the timing of Beijing’s initiative is terrible. The riots in 2019 already had a devastating impact on the Hong Kong economy. Mainland Chinese tourists all but disappeared. Shopping malls and luxury shops suffered tremendously, and so did hotels, restaurants and all businesses that relate to tourism. Then came COVID-19, and with it came the lockdown of Hong Kong borders and the total obliteration of whatever business related to tourism was still alive in Hong Kong. Bringing to life the Hong Kong Security Law issue now could be seen as a provocation by Beijing that contributed to the U.S.-China relationship reaching new lows that had not been seen for decades. 

    We would argue that the timing for promulgating a National Security law was actually well chosen. The Hong Kong economy is already on its knees after nine months of chaos followed by COVID-19. The U.S.-China relations are in tatter, things can hardly get worse. And the Hong Kong general public is in dire need of long-term stability. As to the impact on the Hong Kong economy of this National Security law, we are, surprisingly, optimistic. We would argue that the recent move made by Beijing, however controversial it is, will gradually bring back the confidence in Hong Kong that mainland Chinese investors had lost over the past year. By imposing its National Security law on Hong Kong, Beijing is reducing the risk premium attached to Hong Kong assets by providing better visibility over the future of the city, and it will hopefully bring back mainland Chinese investors and tourists who have been conspicuously missing for the past 18 months.

    So what next? 

    The question of what will happen to Hong Kong after 2047 when the ‘One Country, Two Systems’ framework reaches its expiry date is haunting a lot of people. We don’t have a crystal ball, but we certainly do not subscribe to the conclusion Mike Pompeo drew which is that “Hong Kong has lost its autonomy”. Today Hong Kong still has its own judicial system, its own currency, a hard border with China, free press and no internet censorship. The Commissioner of China’s Ministry of Foreign Affairs in Hong Kong said earlier this week that the new National Security law “will not change the legal system in Hong Kong, nor will it affect the independent judicial power, including that of final adjudication, exercised by the judiciary in Hong Kong.” Let’s hope this will prove to be an accurate statement.

    The Trump administration is now threatening to remove the special status that Hong Kong had been enjoying since 1992, whereby Hong Kong is treated differently from Mainland China. Our view is that the measures to be taken will be symbolic more than anything else: Exports from Hong Kong to the U.S. that are not re-exports from China and that were exempted from U.S. tariffs until now represent less than 3% of Hong Kong’s GDP and consist mainly of postal and logistic services. Any other action taken against Hong Kong would first and foremost hurt Hong Kong people, which is not necessarily the objective of the White House, let alone the impact any measure may have on the 1200 American companies that have operations in Hong Kong.
    Another positive we see for the city is the potential listing in Hong Kong of Chinese companies currently listed in the U.S.  The Trump administration and the U.S. Senate have recently targeted Chinese companies listed in the U.S., forcing them to delist should they not comply within three years with U.S. accounting rules or not being able to prove that they are not controlled by the Chinese government. Alibaba has shown the way and has recently obtained a secondary listing in Hong Kong. We believe it is a matter of time for the other 146 Chinese companies listed in the U.S. with a total market capitalisation in excess of USD1.3 trillion to follow the trend and move their primary listing to Hong Kong, and ultimately delist from New York. As long as the capital account of China remains closed, the Hong Kong stock market will remain the best way to get access to the most prominent companies China has to offer. If anything, the unique position that the Hong Kong stock market enjoys will only be reinforced by the moves made recently by the Trump administration and by the U.S. Senate. This has been the driving force behind the share price of the Hong Kong Exchange which has outperformed the Hang Seng Index by 26% since the start of the year.
     

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report.

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    news-2005 Fri, 29 May 2020 11:37:48 +0200 The game is on /en/who-we-are/news/detail/the-game-is-on/ By Nina Lagron, CFA, Head of Large Cap Equities, La Française AM. ESG as alpha providers during crisis-ridden environments. 
    ESG stands for Environmental, Social, and Governance. Investors are increasingly applying these non-financial factors as part of their analysis process to identify material risks and growth opportunities. The SRAS-CoV2 crisis is the ultimate Litmus test for companies whose managements have integrated ESG factors. These so-called extra-financial factors are actually at the heart of the strategies of many corporates. Any organization taking a holistic approach to value creation is already on a long transformational road making it more flexible. It is hence more apt to absorb short-term shocks. Thus, any black swans can be weathered much better given already integrated flexible forward thinking. Corporates integrating ESG factors are more agile and light on their feet. 

    During the recent downturn of the equity market, strong ESG companies outperformed their peers during bearish as well as bullish markets. Admittedly, the time horizon is short, and we should be weary of generalizations. However, at year end, it will be interesting to reflect on 2020 performance.

    One might imagine that mainly technical factors such as sector biases played a role in the pronounced outperformance since the beginning of 2020. However, even when neutralized for sector biases, high-scoring ESG corporates outperform within most sectors.

    Regionally, the outperformance is more pronounced outside Europe, notably in the United States, where the inclusion of extra-financial factors is more recent and hence less mainstream.  Differences in social and environmental regulations between Europe and the United States may lead as well to more noticeable differences between companies with above-average ESG standards.

    During bearish markets, it was, in our view, mostly the strength in Social & Governance factors which led to this relative robustness: the strong management of Human Capital allowed for seamless employee protection and a reorganization process and in consequence minimized disruption. Investors felt that these companies could reopen more quickly than their peers. 

    Simultaneously, strong governance led to communicating transparently with investors and taking responsibility vis-à-vis their stakeholders. Investors were reassured and had greater visibility. 

    Many observers were surprised when high-scoring ESG companies outperformed their peer groups during the bull markets - especially as cyclical stocks outperformed defensive stocks.  

    At the trough of the market, a window of opportunity opened for ESG stocks and investors took advantage of the drop in share prices to redirect flows to ESG investments they might have missed, partly explaining the strength of the rebound thereafter.  It might be utopic to believe that the world after the crisis will be radically greener than the world before. However, if a significant proportion of government stimulus is directed towards sustainable infrastructure and e-mobility it is plausible. The climate crisis has not been put on hold by the current pandemic. To the contrary, it is now considered to be an even greater threat to Humanity. 

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    news-2003 Wed, 27 May 2020 09:55:13 +0200 The latest US sanctions against Huawei: Our analysis /en/who-we-are/news/detail/the-latest-us-sanctions-against-huawei-our-analysis/ by Fabrice Jacob, CEO JK Capital Management Ltd., a La Française group-member company On 15th May, the Trump administration slapped Huawei with further sanctions that are meant to restrain Huawei from selling products that are using its own chips, or to be more precise chips designed by its own design house subsidiary HiSilicon. From now on, any company anywhere in the world that designs or manufactures chips for Huawei and that is using either US equipment or US software to do so needs to obtain a licence from the US government before it can proceed. And most likely this licence will never be granted as an official “presumption of denial” is the starting point of the licensing process.


    Chipmakers including the largest of all, TSMC from Taiwan, all use US equipment, and some of these machines, such as those made by Applied Material, Lam Research or KLA-Tencor, do not have foreign competition. It is the same situation for Electronic Design Automation software that are necessary for design houses such as HiSilicon to design chips. This software can only be bought from Synopsys or Cadence Design Systems, two American companies.


    Is Huawei going to disappear as a result? Quite certainly it will not.


    On the chip making side, HiSilicon can always decide to replace its long-term partner TSMC with Chinese manufacturers to produce the chips – SMIC and Hua Hong Semiconductor are the first names that come to mind. Although their technology is still not as advanced as TSMC’s, we believe these manufacturers can adopt a “multiple-patterning technology” that does not require US-made equipment to deliver 12 nanometre chips (12nm) or 10nm chips that would still be acceptable for Huawei phones. It is true that the chips would not be as performant as the current top-of-the range 7nm chips produced by TSMC, however this is exactly what Intel is currently doing as it has extensively adopted the multi-patterning process at 10nm. It will still slow down Huawei’s current semiconductor speed by approximately 20-30%. In addition, the yield and capacity of Chinese semiconductor factories such as SMIC and Hua Hong are still far from being optimum, which means the cost of production might end up being higher than what it is now with TSMC as the manufacturing partner. 


    But in the end, Huawei will still be able to deliver the chips and the phones it currently sells, without using any US technology.


    Interestingly, on the same day that the Trump administration announced its latest batch of sanctions against Huawei, TSMC announced that it will invest $12bn over 2021-2029 to build a factory in Arizona, with production to start in 2024. The fact that this announcement was made on the same day is certainly not a coincidence. Our understanding is that TSMC negotiated a deal with the US government to build chips for Huawei on US soil and under strict supervision by US regulators. Whether these chips will be designed by HiSilicon or by an independent design house is a matter of speculation at this stage. But it is certainly a smart way for TSMC not to lose the Huawei smartphone chip business that represents 8% to 10% of its total sales. In other words, notwithstanding the fact that Huawei stocked up a lot of chips designed by HiSilicon and made by TSMC prior to the sanctions being announced, we believe the smartphone business of Huawei will be only slightly affected, if at all, by the latest move made by the Trump administration.


    Unfortunately, the other division of Huawei that is responsible for telecom equipment, the so-called High Performance Computing division, may not be as lucky. 
    This is the largest such company in the world. It competes with Nokia, Ericsson and with Samsung Electronics to make network equipment using 4G and 5G, and it is known for offering the most performant technology. This is the division that Trump wants to kill for fear of security breaches. It is the one that the Chinese government will defend at all costs at it is literally the flagship of Chinese know-how. The central processing units that are made (once again) by TSMC are not as sophisticated as they could be for smartphones as miniaturisation is not an issue for telecom equipment. However, these 5G machines need other chips that are only made in the US. Baseband processors are one of these bottlenecks that Huawei managed to circumvent by launching last year its own 5G baseband processor, named Tiangang and manufactured by TSMC, but TSMC uses American equipment to produce them. It is public information that TSMC and those absolutely critical US chip makers (such as Broadcom, Qualcomm, Marvell) have already provided inventory to Huawei that should last until 2021. This is when Huawei will be cut off from its critical suppliers if no agreement can be found between the US and China until then and will have to stop making 5G communication equipment.


    How has China reacted? It has threatened to take reciprocal actions against some carefully-selected US companies. Global Times, a mouthpiece of the Chinese government, has indicated that Beijing was considering banning the sale in China of all products made by Qualcomm (representing 48% of its total sales), Cisco (3%), Apple (17%) and Boeing (17%) if the US administration was to pursue on its path.

    This is the latest chapter of a story that has already created major headaches for chipmakers both in Asia and in the United States. Very likely there will be many more chapters to come.

    Informative Document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report.

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    news-1999 Mon, 18 May 2020 15:22:44 +0200 Property sales are rebounding strongly in China /en/who-we-are/news/detail/property-sales-are-rebounding-strongly-in-china/ By Sabrina Ren, Portfolio Manager, JK Capital Management Ltd, a La Française group-member company As we expected, Chinese property sales are on the rebound. Industry data show that as of 3rd May, the largest 36 cities’ weekly sales in volumes were inching back to pre-COVID-19 levels while property prices were showing remarkable resilience. As for the top 36 property developers, their pre-sales growth bounced back on a weighted-average basis to +2% in April 2020 versus April 2019. High-profile developers including Shimao, Logan, Jinmao, Yuzhou and Greentown have all announced year-on-year sales growth in April that were in excess of 40%. We expect this sales rebound to continue over the next two months given a strong pipeline of new projects launches. Meanwhile, the land market also continues to benefit from a strong momentum. According to China Real Estate Index System (CREIS), total residential land transactions in 300 cities grew by 142% month-on-month and by 24% year-on-year in value terms, which evidences how optimistic the largest property developers are about the outlook for the sector. 


    For the past twenty years, some of the most frequent questions we have been asked related to the Chinese property sector and its myth. Books have been written on this topic. We have argued for a long time that the property sector was one of the most misunderstood sections of the Chinese economy for reasons that largely revolve around the level of regulatory interventionism implemented by the Central government, by local authorities, by the Central bank and by the financial regulator that oversees the banking system. Still, we want to reiterate that the structural growth of the sector since the housing reform in the mid-late 1990s reflected the unleashed substantial pent-up demand for private residential housing, rapid income growth and ongoing urbanization which leads to rising land values. The Chinese housing market is not ONE market but hundreds of them. Therefore, a nationwide property bubble does not exist even though regional imbalance happens from time to time. e.g. undersupply in cities with population inflows and simultaneous oversupply in others. It is also worth noting that as the Chinese middle-class rises, housing has become not only a living space but also an asset class. With a high savings rate and limited investment channels, wealthier Chinese see housing as a means of storage of value, which inevitably leads to concerns about speculation. The savings rate for urban residents in China was 37.1% in 2019, while that of migrant workers was 30.2%, and 22.5% for rural residents according to data gathered by Texas A&M University. These are among the highest savings rates in the world. As a result, the Chinese government which repeatedly emphasizes that “housing is for living, not for investment” put in place Home Purchase Restrictions (HPRs) back in 2010 to curb investment demand. These HPRs vary from city to city and are frequently amended to balance supply with demand. At the moment, we see China’s property market as being largely healthy with momentum picking up post-COVID-19.

    Sources: Citi research, CREIS – May 2020

    Informative document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation, or a recommendation to invest in specific investments. The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assume any liabilities (including any third-party liability) in respect of any errors or omissions on this report. 

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    news-1993 Wed, 13 May 2020 09:44:42 +0200 The Supervisory Board of La Française Group has appointed Patrick Rivière as Chairman of the Executive Board and has adopted a new governance structure /en/who-we-are/news/detail/the-supervisory-board-of-la-francaise-group-has-appointed-patrick-riviere-as-chairman-of-the-executive-board-and-has-adopted-a-new-governance-structure/ At its meeting on 11 May 2020, the Supervisory Board of La Française Group appointed Patrick Rivière to replace Xavier Lépine as Chairman of the Executive Board. After 20 years with the Group, Xavier Lépine had decided to leave the Group to pursue personal projects, following an internal consultation process that began several months ago, in agreement with the management of Crédit Mutuel Nord Europe. The Supervisory Board has also adopted a new governance structure with the appointment of two new members to the Board. Marc Bertrand and Philippe Lecomte have thus joined Pascale Auclair on the Executive Board of La Française Group.

    As part of this new governance, Patrick Rivière, who until now held the position of Chief Executive Officer, has set up a strong management team that is more committed than ever to ensuring the Group’s success. 

    • Pascale Auclair, a member of the Executive Board since May 2018, retains her duties as Corporate Secretary of the Group and is also in charge of Research and Sustainable Investing for the Group under the new governance framework. She will continue to act as spokesperson for the Group on regulatory issues and represent the Group vis-à-vis all professional associations and market bodies. 
    • With over twenty years of experience in the Group, Marc Bertrand will steer all activities relating to real estate, including the innovation platform, which is in close synergy with the real estate business line and brings together the new activities, identified as key businesses for the future. He will represent La Française in all real estate market bodies. 
    • Since joining La Française Group in 2012 to develop the Group's international expansion, Philippe Lecomte, will take responsibility for extending the Group, both in France and abroad, while retaining responsibility for the international distribution platform. He will also be in charge of synergies with Group affiliates. He will steer the Group’s entire product range as well as its external communication.

    These appointments came into effect on 11 May 2020.

    This re-organisation comes in the wake of strong growth in 2019, with inflows of €5.6 billion. It will help the Group develop its multi-boutique model, which is now structured around two core business lines – real estate and financial assets – and an international distribution platform. 

    Despite the severe turbulence caused by the health crisis, La Française Group intends to pursue its ambitious development targets for 2020. All Group management and sales teams will continue to offer both clients and partners the same high-quality service.


    Eric Charpentier, Chief Executive Officer of CMNE declared: “I would like to thank Xavier Lépine for his valuable cooperation over all these years as well as his outstanding contribution to the Group’s expansion and his enthusiasm as a developer. I welcome the appointment of Patrick Rivière and the new management team, who will be able to best respond to the current developments and successfully continue the expansion of La Française Group.”


    Patrick Rivière stated: “Alongside Xavier Lépine, we have worked hard for over 12 years to help make the Group one of the leading European companies based on distinctive, high-added-value expertise. The Group is turning a new page, entering a new era during a time of crisis that affects us all. With this new governance framework and the refocusing of the Group’s activities over the past two years, I am convinced that our expertise in terms of real assets, credit, quantitative asset management using the Risk@Work model and sustainable investment, and the unwavering support of our teams, will be needed now more than ever to meet the needs of our clients and partners. This is a challenge that Pascale, Marc, Philippe and myself are prepared to face in these unprecedented times”.

    Marc Bertrand:  a graduate of the EDHEC business school in 1992, Marc started his career in 1994 as a financial controller in the real estate department of GAN Insurance. He joined UFG in 1999 in charge of management control. Marc then quickly took on both functional and operational roles, alternating between Group CFO and Financial Director of the real estate business unit. Marc has been in charge of the real estate activities of La Française Group since 2014, initially working in tandem and then on his own. In late 2019, the real estate business of La Française amounted to over €23 billion and had about 140 employees.

    Philippe Lecomte: with a post-graduate degree awarded by the University of Economic Science in Caen in 1991, Philippe started his career as Head of Institutional Clients when INVESCO was launched in Europe. After being in charge of development in Western Europe at INVESCO, he took over General Management at SCHRODERS in France in December 2003. Two years later, he was appointed Head of Global Financial Institution in London and joined the Executive Committee (Europe) at SCHRODERS. He joined La Française Group in 2012, in charge of the Group’s commercial development. 

    Pascale Auclair: a graduate of the IFSA business school in Lyon, Pascale started her career in 1983 at Société Générale as a bond fund manager and then at BAFIP, Cheuvreux de Virieu. In 1992, she joined Groupama where she was head of fixed income investment. Then, in 1994, she was involved in the creation of the subsidiary dedicated to the management of the Group's assets and the development of activities for external clients. In 1998, Pascale Auclair took responsibility for bond and diversified management teams. Later, in 1999, she was appointed to the executive board of Groupama Asset Management and then became Deputy Managing Director. In 2006, she joined LFP Investissements as Head of Investment Management and then, when the company merged with UFG Group in 2010, she was appointed Head of Investment Management and Managing Director of LFP, a securities asset management company within UFG-LFP Group, which later became La Française Group. Pascale Auclair was appointed Corporate Secretary of La Française Group in 2018.


    Patrick Rivière: a graduate of the IFSA business school, he started his career in 1983 at Cholet Dupont before joining Fimagest in 1985. Following the takeover of Fimagest by Générale de Banque in 1996, Patrick was appointed Chief Executive Officer of Générale de Banque Asset Management. Following the acquisition of Générale de Banque by Fortis, Patrick became CEO of Fortis I.M.  (1998-1999). In late 1999, Patrick joined Invesco, where he worked for nine years as Chief Regional Officer for Invesco Continental Europe, and then Chairman of the Executive Board of Invesco AM SA and CEO of Invesco AM SA. In 2008, Patrick joined La Française Group as Managing Director.

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    news-1989 Wed, 06 May 2020 15:09:53 +0200 Grand Re-Opening? /en/who-we-are/news/detail/grand-re-opening/ Declining new coronavirus cases in the U.S. and federal guidelines for lifting stay-at-home restrictions are allowing many states to commence or plan for gradually re-opening their economies. While we take no position on how fast states should lift restrictions and note that this is a very fluid situation, the aggregate opening cadence does have important economic implications. Percent of U.S. Population Not Under Stay-at-Home Restrictions

    • The chart above shows estimates of how much of the U.S. is not or will not be under stay-athome restrictions in the coming months. The trough occurred in April. However, with many states having seen large declines in new cases, states are increasingly lifting their limitations on working and recreation.
    • Many investors and health professionals are concerned about a second wave of infections. The risk of a resurgence is difficult to quantify. However, we can look to Europe, where some countries have started to ease restrictions or will be easing restrictions in the next couple of weeks. Alger’s investment team is actively monitoring the European situation to determine whether a resurgence occurs as well as the pace and pattern of an economic recovery in Europe as an important signal for the U.S.
    • The current “U” shaped re-opening provides some optimism for potential economic improvement as many people look to get back to work and restart their daily lives and routines. As investors, we at Alger are less focused on the shape of this curve, which is ultimately difficult to predict, and more focused on those innovative themes that we believe are durable through the current economic crisis as well as the eventual recovery.
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    news-1986 Mon, 04 May 2020 14:22:30 +0200 Is the worst behind us? /en/who-we-are/news/detail/is-the-worst-behind-us/ By Fabrice Jacob, CEO JK Capital Management Ltd., a La Française group-member company based in Hong Kong The worst seems to be behind us. The number of newly infected people has started receding in most countries around the world, hospitals are no longer the scene of apocalyptic chaos, respirators and face masks are in good supply, and everyone is now talking about deconfinement and when the reopening of the global economy will take place. China is ahead of the curve on that front. What is happening in China could well be used as a template for what to expect elsewhere. Despite the country being reopened (even though travelling from one province to another is under strict control), Chinese people remain very cautious. Traffic in public transportation is limited. Train stations are mostly empty. Property sales and traffic jams that are typical activity indicators have plateaued after starting to rise in March. Restaurants are half occupied, shopping malls are seeing traffic cut by half when compared to pre-COVID levels, and fast-food restaurants are busier on weekdays than they are over weekends. As an example, Yum China which operates Kentucky Fried Chicken across the country, is now running special promotions only on Saturdays and Sundays. Only 64% of surveyed people visited a restaurant over the month of April.

    Quite clearly, people remain very wary of a second wave of infection, and no one would blame them: The province of Heilongjiang saw a sudden resurgence of the outbreak in April that sent shivers across the country. Factories are all at work and producing as guided by the Central government, which prioritized the reopening of the economy, but the order books are not full as overseas clients remain in lockdown. We are seeing signs of inventories piling up as a result. Shopping mall owners waived rents when cities were in shutdown, but this is over now, and foot traffic remains sparse. The Central government waived all social security payments, and local authorities waived all taxes while providing subsidies to companies that could not operate during the shutdown, but this is also over. 

    As such, we believe the results of listed companies for the second quarter might be almost as bad as they were for the first quarter, even though China has reopened for business. To get back on its feet, China needs the coronavirus situation to be decisively under control around the globe, and foreign economies to reopen. Before these two conditions are fulfilled, it is our view that the Central government will not announce any powerful fiscal stimulus or any aggressive cut in interest rates. It would be a waste of ammunition. 
     So far fiscal measures have been a piecemeal of isolated efforts adding up to only 3% of GDP. So-called “helicopter money” was limited to certain cities and strictly focused on consumption such as the city of Nanjing giving away $45m of restaurant coupons to its 8.8m citizens (or less than $6 per person). Therefore, it is critical for China that Europe and the United States reopen as soon as possible to kick-start demand for Chinese products. This is when China will most likely decide to act forcefully on the monetary and fiscal fronts, with the positive impact one can expect on stock markets. 

    The good news is that this reopening is scheduled to take place in May, arguably in phases. The bad news is that millions of people who have already been let go (as in the case of the United States) or are about to lose their job when furlough comes to an end (as in the case of Europe) are not going to spend money on discretionary items. The recovery will, therefore, take a long time. It is also likely that many companies will review supply chains as the virus outbreak made them realize that their dependence on China is too risky. But this will not happen overnight as countries like Taiwan, Vietnam or Cambodia simply do not have the workforce that is required to replace Chinese labour, while India does not have the necessary infrastructure. Any changes to China-centric supply chains will most likely be at the fringe, in our views, especially for electronic consumer goods.

    In the meantime, we stick to our view expressed earlier this year that we will end 2020 with Chinese equity indices being higher than they were at the start of the year. Chinese equities have outperformed all developed markets last year and are again outperforming this year. We believe that a significant portion of the considerable amount of cash that is being printed through quantitative easing by the Fed and the ECB will be invested in Chinese equities and Chinese bonds. The country offers abundant market liquidity, a combination of sound monetary policy with positive real interest rates, a stable currency backed by a neutral current account balance and large FX reserves, a weighting in MSCI indices that keeps on rising, an economy that can withstand the current turmoil thanks to the demand of its rising middle class, and, above all, political stability.

    Moving away from China, we see two very different pictures when we look at North Asia and in South Asia. North Asia (ex-China that is covered above) consists of South Korea and Taiwan. From a pandemic perspective, these two regions did remarkably well in controlling the spread of the virus. They are often cited as role models. Taiwan (23m people) has only had six fatalities even though there has never been any lockdown, only drastic measures requiring a high sense of individual discipline. For the record, Hong Kong, where we are based, is in a very similar situation with 7m people, four fatalities only, no lockdown, closed borders and stringent social distancing measures implemented based on a remarkable sense of self-discipline. 
    From a business perspective, Taiwan and Korea are looking reasonably good: Their almighty tech sector driven by TSMC, Samsung Electronics and SK Hynix, is not showing much sign of a slowdown. These three companies have announced their Q1 numbers and their outlook for the full year, which surprised analysts in a very positive way. These three companies being dominating forces in the chip and memory sectors, they are a critical barometer for the entire tech industry. It is not a surprise to us that these markets have been outperforming emerging markets year-to-date alongside China.

    In South Asia, the picture is very different. India is in a worrying situation. The fiscal deficit of the central government was already 3.7% of GDP last year, and 7% of GDP when consolidating all states’ deficits. The government’s think tank is pushing for a stimulus package equal to 5% of GDP, but it seems to have fallen on deaf ears. So far, the only relief package provided by the government was $23bn, or 1% of GDP, which we see as being a drop in the ocean. The standard view among economists is that the Modi government is well behind the curve when it comes to taking actions and decisive measures. The Reserve Bank of India looks almost frozen at the wheel and has been looking like this for two years already, ever since the non-banking financial companies’ crisis (or NBFC) started with the bankruptcy of IL&FS. The coronavirus outbreak has only exacerbated this observation.
    In South-East Asia, we would like to highlight the differences we see between two countries that, from a distance, may look similar: Thailand and Indonesia. 

    Thailand is already suffering extensively from the coronavirus as tourism has all but evaporated. Tourism was 11.5% of the GDP of Thailand in 2019 but had ramifications across many sectors of the economy. Three fiscal stimulus packages equivalent to 13% of GDP were announced recently, adding up to the 2.6% fiscal deficit the government had already budgeted before these stimulation measures. It is not a surprise that the Thai baht has depreciated by 7.1% against the USD year-to-date. But what concerns us the most about Thailand is the long-term impact of the coronavirus on the airline industry, and more specifically the ongoing demise of budget airlines that the pandemic triggered and which the tourism industry of Thailand benefitted greatly from. Without budget airlines bringing cohorts of tourists, holiday resorts in Thailand may look very different going forward.

    In Indonesia, approximately half of the country is in lockdown. However, the Indonesian version of lockdown is not a drastic one: People can live a normal life in their villages despite these villages being under strict access control for outsiders. Bank Indonesia, the central bank, has managed to give reassurance to foreign investors who are critically important since they control 32% of the country’s sovereign debt. The central bank has embarked in a quantitative easing exercise equal to 3% of its GDP, has cut its Required Reserve Ratio for banks, and most importantly has entered into a USD60bn swap agreement with the US Fed. This was enough for the rupiah to appreciate by 10% in April after having depreciated by 17% in the first quarter of the year. These are decisive measures that give us confidence in the long-term path of the Indonesian economy.

     

    Promotional document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. The information and material provided herein do not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments. The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assume any liabilities (including any third-party liability) in respect of any errors or omissions on this report. 

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    news-1985 Mon, 04 May 2020 09:10:40 +0200 Unprecented crisis... Exceptional responses /en/who-we-are/news/detail/unprecented-crisis-exceptional-responses/ The Covid-19 crisis will unquestionably have major economic impacts. Unlike previous crises, the world is facing a slowdown and numerous health uncertainties which will impede a rapid return to normality. Various segments of our economies will remain lastingly affected. The IMF now expects a global recession of 3% in 2020 and a rebound of 5.8% in 2021. Each month of confinement erases 3% of global growth and we do not expect a strong rebound in Q2. At this point, only China and India would narrowly avoid a recession. For several developed countries, the rebound will not allow a return to Q4 2019 levels, particularly because productive investment of companies, whose financial leeway will remain very limited, will be durably impacted by the containment measures.

    To a lesser extent, there is some concerns regarding the level of consumer confidence in governments’ post lockdown sanitary measures, the deteriorated state of the labour market and, consequently, the resumption of normal consumption behaviours. Faced with these impacts, which for the time being are hard to quantify(the forecast are regularly revised downwards given the extension of the confinement period and a further deteriorating balance of risks), governments as well as central banks have acted quickly and strongly, in a coordinated manner, and will continue to adjust their bailouts to best preserve employment and protect companies.

    Macroeconomic analysis by region

    In the United States, the contraction in GDP in the second quarter is thus expected to reach -35% on an annual basis, with retail sales and industrial production in March recording their worst month since 1992. The latest PMI figures released on 23/04 show a crisis of an, immediate magnitude greater than that of 2008. The composite PMI came out at 27.4, the lowest figure since these indicators have been calculated. Growth in 2020 is expected to be around -6% and rebound to almost 5% in 2021. 

    With regard to U.S inflation, a drop of 100 and 200 bps in core and headline inflation respectively in 2020 is plausible. The amplitude is substantial and notably results from the high level of correlation between this index and the price of oil, which has been free-falling; It also stems from the decrease in flight prices in march (the virus halted the airline industry). Nevertheless, this sharp fall in inflation will most likely be followed by a strong rebound, triggered by an increase in price levels across the aforementioned sectors.

    In the Eurozone, PMI surveys recorded the sharpest fall in their history in March and are expected to fall even further in April: Italy is the most affected country, followed by Spain, France and to a lesser extent Germany and Ireland. The shock is expected to be much stronger than in 2008. GDP growth is estimated at around -7% for the year 2020 (rebound of 5% in 2021), which we believe is consistent with the leading indicators and, as a result of sectoral biases such as the weight of services in GDP, the Eurozone will ultimately be more impacted than the United States.

    In this period of confinement, the consumer inflation basket has been totally transformed, to the benefit of food and to the detriment of leisure for example. However, the European Institute of Statistics ‘’Eurostat’’ recommends that national institutes do not amend the weights of the various goods and services which constitute this basket, and ensure that obtaining a price for each product, regardless of the information channel, remains a priority. Core inflation is expected to gradually fall to 0.5%, due to the decrease in the price index of the services sector, which will only be partially offset by food inflation; while we estimate that headline inflation will fall into negative territories from next month, for a period of one year. Inflation is expected to return to pre-crisis levels from April 2021 onwards.

    The situation is significantly different in China since the confinement was ended as early as March (with the exception of Hubei and Wuhan, epicentre of the pandemic). The contraction in GDP in the first quarter thus stands at -6.8% yoy, a figure which must be analysed with some level of scepticism as difficult to reconcile with the macroeconomic data available to us. The deconfinement in this region, preceding that of developed countries, indicates that the recovery will be long and very gradual. Thus, retail sales fell by 16% YTD (as at the end of March 2020), highlighting the difficulty of Chinese consumers to return to a normal life. In addition, the collapse in global demand will hinder the recovery of the Chinese industrial activity for several months.

    Emerging countries are particularly affected because of the conjunction of the health crisis, the slowdown in world trade, and the historic fall in commodity prices.

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    news-1979 Thu, 30 Apr 2020 09:05:00 +0200 Notice: La Française Rendement Global 2028 sub-fund of the La Française SICAV /en/who-we-are/news/detail/notice-la-francaise-rendement-global-2028-sub-fund-of-the-la-francaise-sicav/ We hereby inform shareholders of the La Française Rendement Global 2028 sub-fund that the management company, La Française Asset Management, has decided to implement a net asset adjustment mechanism linked to swing pricing, with a triggering threshold for this sub-fund. This change will come into force on 4 May 2020.

    Other sub-fund characteristics remain unchanged.

    We would like to emphasise the need and importance of reading the key investor information document of the La Française Rendement Global 2028 sub-fund, which is available at www.la-francaise.com.

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    news-1977 Tue, 28 Apr 2020 17:45:58 +0200 FOMC meeting expected less eventful, Powell to reject negative rates /en/who-we-are/news/detail/fomc-meeting-expected-less-eventful-powell-to-reject-negative-rates/ With several communiques per week, the Fed has been exceptionally active in terms of communication since the last FOMC meeting held on March 15. Its primary preoccupation has been to ensure the continuous flow of credit into the real economy and that financial markets operate normally. Its primary preoccupation has been to ensure the continuous flow of credit into the real economy and that financial markets operate normally. In a nutshell, the Fed is buying more aggressively than ever, diversifying the composition of purchases and lending dollars in the US and to foreign central banks; all of these measures are undertaken in a virtually unlimited manner.
    Since the Fed has acted between meetings in such a bold way, we expect it to take a step back at this formal FOMC meeting which we expect will be less eventful.
    However, they could tweak the FOMC statement:

    • Forward guidance could be strengthened: the Fed could easily commit to not raising rates until a defined date such as 2021-year end. In the coming quarters, we expect the Fed to embrace Yield Curve Control just as Japan and Australia have done. However, stronger forward guidance would be the logical next step, before opting for Yield Curve Control.
    • It will probably comment on the Libor-OIS spread, which has started to tighten from very stressed level thanks to its measures. It could announce some extra measures to help money markets, or at least commit to pumping in more liquidity if the spread does not tighten fast enough.

    In the Q&A, Mr. Powell will likely continue to reject the prospect of negative rates. We must admit that according to our experience in Europe, the impact of negative rates on the banking sector has been far from positive! 


    Disclaimer
    This commentary is intended for non - professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-1972 Fri, 17 Apr 2020 09:58:45 +0200 La Française collective real estate investment vehicle acquires first UK asset /en/who-we-are/news/detail/la-francaise-collective-real-estate-investment-vehicle-acquires-first-uk-asset/ A La Française collective real estate investment vehicle, represented by La Française Real Estate Partners International, has acquired its first UK asset from the joint venture formed between Helical PLC and The Baupost Group, L.L.C. The recently developed office and retail property is located at 90 Bartholomew Close in the City of London, between St Paul’s and Farringdon underground stations. The property is multi let to 6 tenants from a range of sectors.

    The property, certified BREEAM Excellent, was developed by Helical PLC and completed in 2018 as part of the first phase of its mixed-use urban quarter, known as Barts Square. Originally a linoleum factory, it was rebuilt behind a retained Victorian façade and provides 24,000 sq.ft. of grade A offices across six upper floors and a retail unit of 6,400 sq.ft on ground and lower ground levels.

    The property has unrivalled connectivity due to the proximity of three key transport hubs: St Paul’s (Central Line), Barbican (Circle, Hammersmith & City and Metropolitan Lines) and Farringdon (Elizabeth Line). It is also close to Culture Mile, a new cultural area formulated around three development projects including Smithfield Market, the Centre for Music and Beech Street.

    The agreed purchase price was £48.5m and purchase reflects a net initial yield of 3.9%. JLL represented La Française Real Estate Partners International and Ingleby Trice and Fineman Ross represented the Seller.

    David Rendall, CEO of La Française Real Estate Partners International, said, “We are delighted to secure the property and grow assets under management in the UK. This follows the recent completion of an office development by La Française Real Estate Partners International at 10 George Street in Edinburgh on behalf of a Danish client.”

    Peter Balfour, Investment Director of La Française Real Estate Partners International – UK, said, “90 Bartholomew Close marks the milestone of our first acquisition in the UK on behalf of La Francaise funds and signifies the intention to grow our assets under management in the UK real estate market. We are pleased to have purchased a key building in Helical’s Barts Square estate and anticipate good growth prospects associated with the completion of new developments nearby. 90 Bartholomew Close makes a good addition to our group’s portfolio of €23 billion in assets under management.”

    Gerald Kaye, CEO, Helical, commented, “Despite operating in a constrained environment, the timing of this sale reflects my firm belief that the attraction of good quality London real estate for international capital will continue. 90 Bartholomew Close is an integral part of the Barts Square estate as it forms a recognisable landmark ‘gateway’ to the newly created public realm and retail offering.”

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    news-1970 Thu, 16 Apr 2020 17:26:16 +0200 High Yield Market update /en/who-we-are/news/detail/high-yield-market-update/ To date, the number of people who tested positive for Covid-19 is close to 2 million and the death toll exceeds 120,000 worldwide. Social distancing measures seem to be bearing fruit with a slowdown in the spread of the virus in Europe and even in the United States, which is becoming the most affected country. The situation in some emerging countries is still concerning as Turkey, India and Brazil could see a rapid increase in new cases and deaths. Europe and the United States are now examining strategies to lift lockdown restrictions, and it seems that resuming normal activities will take months, if not quarters.

    WHAT COULD BE THE ECONOMIC CONSEQUENCES OF THIS HEALTH CRISIS?
    The assessment is made even more difficult by the nature of this unprecedented shock as well as governments’ inability to put a timetable on the loosening of restrictions. As confinement extends, the predictions regarding the severity of the recession worsen. For 2020, the IMF average growth forecasts stand at -3% globally, -7.5% in Europe, and -3.2% in the United States. For 2021, it anticipates global growth to reach +4.7% in Europe and in the United States, and +5.8% globally1.

    The world will undoubtedly enter a severe recession. Social welfare systems along with political decisions will affect the degree to which public debts will absorb the shock, but households and firms will not be spared.

    CENTRAL BANKS
    Central banks are going beyond the actions taken throughout previous crises. Spectacular measures have notably been initiated by the Fed, which has increased its secondary market corporate credit facility. The initial investment of $ 20 billion in primary and secondary markets was thus increased to $ 75 billion.

    - Bonds rated BBB- / Baa3 as of March 22, 2020 and whose ratings have been downgraded to BB- / Ba3 are now eligible for purchases by the Fed.

    - High Yield ETFs, which were initially excluded, are now eligible if the fund's objective is to gain exposure to the US High Yield bond markets. This announcement, albeit not eliminating the risks of default of fragile American companies (B and CCC), remains very positive for the credit market as it alleviates the major risk of deterioration of BBB (“fallen angels”) issuers and will limit the probability of a global increase in default rates.

    THE HIGH YIELD MARKET IS UNDER PRESSURE
    Risky assets are severely penalized by the current crisis and in particular the High Yield market which is very dependent on macroeconomic data and on issuers’ solvency. Spreads on the global HY index2  have widened by more than 400 bps since the beginning of February. The emerging and US High Yield markets were more significantly impacted, with spreads widening by 430 bps and 550 bps respectively. Furthermore, the lowest rated issuers (B and below) were naturally more affected, with spreads widening by more than 500 bps for the "B" segment vs 380 bps for the "BB" segment.

    The inversion of the curves, along with the expected rise in default rates, also accentuated the underperformance of short-term bonds compared to long-term issues. This inversion of the curves also applies to BB and Investment Grade issuers.

    The Fed’s recent pledge to buy high yield bonds led to a substantial increase in valuations. 

    Source: IMF, April 2020. 
     BofAML, April 2020 La Française Rendement Global 2025 is a sub-fund of the LA FRANÇAISE SICAV

     

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    news-1959 Tue, 14 Apr 2020 17:58:17 +0200 Notice to shareholders of La Française LUX Multistratégies Obligataires (The “Sub-Fund”) /en/who-we-are/news/detail/notice-to-shareholders-of-la-francaise-lux-multistrategies-obligataires-the-sub-fund/ We are writing to inform you of the decision of the board of directors of the Company (the “Board”) to temporarily apply swing pricing to the Sub-Fund with effect as from the 15 April 2020 (the “Effective Date”) and until further notice. 1. Reasons for the application of the Swing Pricing
    The current market environment is unprecedented, with liquidity severely impacted and a strong contraction in liquidity (in particular on some bonds), resulting in respect of the prices of instruments traded by the Sub-Fund in an important gap between the real prices and those displayed by suppliers.

    Under these exceptional circumstances, and for the purpose of preserving the best interests of the shareholders of the Sub-Fund and ensuring their equitable treatment, the Board has resolved to apply swing pricing mechanism to the Sub-Fund as further detailed below.

    2. Practical information
    Swing pricing aims to protect existing or remaining shareholders of the Sub-Fund from the dilution's effects they may suffer as a result of subscriptions, redemptions and/or conversions of shares in or out of the Sub-Fund. Further details on the swing pricing mechanism can be found in section “SHARE PRICING” of the Prospectus.

    The applicable swing factor (expressed as percentage of the net asset value) shall not exceed 2%. The swing pricing threshold is set at 5%.

    The application of the swing pricing will be continuously reviewed and will be lifted as soon as it is no longer required, taking into account the best interests of shareholders of the Sub-Fund. Shareholders will be informed about the lifting of the application of the swing pricing via separate notice.

    If you require further information, please do not hesitate to contact La Française Asset Management or your financial adviser.

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    news-1958 Tue, 14 Apr 2020 17:53:19 +0200 Notice to sharehoders of La Française Lux – Multi Asset Income (The “Sub-Fund”) /en/who-we-are/news/detail/notice-to-sharehoders-of-la-francaise-lux-multi-asset-income-the-sub-fund/ We are writing to inform you of the decision of the board of directors of the Company (the “Board”) to temporarily apply swing pricing to the Sub-Fund with effect as from the 15 April 2020 (the “Effective Date”) and until further notice. 1. Reasons for the application of the Swing Pricing
    The current market environment is unprecedented, with liquidity severely impacted and a strong
    contraction in liquidity (in particular on some bonds), resulting in respect of the prices of instruments traded by the Sub-Fund in an important gap between the real prices and those displayed by suppliers.

    Under these exceptional circumstances, and for the purpose of preserving the best interests of the shareholders of the Sub-Fund and ensuring their equitable treatment, the Board has resolved to apply swing pricing mechanism to the Sub-Fund as further detailed below.

    2. Practical information
    Swing pricing aims to protect existing or remaining shareholders of the Sub-Fund from the dilution's effects they may suffer as a result of subscriptions, redemptions and/or conversions of shares in or out of the Sub-Fund. Further details on the swing pricing mechanism can be found in section “SHARE PRICING” of the Prospectus.

    The applicable swing factor (expressed as percentage of the net asset value) shall not exceed 3%. The swing pricing threshold is set at 5%.

    The application of the swing pricing will be continuously reviewed and will be lifted as soon as it is no longer required, taking into account the best interests of shareholders of the Sub-Fund. Shareholders will be informed about the lifting of the application of the swing pricing via separate notice.

    If you require further information, please do not hesitate to contact La Française Asset Management or your financial adviser.

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    news-1957 Tue, 14 Apr 2020 17:08:03 +0200 Notice to shareholders of La Française Lux – JKC Asia Bond 2023 (The “Sub-Fund”) /en/who-we-are/news/detail/notice-to-shareholders-of-la-francaise-lux-jkc-asia-bond-2023-the-sub-fund/ We are writing to inform you of the decision of the board of directors of the Company (the “Board”) to temporarily apply swing pricing to the Sub-Fund with effect as from the 15 April 2020 (the “Effective Date”) and until further notice. 1. Reasons for the application of the Swing Pricing
    The current market environment is unprecedented, with liquidity severely impacted and a strong contraction in liquidity (in particular on some bonds), resulting in respect of the prices of instruments traded by the Sub-Fund in an important gap between the real prices and those displayed by suppliers.

    Under these exceptional circumstances, and for the purpose of preserving the best interests of the shareholders of the Sub-Fund and ensuring their equitable treatment, the Board has resolved to apply swing pricing mechanism to the Sub-Fund as further detailed below.

    2. Practical information
    Swing pricing aims to protect existing or remaining shareholders of the Sub-Fund from the dilution's effects they may suffer as a result of subscriptions, redemptions and/or conversions of shares in or out of the Sub-Fund. Further details on the swing pricing mechanism can be found in section “SHARE PRICING” of the Prospectus.

    The applicable swing factor (expressed as percentage of the net asset value) shall not exceed 5%. The swing pricing threshold is set at 1%.

    The application of the swing pricing will be continuously reviewed and will be lifted as soon as it is no longer required, taking into account the best interests of shareholders of the Sub-Fund. Shareholders will be informed about the lifting of the application of the swing pricing via separate notice.

    If you require further information, please do not hesitate to contact La Française Asset Management or your financial adviser.

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    news-1955 Tue, 14 Apr 2020 16:41:48 +0200 Notice to shareholders of La Française Lux – Absolute Emerging Debt (The “Sub-Fund”) /en/who-we-are/news/detail/notice-to-shareholders-of-la-francaise-lux-absolute-emerging-debt-the-sub-fund/ We are writing to inform you of the decision of the board of directors of the Company (the “Board”) to temporarily increase the swing factor applicable to the Sub-Fund as foreseen in the general part of the Company’s prospectus (the “Prospectus”) with effect as from the 15 April 2020 (the “Effective Date”) and until further notice. The Prospectus currently foresees that the Board may apply swing pricing for the Sub-Fund but that the adjustment (i.e. swing factor) will not be larger than 2% of the net asset value. The Prospectus also foresees that the Board can raise this percentage when necessary to protect the interests of the shareholders.

    The current market environment is unprecedented, with liquidity severely impacted and a strong contraction in liquidity (in particular on some bonds), resulting in respect of the prices of instruments traded by the Sub-Fund in an important gap between the real prices and those displayed by suppliers.

    Under these exceptional circumstances, and for the purpose of preserving the best interests of the shareholders of the Sub-Fund, the Board has resolved to increase the swing factor (expressed as percentage of the net asset value) applicable to the Sub-Fund to up to 3%. The swing pricing threshold is set at 5%.

    The application of the increased swing factor will be continuously reviewed and will be lifted as soon as it is no longer required, taking into account the best interests of shareholders of the Sub-Fund.

    If you require further information, please do not hesitate to contact La Française Asset Management or your financial adviser.

    ]]>
    news-1954 Tue, 14 Apr 2020 16:22:35 +0200 Notice to shareholders of La Française Lux – JKC Asia Bond (The “Sub-Fund”) /en/who-we-are/news/detail/notice-to-shareholders-of-la-francaise-lux-jkc-asia-bond-the-sub-fund/ We are writing to inform you of the decision of the board of directors of the Company (the “Board”) to temporarily apply swing pricing to the Sub-Fund with effect as from the 15 April 2020 (the “Effective Date”) and until further notice. 1. Reasons for the application of the Swing Pricing
    The current market environment is unprecedented, with liquidity severely impacted and a strong contraction in liquidity (in particular on some bonds), resulting in respect of the prices of instruments traded by the Sub-Fund in an important gap between the real prices and those displayed by suppliers.

    Under these exceptional circumstances, and for the purpose of preserving the best interests of the shareholders of the Sub-Fund and ensuring their equitable treatment, the Board has resolved to apply swing pricing mechanism to the Sub-Fund as further detailed below.

    2. Practical information
    Swing pricing aims to protect existing or remaining shareholders of the Sub-Fund from the dilution's effects they may suffer as a result of subscriptions, redemptions and/or conversions of shares in or out of the Sub-Fund. Further details on the swing pricing mechanism can be found in section “SHARE PRICING” of the Prospectus.

    The applicable swing factor (expressed as percentage of the net asset value) shall not exceed 5%. The swing pricing threshold is set at 1%.

    The application of the swing pricing will be continuously reviewed and will be lifted as soon as it is no longer required, taking into account the best interests of shareholders of the Sub-Fund. Shareholders will be informed about the lifting of the application of the swing pricing via separate notice.

    If you require further information, please do not hesitate to contact La Française Asset Management or your financial adviser.

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    news-1953 Tue, 14 Apr 2020 16:06:40 +0200 Notice to shareholders of La Française LUX – Euro Inflation (the “Sub-fund”) /en/who-we-are/news/detail/notice-to-shareholders-of-la-francaise-lux-euro-inflation-the-sub-fund/ We are writing to inform you of the decision of the board of directors of the Company (the “Board”) to temporarily apply swing pricing to the Sub-Fund with effect as from the 15 April 2020 (the “Effective Date”) and until further notice. 1. Reasons for the application of the Swing Pricing
    The current market environment is unprecedented, with liquidity severely impacted and a strong contraction in liquidity (in particular on some bonds), resulting in respect of the prices of instruments traded by the Sub-Fund in an important gap between the real prices and those displayed by suppliers.

    Under these exceptional circumstances, and for the purpose of preserving the best interests of the shareholders of the Sub-Fund and ensuring their equitable treatment, the Board has resolved to apply swing pricing mechanism to the Sub-Fund as further detailed below.

    2. Practical information
    Swing pricing aims to protect existing or remaining shareholders of the Sub-Fund from the dilution's effects they may suffer as a result of subscriptions, redemptions and/or conversions of shares in or out of the Sub-Fund. Further details on the swing pricing mechanism can be found in section “SHARE PRICING” of the Prospectus.

    The applicable swing factor (expressed as percentage of the net asset value) shall not exceed 2%. The swing pricing threshold is set at 5%.

    The application of the swing pricing will be continuously reviewed and will be lifted as soon as it is no longer required, taking into account the best interests of shareholders of the Sub-Fund. Shareholders will be informed about the lifting of the application of the swing pricing via separate notice.

    If you require further information, please do not hesitate to contact La Française Asset Management or your financial adviser.

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    news-1952 Tue, 14 Apr 2020 10:40:01 +0200 The Opportunity in Correlations /en/who-we-are/news/detail/the-opportunity-in-correlations/ When investors are anxious and fearful, they often make wholesale decisions to raise cash or reduce risk. These types of actions often cause correlations among securities to increase, potentially creating opportunities for investors.

    • When investors indiscriminately sell (or buy) equities, correlations among stocks rise. The chart above shows that during the recent pandemic-related panic, correlations soared to the highest level that we have seen in at least a quarter of a century.
    • When stocks are moving in sync with each other, some may be mispriced. Attractive stocks may go down with lower quality stocks as investors eliminate the good with the bad.
    • Investors may want to consider this a good opportunity to “trade up” in quality and buy the companies with the best management, strongest competitive advantages and most innovative products or consider allocating to active managers who may be able to pick winners from the carnage.
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    news-1946 Fri, 03 Apr 2020 09:14:31 +0200 What could be the economic cost of this health crisis? /en/who-we-are/news/detail/what-could-be-the-economic-cost-of-this-health-crisis/ Government and central bank stimulus packages have prevented market dislocation.
  • Liquidity remains a major issue and adversely impacts valuations
  • We remain cautious in the equity and emerging markets and favour investment grade corporate bonds and financial subordinated securities.
  • COVID-19 ASSESSMENT

    To date, the health situation has been evolving without much surprise. Although some scepticism concerning the current state of the epidemic in China is necessary, it seems that Europe, especially Italy and Spain, drew the necessary conclusions from the Chinese situation. The United States is now preparing adequately to face the peak of the epidemic within the next two weeks.

    WHAT WILL BE THE ECONOMIC CONSEQUENCES OF THIS HEALTH CRISIS?                    
       

    For economists, it is time to assess the cost of the crisis, its impact on the balance sheet of banks and that of businesses, sector by sector, and of course on public deficits. These estimates, as well as the impact on households via the unemployment rate, are to be modelled according to the budgetary stimuluses already announced as well as the social shock absorbers which vary enormously from one country to another. The scenarios anticipate a global recession in 2020 despite a vigorous economic rebound between April and July, depending on the speed of deconfinement of each country. The forecasts are between -2.7% and -4.5% for the Euro zone, -2% and -6.4% for the US, between + 1.5% and 0% for China which would result in negative global growth in 2020 of approximately -2.5% on average1.
    From a political point of view, in the euro zone, the speed of budgetary commitments has been beneficial, but we may regret that the euro zone seems to have once again missed a chance to evidence real cohesion. We anticipate that the stimulus packages will go beyond recent announcements and we can only hope for some large scale coordinated actions, which could mark a turning point in terms of European coordination

    CENTRAL BANKS’ INTERVENTION

    The intervention of central banks will have been effective in avoiding the total dislocation of the markets. They evidently remain fragile and liquidity is persistently very low in most asset classes, from those typically characterized as illiquid to certain government debt markets, such as Italian or Spanish debt on which transactions of a few million euros are still difficult to execute.

    WHAT IS THE RIGHT POSITIONING? 

    After the shock, the forthcoming period will require the valuation of each asset class according to the specific consequences of the crisis. It seems to us today that the rebound in the equity markets, which in the United States far exceeded the lows of December 2018, is excessive. We also continue to be cautious about emerging countries, which will continue to be affected by various adverse factors. On the credit market, we favour the financial subordinated debt market as well as the Investment Grade segment on which the primary market is reopening and offers real opportunities, as it was the case in January 2009 at the end of the crisis financial.

    Completed by Jean-Luc Hivert, Chief investment officer of LFAM, on April 1st, 2020 

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    news-1942 Wed, 01 Apr 2020 09:35:05 +0200 There is no Planet B /en/who-we-are/news/detail/there-is-no-planet-b/ global health crisis is spreading exponentially – how far, and for how long, no one knows – in a world where both economic activity and financial markets are globalised. Only one thing is certain: the situation we find ourselves in is unprecedented, and everything we say or do could turn out to be right or wrong, depending on the health parameters, then the policy parameters, currently unknowns. In concrete terms, the flight-to-quality concept has not quite panned out this time. The German Bund has also plummeted amid fears of budget deficits and the 'bazooka' support policy implemented by the ECB. This suggests that the zero long-term rate policy could end if not enough investors bite. Maybe now is the time to accept refuge as the place where people find their tribe, where they feel accepted. As such, refuge becomes temporary and relative. As it goes for the health, so it goes for financial markets.

    This major crisis is a speeded-up version of the scenario we thought would unfold over the next 15 years. Lest we forget, when climate scientists warned us in the 2000s about the consequences of climate change in 2100, political and economic decision-makers were close to zero on the sensitivity scale. The preference for the present was "humanly, economically, and politically" dominant; a present value, mathematically speaking, of close to 0: (1+3%)ˆ-100 = 5% [where 3% is the very-long-term nominal rate of return]. Since COP21, climate scientists have
    managed to convince politicians of the climate emergency by referring to 2030, inferring a present value that then jumps from 5% to 65% or (1+3%)^-15. From this abrupt acceleration in present value, either by becoming "ethically" aware or by simply anticipating that the game now in development will have new rules, economic players (in a growing majority) are incorporating these parameters into their strategy. The energy transition and the environmental transition (relocation, short supply circuits, local preferences, etc.) are becoming essential questions. If you recall, the cost of this transition, at least the carbon side, is estimated by the IPCC at €50 per tonne of CO2, or €2 trillion in investments each year, equivalent to 2% of world GDP! Based on this, we have said that such financing would require managing long-term interest rates so they stay low for a minimum of five years, and more likely close to 10 years – long enough for the first investments to turn a profit and for inflation to rear its head (as globalisation has had the beneficial effect of driving the price maker concept right down). By the same token, in the developed countries, the social unrest spurred by globalisation is questioning democracies more and more, and the "S" measures that are part of SRI and ESG seem much too anaemic to resolve inequalities which have sometimes become intolerable (in 40 years, consumer prices have risen 3.5 times and the French minimum wage 4 times, but residential real estate prices have risen 10-fold in in-demand areas and the MSCI total index has increased by a factor of 33).

    In mediating between short-term economic yield in a given competitive environment and sustainability, the two major challenges for businesses are organising a new, partially "deglobalised" supply chain and, more broadly, complexity in reframing the concept of productivity and capital efficiency, now that the ultimate Corporate purpose is no longer solely profit.

    Except in its sudden and universal onset, the health crisis fits into the same rationale of externalities that, in this case, had never been factored into economic arguments, financial equilibrium, or political agendas... And its present value is 100!

    The worst-case scenario must be considered, if only because it will be included as an assumption in government decisions so that it can be avoided. In concrete terms, over the first two quarters of 2020, global production will crumble by 30-40%, and if things do pick up in the third and fourth quarters, global production will be down 20% for the year as a whole.

    However long this health crisis lasts and however far it reaches, it is not much of a risk to assert that "whatever the cost", the States and the Central Banks will do their part to support their people and their economies, but also that economic and social models will be thoroughly overhauled. As to the climate emergency, which would involve complex trade-offs between the "relative" urgency, its cost, and the loss of competitiveness among domestic and international competitors depending on how sensitive they are (by dint of their national regulations; see climate sceptics and other Trumpian mindsets), it now seems certain that health-related externalities will be recognised on an entirely different scale, challenging the "old-world" models.

    "I’m afraid of the clean slate, but also of its opposite: that fear passes in vain, without leaving a trace behind it. " Paolo Giordano (Contagions)

    While it is highly likely that the measures to ensure liquidity will be effective, the next question will be solvency; then orders and business capital, though, paradoxically, the widespread efforts at support may give a leg up to free riders, i.e. businesses or sectors that would no longer have a place in this new world, resulting in high inflation and ultimately a major social and political crisis.

    The response has been massive, both from the Central Banks and from the States, but the fundamental question that remains is, how differently will our economies be organised, on the other side of this crisis?

    Can we accept the idea that, once the health crisis is over, we will be in a new era, and that we will be moving into a wartime economy, where, just as at the start of the '40s in the United States, the industrial base must be structurally realigned: as such, the increase in healthcare spending that was taken as bad news, and the increase in auto sales as good news, would no longer be the right formula? While the soldiers on the front lines are those with the highest added value?

    The “S” in ESG must from now on include healthcare: though we often ran into trouble mathematically quantifying the social in ESG, what is now clear is that healthcare will dominate the approach, just as much as the environment.

    Still, while this health crisis creates an immediate and worldwide drop in demand and supply alike, and if it seems plausible that the global organisation of overconsumption will not carry on as it was, the essential question is, what will replace it?

    While today, all governments (and Central Banks) are adopting a policy of support for their economies through extraordinary fiscal and/or monetary policies, not all countries are in a position to do so in any lasting way – specifically within Europe, where many States, and not just the smaller ones, were already deep in debt.

    This new economy will prioritise healthcare: health, the services that revolve around it, food, sanitation, education, artificial intelligence and, more generally, virtual (rather than physical) travelling, which presumes converting a portion of industry whenever possible, just as in a wartime economy, and revaluing the social model to benefit these populations.

    The issue of the S standing for Solidarity is becoming the essential question!

    In an optimistic view, even though it is desired by the Secretary-General of the OECD and many economists, we can hope that States will implement a Green New Deal and a worldwide Marshall Plan in the interest of solidarity in establishing the new world “of relocation and decarbonisation" and even if we are incapable right now of quantifying the cost of such adaptation (including the socialisation of the financial consequences of the crisis), there are two fundamental departures from previous crises: there has been no physical destruction and, since the crisis is not financial or economic in origin, if the health crisis does not last too long, the majority of States will have succeeded in limiting the damage in terms of business failures. The recovery would be costly but timelimited, the colossal cost being the cost to transform our economic and social models.

    In an approach that is, at this stage, sadly more realistic, we can reasonably expect that after the health crisis, stimulus plans will be highly nationalistic, with a very marked priority for the short-term, considering, quite mistakenly, that the climate change problem has been partially solved because of the drop in consumption, changed behaviours and relocations that will occur. Deglobalisation, which is already a matter for debate, will accelerate by necessity, but the answers will often be nationalistic, keeping local economies afloat (including nationalising airlines and other key employment segments, depending on the country). Many already debtridden States will use up their last resources supporting their population in the short term, and overall the "system" will end up even more depleted. In Europe, the "nationalist" stance of Germany, which has announced its stimulus plan and, so far, refused to set up a Europe-wide Marshall Plan / New Deal, is the perfect example.

    It is true that the differences in social systems by country can only result in different treatments, at least initially. France has a strong protection system (unemployment and partial employment), while at the other extreme of the developed countries, in the US, the jobless rate will soar from 3 to 20% of the active population, with weak protections in place – and a jump in weapon sales, because, well, you've got to make a living.

    Clearly it is too soon to tell which way the scales will tip – utopia or dystopia? In the best possible scenario, the shock of the health crisis creates a virtuous circle in the long term, with a sharp redirection of our economies towards an approach where negative externalities (health, environment, society) are factored in when organising the way the global economy works (relocation, decarbonisation). In the worst possible scenario, national pride carries the day, Europe and its single currency shatter, long-term interest rates spike for lack of long-term investors,
    short-termism has drained financial resources, and the planet surely but (somewhat more) slowly keeps heating up, due to a lasting and virtually global recession as a result of the combination of these factors.

    Somewhere between these two extremes, which is most likely, we must hope that the economic transition that will ensue has enough impact so that the delay we will be facing in the environmental transition is manageable. For if there is an environmental crisis, we have no States, no Central Bank and no Planet B.

    So the answer lies mostly in the hands of the States, the Central Banks (as well as the people), and solely in their ability to adopt a form of solidarity that, from the outset, looks less optimal for the State that supports the other States; in other words, in their ability to invest together in the medium term. Historically, there are examples of long-term challenges, but rarely short-term (including, recently, that mask-buying business).

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    news-1940 Tue, 31 Mar 2020 17:35:53 +0200 How will the post Covid-19 world look like? /en/who-we-are/news/detail/how-will-the-post-covid-19-world-look-like/ The 2019 YE stock market rally came to an abrupt halt only a few weeks into the year of the Rat when enthusiasm about a political and economic normalization was douched by the spread of a new corona virus: Covid-19 halted literally overnight first the Chinese economy and then the rest of the world. As we write, close to 3 billion people1 are under a stay at home order, over half a million have been officially tested positive2 and over 24,000 have died3. No vaccination or effective early stage drug are in sight. The stock market has reacted with the most abrupt selloff ever due to the depth, breadth and magnitude of the health crisis as well as the lack of visibility of its duration. The response of the Central Banks and governments has been as well unprecedented: literally unlimited means are put to work to support every single lever of the economies around the planet. Interest rates levels have been pushed even lower and have hence enhanced the long-term attractiveness of the equity market. Despite the severity of the crisis and the lack of visibility as to its duration, we believe to have identified some sectors which could benefit from the current meltdown and the post Covid-19 world.

    The graph below illustrates the relative outperformance of sustainable companies during the downturn:

    High-emitting companies underperform globally (excluding the energy sector)

    Source: Inflection Point by La Française. March 23rd, 2020. The Carbon Factor is defined as Carbon Intensity = Carbon Emissions Scope 1&2 in tCO2e divided by revenues in euros. Within each ICB super-sector we take the top 10% of carbon intensity and compare to the rest of the market. MSCI ACWI excluding oil & gas sector.

    While we cannot be sure yet about the long-term performance impact of the crisis, this early finding is encouraging and corroborates our findings that sustainability and climate change consciousness play a significant role in influencing stock valuations.

    Written on March 26 2020 by Nina Lagron, CFA, Head of Large Cap Equities

     

    1Source: The New York Times, March 26,2020. 2Source: Forbes, March 26,2020. 3Source: BBC, March 27, 2020

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    news-1936 Fri, 27 Mar 2020 16:53:10 +0100 La Française and sustainable investing /en/who-we-are/news/detail/la-francaise-and-sustainable-investing/ by Roland Rott, Managing Director of Inflection Point by La Française & Perrine Dutonc, Groupe La Française Advisor. .    How can ESG criteria enrich financial analysis? 
    ESG criteria complement the financial analysis by adding different perspectives to the financial statements. In particular, they shed light on environmental, social and governance issues not traditionally covered by financial analysis. They enrich the analysis for three reasons: (i) a time horizon geared towards the long term, (ii) an attempt to capture the impact of externalities and pending regulatory change, and (iii) a framework for assessing intangible assets like human capital, customer loyalty or brand value. Depending on sector- and company-specific circumstances these additional factors have the capacity to significantly alter the outcome of the financial analysis, for example, through revised revenue forecasts, margin assumptions, asset valuations or discount rates.

    .    What changes will the new European regulation imply for fund managers and investors? 
    New regulation if applied to all EU countries will level the playing-field between the different actors and provide a common understanding of sustainable finance, green activities or SRI funds. However, so far there are many different attempts to push forward national definitions instead and influence the EU regulation. So hopefully down the line, the outcome will bring clarity and a more harmonised approach, but this is not what we are observing today. While we support the need for harmonised regulation at the EU level, we are mindful of the unintended consequences in terms of limiting innovation and the regulatory burden on fund managers and investors.

    .    Will fund managers be required to have a portion invested under ESG criteria? 
    Funds managers will not have the obligation to invest a portion according to ESG criteria but there will be a push on the demand side from clients, and most probably a request from regulators to explain why they do not factor in ESG considerations.

    .    How can SRI change the investment world in the next five years?
    Sustainable Investment can make a crucial change by shifting capital to sectors needed in a low carbon economy world and away from the most carbon-intensive ones. Climate change is the number one real-life topic for SRI to make a measurable impact.  Including ESG criteria massively into investment decisions will help to foster the just transition needed across the world. Therefore, we expect that the investment world will fully embrace Sustainable Investment in order to remain relevant for society. The current sanitary crisis is a massive and immediate inflection point with a global reach. Sustainable investing gives more chance to assess the future impact of negative externalities that must be integrated when assessing a corporate strategy. 

    Disclaimer
    This commentary is intended for non-professional investors only within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. Inflection Point by La Française Ltd, a company incorporated under English law and registered under number 08773186.

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    news-1934 Fri, 27 Mar 2020 10:18:01 +0100 La Française Multistratégies Obligataires, Best performing fund over 5 and 7 years in Rates Long/Short category /en/who-we-are/news/detail/la-francaise-multistrategies-obligataires-best-performing-fund-over-5-and-7-years-in-rates-long-short-category/ This year’s Hedge Fund Journal’s Ucits Hedge Awards celebrated the industry’s top performing managers. La Française Multistratégies Obligataires, co-managed by Maud Minuit and François Rimeu, was awarded for the third consecutive year best performing fund over 5 and 7 year periods in the Rates Long/Short Category. Best performance is defined as the best risk adjusted return applying the Sharpe Ratio.

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    news-1921 Tue, 24 Mar 2020 17:39:32 +0100 Update on the impact of the coronavirus crisis on fixed income and equity markets in Asia /en/who-we-are/news/detail/update-on-the-impact-of-the-coronavirus-crisis-on-fixed-income-and-equity-markets-in-asia/ by Fabrice Jacob, CEO of JK Capital Management Ltd., based in Hong Kong Asian bonds suffered severe price falls last week as a wave of de-risking swept across global markets. As cases and fatality rates of the COVID-19 virus began to accelerate across the world and the majority of western developed economies began to implement aggressive lockdowns of their populations, the stark reality of the economic impact of disease began to take root. The Asian USD bond asset class which had managed to trade through the initial China outbreak with a degree of relative stability and even outperformance in February and early March, began to see a significant pick up in volatility last week following the sharp asset price devaluations in US and Europe. Concerns over the potential unwinding of leveraged hedge funds positions exacerbated the situation, particularly in the US where large ETF exposure to the US bond market resulted in a significant increase in indiscriminate selling of both high yield and investment grade bonds. Meanwhile the ability of sell side institutions to provide market liquidity buffers has been severely limited on the account of Dodd Frank rules, imposed in the wake of the 2008 financial crisis. Unsurprisingly, in such an environment, fixed income assets have begun to see their prices meaningfully diverge from fundamentals and despite signs of a stabilization of the virus outbreak in China, any outperforming sectors in Asia have unfortunately provided little relief from a global bearish sentiment and liquidity driven sell off.

    However, it should be noted that, however tragic the news flow appears now, markets will ultimately find their floor when the virus inevitably stabilizes, particularly given the massive levels of monetary and fiscal stimulus at virtually every major financial hub in the world. In one encouraging sign in the Asian high yield market, we have started to see announcements of corporate bond buy backs and while these bids have so far come at significant discounted valuations, this trend proved to be one of the key catalysts of driving eventual market stabilization during the similar market crash of 2008. With poor liquidity dominating through global credit markets, as evidenced by extremely wide bid/offer spreads, maintaining a strict focus on corporate fundamentals and maintaining dispassionate stance asset price valuation will ultimately prove to be a key determinant in navigating these extremely challenging times.

    The situation is slightly better on the equity front as the main equity markets across the Asia region have remained highly liquid. The A share market of China (Shanghai and Shenzhen) is outstanding in this regard, outperforming very significantly the rest of the world so far this year. It is worth remembering that the A share market is largely domestic-driven (foreign participation remains in the single digits), and that China is ahead of the world in fighting the coronavirus. The Chinese government managed to re-open approximately 80% of its economy after more than two months of lock-down and is focused now on economic stimulation. As Bloomberg put it in an article on 23rd March, “China is swimming in cash with cheapest funding since 2006”, which is in sharp contrast with the situation in the US where the yield gap between US commercial paper and risk-free rates is at its highest since the 2008 global financial crisis.

    Hong Kong, Taiwan and Korea have also remained very liquid as local investors in these markets (both retail and institutional) tend to be very cash rich. They are attracted by what they might perceive as being a once-in-a-decade buying opportunity. In other words, any foreign investor who wants to sell any of these markets will probably find a local buyer. The stability of the Chinese RMB and of the Taiwanese dollar are other reasons why these two markets are relative safe haven.

    It is in South East Asia (India, Indonesia, Thailand, Malaysia, Philippines) that the situation is more complicated as the currencies of these countries have suffered strong bouts of depreciation over the past few days, triggering intense selling pressure from overseas investors without much of a local bid. A number of companies in these markets went limit-down day after day, and saw their trading suspended as a result, even though an oil price at $22 a barrel should be a reason for them to celebrate. These markets could be described as being totally dislocated, valuations being meaningless. This explains why China funds are typically outperforming Asia funds these days.

    The critical question on everyone’s mind is whether we are going to see a second wave of outbreak in China. Unfortunately, the situation in Korea, Singapore and Hong Kong has deteriorated over the past few days as nationals of these countries came back home from Europe, brought back the disease and disregarded quarantine discipline.

    However, the situation in China seems to be under control, and that is the most important news for the rest of the world that is watching closely as it stands on the edge of a precipice.

     

     


    Promotional document for non-professional investors as defined by MIFID II. The information contained herein is issued by JK Capital Management Limited. The information and material provided herein do not in any case represent advice, offer, solicitation or recommendation to invest in specific investments. The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.  To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. 

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    news-1920 Tue, 24 Mar 2020 14:49:50 +0100 What kind of sectors could benefit from the coronavirus crisis? /en/who-we-are/news/detail/what-kind-of-sectors-could-benefit-from-the-coronavirus-crisis/ By Nina Lagron, CFA, Head of Large Cap Equities, La Française AM. 1.- What kind of companies or sectors do you think could benefit from the coronavirus crisis?


    We believe that the most significant long-lasting effect will be felt in the technology sector as digitalization is going to play a major role in the post Covid-19 world.
     
    We believe hyperscalers, data center providers, communication infrastructure software providers, cybersecurity, digital gaming and other streaming entertainment companies, online education and the outdoors to indoors movement players are the main beneficiaries of the current confinement period. 

    2.- Why do you think they will benefit?


    The current sanitary crisis will have long lasting effects on how work is organized. During the current confinement period corporates are forced to operate with a close to 100% work-from-home setup. Until recently in many countries work from home was still not deployed largely. 

    As the confinement period gets longer the communication and collaborative software infrastructure needs to be more comprehensive, and more specific/customized. 

    We believe that the normalization out of the confinement will be very slow and gradual and corporates will continue to work for many months offsite. Once this modus operandi has proven to be resilient during the crisis period corporates might allow workers who have requested to work from home for many years to continue to work off site. 

    Software companies that allow collaborative work will see significant growth which should last over the long term. 

    This move to the home office as the new norm will increase the demand for cloud space from which the hyperscalers as well as the data center providers should benefit. 

    Cybersecurity will become even more important in this setup as absolutely all exchanges of information are done via online applications.

    Gamers are currently discovering streamed games and the switch towards streaming and mobile gaming is certainly going to be accelerated and growth should be strong over the medium-term period.  

    The entire entertainment sector’s move to digital apps is being accelerated as well: downloadable books, podcasts, audiobooks and off course movie streaming are seeing massive tailwinds. Our guess is that a significant proportion of new subscriptions to streaming services will not be cancelled after the crisis as convenience and user experience prevails  

    The current confinement period allows for a formidable real-life laboratory for online education across all classes and ages. Until now, online education was rather a tool for university level education. Now it is even deployed for primary schooling. Whilst face to face teaching can never be entirely replaced, more digital applications will be deployed in the future. 

    Last but not least many consumers are trying to reproduce indoors what they usually love to do outdoors. Typically, within sports this outdoors to indoors move via IOT will create a whole new way of doing sports and communicating about it.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-1914 Mon, 23 Mar 2020 09:44:12 +0100 Notice: La Française Rendement Global 2025 sub-fund of the La Française SICAV governed by French law /en/who-we-are/news/detail/notice-la-francaise-rendement-global-2025-sub-fund-of-the-la-francaise-sicav-governed-by-french-law-3/ We hereby inform shareholders in the La Française Rendement Global 2025 sub-fund that the management company, La Française Asset Management, has decided to implement a net asset adjustment mechanism linked to swing pricing, with a triggering threshold. This change will come into force on 24 March 2020.

    Other fund characteristics remain unchanged.

    We wish to underline the need and importance of reading the key investor information document of the La Française Rendement Global 2025 sub-fund, which is available at www.la-francaise.com.

    The Prospectus, the Key Investor Information Document, the articles of association and the latest financial reports are available free of charge, in paper form at the registered office of the SICAV and at the German paying and information agent BNP Paribas Securities Services S.C.A. Zweigniederlassung Frankfurt am Main.

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    news-1912 Fri, 20 Mar 2020 16:52:44 +0100 Beyond the uncertainties /en/who-we-are/news/detail/beyond-the-uncertainties/ Revaluating our strategy today, to prepare the post – crisis As in previous crises, the current environment is not necessarily conducive to risk taking. However, we believe in dedicating our efforts to calmly evaluate current valuations and identify the opportunities which, as we all know, when adequately seized in these troubled times, often constitute the drivers of tomorrow's performances.

    Certain markets are showing signs of capitulation: hence the current valuations of Additional Tier 1 and HY seem low relative to their fundamentals.

    Without underestimating the major economic impacts of this crisis, the stimulus programs announced by governments and the measures put in place by the European Central Bank are likely to reassure. The ECB's March 18 announcements are further proof of this. interventionism rather than ‘’laissez faire’’ is now being advocated to revive the economy as quickly as possible, and the banking sector clearly constitutes an essential transmission channel to the real economy which will have to be preserved at all costs.
    European banks have been evolving for more than a decade in an environment characterised by heightened prudential regulation, which has substantially favoured the strength of balance sheets to the detriment of shareholders. With very favourable capital levels, they also evidence very cautious risk management which will leave no room to the infamous "moral hazard" concern, if the institutions were to strengthen the accommodative measures.

    Therefore, the financial subordinated debt market clearly constitutes a strong conviction for us on the credit market because of current valuations and extremely low levels of credit risk on the sector.
     

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    news-1908 Thu, 19 Mar 2020 09:45:01 +0100 Grocery innovation /en/who-we-are/news/detail/grocery-innovation/ People worldwide are worrying about the coronavirus and potentially stocking up on groceries. With all this attention on food retailers, it’s important to note that the grocery industry made few consumer facing innovations during the 25 years leading up to 2017. In 2017, however, Amazon acquired Whole Foods and everything changed; now grocers—small and large—are making technology improvements and harnessing the power of the internet.

    • The trend of buying groceries and prepared food online is expected to grow considerably over the next few years. When Amazon acquired Whole Foods, shockwaves surged through the industry and the incumbent large brick and mortar grocery chains realized they needed to innovate in order to survive.
    • One major initiative is click and collect, which allows customers to order groceries online or via a mobile app and then pick up the groceries pre-bagged curbside at the store. Our research indicates that in locations where this service is available, up to 8% of sales are from click and collect, with half of that figure being new business. The incumbents are also launching home delivery.
    • Amazon is developing two new grocery initiatives. Amazon Ultrafast offers grocery delivery within one or two hours. Amazon also now has two dozen Amazon Go stores; they are smaller, bodega-like stores with no checkout counter. Customers simply scan their app and pick up what they require.
    • For consumers, this new wave of innovation is a major benefit. For investors, the tectonic shift to grocery sales online presents opportunities and hazards. Historically, success in this space meant strong real estate and merchandising among other things. Going forward, success will likely be driven by innovation. In our view, those who are not innovating quickly will lose while those companies introducing new products and services to increase convenience for customers are likely to win.
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    news-1907 Tue, 17 Mar 2020 11:28:00 +0100 Covid-2019 – Communication La Française Group /en/who-we-are/news/detail/covid-2019-communication-la-francaise-group/ Recent actions taken by several European countries in the fight against Covid-19 and last night’s announcement by President Macron placing France in lockdown, signify a new stage in the crisis. To our investors and business relations, La Française would like to convey our commitment to providing quality asset management services un-interrupted.

    In accordance with professional obligations and standards, La Française has a business continuity plan that has been regularly updated and tested. Moreover, all La Française employees are equipped with the necessary equipment to work from home in the best possible conditions.

    As of today, all La Française employees are working from home. 

    With the IT organization and cyber security that we have put in place, we are pleased to inform you that even in such turbulent market conditions, we are able to ensure the continuity of our activities in asset and fund management. 

    All phone numbers remain unchanged and function. During lockdown, remote communication methods are the only option. Please do not hesitate to contact us for further information. 

    Please rest assured that La Française is taking all possible action to ensure the continued operation of its business activities. 

    We send you and your loved ones our best regards. We wish you health and serenity.
     

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    news-1904 Wed, 18 Mar 2020 09:46:33 +0100 COVID-19: liquidity management is essential /en/who-we-are/news/detail/covid-19-liquidity-management-is-essential/ In light of the rapid spread of the epidemic, European countries have confined people to their homes
  • Economies will slow down
  • Financial markets are on the verge of collapse
  • Central banks and government will implement measures to boost the economy, but it is too soon to determine whether those will be sufficient
  • In this complex environment, liquidity management is essential
  • ENTERING UNCHARTED TERRITORY…
    Governments and citizens from western countries have clearly entered uncharted territory. It took Europe a few weeks to realize that it was going to experience the unprecedented experience of severe containment, on the scale of a large part of its population. The health battle to control the spread of the virus and contain the human toll has no other alternative.

    WHAT ARE THE CONSEQUENCES?
    Financial markets are taking a major hit, proportional to the current economic uncertainties. The economy will be almost completely shut down for the weeks to come and impacts on growth, households and businesses are extremely difficult to estimate.

    IS THE CRISIS SIMILAR TO 2008?
    This crisis is radically different from 2008 but it will also lead to a global recession. Political and financial responses of last week and this weekend do not allow us to refine our figures on this point, however we can have a confirmation of the commitment of states and central banks in the management of this economic crisis. Central banks, sometimes hesitant by nature, will quickly point out that their interventions have no limit in terms of size. Moreover, measures to support economy announced by major European countries are already important, others will come and we already know that national budgets will be used massively to offset the recessive effects of this crisis.

    As in any unprecedented situation, the uncertainties are major for the economy. Financial markets need to take this into account and the result is colossal volatility. But markets are also concerned about liquidity risk, which can sometimes be more dangerous than the economic risk itself. The combination of these two risks implies very low visibility in financial markets, regardless of the asset classes considered.

    For our part, beyond the unchanging objective of protecting the performance of our funds, we are now paying particular attention to this liquidity risk on our whole range.

    Completed by Jean-Luc Hivert, Global Chief Investment Officer of LFAM, March 16, 2020

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    news-1901 Thu, 12 Mar 2020 09:24:54 +0100 Positive effect of ECB measures could be short-lived in light of coronavirus contagion /en/who-we-are/news/detail/positive-effect-of-ecb-measures-could-be-short-lived-in-light-of-coronavirus-contagion/ Expectations are high for upcoming ECB meeting. Following the massive volatility spike in financial markets over the last two weeks and the major tightening in financial conditions, expectations are very high for the Thursday ECB meeting. The negative impact of coronavirus on GDP growth is still very difficult to estimate, but European growth could turn negative this year. In that context, this ECB meeting is very significant for financial stability in Europe going forward. Here is what we expect:

    • We expect the ECB to cut deposit rates from -0.50% to -0.60%, but in the current situation this is not the most important change; we would not be overly surprised if the ECB were to keep rates unchanged.
    • We expect an increase in asset purchases, most likely at a monthly pace of 40-50bn € for at least 6 months, with a strong wording highlighting the possibility to go further if needed.
    • We expect those asset purchases to be skewed towards corporate bonds.
    • We expect TLTRO conditions to be improved relative to existing terms with targeted measures for small and medium enterprises (SMEs). The tiering multiplier could also be increased. 

    All in all, we think that market reaction could be positive for credit and peripheral spreads BUT this could be very short-term. Given the current level of uncertainty and the development of the coronavirus crisis in different countries (France, Spain, Germany, the United States..), the impact of the ECB could prove to be short lived. 
     

    Disclaimer
    This commentary is intended for professional investors only within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-1900 Mon, 09 Mar 2020 18:23:24 +0100 The worst configuration since the 1930s for the oil market /en/who-we-are/news/detail/the-worst-configuration-since-the-1930s-for-the-oil-market/ At the time of writing, the price of oil is down -18% since Friday’s close and following the decision of Saudi Arabia to start an oil-price war. In terms of demand / supply chock, this is maybe the worst configuration for the oil market since the 1930s. The IEA said today that there is already a surplus of about 3.6 million barrels a day and we estimate this oversupply could rise to more than 5 million barrels a day during the second quarter.
    Consequences: 

    • Very negative for shale oil producers in the US; we estimate their breakeven price to be between $45 and $50. The December 2020 future is currently trading at $37, meaning that most producers will not be able to survive should the price remain close to those levels. Consequently, this is also very negative for US high Yield with US High Yield Energy companies representing around 12% of the segment.
    • Very negative for break-even inflation expectations obviously.
    • Very positive for G7 bonds: This is one of the main reasons of the sudden drop is G7 rates today.

    Over the medium-term, we can also see some positive effects, especially for European countries importing most of their oil consumption.
     

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    news-1899 Thu, 05 Mar 2020 11:16:40 +0100 FED's emergency rate cut /en/who-we-are/news/detail/fed-s-emergency-rate-cut/ The FED delivered an emergency half-percentage point interest rate cut Tuesday in a bid to protect economic expansion from the threats of the coronavirus; it is the first emergency rate cut since October 2008. Our analysis is that this move is premature:

    • We are not yet capable of accurately estimating the impact of the coronavirus on the global economy. For the time being, the only worrying figure came from China with the Manufacturing PMI at 35. The other economic numbers are more or less in line with expectations and show no weakness.
    • Prior to the rate cut, financial conditions were tightening but markets were not collapsing, meaning that the FED could afford to wait for their meeting on March 18th to act and have more visibility.
    • Even if rates are higher in the US than in other developed countries, the FED does not have a lot of ammunition, so it should use it more carefully.
    • Additionally, last week central bankers were communicating that they were experiencing  a supply shock and that the response should be fiscal and not monetary. And now, the FED has done just the opposite.

    This action is a confirmation of what we learned in 2018: Mr. Powell is mainly driven by market pricing and the behavior of equity markets. We would be surprised if the Fed does not deliver what the market is now expecting on March 18th, which is another rate cut of 50bps. 

    The consequences are negative for the US Dollar, positive for emerging markets (but if we are heading to a global recession, it will not save them) and very positive for US rates.

    Disclaimer
    This commentary is intended for professional investors only within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-1897 Thu, 05 Mar 2020 10:00:00 +0100 Innovation First /en/who-we-are/news/detail/innovation-first/ What should investors prioritize when evaluating equity investments? Election results? Fed policy? Trade wars? There is reason to believe that analyzing which companies are most innovative may be a winning investment strategy. Innovative Companies Have Consistently Performed Well

     

    Data has indicated that innovation is accelerating across many areas of the economy. As a result, new products and services are diffusing through society faster, disrupting businesses at a greater pace. Companies investing the most into research and development have been outperforming.

    • Domestically focused companies that should have benefitted from trade barriers and the corporate tax rate reduction have actually underperformed.
    • In the long run, investing in innovation can triumph over short-term policy decisions. History shows that there were areas of innovation and growth throughout recessions, depressions and panics over the past 150 years (see Alger on the Money “The Resilience of Innovation”).
    • Investors may want to consider secular growth companies irrespective of exogenous factors.
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    news-1896 Mon, 02 Mar 2020 14:50:00 +0100 Coronavirus: Financial markets destabilisation /en/who-we-are/news/detail/coronavirus-financial-markets-destabilisation/ The Coronavirus epidemic has put a stop to the particularly favourable environment for risky assets since the end of 2018.
  • In addition to the human impact, this crisis will have severe short-term economic consequences. The key to determining possible market scenarios, will be to evaluate the extent to which this crisis will be hampering economic activity.
  • In this environment of uncertainty, it is necessary to act with caution and to give priority to liquid assets until the market fully considers the impacts of this epidemic.
  • Financial markets remained stable as long as the epidemic was contained within the Chinese territory but reacted negatively when global spread appeared inevitable. Beyond the health risk, the market reaction reflects expectations of lower global growth and severe downward adjustments in corporate profits.

    The unprecedented nature of this crisis makes economic and financial projections complicated.

    Beyond health developments, there are only a few concrete economic elements to rely on today:

    • The first economic indicators incorporating the effects of the epidemic were published this weekend. The Chinese PMI thus stands at 35.7, well below expectations but more importantly, at levels unseen since 2008. It is in line with a very severe scenario of instant contraction of Chinese growth. Probably around -4%.
    • Asian SME indexes published on March 2 do not show any collapse. However, this is due to the very recent development of the epidemic, and more substantial slowdown are to be anticipated throughout the second quarter.
    • In Europe and in the United States, indicators do not yet reflect the consequences of the epidemic. It will be important to monitor the production components, as well as inventory levels and procurement lead times

    The medium-term political consequences may be significant as each government will be accountable for its management of the crisis. Inadequate crisis management will have to be defended. We consider some of the political aspects to be particularly impactful for financial markets:

    • Monetary action, possibly concerted action by central banks, including the FED and ECB. This will be possible only when health information begins to translate into tangible economic data. Central banks will then be able to react to any disruption in financial markets through announcements targeting liquidity, new TLTRO, large-scale asset purchases and even rate cuts. However, they will not be able to avoid the forthcoming economic downturn.
    • A significant budgetary response. This may take longer to implement on a large scale, particularly in Europe because of governance issues. 
    • Finally, markets could re-evaluate the likelihood of Donald Trump's non-re-election, which has so far been very low. Some elements of Democratic programs may then require applying an additional risk premium to U.S. equity markets.

    Perspectives. China is currently most likely in recession and there are strong credible scenarios of global slowdown along with significant uncertainties concerning the length of this slowdown. The "U"-shaped growth scenario, with uncertainty concerning the dynamics of the recovery, is already projected by some industrialists such as BASF for whom the slowdown will occur throughout the second quarter of 2020.

    We consider that equity markets, and to a lesser extent bond markets, have for the time being only partially priced the economic and human damages of the situation and that visibility regarding the evolution of market conditions will remain low.

    Meanwhile, we should probably anticipate negative information to be released, whether it is about the spread of the virus or the economic trend, which would prevent markets from rebounding durably to pre-crisis levels. It is therefore necessary to remain cautious on risky assets.

    Assets and liquid hedges should also be preferred. Indeed, the rebounds in bear markets are often very violent and political announcements may require rapid adjustments to the exposures.

    Jean-Luc HIVERT Chief Investment Officer, Achieved 2020 | 03 | 02

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    news-1886 Tue, 25 Feb 2020 14:00:00 +0100 2019, a year of strong growth for La Française Group driven by real estate and international development /en/who-we-are/news/detail/2019-a-year-of-strong-growth-for-la-francaise-group-driven-by-real-estate-and-international-development/ La Française records inflows of €5.6 billion. As at 31/12/2019, the Group posted more than €69 billion in assets under management for third parties and reaffirms the advantages of its multi-boutique model to meet the new challenges of asset management. A clear vision of today’s challenges 

    In the global context of strong changes linked to environmental and societal challenges, in 2019 La Française reaffirmed its position as a responsible player by structuring its approach around the creation of a dedicated transversal department. It thereby proves its commitment to participating in international efforts which aim to direct capital towards financing the energy transition and reducing greenhouse gas emissions. As a responsible asset manager, La Française is convinced that it is essential to integrate these major changes. These are all opportunities to reconsider the future, by identifying new performance levers, so that savings becomes a means of taking action. This is the approach of La Française Group, made possible thanks to its extra-financial research center Inflection Point by La Française. 

    A full range of complementary expertise: the multi-boutique model

    The Group began 2020 with a streamlined structure, organised around two pillars, real estate and financial assets. It is thereby pursuing its ambitious development, thanks to a multi-boutique strategy ensuring complementary expertise and a solid foundation to the Group, all of which is leveraged by an innovation platform, which brings together the new activities identified as key businesses of tomorrow. La Française will continue to develop investment solutions based on its flagship expertise and its entrepreneurial and innovative initiatives such as the development of its BtoC platform, Moniwan, or Newtown Square and its eco-working concept.

    Xavier Lépine, Chairman of the Board of Directors of La Française Group, concludes, "The year 2019 was marked by a number of successes for La Française Group. We will pursue our development strategy in 2020, a year which promises to be full of challenges. The low interest rate environment, pension reforms and civil society’s awareness of climate issues will fundamentally change the asset management industry. The strength of our model, our commitment and that of our employees in terms of social and environmental responsibility place La Française Group in a good position to respond favorably to new challenges.”

    Focus on the Group’s results 
     
    A record year for the Real Estate pillar 
     
    La Française's “real estate” pillar posted €3.7 billion in gross inflows in 2019, 16% more than in 2018, bringing its total real estate assets to €23.6 billion as at 31/12/2019. 32% of 2019 inflows in real estate come from foreign investors, mainly from Asia. 
     
    The low interest rate environment favored investments in real estate. The European market continues to attract institutional investors as evidenced by the co-acquisition of Crystal Park in Neuilly-sur-Seine with Samsung Securities, the signing of the joint venture with the CMNE and CPPIB (Canada Pension Plan Investment Board) for the development of Foncière du Grand Paris and the co-investment in D-Square in Luxembourg alongside South Korean investors. Xavier Lépine points out, "This is proof of the installation of La Française as a key player for foreign investors: South Korea, which was the second largest investor in France in 2019, has entrusted nearly half of its transactions to the Group." The mandates signed in 2019 represent nearly €2 billion in inflows for La Française and the first weeks of 2020 confirm this trend, particularly with the signing of a mandate with PFA, the Danish pension fund. 
     
    Retail investors favored collective real estate investment vehicles in 2019, and La Française benefited greatly from this interest thanks to a complete and diversified range allowing it to reach a historical record of gross inflows with more than €1.2 billion. The attraction for unit-linked life insurance contracts suggests good prospects for La Française and its real estate offering in 2020. 
     
    Thanks to its European investment platform with management centers in Paris, Frankfurt and London, La Française signed €4 billion in acquisitions on behalf of retail funds and mandates and sold €330 million, in a dynamic European market, particularly in France with the volume of commercial real estate transactions reaching €38.6 billion (Source: CBRE). The most emblematic acquisitions included:  

    • The Watt in Courbevoie (92), offices;
    • The M in Paris (17th), offices;
    •  The Smart’Up in Chatillon (92), offices;
    • The 6B in Lyon (69), offices;
    •  The Identity 2 in Rennes (35), offices;
    •  The World Rugby House in Dublin (Ireland), offices;
    •  The Steag in Essen (Germany), offices;
    • Ansgari Haus, Bremen (Germany), offices and retail;  
    •  The Baxter Building in Amsterdam (Netherlands), offices;
    •  The Babel Community, co-living building in Marseille (France). 

     
    A Financial Assets pillar driven by strong international development 
     
    La Française’s “financial assets” pillar posted some €2 billion in net inflows, bringing its assets in securities under management to almost €46 billion, 34% of which on behalf of foreign investors. 

    With the integration of Veritas, Germany has become La Française’s second market and represents more than 12% of the group’s assets under management. The Risk@Work quantitative multi-asset model developed by Veritas is now integrated into the management process of several French funds. Management synergies are emerging and the “carbon” investment strategy, developed by La Française AM with its extra-financial research center Inflection Point by La Française, is now an integral part of a number of quantitative funds, managed by its German subsidiary, La Française AM GmbH. 
     
    Two of the Group's credit funds exceeded the symbolic mark of USD1 billion under management on 31/12/2019, confirming the appeal to investors of La Française AM's bond solutions. During 2019, La Française launched three new fixed-maturity funds, one with a low carbon credit strategy.  The group now offers investors a range of solutions enabling them to position themselves on promising strategies linked to limiting the rise in global warming. 
     
    LFIS’ assets under management increased by 6% in 2019 to €14 billion. Growth was driven by strong fund performance across the range as well as inflows into LFIS’ premia range of funds from a broader scope of clients including from Australia and Canada. 2019 also saw momentum for LFIS’ multistrategy Perspective approach and the launch of a number of new strategies expected to drive growth going forward. 
     
    Specialized in identifying and investing in management companies and technology start-ups on behalf of French and international institutions, NewAlpha recorded net inflows of more than €200 million, bringing its AUM to €2.2 billion. 

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    news-1885 Thu, 20 Feb 2020 10:45:22 +0100 Semiconductor Economies of Scale /en/who-we-are/news/detail/semiconductor-economies-of-scale/ The global semiconductor industry, which represents over $450 billion of annual sales, operates very differently from most other areas of technology. We believe the semiconductor industry enjoys a concept we call “continuous economies of scale.” This means that the larger companies become, the more their protective barriers to entry strengthen and the more their margins rise. Average Semiconductor Company Operating Margins

    • Average semiconductor company operating margins have increased from 13.7% in 1Q06 to 16.2% in 3Q19.
    • In semiconductors the slowing of Moore’s Law1 causes advances in speed or capability to require more engineering capital. This capital hurdle prevents venture capital-backed startups from creating cost-competitive products to compete against larger incumbents.
    • The investment required to produce cutting-edge silicon, a primary ingredient in semiconductors, is additive. Years of capital expenditures—on equipment, buildings and chip architecture need to be aggregated to determine the total cost of replicating a product. We think the barriers to entry created by this capital intensity can last multiple decades.
    • We believe the leaders in subsectors of semiconductors—especially in capital intensive areas like foundry—offer the potential for strong, long-term returns for tech investors. Additionally, we believe continuous economies of scale will continue to consolidate the semiconductor industry by removing subscale companies, increasing barriers to entry and improving pricing power, which should together reduce the industry’s cyclicality and improve long-term margins.

     

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    news-1881 Mon, 10 Feb 2020 10:12:24 +0100 Outlook 2020 /en/who-we-are/news/detail/outlook-2020/ From a fundamental standpoint, the global environment would benefit from interest rates remaining low on a more or less permanent basis. As such, the search for yield continues, including with respect to riskier assets.
  • Convergence towards potential growth is expected for a number of countries in 2020, with the balance of risks to the downside  
  • Hopes for a fiscal stimulus, prompted by the new leadership of the SPD in Germany and a big question mark over the USA’s ability to deliver a new tax plan before the November elections will - if they are fulfilled - put pressure on interest rates
  • The central banks, and in particular, the Fed, which relaunched refinancing operations in September - as did the ECB - look set to maintain an accommodative stance and flood the markets with liquidity
  • The recent pause in the Fed’s rate cutting programme is unlikely to be reversed, but should mean fewer rate cuts by the main emerging country central banks in 2020 (there were several in 2019)
  • In the current environment, with the USD and oil price stable, inflation should remain low in 2020
  • In the developed countries, the slowdown/manufacturing recession is still in place, and labour market performance will be key to monitoring the risk of contagion to the services sector: convergence towards potential growth is expected for a number of countries in 2020, with the balance of risks to the downside. The rise in the household savings rate alongside a steady level of consumer spending

    is a warning to be taken seriously: if this turns out to relate to precautionary savings (negative interest rates, pension reform), these will not be used to fund future spending. Protectionism will remain an important theme before the US elections, and even though tensions appear to have eased in recent weeks, it will continue to weigh on growth, the investment outlook and market volatility. The central banks will continue to factor this omnipresent threat into their balance of risks.

    With monetary policy looking likely to remain accommodative for some time to come, there are two opposing camps in the market:

    • Its virtuous effects have confused many market participants in terms of their ability to respond to the slowdown in global growth and lower inflation than deemed desirable.
    • Conversely, some investors still believe that its benefits will eventually feed through to growth in 2020.

    In our view, there are limits to what monetary policy can do, and ECB members have said as much. Fiscal policy needs to do more, especially as the message from Mario Draghi, when relaunching the asset purchase programme for an unlimited period, was to create long-term, low-cost refinancing conditions for governments. However, this will take time. Hopes for a fiscal stimulus, raised by the new leadership of the SPD in Germany and a big question mark over the USA’s ability to deliver a new tax plan before the November elections will - if they are fulfilled - put pressure on interest rates.

    With Brexit continuing to fuel uncertainty in 2020, the focus will be on the fiscal stimulus, probably more so than in the eurozone. Japan has already announced a stimulus plan. The central banks, and in particular, the Fed, which relaunched refinancing operations in September - as did the ECB (which had in fact never stopped) - look set to maintain an accommodative stance and flood the markets with liquidity.

    This was the case before and after the summer of 2019 for most insurance companies: the sharp fall in rates had a major impact on their solvency ratios that the regulators were keen to stabilise, if not increase. This led the insurers to increase the maturity of their IG* credit and peripheral debt purchases, and the banks to do the same to cover their asset/liability duration gap. These massive flows serve to limit any major tension on rates, particularly in Europe, as well as the compression of peripheral debt or IG credit risk premiums. And so, the search for yield continues, including with respect to riskier assets.

    At the end of 2019, the indicators seemed to be showing that the economic growth of emerging countries had turned the corner. The economic forecasts suggest that 2020 growth will be close to 2019 levels; quarterly performance does not point to a significant recovery. Growth in China is likely to slow slightly between 2019 and 2020. This stabilisation of growth nonetheless remains subject to geopolitical tensions, progress being made in resolving the China- US tariff war, and the continuation of accommodative policies by the central banks. The recent pause in the Fed’s rate cutting programme is unlikely to be reversed, but should mean fewer rate cuts by the main emerging country central banks in 2020 (there were several in 2019). These still have some room for manoeuvre given their current inflation levels, which are generally within central bank targets. In the current environment, with the USD and oil price stable, inflation should remain low in 2020. The results of legislative elections (presidential and local) in Argentina, India, Ukraine, South Africa, Turkey and Romania, etc. have altered expectations for future economic policy, such as in Argentina, with the defeat of Mauricio Macri and the return of the Peronists to power, and in Ukraine, with the election of Volodymyr Zelensky and the arrival of a pro-reform government.

    The major social tensions in recent months, in response to economic inequality, budget austerity, corruption and the deprivation of liberty have ramped up pressure on governments, and the repercussions for economic and fiscal policy will be seen in some countries in 2020.

    Fiscal stimuli could also play a role in the economic recovery, but remain limited in countries with a solid financial base (low debt, deficit under control, major domestic refinancing). Lastly, we continue to be positive on emerging IG* debt in hard currency.

    *IG: Investment Grade

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    news-1873 Thu, 06 Feb 2020 10:34:43 +0100 Notice: La Française Rendement Global 2025 sub-fund of the La Française SICAV governed by French law /en/who-we-are/news/detail/notice-la-francaise-rendement-global-2025-sub-fund-of-the-la-francaise-sicav-governed-by-french-law-2/ We would like to inform the shareholders of the La Française Rendement Global 2025 sub-fund that the management company has deemed it in the interest of the shareholders to extend the Fund’s marketing period by 3 months to continue taking advantage of the opportunities it presents. The Fund will thus be closed for subscription on 30 June 2020 and not 31 March 2020.

    This change will come into force on 12 February 2020.

    Other fund characteristics remain unchanged.

    We wish to underline the need and importance of reading the key information document for investors in the La Française Rendement Global 2025 Fund, which is available at www.la-francaise.com.

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    news-1871 Tue, 04 Feb 2020 11:06:30 +0100 2020: Real Estate Market outlook /en/who-we-are/news/detail/2020-real-estate-market-outlook/ 2019 was an excellent year for the real estate market thanks to lower interest rates and limited supply. 2020 should see an extension of the real estate cycle with persistently low rates, further cuts and new pockets of rent increases. In the investment market, real estate assets will continue to attract capital thanks to their resilience due to a comfortable real estate risk premium. Further yield compressions are expected in all asset classes except retail. After a fall of around 100 bps in the first nine months of 2019, prime office yields, in Europe, in 2020 are expected to decline further by at least the same amount. The alternative asset class (hotels and operated residential assets) should attract a growing number of investors as they provide diversification thanks to strong fundamentals that are uncorrelated to local economic cycles. As competition is increasing and supply is dwindling, many investors are looking abroad to increase their supply pipeline. Retail could gain new traction as the price correction movement continues.

    However, rising uncertainties and slowing economic growth in the euro zone should lead to a change in investors’ risk appetite, given the very low remuneration for risk.

    The occupier market will have to integrate the influence of social values on the spaces we use, notably the blurring lines between work and life, the development of new smart services and the need for flexibility. The office letting market, which slowed down in 2019, should land smoothly in 2020. The new year should see demand return to more conventional volumes and a real dichotomy between central and peripheral locations. Pockets of value creation persist thanks to expected rent increases in markets where supply tensions are increasing. The development of areas where the tertiary sector is part of an urban mix offers many opportunities.

    2020 will see the tightening of environmental regulatory obligations with the ongoing discussion on of the EU taxonomy and the implementation in France of the “decret tertiaire” which set-up an obligation to reduce energy consumption of tertiary building by 40% by 2030.

    Residential should offer good performances driven by the phenomenon of metropolization and the decline in the home ownership rate. The best performing assets will be those that respond to demographic changes: a more urban population with a growing number of seniors and an acceleration of the de-cohabitation phenomenon. Many initiatives should be launched to improve the solvency of households, which remain a focus of attention in most major European cities.

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    news-1868 Mon, 03 Feb 2020 15:52:55 +0100 The coronavirus and its potential impact on the economy and on markets /en/who-we-are/news/detail/the-coronavirus-and-its-potential-impact-on-the-economy-and-on-markets/ Commentary by Fabrice Jacob, CEO of JK Capital Management Limited The optimism we showed when we started the year just a few weeks ago was derailed by the new coronavirus that spread out of Wuhan since the last days of December. For having lived in the epicentre of SARS when this virus hit in 2002/2003, we remember vividly the situation on the ground, what we did with the portfolios at that time and what happened once it was all over. Unfortunately doing a parallel comparison between 2002/2003 and today would not be entirely appropriate.
     
    Starting with the virus itself, it looks like it is spreading much faster than SARS but is also far less lethal (2.2% vs 9.6% fatality rate), even though both belong to the same family of viruses. The people it has killed are almost all located in Hubei province. There has only been eight fatalities outside of Hubei, and only one outside of China. Many patients have already been cured and sent back home.
     
    Other differences are worth highlighting: Seventeen years ago Chinese people were not traveling much within China, let alone overseas. There was no social media and not much internet connectivity within the country. Information did not disseminate fast. Today it is the opposite.
     
    Seventeen years ago the Chinese government refused to face reality and tried to hide the situation as long as it could, until it could no longer. Today it wants to show the world that it is pro-active by dealing with it forcefully. One can only be impressed by the decision to lock down 56 million people, preventing virtually anyone from entering or exiting the province of Hubei, which explains why so few people have died outside of that province. Overseas it looks a bit like a competition has started between governments and corporates for who will do the most to show the world that it is taking forceful measures to bring its citizens and employees back home and prevent contamination, even if these measures could be seen as being tantamount to overkilling. And of course media love it as they bring a dose of sensationalism that can only fuel a sense of hysteria which, in turn, filters through financial markets.
     
    Unfortunately the short-term impact on the Chinese economy might be much more severe than it was in 2003, simply because the entire country is literally paralysed by the measures taken by the government at all levels. The Chinese New Year holiday was extended by ten days (so far) in 14 provinces that are responsible for 69% of China’s GDP. Similar measures that impact the supply side of the economy were never taken during SARS. 
     
    In other words GDP growth will be hit not only by a steep drop in consumption, but also by a steep drop in production, and that is new. If this extension of holiday was to be prolonged, it would be reasonable to expect a ripple effect on all countries that rely heavily on imports from China. As a result we expect the fall in GDP growth in Q1 2020 to be very significant. The February manufacturing PMI numbers will be atrocious (the January ones [50.0 for the official index, 51.1 for the Caixin index] were calculated before the lockdown). Looking at the bright side, SARS disappeared as mysteriously as it appeared after a few months. We can hope that the same will happen this time, especially given the strict lock down measures taken in Hubei province that had not been implemented in 2003. It is then our base case that activity will resume as fast as it has dropped, with the backlog of orders pushing for lots of overtime in factories.
     
    Our previous base case was that China would not stimulate its economy this year for the simple reason that it did not have any reason to as long as its growth was following a moderate declining slope. Today the situation looks quite different. Kickstart a rebound and stimulate the Chinese economy through a combination of monetary policy and personal subsidies awarded to those who are currently taking the brunt of the economic blow is a scenario that could easily gather supporters within the Standing Committee of the Politburo, even if it leads to a short-term pick up in the overall system leverage and a sudden deterioration of China’s fiscal deficit. It is certainly a scenario that we would not discount too rapidly and that would make a strong positive impact on markets. It would be all the more relevant that the global economy is in a slowdown mode and that China is facing additional headwinds from the US administration.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. The information contained herein is issued by JK Capital Management Limited. To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. JK Capital Management Ltd. Is a limited company regulated by the Securities and Futures Commission of Hong Kong, with its registered office at Rm 1101 Chinachem Tower, 34-37 Connaught Road Central, Hong Kong.

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    news-1866 Thu, 30 Jan 2020 10:00:00 +0100 Cheaper than you think ? /en/who-we-are/news/detail/cheaper-than-you-think/ Many investors now view stocks as relatively expensive because the often cited price-toearnings ratio is above historical averages. But we believe that viewpoint dismisses low interest rates. World Equity Risk Premium Indicates Stocks Are Relatively Cheap

     

    Low interest rates may be very impactful to valuations. One way to factor in interest rates is to look at the return demanded by investors above the risk-free rate, also known as the risk premium. The higher the risk premium demanded by investors, the cheaper stocks are, as indicated above.

    • Global equity risk premiums are close to the highest they have been in two decades, including the Global Financial Crisis. We believe this indicates that investors are demanding to be compensated handsomely for the risk they bear.
    • In our view, there are only three ways equity risk premiums can decline to more historically typical levels: 1) higher interest rates 2) higher stock prices 3) lower projected earnings. While higher interest rates and lower projected earnings are certainly risks, the current equity risk premium may make these risks worthwhile.
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    news-1863 Mon, 27 Jan 2020 15:10:18 +0100 La Française presents its new carbon fund solution. /en/who-we-are/news/detail/la-francaise-presents-its-new-carbon-fund-solution/ Marie Lassegnore, Credit Manager/Analyst, presents our new carbon maturity fund solution. Discover through this video what the carbon budget is, how we measure the transition of companies and more specifically the nature of their carbon emissions and what our methodology of company trajectory is.

    La Française Asset Management has more than 20 years of experience in maturity funds and manages nearly €2bn in this strategy.

     

     

     

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    news-1858 Fri, 24 Jan 2020 10:04:24 +0100 Our views on the latest events surrounding the Wuhan coronavirus. /en/who-we-are/news/detail/our-views-on-the-latest-events-surrounding-the-wuhan-coronavirus/ Commentary by Fabrice Jacob, CEO of JK Capital Management Limited By now everyone has heard about this new coronavirus that originated a few weeks ago in the city of Wuhan, the capital city of Hubei in Central China (the 6th largest city of China with 11 million people including 2 million migrant workers) and that has led to the shutdown of the city’s airport, the train station, the subway network, the ferry pier and all bus stations to avoid further virus spread.

    The purpose of this communication is not to repeat what is already covered by western newspapers, but to highlight what most likely has not been disseminated out of China, which is the reaction of the private sector to this situation. We are flagging these private initiatives as they are new to us and as we believe they reflect to some extent the recent evolution of Chinese society in terms of social responsibility as the country is gradually becoming less individualistic, in our views. Specifically, the following announcements were made by various companies over the past 24 hours:

    • In response to the rise in mask prices and out-of-stock situations caused by the new coronavirus pneumonia epidemic, mainstream e-commerce platforms including Taobao [Alibaba], JD.com and Pinduoduo collectively stated that masks sold by platform merchants are not allowed to see their prices rise.
    • Eleme and Meituan, the two largest food-delivery companies have announced having taken anti-epidemic prevention measures in delivery and have suspended delivery services to some hospitals in Wuhan.
    • Taobao Ticket and Maoyan, two cinema ticketing online platforms are providing free cancellation of all movie tickets in Wuhan during the Chinese New Year holiday
    • Cainiao Logistics and Tmall Supermarket [both subsidiaries of Alibaba] will guarantee the supply of various protective supplies such as masks, disinfectant, hand sanitizer, etc. to 300 cities over the Chinese New Year holiday. Cainiao Logistics has already distributed nearly 10,000 masks, thousands of sulfur soaps and other preventive materials to staff including front-line distribution staff in Wuhan.
    • From January 22 to January 31, Amap, an Alibaba company, the Google map of China with car-hailing feature among many other valued-added services embedded, will refund all ordinary bookings and transfer bookings in Wuhan (no limit to the starting and ending points, including round-trip airport and train station) if such bookings are cancelled.
    • Meituan, Ctrip and Fliggy, three online travel platforms provide a free cancellation policy for bookings of hotels, tickets and cars in Wuhan during the Chinese New Year holiday
    • D Logistics has launched an emergency plan to ensure uninterrupted logistics services in nearly 300 cities and thousands of districts and counties during the Chinese New Year holiday, with priority given to orders designated by medical institutions.

    We also want to highlight that even though it’s still difficult to gauge the impact of the Wuhan coronavirus, the Chinese government is much more prepared to handle similar situations. They have learned from the lessons during SARS in 2002-2003 and understood the cost of staying in denial. As such, we don’t give any credit to market rumours that the Chinese government intentionally covered up the reality for the sake of saving face this time again, as it has started being suggested by certain media.
    As far as Hong Kong is concerned, two persons have been identified so far and sent to hospital. Hong Kong having been at the epicentre of the SARS outbreak of 2002/2003, local health authorities are quite likely well trained to handle the situation should it deteriorate. Other than spotting an increasing number of people wearing masks in the street, life is normal.

    Disclaimer
    This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. The information contained herein is issued by JK Capital Management Limited. To the best of its knowledge and belief, JK Capital Management Limited considers the information contained herein is accurate as at the date of publication. However, no warranty is given on the accuracy, adequacy or completeness of the information. Neither JK Capital Management Limited, nor its affiliates, directors and employees assumes any liabilities (including any third party liability) in respect of any errors or omissions on this report. JK Capital Management Ltd. Is a limited company regulated by the Securities and Futures Commission of Hong Kong, with its registered office at Rm 1101 Chinachem Tower, 34-37 Connaught Road Central, Hong Kong.

     

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    news-1857 Thu, 23 Jan 2020 10:39:17 +0100 Due to weak bank lending survey, ECB should keep its policy unchanged and maintain the downside risk bias. /en/who-we-are/news/detail/due-to-weak-bank-lending-survey-ecb-should-keep-its-policy-unchanged-and-maintain-the-downside-risk-bias/ On ECB strategic review, we expect to gather some more information which could be either hawkish or dovish. We expect no change in terms of ECB policy on January 23rd:

    • The latest macro-economic figures point toward stabilization and forward looking sentiment indicators have improved over the last six weeks. We expect the ECB to acknowledge this but we think they would need more evidence before describing risks as “balanced” vs “skewed to the downside” currently, especially with latest lending survey which shows softening loan demand (index is negative for the first time since 2013);
    • Inflation figures  came broadly in line with previous market expectations, meaning that nothing new is to be expected on this front;
    • Mrs. Lagarde will formally launch the ECB’s strategic review; at this stage, the scope is expected to be quite broad. We expect President Lagarde to give details on the organization of the review and to explain how external stakeholders such as academics and civil society may be involved. Please find below the potential topics that could affect financial markets:
      - The ECB’s objective is currently only related to inflation; they might signal that this objective could be reviewed;
      -  They could shift to a symmetric inflation target => dovish;
      - They could include owner occupied housing in an alternative measure of inflation => hawkish;
      - They could include climate change in their review => hawkish:
    • We expect the ECB to leave the tiering multiplier unchanged, but we do see potential increases in 2020.

    We do not expect this meeting to have a material impact on financial markets.


    Disclaimer
    This commentary is intended for professional investors only within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-1850 Tue, 21 Jan 2020 10:00:00 +0100 La Française, mandated by PFA for a French senior housing portfolio /en/who-we-are/news/detail/la-francaise-mandated-by-pfa-for-a-french-senior-housing-portfolio/ La Française is pleased to announce the signing of a mandate with PFA, a leading Danish pension fund, for the acquisition and management of a senior housing portfolio. The mandate will be launched with an initial equity investment of €100 million and have a geographic focus on France. PFA has seized the opportunity to invest in an asset class where demand currently exceeds supply; the available stock of senior housing in France is only able to accommodate a small percentage of the population aged of 75 years and older, a growing and solvent segment. PFA has found in La Française a partner of choice to deploy their senior housing real estate strategy. La Française has a  longstanding expertise in the senior housing market with already over €330M assets under management through a separately managed account and commingled fund, representing 18 senior housing facilities. 

    The properties of the senior housing portfolio will be acquired as forward purchases (VEFA) and will initially be sourced across France.

    “We are pleased to invest in a strategic asset class, that offers the advantage of residential properties with an attractive risk-return profile and a strong societal impact. We are pleased to work with such an experienced investor as La Francaise to deploy our long-term real estate approach,” says Michael Bruhn, Managing Director of PFA.

    “This partnership with a major institutional player (PFA), enables La Française to accelerate its strategic positioning in senior housing, a sector on the rise, that not only satisfies a structural societal demand, but that is also in line with the group’s sustainable investment approach,” declared Marc Bertrand, Chairman of La Française Real Estate Managers.

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    news-1848 Thu, 16 Jan 2020 15:05:21 +0100 La Française fixed maturity high yield credit fund: La Française Rendement Global 2025 surpasses US$1 Billion mark /en/who-we-are/news/detail/la-francaise-fixed-maturity-high-yield-credit-fund-la-francaise-rendement-global-2025-surpasses-us-1-billion-mark/ La Française is pleased to announce that in just over two years following its creation(1), La Française Rendement Global 2025 has reached €958 million (US$1.075 billion) in assets under management. The fixed maturity fund is a diversified global portfolio of 160 high yield debt issuers with an average rating of B+ and an average net yield2 of 3.48% (Source: La Française, as at 31/12/2019). The fund is managed by Akram GHARBI, Thibault CHRAPATY, Gabriel CRABOS and Jaafar IBARAGHEN. La Française AM currently manages close to €8 billion in credit.

    Twenty years and €2.3 bn of investment experience are wrapped into La Française Rendement Global 2025, a discretionary fixed maturity global high yield fund. The investment strategy is designed to mitigate interest rate and credit risks while still delivering a potentially attractive rate of return. In terms of credit risk, the large investment universe covers a wide spectrum of countries and issuers, including Emerging Markets. La Française has a selective approach in an environment where credit quality remains reasonable but where selection is key because of the potential rise in defaults, particularly in cyclical sectors due to the trade war and the global economic slowdown. The strategy is a combination of carry and arbitrage in the event of new market opportunities or an increased default risk on one of the issuers held within the portfolio.

    Akram Gharbi, the fund manager, maintains that investors, against the backdrop of a low interest rate environment, have little alternative but to look at more dynamic segments such as high yield. “With the exception of a rise in defaults in the US in 2015/2016 because of oil & gas turmoil, the global default rate for high yield bonds has been below 3% per year over the last 10 years (Source: Bank of America Merrill Lynch). High yield is one of the few asset classes to continue to offer an attractive relative return. The relative success of the fund, judging by net inflows, is the results of the pertinence of the investment strategy in today’s low interest rate environment.”

    La Française Rendement Global 2025 entails certain risks including the risk of capital loss, interest rate risk, default risk relating to issuers of debt securities, etc.

    1 The sub-fund (La Française Rendement Global 2025) originates from the merger absorption of the La Française Rendement Global 2025 mutual fund created on 30 August 2017, with an identical strategy and absorbed on 5 December 2018.

    2 after deduction of running and hedge fees
     

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    news-1845 Wed, 15 Jan 2020 18:26:08 +0100 2020, unlikely a repeat of 1995 /en/who-we-are/news/detail/2020-unlikely-a-repeat-of-1995/ By Jean-François Jolivalt, Multi Asset Fund Manager, La Française AM French protests and transport strikes against the government’s planned pension reforms have been ongoing for more than 40 days now, without precedent in France's recent history. It is not the first time that the country is paralyzed by a nationwide transport union blockage. Recent protests echoed the ones of late 1995, which were also spurred by proposed pension reforms. Back then, the French national statistics bureau, INSEE, estimated that the impact of social unrests was a reduction in GDP of about 0.2% for the last quarter of 1995. At the time, the Paris region was especially affected as were a number of sectors: telecom, energy, education and health. 1995 strikes resulted in lower consumer spending and production disruption.

    Today’s concerns about downside risk to the French economy are legitimate. Paris has borne the brunt of the economic slow-down with restaurants, tourism and retail stores suffering the most, especially around the critical Christmas period. Strikes are for sure weighing on consumer confidence. However, the population has adapted to the situation thanks to e-commerce, remote working, carpooling and car sharing, which are all services or alternatives that are now widely accepted and available.

    Business surveys and other advanced French economy indicators are holding up, especially when compared to other European economies. Despite the global manufacturing slowdown, French economic data does not point to any major drag on the industrial sector. Germany, however, is feeling the pain. Additionally, the latest Ernst & Young industrial barometer named France as the most attractive country in Europe.

    French Finance Minister, Bruno Le Maire, recently commented that transport strikes would have little impact on growth and employment; an analysis we share. Overall, we expect 4Q19 GDP to grow approximately +0.3%. A compromise between the French government and reformist unions was found last week. This latest development is a positive step and paves the way to an end in the strikes. However, if both parties fail to reach an agreement and protests continue, growth could remain tilted to the downside with more clouds on the horizon.

    Disclaimer
    This commentary is intended for NON-PROFESSIONAL investors only within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-1843 Thu, 16 Jan 2020 09:17:00 +0100 The Wealth Creator /en/who-we-are/news/detail/the-wealth-creator/ Seen from the long arc of history, the rate of change has been accelerating. This holds important implications for society and investing, and it has significantly affected the United States’ economic output over the past couple of centuries.

    • Over the long term, real GDP growth per capita has been accelerating. From 1650-1800, real GDP per capita grew 0.5%. From 1800-1950 it grew 1.4% and from 1950-2019 it grew 1.9%, nearly four times more than it did during the earliest period stated.
    • The increasing speed of innovation is paramount to this growth in GDP as we have discussed in the past (see Alger whitepaper “The Enduring Force of Innovation”). This accelerating pace of innovation is present in computer chips as made famous by Moore’s law and also in wireless telecommunications, energy, information storage and artificial intelligence.
    • While global economic growth may be slower than it was a few years ago, the underlying trend built on innovation is strong and may likely point to material progress in disruptive developments over the next couple of decades, as the new technological revolution marches on (see Alger white paper “A New Era Emerges: The Age of Connected Intelligence”).

     

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    news-1842 Mon, 13 Jan 2020 15:29:10 +0100 Geopolitical uncertainties & oil prices /en/who-we-are/news/detail/geopolitical-uncertainties-oil-prices/ by Jean-François Jolivalt, Multi Asset Fund Manager, La Française Geopolitical uncertainties have come back to the table after American killing of top Iranian general Qasem Soleimani. Oil and Gold surged on the news. The price of a barrel of Brent, the benchmark for northern European oil, came close to $70, flirting with the 2019 peak (Source: Bloomberg). Gold is back to $1550 per ounce, its highest level since 2013 (Source: Bloomberg). It also translated into a typical bid for safe-haven assets such as the Yen and government bonds which all rallied the following day. 

    This latest development in US-Iran relations follows last September’s attacks on Saudi ARAMCO facilities and on other Saudi energy infrastructures attributed to Iran. Markets were spooked, expecting disruptions in oil supply from the top producing region. A few days after US strikes were announced, Iran retaliated sending rockets on an Iraqi military base. This Wednesday, US President Trump publicly downplayed the whole situation looking to de-escalate hostilities with Iran. 

    At this stage, oil market fundamentals have not changed. Excess supply, thanks to the US shale-drilling boom and weak growth in global demand, is still our base case. In other words, oil should keep flowing abundantly. This should limit price increases. In this context, these dramatic events should have no major impact on the global economy. Our baseline economic scenario for 2020 is one of a mild pick-up with a slow and steady growth, low inflationary pressures and accommodative monetary policy.  

    Having said that, recent oil market volatility is occurring against the backdrop of increasing energy prices over the past several months. The primary reasons behind this move are:
    1/ Markets are pricing out a number of tail risks, especially those related to Brexit and the US-China trade war dispute; 

     2/ Better economic data around the world suggests that a recession is no longer in the cards. Like any other risky asset, oil increased in tandem in a so-called optimism/reflation trade. 

    The way forward is however still uncertain as further tensions cannot be ruled out. Any escalation could certainly trigger a sharp increase in oil prices which would ultimately weigh on the global macro outlook. This supply-side driven price increase should decrease global capex, hit consumer demand and impact oil importers, especially EM countries with current account deficits. This scenario could bring significant deflationary pressure given reduced demand. It could lead to a strong central bank response and rates would likely continue their way down. 


    Disclaimer
    This commentary is intended for NON-PROFESSIONAL investors only within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-1840 Mon, 13 Jan 2020 12:10:29 +0100 Climate Risk And The Finanial Sector /en/who-we-are/news/detail/climate-risk-and-the-finanial-sector/ Climate risk is a key issue of concern in financial circles, and this is probably just the start; however, it is significant that two recent reports were published at around the same time by influential French organisations. While the Bank of France (BdF) bulletin for September-October was entitled "Climate change: what are the risks for the financial sector?", a Finance for Tomorrow (F4T) report ("Climate risk in finance - concepts, tools and methodologies") also came out in September, with the aim of helping the very many sector participants likely to be concerned about the management of climate risk in finance.

    And we shouldn't forget two other reports that were published this summer by the IPCC, on the link between climate change and agriculture, and on the oceans and the cryosphere, plus the various announcements and commitments made between the G7 in Biarritz and Climate Week NYC, and the Green Deal set out by the new President of the EU Commission.

    The climate risks have now been clearly identified, and there are three types: physical risk, transition risk and liability risk. The tools for analysing these risks mainly use one of two methods:

    • A tool for measuring CO2 emissions: the carbon footprint
    • Tools for assessing the risks: the green/grey components, financial impact indicators, indicators of alignment with a 2-degree scenario and risk exposure ratings

    At present, although the understanding of transition risk is improving all the time, liability risk remains a blind spot, while physical risk is rarely perceived as a potential threat.

    However, the key element in climate finance lies in the appropriation of metrics and internal analysis. It is essential that climate risk is managed as a traditional financial risk, and that companies have in-house expertise to enable them to decipher and analyse data and refine their methodologies. Governance bodies should therefore be recognising the importance of climate risk as part of traditional risk management, and reflecting it in their corporate strategies. It is no longer appropriate for this risk to be discussed or assessed by isolated experts outside the information systems of financial sector players. Climate finance must be at the heart of what we do.

    To read the Bank of France bulletin
    To read the F4T report

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    news-1835 Mon, 06 Jan 2020 10:59:24 +0100 Oid conference Report /en/who-we-are/news/detail/oid-conference-report/ How can the real estate sector adapt to a 2-degree or even a 4-degree world? The OID (Green Building Observatory) tackled this subject as part of the 11th conference of the Real Estate & Outlooks cycle, which was held at the La Française headquarters, in partnership with Plan Bâtiment Durable (a sustainable building organisation) and the Paris City Council.

    The conference was introduced by Laurent Jacquier-Laforge, Global Head of Sustainable Investing – La Française, and hosted by Gérard Degli-Esposti, Director of Real Estate SRI and Chairman of the OID.

    The talk was given during the first session by Catherine Larrère, the philosopher and emeritus professor at Paris’s Sorbonne University, who approached this complex subject from the perspective of environmental ethics, citing an extract from “The Spirit of Laws” by Montesquieu (1689-1755).

    This step back in time enables us to reframe the issue of the relationship between humanity and nature. Catherine Larrère invites us to reflect on this relationship. Today, the whole Earth system has been impacted by industrial societies because the creations of humanity outlive them (Henning Mankell). Climate change is the eventual result, not because it was what we sought, but because it was something we hadn’t thought about.

    The period in which humans have had the biggest influence on nature (the Anthropocene) will have consequences that continue beyond the extinction of humanity (such as radioactive waste, climate change, the erosion of biodiversity, etc.).

    Living differently on the earth

    Knowing what to do is not enough, we need to know how to do it, and the work of philosophers may help us in this task. For a long time, our approach has been to conquer, dominate and discipline nature through power, exploitation and destruction...but do we have to turn our backs on the past completely? How can we include nature in morality?

    Our existence is short (the time of humans, of economies and politics), while nature endures.

    An appropriate period is one that corresponds to both the lifespan of humans and of nature; and the right approach is to consider humanity as part of nature, and no longer talk about humanity AND nature.

    Talking about nature with respect is not enough because the creations of humanity interlock with nature and outlive them. The question is: what will be our legacy?

    The ethics of nature cannot be separated from the ethics of humanity. While the actions of humans have made us vulnerable to nature, we now needs to engage in a more moral relationship with nature by developing environmental ethics and ethics of care: living differently on the earth.

    This philosophical introduction was followed by a roundtable discussion with the participation of Jérôme Duvernoy, (Observatoire National sur les Effets du Réchauffement Climatique), Jérôme Gatier, (Plan Bâtiment Durable) and Stéphanie Chevallier (Nexity).

    A review of the outlook for the climate set out by Jérôme Duvernoy put the increase in temperature in France at +1.5°C since 1900, with, in 2050, 50% of urban forests at a high risk of fire and a water shortage of 3 billion m3. This was followed by the presentation of an innovative urban redevelopment project that takes account of the natural environment and the sharing of examples of good practice.

    The second section of the conference focused more on climate modelling and adaptation solutions, looking at past changes in the climate, future trends and ways to apply these to the construction of buildings going forward.

    You can find videos of the conference on the OID’s YouTube channel.

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    news-1832 Mon, 30 Dec 2019 10:30:50 +0100 The transition pathway initiative /en/who-we-are/news/detail/the-transition-pathway-initiative/ Analysing the alignment of companies with a 2-degree scenario On 26 November, the La Française Zero Carbon Club received a visit from Nadine Viel Lamare, Director of the Transition Pathway Initiative (TPI)*. This is an initiative that La Française supports and is happy to promote.

    After COP 21, institutional investors had a problem to solve: how to analyse portfolios from the perspective of keeping global warming within 2° and identify companies with practices and policies that are in line with the Paris climate accords? With no tools available to them, some of these investors decided to get together and create one, based on the following key principles:

    • To provide a free tool that can be used by all investors, including the very smallest
    • To be transparent with regard to data, methodology and results
    • To use only public data
    • To build robust sector methodologies in partnership with a prestigious academic institution: the London School of Economics (LSE)

    As a result, the Transition Pathway Initiative was launched at the start of 2017. The methodology it adopted analyses companies on two criteria:

    1. Management Quality: the quality of companies’ governance, strategy, objectives and structures, assessed using the same 19 questions for all sectors covered

    2. Carbon Performance: how companies’ carbon performance now and in the future might compare as measured against different targets: the Paris Agreement, the 2-degree scenario and the below 2-degree scenario. If a company has not published targets, then the current trend in CO2 emissions is projected into the future

    The overall carbon performance results analysed over 8 sectors and 190 companies, including the world’s largest carbon emitters, show the size of the task still to be done...just 16% of the companies analysed are in line with increases in temperature of 2° or less. This figure rises to 30% when the companies aligned with the Paris Agreement are included, which we know will lead us to something approaching a 3-degree world.

    The TPI’s aims are ambitious, as it looks to cover more sectors (air and sea transport in the coming weeks), extend the number of companies analysed to include small caps and selected non-listed companies, and lastly, assess government policies in order to incorporate an assessment of sovereign debt.

    Now that we have properly understood that our world is changing, and that global warming and its societal consequences, in terms of access to food and migration, and therefore, the political consequences, mean that we need to produce and consume differently, we must all be able to manage our reductions using criteria other than just financial ones. There is a real need for new standards that are available to everyone, so that climate and social issues can be included in economic and financial scenarios. In this respect, the TPI provides a vital, high-quality resource, which is also used by "Climate Action 100+".

    The TPI tool is available free of charge to everyone from the debutant to the professional investor, and the initiative’s website provides all the information needed to understand how to use it. Why not take a look, and search for a sector or company on the TPI website today!

    * Nadine Viel Lamare was previously Head of Responsible Investment for Swedish pension fund AP1, for around 10 years

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    news-1822 Fri, 20 Dec 2019 11:02:36 +0100 We need hope ! /en/who-we-are/news/detail/we-need-hope-1/ On 24 October, the third One Planet Summit was held at the French Ministry of the Economy and Finance (Bercy) in Paris. The theme of this year’s event, which was set up to mobilise funding for projects fighting climate change, was “blended finance”. Blended finance refers to the use of public investment in projects to attract private capital by reducing risk. "We need hope!" This was the message in the introduction given by Brune Poirson, France’s Secretary of State to the Minister for the Ecological and Inclusive Transition. Following a trend that has been taking shape in recent months, attention has shifted to the oceans, agriculture and biodiversity. We are no longer only talking about energy and the climate, since, as Jennifer Morris, President of Conservation International underlined: “the best way of reducing our carbon emissions is nature itself. It represents 30% of the solution, but only receives 2% of the investment". In the conclusion to the summit, Brune Poirson set out a very clear map for all the finance professionals and politicians present: "We need to get some nature-related projects up and running by next year".

    Meanwhile, in Chile, Ecuador and Lebanon, anger is mounting. The issue of purchasing power is also the cause of protests in Iraq, Venezuela and Spain, where demonstrators - along with the gilets jaunes in France - are calling for profound change in our societies. The ecological, financial, political and societal transition must be a fair transition that everyone can support, whatever their place in society. We mustn’t lose sight of the fact that we live on a planet where, in 2018, the 26 richest billionaires owned as much as the 4 billion poorest people*.

    However, there was some good news from the UN Climate Action Summit that took place in New York on 23 September:
    - Moscow announced it had signed a decree for Russia to ratify the Paris Climate Agreement
    - Following announcements from Austria, Chile, Italy, Japan and East Timor, 66 countries have now joined the Carbon Neutrality Coalition
    - A coalition aimed at protecting biodiversity was presented by 19 companies, including
    a number of agri-food giants
    - Amazon has undertaken to target carbon neutrality by 2040

    For its part, La Française has continued to engage with its partners over the months. Nature was also a key theme of the conference held by the OID (Green Building Observatory) at the La Française offices, which was introduced by Gérard Degli Esposti. This event featured a talk by the philosopher Catherine Larrère exploring the links between humanity and nature (a brief summary is shown on page 2 of this newsletter).

    Still on the subject of nature, the La Française online distribution platform Moniwan is responding to the concerns of some and raising the awareness of others by planting trees for each SCPI subscription. Planting trees is a good way to decarbonise, because little by little, small trees become big forests with long-term decarbonisation potential. It’s also a fantastic way to foster biodiversity and support local economies, and these are all steps in the right direction. So let’s carry on reducing our carbon footprint where we can and plant trees to offset what we can’t reduce!

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    news-1817 Thu, 19 Dec 2019 10:00:00 +0100 This May Surprise You /en/who-we-are/news/detail/this-may-surprise-you/ While negative headlines concerning impeachment in the U.S., economic growth and trade wars have dominated market news recently, the S&P 500 is currently having its second best year over the last 20 years. As investors approach the home stretch of 2019, it’s time to take stock of the year in equities. YTD Returns at the End of Each November

    • Alger foresaw potentially robust equity returns for 2019 in our Winter Capital Markets presentation. We noted that strong returns typically follow large declines in valuations and that in years following double-digit declines in price-to-earnings (P/E), the S&P 500 has historically averaged 19% returns. Indeed the S&P 500 P/E multiple had its second largest decline in three decades in 2018 when it plunged 21%.
       
    • During 2019, the market’s P/E rebounded more than 20% while next 12-month earnings expectations grew modestly. In our view, the driver behind the P/E expansion was increased
      confidence that the economy would avoid recession in the near term. The Fed moved from tight monetary policy in a difficult economic environment to a more accommodative policy that has helped boost economic metrics such as mortgage applications and industrial activity (as measured by Purchasing Managers’ Indices).
       
    • While the market’s P/E now appears elevated relative to history, we believe valuations look more reasonable with respect to low interest rates and stronger free cash flow generation as a result of the changing economy and changing business models (see Alger On the Money “Evaluating Valuations”). As a result, a strong year may not preclude future gains.
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    news-1808 Fri, 06 Dec 2019 11:27:00 +0100 La Française REPI completes sale of Thales office campus in Stuttgart-Ditzingen on behalf of Samsung SRA /en/who-we-are/news/detail/la-francaise-repi-completes-sale-of-thales-office-campus-in-stuttgart-ditzingen-on-behalf-of-samsung-sra/ After a five-year holding period, La Française Real Estate Partners International, acting on behalf of Samsung SRA, has completed the sale, via a share-deal, of the office campus situated on Thalesplatz in Stuttgart-Ditzingen, Germany to an investment vehicle managed by Antirion, an independent Italian asset management company. For Samsung SRA, this is the first sale of a German office property. The office campus, comprised of four buildings and a multi-storey car park, offers ca. 58,000 m² of lettable area and is currently let on a long-term lease to Thales Immobilien Deutschland GmbH. Thales Group is a market leader in the fields of aerospace, security and transportation.  

    The seller was advised by La Française Real Estate Partners International, the law firm Ashurst, Colliers International Deutschland GmbH and BNP Paribas Real Estate GmbH.

    Jens Goettler, Managing Director of La Francaise Real Estate Partners International - Germany said: “This was one of SRA’s first acquisitions in Germany. It was also one of the  very early transactions completed on behalf of South Korean investors in the market. Today, South Korean investors are an important and established part of the investor community and are very active in the country. The 5-year business plan has now been completed with the successful sale of the asset. The market interest in this quality property with a long lease to a strong covenant, located in a prosperous location in the Stuttgart region was strong. With Antirion, we found an investor with a long-term view and a great partner for the tenant.”
     

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    news-1803 Thu, 05 Dec 2019 10:23:53 +0100 Disruption on the Menu /en/who-we-are/news/detail/disruption-on-the-menu/ While online restaurant ordering platforms are in their nascent stage, users of the technology are steadily climbing and there is reason to believe that these platforms will continue to take share from take-out and dine-in purchases. Given the transformative nature of online food delivery, investors may want to closely watch its proliferation. Use of Online Restaurant Ordering Platforms Has Surged Over 150% in U.S.
     

     

    • Since 2017, online restaurant ordering platforms, such as Uber Eats, GrubHub and Doordash, have grown over 150% in usage in the U.S.
    • These platforms are growing because they are more convenient for customers and dramatically expand restaurant selection by offering customers broader choices. By reducing the cost of delivery operations, these platforms have expanded delivery options from just pizza or Asian restaurants to nearly every cuisine imaginable. As a result, online restaurant ordering platforms are becoming a habit for many consumers.
    • Online restaurant ordering platforms are also amassing significant amounts of data about ordering trends that they can potentially use to create virtual restaurants. These “ghost kitchens” have  no real storefronts and can be created inside empty warehouses near urban centers; they can change menus daily to adapt to customer tastes. Equipped with ripe data from the platforms’  ordering history and flexibility to constantly change menus, virtual restaurants could become  serious competitors to traditional restaurant locations.
    • It will be interesting to observe how the dynamic between traditional restaurants and online  restaurant ordering platforms plays out as both increase their business at the hands  of technology.

     

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    news-1801 Thu, 12 Dec 2019 10:30:00 +0100 La Française Sub Debt surpasses US$1 Billion in Assets under Management /en/who-we-are/news/detail/la-francaise-sub-debt-surpasses-us1-billion-in-assets-under-management/ La Française is pleased to announce that La Française Sub Debt has reached €923 million (US$1,017) in assets under management. The fund is a diversified portfolio of approximately 150 subordinated debt securities with an average rating of BB (Source: La Française, as at 30/11/2019) and is co-managed by Paul Gurzal, Head of Credit who joined La Française in 2008, and Jérémie Boudinet, Fund Manager. Overall, La Française AM manages €1,4 billion in subordinated debt instruments.

    The track record of Paul Gurzal, manager of the fund since its creation in 2008, and Jérémie Boudinet is especially notable and attracting attention among European professional investors. The fund has registered €230 million in net inflows since past January. La Française Sub Debt has a recommended investment horizon of more than 10 years and had a cumulative net performance since inception (20/10/2008) of 124% (30/11/2019), considerably outperforming the performance objective of 112%. The annualized performance of the fund over the same period was 7.54% compared to its annual objective of 7%.

    Paul Gurzal remains positive on the outlook for subordinated debt and commented, “Subordinated debt is an alternative to High Yield bonds. They enable investors to build exposure to financial and non-financial companies which in our selection process are mostly Investment Grade-rated. Subordinated bonds carry structural risks but can add a better “carry” component to fixed income portfolios, as their average yields remain largely positive.”

     

    Paul Gurzal holds a “AAA” Citywire Fund Manager Rating for his rolling risk-adjusted performance for the period running from 30/11/2016 to 30/11/2019 (Source & copyright: Citywire)

    The C-share class of the Fund had a net performance YTD as at 30/11/2019 of 13.88% and over the last ten calendar 12-month periods of: -6.45% (2018), +13.42% (2017), +5.8% (2016), -0.60% (2015), +9.11% (2014), +11.2% (2013), +35.33% (2012), -24.99% (2011), +4.89% (2010), +28.87% (2009). (Source: La Française AM) It should be noted that an investment in the Fund entails certain risks including the risk of capital loss, interest rate risk, risks arising techniques such as derivatives, etc.

     

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    news-1799 Wed, 04 Dec 2019 15:09:49 +0100 A triptych approach for reverse stress testing of complex portfolios /en/who-we-are/news/detail/a-triptych-approach-for-reverse-stress-testing-of-complex-portfolios/ Pascal Traccucci, Luc Dumontier, Guillaume Garchery and Benjamin Jacot present an extended reverse stress test (ERST) triptych approach with three variables: level of plausibility, level of loss and scenario. Any two of these variables can be derived, provided the third is given as input. A new version of the Levenberg-Marquardt optimisation algorithm is introduced to derive the ERST in certain complex cases Introduction: the case of ARP portfolios
    Academic theory has been mined to support the development of investment solutions containing an ever-increasing number of factors. Over the last decade, academics and practitioners have shown traditional asset classes offer limited diversification, especially in market downturns. In response, they have delved into modern portfolio theory (MPT) to identify the microeconomic factors that are the backbone of alternative risk premia (ARP) solutions. The ARP 1.0 approach combines 10–15 different long/short portfolios capturing standard investment styles such as value, carry, momentum, low risk and liquidity across a broad range of traditional asset classes. For further diversification, the ARP 2.0 approach combines up to 30 strategies by including investment banking-style premia likely to use instruments with quadratic profiles.
    Many risk management frameworks cannot properly account for nonlinear profiles and assess the risk of loss associated with combining an unusually high number of strategies. Specifically, historical value-at-risk is an instantaneous risk indicator and does not correspond to a clearly identified scenario; hence the need for complimentary stress tests. To build a stresstesting
    tool, the dataset must be simplified, and historical or predefined scenarios are used without quantifying their plausibility. Thus, parametric VAR imposes dependence on a model to benefit from an analysis framework in the form of a VAR and a sensitivity of this VAR to all the parameters of the model. This requires several numerical problems to be addressed, especially in case of quadratic profit and loss (P&L). This article presents an innovative approach: the extended reverse stress test (ERST), following on from the work of Breuer et al (2009) and Mouy et al (2017). This approach is able, with low technical costs,1 to deliver two of three parameters, provided the third is given as input. The three parameters are scenario, level of plausibility and level of loss (see figure 1). The result is a more meaningful risk measure and one that corresponds to a clearly identified scenario.
    In what follows, S is defined as a scenario. It is a vector with length n, which equals the number of risk factors to which the portfolio is exposed. In addition, the covariance matrix of the risk factors will be denoted by...

    1 Using an algorithm derived from the Levenberg-Marquardt one to deal with complex problems.

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    news-1797 Fri, 29 Nov 2019 12:03:47 +0100 Subordinated debt report /en/who-we-are/news/detail/subordinated-debt-report/ Geopolitical risks seem to be taking a break. Fears of a hard Brexit are receding, and the Trade War is tempered by a resumption of negotiations. In this environment, and despite the continued macroeconomic slowdown, sovereign bonds rates have appreciated. The Subordinated Debt and Investment Grade markets are currently buoyed by the expectation of the start of the CSPP (Corporate Sector Purchase Program of the ECB) in early November, and by the positive earnings season for banks confirming the well-established trend towards a reduction in non-performing loans and the refocusing of activities to optimize capital. To give some examples, Caixa Geral de Depositos completed the sale of its Spanish subsidiary to Abanca while Santander got rid of its Puerto Rican business. On a general basis, we believe the rating agencies are slightly behind in their assessment of these balance sheet improvements, particularly in Spain, Portugal and Ireland.

    In this context, AT1 CoCos have significantly outperformed other subordinated debt segments since the beginning of the year for fundamental reasons. Indeed, the banking sector is one of the few sectors that has reduced its financial leverage, even though, as it was to be expected, this reduction in the leverage imposed by regulators has not been without consequences for the profitability of the sector and equity shareholders. On top of this, AT1s benefited from less sensitivity to rate movements and a higher spread component than many other sectors.

    THIS DOCUMENT IS INTENDED FOR PROFESSIONAL INVESTORS ONLY AS DEFINED BY MIFID II. 
    It is provided solely for informational and educational purposes and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It cannot constitute investment advice or an offer, invitation or recommendation to invest in certain investments or to adopt an investment strategy. The opinions expressed by the La Française Group are based on current market conditions and are subject to change without prior notice. These opinions may differ from those of other investment professionals. Please note that the value of an investment may rise or fall and also that past performance results are no indication of future results. Published by La Française AM Finance Services, located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, nº 18673 X, subsidiary of La Française. La Française Asset Management is a management company agreed by the AMF under the number GP97076 on July 1, 1997. For more information, check the websites of the authorities: Autorité de Contrôle Prudentiel et de Résolution (ACPR) www.acpr. banque-france.fr, Autorité des Marchés Financiers (AMF) www.amf-france.org. 

     

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    news-1787 Thu, 21 Nov 2019 09:29:23 +0100 An Illuminating Innovation /en/who-we-are/news/detail/an-illuminating-innovation/ Is the U.S. seeing environmental gains from innovation today? We believe it is. Historically, electricity usage has been highly correlated with GDP growth, but this has not been true of late. Innovation has been a powerful contributor to dampening growth in electricity demand.  

    • Annual electricity consumption per capita increased steadily for many years. The three-year moving average peaked in 2007 and has since declined 5%, even though the three-year moving average of GDP per capita increased 9% over the same time frame.
    • While the U.S. consumer has more appliances and devices needing electricity than ever before, electricity use has declined. Why? One innovation stands out: LED (light-emitting diode) lighting. LEDs use a semiconductor to convert electricity into light. Unlike incandescent bulbs, which release 90% of their energy as heat, LEDs use much less energy and are thus more efficient than other lighting types.
    • LED bulbs cost less in terms of bulb life and last 25 times as long as traditional bulbs. As a result, they can reduce both energy consumption and replacement expenses. According to the U.S. Department of Energy, LED lighting may result in energy savings of 40% by 2030 based on use in residential, outdoor, commercial and industrial settings. LED bulbs also prevent more garbage from entering landfills.
    • What other innovations may benefit the environment? One candidate is electric vehicles that may serve to reduce CO2 emissions, which are currently in need of some innovative help (see Alger On the Money “Emission Mission”).
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    news-1781 Tue, 12 Nov 2019 09:00:00 +0100 Unitholder notice - La Française Sub Debt /en/who-we-are/news/detail/unitholder-notice-la-francaise-sub-debt/ Unitholders of the Fund La Française Sub Debt are hereby informed that as of 15 November 2019, the Fund's regulatory documentation will be amended. As of this date, callable and puttable rate products will be set out in the legal documentation. Callable and puttable bonds will thus be added to the list of securities with embedded derivatives in the Fund prospectus.

    Other characteristics of the mutual fund remain unchanged.

    We wish to underline the need and importance of reading the key information document for investors in the “La Française Sub Debt”, which is available at www.la-francaise.com.
     

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    news-1774 Tue, 12 Nov 2019 09:00:00 +0100 Unitholder notice - La Française Convertibles Dynamique /en/who-we-are/news/detail/unitholder-notice-la-francaise-convertibles-dynamique/ Unitholders of the Fund La Française Convertibles Dynamique are hereby informed that as of 15 November 2019, the Fund's regulatory documentation will be amended. As of this date, callable and puttable rate products will be set out in the legal documentation. Callable and puttable bonds will thus be added to the list of securities with embedded derivatives in the Fund prospectus.

    Other characteristics of the mutual fund remain unchanged.

    We wish to remind you of the need and importance of reading the key investor information document for “La Française Convertibles Dynamique”.
     

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    news-1772 Thu, 07 Nov 2019 14:38:00 +0100 Investing Wisely /en/who-we-are/news/detail/investing-wisely/ Investors consider a range of issues that may drive their performance: asset class selection, style allocation and manager and/or security selection among others. However, many investors may not realize a significant driver of their performance may be related to their own decision making about when to buy and sell, particularly in investments that may have the most upside potential.

    • The chart above shows the amount investors have underperformed equity funds over a decade because of poor timing, segmented by the volatility of the underlying funds. While investors only modestly underperformed less volatile funds, they dramatically underperformed more volatile funds. The takeaway is that when investors make buy and sell mistakes with their investments, they may suffer greater losses because of greater volatility. 
    • One reason investors may have historically underperformed the actual asset classes, funds or securities in which they invest is bad timing decisions. Investors may buy too high and sell too low, often missing out on the upside potential of their securities. 
    • Fortunately, there are methods for mitigating behavioral biases and making better decisions. 
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    news-1770 Wed, 30 Oct 2019 17:15:47 +0100 Sustainable development goals: Sustainability-driven growth /en/who-we-are/news/detail/sustainable-development-goals-sustainability-driven-growth/ The International Monetary Fund reported in october that the world economy is in a “synchronized slowdown” and downgraded its 2019 growth outlook to 3%. This is the slowest pace since the financial crisis. Growth in 2020 is projected to improve modestly to 3.4% but is expected to be “precarious”. Within this macro environment there are multiple long-term sustainable growth opportunities that are embodied in the UN Sustainable Development Goals. The asset management industry will play a key role in delivering these global goals. La Française has a long-standing commitment to sustainable investing and is strongly positioned to capture the related sustainable growth opportunities.

    • The SDGs are the globally accepted sustainability framework
    • They aim to address the world’s biggest challenges by 2030
    • The private sector has a key role to play
    • Asset managers can leverage the sustainable growth opportunities driven by the SDGs

    INTRODUCING THE SDGS AND THEIR APPLICATION TO ASSET MANAGEMENT
    A shared blueprint for peace and prosperity for people and the planet:
    The UN 2030 Agenda for Sustainable Development becomes increasingly relevant to asset managers as the industry itself embraces sustainable investing. At the heart of the 2030 Agenda are the Sustainable Development Goals (SDGs). The goals most clearly define the broader objectives of society. Their underlying ambition is to offer a shared blueprint for peace and prosperity for people and the planet. This is a blueprint for sustainable investment. Recognising this, the Principles for Responsible Investment has put the SDGs at the heart of its strategy.

    There are 17 SDGs with a total of 169 targets and 232 progress indicators across all goals. The goals – environmental, social and economic – are comprehensive in addressing the most critical global challenges: poverty, inequality, climate change, environmental degradation, prosperity, peace and justice. A core focus of the SDGs is developing nations and lower income groups. However, after assessing the individual targets of the SDGs, we believe that there are many opportunities for global businesses to address the goals through their products and services.

    The role of the private sector:
    The SDGs superseded the Millennium Development Goals in 2015 when they were adopted at a landmark United Nations summit in New York. All 193 member states ratified the SDGs at the UN General Assembly. Delivering these goals will require a huge mobilisation of capital. It is estimated that between $3.3-4.5 trillion is needed annually to achieve the goals, with a funding gap in developing countries of $2.5 trillion.(1) The private sector has a major role to play in supporting the goals. However, this should be viewed as an opportunity, rather than an obligation.

    Sustainable growth opportunities:
    The SDGs are the globally accepted sustainability framework. They also represent secular macro risks and growth opportunities that institutional investors must pay attention to. For example, the SDGs could open up $12 trillion of market opportunities by 2030 through food and agriculture, cities, energy and materials, and health and well-being alone. This could create 380 million new jobs.(2)
    Seeing the SDGs in terms of Sustainability-Driven Growth is an effective way of ensuring that asset managers align themselves with the current global sustainability agenda.

    (1) United Nations Conference on Trade and Development (2014)
    (2) Business & Sustainable Development Commission (2017)

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    news-1769 Tue, 29 Oct 2019 15:28:52 +0100 Rate cut and wait and see approach /en/who-we-are/news/detail/rate-cut-and-wait-and-see-approach/ FOMC preview
  • The market is currently pricing a very high probability (92%) of the Fed cutting rates. Historically speaking, the Fed has always delivered with such high probability and we see no reason why it would be different this time. 
  • We expect few changes regarding the wording of the accompanying statement, reaffirming they “will act as appropriate to sustain economic growth”.
  • Since the last FOMC meeting, US economic data signaled a deceleration in terms of activity with the ISM non-Manufacturing index heading lower, payroll growth slowing and disappointing retail sales.
  • On the international front however, geopolitical tensions have eased. Brexit risk has diminished and US- China trade talks have progressed. However, we think uncertainty remains too high for the Fed to acknowledge this in its statement.  
  • All in all and considering recent moves, we think US rates could be marginally lower after the FOMC meeting.
     

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    news-1765 Tue, 22 Oct 2019 18:13:27 +0200 Until the end, M. Draghi should remain dovish /en/who-we-are/news/detail/until-the-end-m-draghi-should-remain-dovish/ M. Draghi, who will attend the last Governing Council meeting of his eight-year term as ECB president on October 24, should reiterate that monetary policy alone cannot resolve everything and that since inflation is still too low, fiscal policy should play a bigger role. The risk balance should remain the same and M. Draghi will certainly communicate about downward revision risks in upcoming economic forecasts in December: indeed, according to the minutes of the latest ECB meeting we believe growth forecasts are too optimistic, especially given prolonged uncertainties like the ongoing trade war and Brexit.
    Many measures, already announced during September’s press conference, will be implemented in the coming weeks. M. Draghi will probably come back on dissensions among the ECB members, as some of them expressed publicly their skepticism about the new bond-purchase program and the inflation target and suggested to include goals other than inflation or to define a range around the ECB inflation target.
    In conclusion, we expect M. Draghi to be dovish until the end of his mandate.


    Disclaimer
    This commentary is intended for professional investors only within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-1764 Thu, 24 Oct 2019 09:30:00 +0200 Can There Be Winners in a Trade War? /en/who-we-are/news/detail/can-there-be-winners-in-a-trade-war/ The U.S. and China trade war has disrupted markets this year and is causing meaningful change in global supply chains. While it is straightforward to identify countries that have gained from the conflict, singling out the companies that may thrive amid this turmoil requires deep research.

    • The U.S.-China trade war is having significant, tangible results with year-over-year (YOY) U.S. imports of Chinese goods down over 13% and U.S. exports to China down over 6% YOY. Chinese imports have been negative on a YOY basis for six straight months.
    • While imports from China have been decreasing, other countries, such as Japan, the Philippines, Korea, Taiwan and Vietnam, have all increased exports to the U.S. on a YOY basis. In fact, these five countries in aggregate have increased their exports to the U.S. more than 8% in the last 12 months.
    • American companies are already adjusting their supply chains in case the trade war becomes a long-lasting conflict. 42% have said they expect to get materials normally sourced from China from a different provider in the next year, according to a recent survey by Bain & Company, and 81% have indicated that escalating trade tensions have affected their current business operations.
    • Some people believe only those multi-nationals with flexible supply chains may have the ability to successfully mitigate the impact of increased tariffs. Identifying these companies necessitates diligent research. However, those corporations that operate in the digital sphere, such as new media, cloud computing and enterprise software businesses, may be impacted less than those that deal in physical goods, e.g., industrials and materials companies.

     

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    news-1761 Thu, 17 Oct 2019 16:04:37 +0200 SICAV de Cristal – Kristallenfondsen 2019 Awards Ceremony, Belgium Oct. 9, 2019 /en/who-we-are/news/detail/sicav-de-cristal-kristallenfondsen-2019-awards-ceremony-belgium-oct-9-2019/ Fred Alger Management Inc and Senior Portfolio Manager Amy Zhang, proud receivers of the Best Sicav Award - Small and Mid-cap category at this year’s Sicav de Cristal ceremony, organized by La Libre Belgique and De Standaard.  Accepting the award on behalf of Amy Zhang, Andrea Bertocchini, Head of Northern Europe, Benelux and Italy.

    Past awards and rankings are not indicative of future performance or awards/rankings. 

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    news-1758 Wed, 16 Oct 2019 10:39:53 +0200 Eco-Working Reinventing Workspaces /en/who-we-are/news/detail/eco-working-reinventing-workspaces/ Newtown Square, a subsidiary of La Française group, offers flexible workspaces and coworking spaces for entrepreneurs and intrapreneurs. This new activity was launched this summer and it has a different approach: eco-working. Eco-working enables anyone to bring a project to life while offloading aspects that are potentially harmful to their plans. The concept of individual ecology is only meaningful if we can consider the working environment as being ‘healthy’ for users, like in the saying “healthy body, healthy mind”. That’s where eco-working comes in.

    To make its project a success, Newtown Square has a multi-step plan to build its workspaces on solid, sustainable foundations. 

    Its first goal is an environmental commitment. Banning the use of plastic and paper in everyday life is a very ambitious challenge.  We cannot avoid packaging on a fruit salad bought at the local supermarket for lunch or on a parcel delivered to our workstation, but we can rethink many of our everyday habits. At Newtown Square, this starts first thing in the morning in the shared kitchen area. We choose a cup or mug before making a cup of eco-friendly zero-pesticide tea or coffee. We can avoid printing more than we need to by checking the printing quota assigned to each workstation each month. The plastic badges used to enter the building have been replaced by Filtdesk, a free app developed by a French start-up that users can install on their smartphone.

    The second goal covers quality of life and well-being: making the workspace pleasant, welcoming and user-friendly. This objective led the teams in charge of the project to design responsible workspaces by limiting their environmental impact. Nearly all lights use LEDs with light switches – just like at home – so users can switch lights on or off as required. This also makes individuals aware of their energy use. The office furniture is comfortable and attractive, sourced second-hand from the circular economy. All the plants at Newtown Square had a previous life in hotels, restaurants or offices. We have taken them in and look after them each day.

    A number of services are also committed to socially responsible initiatives.  For example, working with local businesses or choosing partners that have ethical commitments. Maintenance teams are all employed by our partner on permanent contracts and they only use 100% natural products.

    These projects and their different “Impacts” represent part of the journey. Newton Square and its members have undertaken to make changes to the working environment to make it healthier. Other projects are planned, the most symbolic of which is the offsetting of co-working workstations’ carbon emissions by planting trees in the Ile-de-France region. We are continuing to make progress in our journey towards the transition.

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    news-1748 Wed, 02 Oct 2019 10:54:41 +0200 Back to work with commitment /en/who-we-are/news/detail/back-to-work-with-commitment/ While we enjoyed our holidays in the sun, news on the climate was not good this summer. The IPCC, which is generally restrained in its remarks, published two alarming reports – one on the link between climate change and land use and another on the state of our oceans and glaciers. Weather conditions over the summer were clearly not normal, be it in France – where 
    87 departments have water restrictions, 41 of which at crisis levels – or around the world, with unprecedented wildfires in the Amazon and Africa and Hurricane Dorian. 

    The signatories of the COP 21 climate agreement – which in itself did not go far enough – have fulfilled few or none of their commitments and we are hearing more and more bad news. The climate is making the headlines in our daily newspapers, on the radio and on TV news. It also joined the agenda at the G7 summit in Biarritz where the world’s leaders brought attention to the Amazon wildfires and the dangers that come from destroying the Earth’s lungs, calling on President Bolsonaro to take action and offering their help.

    Climate news – bad news – has reached the French National Assembly, where Valérie Masson-Delmotte was at last able to present the IPCC’s latest special climate report dating from last October – thanks to Greta Thunberg! 

    The climate also came up at the annual conference organised by the Medef (French employers’ organisation), both intentionally (because it was part of the conference theme: “Our Future(s)”) and unintentionally (when students addressed the conference with their Manifesto for an Ecological Awakening). 

    The Statement of the Purpose of a Corporation issued by the powerful Business Roundtable in the United States, which suggests moving away from the extreme focus on shareholders, shows that bad news can also raise awareness and bring about change in society. We in France in general and at La Française in particular wholeheartedly support this change.

    It is with this in mind that we are continuing to organise our activities to make our commitment even more visible and effective, for example with the appointment of Laurent JacquierLaforge as Global Head of Sustainable Investing. Laurent will be responsible for embodying and promoting La Française group’s commitments to responsible investing in all its areas of expertise, both internally and outside the group. He will draw on Inflection Point by La Française, our group’s ESG research centre located in London. 

    The group is fully aware of the need to raise awareness, because change can only come about with widespread support. So, in early September, taking advantage of the PRI*, which La Française sponsored, we organised a roundtable on impact investing followed live and streamed online. The keynote introduction was given by Eric Salobir and the conference included a speech by Valérie Masson-Delmotte (IPCC). It covered 3 topics: The Grand Paris project – the impact of metropolises; Roadmaps for measuring the transition; Raising awareness to raise the impact. The presentations are now available on our BlueRoom.
     

     

     

     

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    news-1745 Thu, 03 Oct 2019 10:00:00 +0200 Undiscovered Gems /en/who-we-are/news/detail/undiscovered-gems/ Historically, small cap equities have attracted fewer Wall Street research analysts than large cap equities. The scarcity of small cap coverage creates opportunities for investors and portfolio managers who are committed to doing in-depth research on these companies. Smaller Companies Flying

     

    • For a number of reasons, analyst coverage of public companies has generally narrowed over the years as a result of a greater number of independent research firms covering a shrinking pool of public companies. However, this narrowing has led to increased coverage of larger cap companies at the expense of small cap companies. Specifically, in 2003 there were eight more analysts on average covering a large cap stock than a small cap stock. Today, the average large cap company is followed by 22 analysts, while the typical small cap company is followed by just 7 analysts.
    • The result of small cap companies receiving less coverage by Wall Street analysts is that portfolio managers who conduct in-depth proprietary research may have a better chance of identifying undiscovered opportunities. This may be one reason why over the 20-year period ended June 30, 2019, managers in the small cap category produced an average annualized three-year excess return that was 168 basis points greater than that of the large cap category.1
    • There does not appear to be an end to the trend of Wall Street allocating more resources to large caps compared to small caps; therefore the opportunity for small cap portfolio managers (and the underlying shareholders) appears just as bright today as it did 20 years ago.

    1 Callan, Active vs. Passive Report, Second Quarter 2019. Large cap equity style managers vs. Russell 1000 and Small cap equity style
    managers vs. Russell 2000.

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    news-1743 Tue, 01 Oct 2019 10:01:34 +0200 La Française Real Estate Partners International acquires office property(1) in Dusseldorf (Germany) /en/who-we-are/news/detail/la-francaise-real-estate-partners-international-acquires-office-property-1-in-dusseldorf-germany/ La Française Real Estate Partners International, on behalf of a La Française collective real estate investment vehicle, has acquired from a Revcap / Kriton JV an office property located at, Am Seestern 5, in an established office submarket of Dusseldorf, Germany. The building is well located and is easily accessible via public transportation. The asset was built in 2002 and underwent extensive renovations that were completed this year. The six-story building offers ca. 10,400 m2 of office space and about 270 indoor parking spaces. The office set-up is flexible, and the space is ideal for multi-tenant use. Currently, the building is fully let to two tenants: a leading global information and communications solutions provider and a manufacturer of high-grade refractories for high temperature industrial processes.

    Jens Göttler, Managing Director for Germany, La Française Real Estate Partners International, said: “We are delighted to add a quality German investment to our portfolio. With Germany’s third largest airport, Dusseldorf is easily accessible and consequently attracting a high level of foreign investment. Additionally, as Germany’s sixth ranking city for its quality of living, Dusseldorf is prospering. These are all factors that should contribute favorably to the valuation of the property and support tenant demand.”

    La Française Real Estate Partners International was advised by Norton Rose Fulbright on legal aspects and by TA Europe GmbH on technical Due Diligence.

    1This is an example of an investment held within the portfolio. It is not indicative of future investments and does not fully reflect the composition of the funds.

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    news-1734 Tue, 24 Sep 2019 15:29:58 +0200 La Française Lux-Sustainable Real Estate Securities awarded Austrian Ecolabel for Sustainable Investments, Umweltzeichen /en/who-we-are/news/detail/la-francaise-lux-sustainable-real-estate-securities-awarded-austrian-ecolabel-for-sustainable-invest/ La Française, building on multiple years of real estate investment experience, launched in 2017 an actively managed sustainable listed real estate investment strategy, La Française Lux-Sustainable Real Estate Securities. The fund managed by La Francaise Forum Securities (SG) Pte Limited, now with more than a two-year track-record, has been awarded1 by the Austrian Ministry of Sustainability and Tourism the selective Ecolabel for Sustainable Investments, Umweltzeichen.

    The Austrian Ecolabel, Umweltzeichen, was established in 1990 by the Austrian Ministry of the Environment and distinguishes non-food products with high ecological and social quality. The sustainable funds / investments category exists since 2004 and was created in response to an increasing demand from retail and institutional investors for SRI investments. Awarded funds undergo the rigorous due diligence imposed by the official auditors Sustainability Model that filters funds according to specific exclusion criteria, incompatible with the principles of sustainability, and stakeholder and product criteria.

    Jana Sehnalova, CEO of La Française Forum Securities (SG) Pte Limited - and Global Portfolio Manager of La Française Lux-Sustainable Real Estate Securities commented, “La Française Forum Securities is committed to responsible investing globally within the listed real estate sector, thus providing a solution to investors with a real desire to participate in the sustainable economy. The award of the Ecolabel is a testament to a rigorous sustainable process, focused on the combination of qualitative and quantitative analysis of ESG (environmental, social and governance) factors. We are pleased with this acknowledgement and we will continue to strive to generate performance on behalf of our investors with a positive impact on the sector and the world we live in.” 

    Through a combination of ESG (Environmental, Social and Governance) and financial analyses, La Française Lux-Sustainable Real Estate Securities, comprised of forty to sixty lines, invests primarily in global real estate companies with solid ESG characteristics and that offer long-term capital growth perspectives. The investment universe of La Française Lux-Sustainable Real Estate Securities includes some 350 global real estate companies that undergo a rigorous ESG rating process. Only the top ESG performers are retained for the “alpha pool” from which the investment manager (La Française Forum Securities SG Limited) picks stocks with above average risk adjusted return expectations.
     

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    news-1729 Wed, 18 Sep 2019 12:24:31 +0200 Notice: La Française Rendement Global 2025 sub-fund of the La Française SICAV governed by French law /en/who-we-are/news/detail/notice-la-francaise-rendement-global-2025-sub-fund-of-the-la-francaise-sicav-governed-by-french-law-1/ We would like to inform the shareholders of the La Française Rendement Global 2025 sub-fund of the following changes:
  • The sub-fund will no longer have to possibility to invest in callable and puttable interest rate products; 
  •  
    These changes came into force on 19 September 2019. 
    Other fund characteristics remain unchanged.
    We wish to remind you of the need and importance of reading the key investor information document for La Française Rendement Global 2025, which is available at www.la-francaise.com.
     

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    news-1723 Wed, 18 Sep 2019 11:58:43 +0200 Notice: La Française Global Coco sub-fund of the La Française SICAV governed by French law /en/who-we-are/news/detail/notice-la-francaise-global-coco-sub-fund-of-the-la-francaise-sicav-governed-by-french-law/ We would like to inform the shareholders of the La Française Global Coco sub-fund of the following changes:
  • The net asset adjustment mechanism (swing pricing) has once again been included in the sub-fund's legal documentation. 
  • Following the change of investment vehicle on 7 December 2018, the description of the mechanism no longer appeared. However, shareholders of the La Française Global Coco fund were informed that the transfer from a joint ownership of transferable securities (mutual fund) to a company structure (SICAV) had no impact on the investment strategy. 

  • These changes came into force on 19 September 2019. 

    Other fund characteristics remain unchanged.

    We wish to remind you of the need and importance of reading the key investor information document for La Française Global Coco, which is available at www.la-francaise.com.
    The Prospectus, the Key Investor Information Document, the management regulations and the latest financial reports are available free of charge, in paper form at the registered office of the SICAV and at the German paying and information agent BNP Paribas Securities Services S.C.A. Zweigniederlassung Frankfurt am Main.
     

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    news-1721 Wed, 18 Sep 2019 10:14:26 +0200 The Opportunity in Saas /en/who-we-are/news/detail/the-opportunity-in-saas/ The software industry is in the midst of a multi-year secular shift toward software as a service (SaaS) Innovation in cloud infrastructure and networking technologies over the last 10-15 years has enabled an increasing number of new and innovative SaaS companies to come to market. In our view, this shift from on-premise license models to SaaS could last for many years to come. 

    • Spending on SaaS is expected to increase from from 20.9% of total software spend in 2017 to 28.7% in 2023. Cloud-based SaaS software is deployed over a network and paid for by customers with a recurring subscription fee. An example of SaaS is customer relationship management software that allows businesses to collect information on leads, prospects and customers on a single online platform, enabling users access anywhere and more highlytargeted client experiences.
    • The advantages of SaaS include lower initial costs, pay-as-you-go pricing, greater functionality and access to more frequent upgrades. SaaS users do not have to maintain their own infrastructure to run these applications.
    • SaaS company investors may realize increased financial visibility because revenue is comprised  of recurring subscriptions, higher renewal rates and potentially higher margins relative to  non-SaaS companies.
    • We believe investment opportunities are most apparent in SaaS companies that serve large  addressable markets, offer disruptive and differentiated technologies, and have sustainable  competitive moats and efficient go-to-market models with compelling unit economics.
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    news-1720 Mon, 16 Sep 2019 16:26:00 +0200 25bps rate cut but a dovish surprise will be hard to achieve. /en/who-we-are/news/detail/25bps-rate-cut-but-a-dovish-surprise-will-be-hard-to-achieve/ Please find below our expectations regarding the upcoming FOMC meeting on September 18th:
  • We expect the Fed to cut rates by 25bps. 
  • The decision to cut is however unlikely to be unanimous with George and Rosengren likely to dissent once again.
  • The 2019 median dot will be worth watching and it is likely to be at 1.875%, meaning no more cuts this year. 
  • Language won’t likely change significantly, with reiteration of “act as appropriate” and “mid cycle adjustment.” 
  • Economic forecast: 
    - GDP: 2019 growth will likely stay at 2.1% (carry-over effect of 1.94% growth at end of Q2);
    - Inflation: 2019 core PCE will likely stay at 1.8%. 
  • REPO: it has been one of the main topics this week; the Federal Reserve may deliver a 30bps IOER cut in order to keep the effective Fed Fund rate within the target range.
  • All in all, we see US rates and the US dollar slightly higher following the FOMC.

    Disclaimer
    This commentary is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-1715 Mon, 16 Sep 2019 11:54:23 +0200 La Française acquires off-market fulfillment centre in North Rhine Westphalia on behalf of South Korean investors /en/who-we-are/news/detail/la-francaise-acquires-off-market-fulfillment-centre-in-north-rhine-westphalia-on-behalf-of-south-kor/ La Française acting on behalf of Samsung Securities and KB Securities has completed the acquisition of a c. 150,000 sqm modern and purpose-built e-commerce fulfillment centre located in Rheindahlen, Monchengladbach in the Rhine Ruhr region of Germany. The property benefits from a long term lease to Amazon and represents one of their largest and most technologically advanced fulfillment centres in Europe. The property combines robotic technology with the skills of more than 1,000 strong workforce. 
     
    Located in an economically vibrant region of Germany and at the heart of European logistics network, the property consists of logistics facilities across 3 floors, office space, training centre and canteen areas alongside a dedicated car park building of more than 1,000 spaces and 180 trailer bays. The construction was completed in July 2019. 
     
    The property was acquired in a share deal on an off-market basis from the developer, Ixocon Immobilien GmbH & Co. KG. This acquisition represents the first logistics investment concluded by La Française on behalf of South Korean investors. For Samsung Securities, this is the third collaboration with La Française following the acquisition of the Belgian headquarters of a leading renewable energy supplier in Brussels (North Light and Pole Star assets) and the recently announced €691 million acquisition of the Crystal Park office campus located in Paris. 
     
     

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    news-1712 Wed, 11 Sep 2019 12:06:37 +0200 Don’t miss one of the most entertaining events of the year : ECB meeting! /en/who-we-are/news/detail/don-t-miss-one-of-the-most-entertaining-events-of-the-year-ecb-meeting/ Widely expected a couple of weeks ago, the relaunch of QE now seems less certain. A lot of questions will have to be answered at the upcoming ECB meeting, which promises to be one of the most entertaining events of the year! Please find below what we expect:
  • Rate cut: It is a close call between a rate cut of 10bps and 20bps; we would tend to lean towards 20bps; QE: There will be a
  • QE announcement, but we might not have all the details and it might be delayed (starting December 1st for instance
    • Public debt (PSPP): Yes, we think QE will include government debt but the share of QE it represents will be smaller than in previous QE programs. They will have to raise issuer limits first to avoid technical constraints;
    • Corporate debt (CSPP):  It is perhaps the easier aspect to forecast; Yes, QE will include corporate bonds.  Different working papers from the ECB conclude that CSPP not only helped large corporates, but also eased credit conditions for SMEs via the loan channel;
    • Size: Something around 20-30bn€, with a large share or private debt. We think they will not go full size as it might put Mrs. Lagarde in a difficult situation should the economic situation worsen;
    • Open ended or not: No, but 12 months minimum.
       
  • Tiering: We think further rate cuts will be accompanied by tiering, to avoid a heavy hit to the banking sector. We could be surprised by the details;
  • Forward guidance: We expect the ECB to reinforce its forward guidance policy: 
    • They might link forward guidance to achieving their inflation target (without mentioning a level);
    • Or they can link it to the asset purchase program (as was the case with former QE programs).
       
  • Economic forecast: 
    • They could cut their Euro area GDP forecast by 10bps both in 2019 and 2020;
    • They could cut their Euro area inflation forecasts by 10bps both in 2019 and 2020.
  • Uncertainty seems high nowadays so we might witness significant volatility following the ECB meeting and consequently we have trimmed down our risk budget. But all in all, we do not think the ECB will underdeliver considering current market expectations.


    Disclaimer
    This commentary is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-1707 Tue, 10 Sep 2019 12:14:11 +0200 Carbon Impact Analysis: the key to Successful Investment in the Energy Transition /en/who-we-are/news/detail/carbon-impact-analysis-the-key-successful-investment-in-the-energy-transition/ Sustainable investment keeps growing: 34% from 2016 to 2018 reaching 30 trillion dollars in assets. Impact investing grew by 79% and sustainability themed investing grew by 269% over the same period(1). La Francaise is well placed to take advantage of this growing trend thanks to the Equity and Fixed Income carbon-impact strategies. Both rely on a proprietary carbon impact methodology:

    •  Sector materiality
    • Carbon footprint
    • Operational carbon assessment
    • Carbon impact assessment of products and services
    • Forward-looking assessment with the low carbon trajectory models

    HOW ALIGN OUR PORTFOLIO WITH THE 2° C WARMING SCENARIO

    A 2° C carbon budget:
    The International Energy Agency (IEA) has estimated a global carbon budget, or cumulative carbon emissions, which can be emitted from 2014 to 2100 to keep global warming below 2° C. This carbon budget is then allocated to the sectors of the economy (agriculture, buildings, industry, transport, power and others). Each sector gets its own emissions reduction path to reach the 2° C levels based on certain technology assumptions.
    The coverage:
    La Francaise has developed its own low carbon trajectories (2° C aligned) for eight industries(2) and three more(3) will be ready by the end of the year.
    The confidence corridor:
    We analyse companies’ targets, strategy, capex, opex and other initiatives and determine a confidence corridor, which depicts our estimated companies’ emissions trajectory. This allows us to forecast the company’s performance versus the 2° C pathway. 
    Portfolio alignment:
    We then add up each holding’s performance versus the low carbon pathway for the respective sector to measure where our portfolios stand in the 2° C transition and how the portfolio managers could invest in each sector to support the low carbon economy.

    (1) The Global Sustainable Alliance
    (2) Electric Utilities, Autos, Airlines, Steel, Cement, Aluminium, Pulp & Paper and Oil & Gas.
    (3) Shipping, Railroads, Freight.

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    news-1706 Tue, 10 Sep 2019 11:55:21 +0200 Climate Change and its Effects on the bond Market /en/who-we-are/news/detail/climate-change-and-its-effects-on-the-bond-market/ Climate change is a reality that affects us all. We are both the victims and the perpetrators of this environmental phenomenon. As a committed investor with strong convictions, we seek to actively participate in the energy and ecology transition essential to the preservation of our planet as we know it. We aim to direct assets under management towards opportunities presented by this transformation, while protecting them from related risks.
  •  In 2015, the average temperature on Earth had increased by around + 1 °C from the 20th century average (1).
  • The frequency of extreme climate events has multiplied by more than 7 since 1960(2).
  • This resulted in more than 1.7 million deaths and 4.4 billion injuries from 1998-2017.
  • Over the same period, the economic impact amounted to $2,900 billion, 251% higher than in the previous 20 years(3).
  • The bond risk premium does not currently integrate climate risk. This risk is explained differently for each industry. For the oil industry, for example, “stranded assets” represent a major risk. A Carbon Tracker study that analyses the CAPEX of 72 oil exploration and production companies shows that in a world aligned with the demand for a + 1.75°C scenario, $1.6 trillion in assets(4) could be economised. This would cancel out their value in the balance sheets of the companies that hold them.

    Faced with the necessity to accelerate the financing of the transition, we have seen the green bond market emerge. This market has grown exponentially over the past four years following the adoption of the concept by industrial and financial issuers. These bonds are issued in relation with projects to invest in renewable energy, high-quality environmental real estate and the financing of “green” projects by banks. 

    However, not all industry sectors have issued bonds on this market. When an industry's main activity is structurally a high consumer of fossil fuels, access to this market is more difficult. Nevertheless, we should not exclude these sectors from the transition, as they form the cornerstone of a profound revolution in energy and the economy. They are actors in the transition and we seek to identify the companies that are investing in their transformation to finance them via the bond market. 

    This graphic illustrates the carbon emissions emitted by a company for a single production unit. As you can see, successive investments in new, cleaner technologies and production assets will help to lower their consumption and improve their energy efficiency. 

    Thanks to climatologists, we know that we have a carbon emissions budget that cannot be surpassed if we want to limit the temperature increase to 2 degrees by the end of the century. We can therefore use companies’ detailed analyses to evaluate how their strategy and their investments might impact their trajectories.


    (1) GIEC AR5 report, 2014
    (2) EM DAT database
    (3) https://www.unisdr.org/2016/iddr/IDDR2018_Economic%20Losses.pdf
    (4) Carbon tracker, “2 Degrees of Separation: Company-level transition risk”, July 2018 Update

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    news-1701 Mon, 09 Sep 2019 09:08:10 +0200 Responsible and climate strategy /en/who-we-are/news/detail/responsible-and-climate-strategy/ Find the datavision of the main figures of the La Française responsible and climate strategy.

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    news-1699 Thu, 05 Sep 2019 14:47:13 +0200 Jean-Luc Hivert, appointed Global Head of Investments of La Française AM /en/who-we-are/news/detail/jean-luc-hivert-appointed-global-head-of-investments-of-la-francaise-am/ La Française changes the organization of its fund management team and appoints Jean-Luc Hivert, currently Managing Director of La Française AM, as Global Head of Investments of La Française AM. He will thus assume the role of CIO for all the securities asset classes covered by La Française AM. With more than twenty years of experience in asset management, Jean-Luc Hivert relies on a team of approximately forty professionals organized by division.

    On equity management, following the appointment of Laurent Jacquier-Laforge as Global Head of Sustainable Investing for the La Française Group, Nina Lagron is appointed Head of Large Cap Equities.

    The other asset classes are under the responsibility of:

    • Odile Camblain le Mollé - Head of Multi Management & Private Wealth, 
    • Jérôme Fauvel - Head of Small Cap Equities,
    • Paul Gurzal - Head of Credit, 
    • Maud Minuit - Head of Fixed Income & Cross Asset, 
    • François Rimeu - Deputy Head of Cross Asset & Senior Strategist.

    Jean-Luc will also be supported in his new functions by Joel Konop, who is appointed COO (Chief Operating Officer).

    Patrick Rivière, Managing Director of La Française concludes, "Jean-Luc’s cross-asset skills coupled with his professionalism will make it possible to optimize synergies within the management team of La Française AM and to pursue the development of innovative solutions with high added value for the benefit of our customers.”

    Jean-Luc began his career in 1997 at Vega Finance and then at Cyril Finance as Convertible Bonds Manager. He joined La Française des Placements in 2001. As Co-Head of Fixed Income Management, Jean-Luc innovated and contributed to the launch of the fixed maturity fund concept, one of La Française's "key differentiation factors" to this day.

    He holds a DESS in "Finance" from the University of Paris VI (1996), a MIAGE - "Computer Methods Applied to Business Management" (1995) and a MASS in "Applied Mathematics and Social Sciences" from the University of Paris XII (1993).
     

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    news-1697 Thu, 05 Sep 2019 14:11:33 +0200 Laurent Jacquier-Laforge, appointed Global Head of Sustainable Investing of La Française Group /en/who-we-are/news/detail/laurent-jacquier-laforge-appointed-global-head-of-sustainable-investing-of-la-francaise-group/ Resolutely mobilized for the transition to a sustainable economy, La Française appoints Laurent Jacquier-Laforge as Global Head of Sustainable Investing. He will be the reference for all parties, internal group or external, and embody La Française’s commitment to sustainable investment relative to all the group’s areas of expertise. Laurent will be supported by Inflection Point by La Française, the group’s proprietary extra-financial research center, based in London. 

    Achieving the group's medium-term development objectives, depends on its ability to successfully position itself on the European market and offer sustainable investments solutions, covering all asset classes, that simultaneously generate value, meet ESG standards and have a positive impact on climate change.

    "Beyond its corporate commitments, La Française has chosen to integrate the consequences of climate, ecological and demographic risks into its investment management. To do so, we rely on our extra-financial research center, the development of impact solutions and the integration of impact measurement into our economic scenarios. Our objective is to offer investment solutions that meet the expectations of investors who are eager to participate in a more sustainable economy," explains Laurent Jacquier-Laforge.

    "Taking into account environmental and social issues is crucial. The appointment of Laurent Jacquier-Laforge and the creation of a dedicated team are further proof of our determination to become an asset manager committed to a world undergoing profound change. It is vital to promote impact management in order to converge the expectations of society in general and investors. This is our conviction and the key role we must play. " emphasizes Xavier Lépine, President of La Française Group.

    Laurent Jacquier-Laforge began his career in 1985 as Head of Equity Research at CCF and then at Svenska Handelsbanken Markets. After several experiences with investment management firms such as CDC Ixis Asset Management and Fortis Investments, Laurent was appointed Head of Equities at Scor Global Investments in 2008. He spent four years there before being appointed Head of Equities at La Banque Postale Asset Management. Laurent joined La Francaise in 2014 and was appointed CIO Global Equities of La Française AM in 2017. Since he joined La Française, Laurent has transformed the equity fund range by integrating a responsible dimension, according to a methodology developed by Inflection Point by La Française, the group's extra-financial research company. 

    Laurent Jacquier-Laforge holds a DESS-DEA degree in Economics from the University of Paris X Nanterre. Laurent is a member of the SFAF ((the French Society of Financial Analysts).

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    news-1694 Thu, 05 Sep 2019 10:00:00 +0200 La Française Real Estate Partners International acquires a mixed-use property in Bremen (Germany) /en/who-we-are/news/detail/la-francaise-real-estate-partners-international-acquires-a-mixed-use-property-in-bremen-germany/ La Française Real Estate Partners International, on behalf of a La Française collective real estate investment vehicle, has acquired a mixed-use (office and retail) property located at 65-71 Obernstraße, a prime retail location in Bremen, Germany. The modern and fully refurbished asset, Ansgari Haus, is centrally located and easily accessible by public transportation. The building was constructed in 1988 and underwent extensive refurbishment in 2014 and 2018. It has a total floor area of 5,700 sqm and is fully let to multiple tenants. Among the tenants of the five-storey property are the coworking space provider Spaces with 3,200 sqm on five floors including a roof terrace and the fashion house AppelrathCüpper, leading premium fashion retailer for women´s wear and lingerie, using 2,400 sqm of retail space spread over three floors.

    The Hamburg project development company QUEST Investment Partners was the seller of Ansgari Haus in Bremen. Confidentiality has been agreed concerning the purchase price. In July 2017, QUEST Investment Partners acquired the part of the Bremer Carrée that had been vacant for years and renamed it Ansgari Haus. With the modernisation and new letting, QUEST Investment Partners is giving the city centre of Bremen new positive impetus.

    Jens Goettler, Managing Director for Germany, La Française Real Estate Partners International, said: “Bremen is the 10th largest city in Germany and is undergoing a positive development. Its thriving harbor activity attracts companies and people from across Germany and abroad, which supports the local economy and creates demand for both office space and services. We were also convinced by the strong inner city which is visited by a substantial and growing number of tourists.” 

    The Ansgari Haus is located in one of the most frequented areas of Bremen. “The two well-known main tenants will make a significant contribution to revitalizing the city center and provide new positive impetus," said Jan Rouven Künzel, Managing Partner of QUEST Investment Partners.

    La Française Real Estate Partners International was advised by Norton Rose Fulbright on legal aspects and TA Europe on technical aspects. QUEST Investment Partners was advised by Hansa Partner Rommel & Meyer on tax aspects and by Jebens Mensching PartG mbB on legal aspects. Jones Lang LaSalle accompanied the sales process.
    About QUEST Investment Partners

    QUEST Investment Partners is a real estate project development and investment company with offices in Hamburg and Berlin. QUEST focuses on investments in commercial and residential properties with upside potential in top locations of major German cities. In retail developments the focus is on good inner-city locations in German metropolitan regions. The QUEST team has extensive experience in the development of high-quality real estate projects and continuously aims at increasing the real estate values of its shareholders and investors. QUEST’s shareholders are the managing directors Theja Geyer and Jan Rouven Künzel as well as the investment holding company of the Hamburg entrepreneur Erck Rickmers who is invested in real estate, equity investments and shipping.  
     

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    news-1692 Thu, 05 Sep 2019 10:39:00 +0200 An overlooked Asset Class? /en/who-we-are/news/detail/an-overlooked-asset-class/ Over three quarters of all U.S. equity fund assets are in large capitalization stocks with the next largest allocation being small cap stocks. With those two categories making up more than 90% of fund assets, are investors missing an opportunity? SMid cap stocks, a hybrid of small and mid cap equities, may be an overlooked part of the market capitalization spectrum, given they have historically offered what some believe to be the best of both the small and large cap worlds. SMid Capitalization Stocks have Outperformed

     

    • Over the past 20 years, U.S. SMid cap stocks have outperformed both their large and small cap counterparts. Given their smaller size (the weighted average market capitalization of the Russell 2500 is about $6 billion), some believe it is no wonder that they have been able to produce higher returns than large caps. But how have SMid caps beaten small caps?
    • One reason why SMid caps have outperformed small caps may be their capacity for further growth after surviving the perils of infancy, which may ensnare smaller companies. Additionally, SMid cap companies may be mature enough to enjoy better access to capital and often may have more seasoned management teams than small caps. At the same time, SMid caps may possess upside potential through M&A or other growth initiatives that can move the needle more easily than for large caps.
    • Another potential benefit of U.S. SMid caps has been their ability to post strong performance without undue volatility. The standard deviation of SMid caps over the past 20 years has fallen between those of small caps and large caps, allowing SMid caps to drive a better Sharpe ratio than both large and small caps.
    • As investors strive for higher returns in a low-return world, they may want to allocate more capital to SMid caps, a potential sweet spot on the market capitalization spectrum.

     

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    news-1688 Fri, 16 Aug 2019 12:07:44 +0200 Worried about a recession? /en/who-we-are/news/detail/worried-about-a-recession/ When it comes to framing risk, especially in a recessionary environment, it is important to understand U.S. history. Gauging expected earnings in a difficult economic environment is key to understanding risk in investments. Look for stocks where fundamentals may prove resilience

     

     

    • During the 12 months following the past two U.S. recessions (2001 and 2008), the aggregate of the S&P 500 Growth Index held steady while the S&P 500 Value Index companies experienced sharp EPS (earnings per share) losses.
    • Historically value stock earnings have been more impacted by economic volatility. Conversely, growth stocks have previously benefitted from steady earnings during difficult economic environments.
    • Because the earnings of growth stocks have previously proven more resilient than those of value stocks, investors should consider their Growth vs. Value weightings should they believe a U.S. recession is on the horizon. These past two recessions have shown the strength of Growth equity earnings.

     

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    news-1686 Tue, 13 Aug 2019 11:28:19 +0200 Carbon Impact analysis : The key to successful investment in the energy transition /en/who-we-are/news/detail/carbon-impact-analysis-the-key-to-successful-investment-in-the-energy-transition/ Sustainable investment keeps growing: 34% from 2016 to 2018 reaching 30 trillion dollars in assets. Impact investing grew by 79% and sustainability themed investing grew by 269% over the same period (1). La Francaise is well placed to take advantage of this growing trend thanks to the Equity and Fixed Income carbon-impact strategies. Both rely on a proprietary carbon impact methodology:

    • Sector materiality
    • Carbon footprint
    • Operational carbon assessment
    • Carbon impact assessment of products and services
    • Forward-looking assessment with the low carbon trajectory models

    How to align our portfolio with the 2° C warming scenario

    A 2° C carbon budget

    The International Energy Agency (IEA) has estimated a global carbon budget, or cumulative carbon emissions, which can be emitted from 2014 to 2100 to keep global warming below 2° C. This carbon budget is then allocated to the sectors of the economy (agriculture, buildings, industry, transport, power and others). Each sector gets its own emissions reduction path to reach the 2° C levels based on certain technology assumptions.

    The coverage

    La Francaise has developed its own low carbon trajectories (2° C aligned) for eight industries(2) and three more(3) will be ready by the end of the year.

    The confidence corridor

    We analyse companies’ targets, strategy, capex, opex and other initiatives and determine a confidence corridor, which depicts our estimated companies’ emissions trajectory. This allows us to forecast the company’s performance versus the 2° C pathway.

    Portfolio alignment

    We then add up each holding’s performance versus the low carbon pathway for the respective sectors to measure where our portfolios stand in the 2° C transition and how the portfolio managers could invest in each sector to support the low carbon economy.

    The low carbon trajectory modelling in the automotive sector

    We created low carbon trajectories for the automotive sector, which is one of the highest emitting sector through its products usage. Transport is responsible for around 30% of global GHG emissions. Our pathways are based on Tank-to-Wheel emissions. In other words, these include downstream emissions. The chart below shows the three main pathways calculated(4) for the automotive sectors. This example of Volkswagen indicates where the company stands compared with these pathways. In our opinion, the historical trend (2014-2018) has been slightly disappointing compared with some of its European peers such as Renault and PSA. However, Volkwagen’s strategy should allow them to catch up to the 2° C trajectory.

    Conclusion

    La Française is well placed to take advantage of the energy transition by offering dedicated investment products to its clients. These products are based on a proprietary carbon impact methodology that incorporates current as well as forward-looking assessments. These allow the portfolio managers to always be well positioned to support the low carbon transition through their investment decisions.

    (1) The Global Sustainable Alliance
    (2) Electric Utilities, Autos, Airlines, Steel, Cement, Aluminium, Pulp & Paper and Oil & Gas.
    (3) Shipping, Railroads, Freight.

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    news-1682 Thu, 01 Aug 2019 15:23:04 +0200 First rate cut since 2008 ; future rate cuts will depend on the trade war /en/who-we-are/news/detail/first-rate-cut-since-2008-future-rate-cuts-will-depend-on-the-trade-war/ Please find below our thinking about last FOMC:
  • The FOMC announced the first rate cut since 2008 => this quarter point decrease was widely expected.
  • They also announced the end of the balance sheet unwind, two months before the initial plan => Not 100% expected, slightly dovish
  • Mr Powell suggested this move was a small adjustment meant to help economy weather uncertainty (coming mainly from the trade war)
  • Both Rosengren and George voted against Wednesday’s decision => not expected, slightly hawkish
  • Mr Powell didn’t look comfortable when questioned about future rate path ; He said it is not “the beginning of a long series of rate cuts” but he didn’t say “it is just one”. 
  • We don’t read this FOMC as particularly hawkish as Mr Powell almost precommit to as least a second rate cut before year end. At the end, the decision will depend on the evolution of the trade war and macro-economic data, which is no news to us.


    Disclaimer
    This commentary is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-1680 Wed, 31 Jul 2019 11:48:00 +0200 Streaming Changes the Game /en/who-we-are/news/detail/streaming-changes-the-game/ Streaming video products take multiple forms: short internet clips, subscription-based services, such as Netflix, traditional content providers and gaming software. Today approximately 200 streaming video services exist but the top four companies dominate the marketwith the number one provider garnering a 70% share of homes. In fact, many homeowners stream content from multiple sources.

     

    • 70% of U.S. homes have some sort of streaming subscription and 40% of homes utilize multiple streaming subscriptions. The average U.S. household has three streaming services and consumes 54 hours of content per month. Currently the top four video streaming providers are Netflix, Google, Amazon and Hulu.
    • The emergence of streaming video technologies has been disruptive to the traditional media ecosystem but incredibly positive for the consumer. Rather than being tied to a traditional television on a regular weekly schedule, streaming video platforms enable consumers to watch the content they want, when they want it, on any device. As a result many people are eliminating their cable or traditional television services.
    • The future appears bright for the leading streaming providers and their infrastructure partners (internet providers and telecom companies), which may present attractive investment opportunities.

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    news-1678 Fri, 26 Jul 2019 16:27:10 +0200 Very dovish statement with potentially a rate cut and a QE announcement in September. /en/who-we-are/news/detail/very-dovish-statement-with-potentially-a-rate-cut-and-a-qe-announcement-in-september/ The ECB meeting on July 25th was interesting. Please find below the main points:

    • No move on deposit rates, in line with our expectations. Still, slightly hawkish stance considering previous market pricing.
    • The ECB mentioned in the statement that:
      • The key ECB interest rates will remain at their present or lower. The change of the forward guidance was widely expected.
      • They changed their inflation target, talking about the symmetry in the inflation aim. Even if it may not have a significant impact over the short-term, this is an important modification, and a very accommodative one.
    • They were examining options such as a tiering mechanism and new net asset purchases. Again, this is very dovish.
    • It seems that a consensual decision might be difficult to reach in September; Mr. Draghi failed to prove that he had the full support of the Governing council. 

    The overall tone is very dovish, and more dovish than we anticipated (taking about symmetry in inflation, mentioning QE in the statement), but no precise information was given. The September meeting will be a very important one with potentially a rate cut (with a tiering mechanism) and a formal announcement of a new purchase program. 

     

    Disclaimer
    This commentary is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-1673 Tue, 23 Jul 2019 09:53:04 +0200 Making the link between financial and climate risks /en/who-we-are/news/detail/making-the-link-between-financial-and-climate-risks/ Climate Value at Risk and scenario analysis On 10 May in London, around 20 investors(1) from 11 countries, including La Française, that had participated in a UNEP FI pilot working group on the implementation of recommendations for climate reporting(2) shared the results of their analysis and case studies on the impact of different climate scenarios on their portfolios. The “Changing Courses” report, download here was presented and discussed at the afternoon launch event, in the presence of 300 people and after introductory speeches from the CEO of Aviva UK Life, Angela Darlington and Sarah Breeden, Executive Director at the Bank of England.

    Intended to be a tool enabling other investors to gain a better understanding of how to make the link between financial risks and the climate, it provides an overview of methodologies for analysing climate scenarios, then concentrates on the methods used by the pilot working group and tested by investors in order to assess the impact of climate change on their portfolios. It also sets out a number of case studies shared by the 20 original investors and summarises their feedback.

    For La Française, participating in this working group has enabled us to remain at the cutting edge of climate finance. As investors, we are exposed to climate risks and opportunities in our portfolios, as the companies in which we invest need to adapt during this transition period towards a low-carbon economy. And measuring the resilience of our portfolios to climate change is a key and complex challenge, based on multiple assumptions that project the impact of climate change on the various companies in a dynamic and forward-looking way. This is an exercise that has so far been too difficult and therefore somewhat out of reach, as the methodologies are in their infancy
    and need further work.

    That is why we have partnered with other major investors within the working group to share our issues and further our discussions in a structured and meaningful manner. During the test phase for the new Climate Value at Risk (CVaR) tool developed by Carbon Delta, we were able to discuss the assumptions made by Carbon Delta and, as a group, challenge them. We then used this tool to analyse some of our portfolios against various climate scenarios. Although the results still require improvement, the Climate VaR sheds new light on the risks to the climate by taking into account transition as well as physical risks, by including forward-looking elements via the patents filed by companies, and lastly, by enabling the selection – which we think is essential – of a range of climate scenarios based on projections of temperature increases of 1.5°, 2° or 3°. It is an innovative tool that will enhance our fundamental analyses, and which we plan to use in the future in managing our portfolios as one of the elements in our analysis of the resilience of companies to climate change.

    We hope that the “Changing Courses” report will bring what we have learnt to a wider audience of investors who share the same concerns and serve to increase the harmonisation of corporate climate reporting, thereby helping investors.

     

    (1) Addenda Capital, Afore Citibanamex, Aviva plc, Bentall Kennedy, CDPQ, CDL Group, City Developments Limited, Desjardins, DNB Asset Management, Investa, KLP Kapitalforvaltning, La Française Group, La Salle Investment Management, Link, M&G Prudential, Manulife Investment Management, Nordea Asset Management, Norges Bank Investment Management, Rockefeller Capital Management, Storebrand Asset Management, TD Asset Management
    (2) Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), www.fsb-tcfd.org

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    news-1672 Mon, 22 Jul 2019 17:56:28 +0200 The ECB will keep all options open, but now is the time to communicate, not act /en/who-we-are/news/detail/the-ecb-will-keep-all-options-open-but-now-is-the-time-to-communicate-not-act/ The next ECB meeting is scheduled for July 25th. Please find below what we expect:

    • We expect a change in forward guidance with policy rates “at present levels or lower” and an extension to September or December 2020, preparing the market for potential rates cut in September.
    • We expect no change in deposit rates. 
    • We expect the governing council to keep all the options open before the September meeting including:
      • Potential rate cut; 
      • Aier deposit system;
      • A new round of quantitative easing. 
    • We don’t expect mention of symmetry of the ECB’s inflation objective, but this topic could be discussed during the Q&A.

    The language should stay very accommodative, in line with recent declarations at Sintra. We do not expect notable market reaction considering current market pricing already reflecting dovish expectations

     

     

    Disclaimer
    This commentary is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997. 

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    news-1669 Thu, 18 Jul 2019 12:40:00 +0200 Gene Tech Opens Doors /en/who-we-are/news/detail/gene-tech-opens-doors/ Your genes determine more than your eye color or your physique. The propensity of you or your offspring to develop certain diseases is highly influenced by genetics. The good news is research into the genome, your complete set of genes, has started to drive huge medical breakthroughs and new drugs are regularly approved for people with rare genetic conditions. As a result investment opportunities up and down the genomic food chain are plentiful.

    • The cost of sequencing the human genome has declined considerably since 2001. According to Illumina, the premiere provider of genetic analysis technology, its goal is to reach a $100 cost sometime in the future. To date over 1.5 million genomes have been sequenced and studied.
    • Next-generation sequencing (NGS), which allows for analysis of the genome, is reducing the costs of treatment and improving the accuracy of diagnosis and the efficacy of treatment. As NGS advances, the research and development of drugs and diagnostic tools continue to accelerate.
    • Gene analysis is a priority worldwide. In the U.S. the All of Us study is geared to find genetic links to diverse diseases. Additionally, over 40 countries internationally are also analyzing the gene sequences of their citizens. These discoveries will spur even more research into diseases that can be targeted.
    • Investment opportunities exist in medical tools companies that are discovering the links between genes and medical conditions, testing companies that identify genetic abnormalities and biotechnology and pharmaceutical companies that develop products to treat the diseases that stem from genetic mutations.
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    news-1662 Tue, 16 Jul 2019 09:02:19 +0200 Could low-tech be the key to a sustainable future ? /en/who-we-are/news/detail/could-low-tech-be-the-key-to-a-sustainable-future/ On 20 February 2019, the OID (Green Building Observatory) organised a conference in the La Française auditorium on applying the “low-tech” movement to the real estate sector. The conference began with a presentation by Philippe Bouix* as part of the Real Estate & Outlooks cycle.
  • Why low tech?
  • The conversation around low-tech is being fuelled by an undeniable truth: the depletion of resources leads to the overconsumption of energy and a vicious circle which is untenable in the long term. Mines that can be easily accessed have been exhausted, and in those currently open, the resource concentration rates are much lower, with ever-expanding amounts of tech investment and energy required to operate them, as illustrated by the use of shale gas.
    Renewable energies, which do not run out, appear to be an answer to the growing need for energy. But the paradox is that producing, storing and processing this energy in increasingly large volumes requires resource-hungry technology, particularly in terms of rare metals.
    At the same time, the “circularity” of the materials or objects produced and used today is very low. These resources are utilised in a “dispersive” way; for example plastic, as it can only be recycled a few times, and metals, because of how they are used. High-tech objects are made from numerous components that cannot be separated at the end of their lives. For more everyday objects, the problem stems from the number of different alloys used. Lastly, their use in micro or nano format makes them unsuitable for recovery: in the case of titanium, for example, 95% is used in chemical form (in paint, make up, creams, etc.).
    The development of “simple” or low-tech solutions represents an opportunity to address the higher energy consumption of digital technologies. Recycling, modularity, repairability, simplicity and restraint are the watchwords of low tech. This allows for the involvement and autonomy of individuals, and makes it possible for communities of interests and skills to develop. The principles of frugal innovation, resilience and the circular economy are also pertinent. This is not just an issue of technology: we are talking about far-reaching societal change.

     

    • Low-tech and real estate

    The time has come for the real estate sector, which is a major consumer of resources (materials and energy), to ask itself the right questions. To reduce its impact, and use low-tech in a smart way, there are some interesting and disruptive possibilities, such as:
    - Shared use of buildings. The building with the lowest impact is the one that isn’t built, and offices are only used for around 30% of the time overall. And buildings that aren’t used also have an impact on the environment, due to the raw materials, carbon footprint and harmful effects of artificial surfaces.
    - Construction that factors in future demolition. Aspects such as re-use, redeployment, recycling, the circular economy, storage and the recovery of materials should be taken into account from the building design stage and need to reflect the local context.
    - Build local. This means removing our dependence on the geopolitical climate by no longer sourcing from Africa, Asia or the Americas. Using sustainable human labour that is available locally rather than unsustainable resource-consuming machines.
    - Working on resilience, to ensure the sustainability of buildings that can withstand increasingly severe climate events.


    As described, the low-tech movement is not a purely technical issue, but a socio-technical, organisational and cultural phenomenon.

     

    * Author of: L’âge des low tech : vers une civilisation technologiquement soutenable

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    news-1656 Fri, 05 Jul 2019 10:03:14 +0200 Strategic asset allocation and responsible investment /en/who-we-are/news/detail/strategic-asset-allocation-and-responible-investment/ In September 2017, the Research Commission of the French Sustainable Investment Forum (SIF) launched a working group on the management of a strategic asset allocation and the related subject of asset and liability management in the context of responsible investment, coordinated by CDC and Edmond de Rothschild Asset Management, along with a number of institutional investors and asset managers, including La Française Group. The aim of the working group was to consider the possibility of integrating the two analysis frameworks by identifying the stages in the asset allocation process in which ESG criteria may be applied. Initial findings on the state of play, data sources and investor expectations were revealed in 2018 and early 2019, and the final results will be presented at the PRI
    in Person
    conference in September.

    The general framework of responsible investment is based on integrating environmental, social and governance (ESG) criteria applied to the issuers of financial instruments into the investment process, while the strategic asset allocation is a technique for maximising risk-adjusted portfolio returns by seeking diversification benefits related to the past or projected performance of each asset. How can these two approaches be reconciled? A “responsible” asset allocation can be created in two stages, by firstly incorporating ESG criteria into the investment process adopted for each asset class (equities, bonds, real estate, private equity, hedge funds, etc.) in order to obtain “responsible” exposures, and then combining these exposures using traditional financial optimisation techniques that target the efficient frontier. This implicitly assumes that there is no diversification benefit between asset classes related to ESG criteria, and that only the financial criteria are a source of diversification benefits.

    Current finance research gets round the problem by quantifying the impact of ESG criteria in terms of projected financial performance to the extent that is possible, so as to bring the analysis framework within the traditional scope of finance theory. This underlies the “Climate Value at Risk” approach proposed by Carbon Delta and supported by a steering committee on the Task Force on Climate-related Financial Disclosures in which UNEP FI and La Française Group are participants, as well as that of the Impact Management Project, a community of investors and supranational bodies, in establishing an “impact” efficient frontier which factors the optimisation of ESG scores into the construction of a portfolio.

    Regulation is also relevant in that the asset allocations of European institutional investors are subject to capital backing requirements under Solvency II. This regulation only takes into account the financial risks in calibrating capital requirements and has no regard to the risks related to ESG criteria. The incorporation of a “green supporting factor” within the regulation is sometimes mentioned, but this can be somewhat more arbitrary, and the financial quantification of ESG criteria in this regard adds an operational solution.

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    news-1655 Thu, 11 Jul 2019 10:00:00 +0200 La Française Real Estate Partners International acquires a prime office building(1) in Essen (Germany) /en/who-we-are/news/detail/la-francaise-real-estate-partners-international-acquires-a-prime-office-building-1-in-essen-germany/ La Française Real Estate Partners International, on behalf of a La Française collective real estate investment vehicle, has acquired from Real I.S. an office property located at Rüttenscheider Strasse, a prime office location in Essen, Germany. The building was designed by renowned German architect Egon Eiermann and classified as a protected monument in 1992.

    The asset, built in 1960 and refurbished in 1994, is ideally situated at the intersection of Rüttenscheider Strasse and Hohenzollernring. The eight-story building, fully let to a power generation company, offers 22,506 m2 of office space and 343 indoor and outdoor parking spaces.

    Jens Goettler, Managing Director for Germany, La Française Real Estate Partners International, said: “Beyond the architectural qualities of the construction itself, its prime location in Essen, home to three DAX corporations and where the local economy is experiencing intensive growth, should contribute to supporting durably tenant demand.”

    La Française Real Estate Partners International was advised by Clifford Chance LLP on legal and tax aspects and by TA Europe GmbH on technical Due Dilligence.
    Photo not binding – Investment example, not indicative of future investments.

    (1) This is an example of an investment held within the portfolio. It is not indicative of future investments and does not fully reflect the composition of the funds.

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    news-1653 Fri, 05 Jul 2019 10:00:00 +0200 La Française sources eighth European office property on behalf of South Korean investors /en/who-we-are/news/detail/la-francaise-sources-eighth-european-office-property-on-behalf-of-south-korean-investors/ La Française, acting on behalf of a collective real estate investment vehicle, and South Korean investors, advised by Korea Investment Management (KIM), have co-invested in a Luxembourg company named DELO 1, owning c.a. 31,000 m2 office building, sourced off-market and named D. Square. This office building is in the final stages of completion and is located bd. Kockelscheuer, just south of the central business district of Luxembourg. Luxembourg, as one of the three official capitals of the European Union, is an attractive location and demand is on the rise with major financial institutions having started or signaled the start of new operations in Luxembourg as a result of Brexit.

    This office building, a high specification office development with a landmark design, is in Cloche d’Or and forms part of a master planned mixed-use development that is in close vicinity to motorway links to Belgium, Germany and France. The masterplan provides a shopping center, international school, residential apartments, greenspace and a sports stadium. The construction of a tramway system and a new railway will further enhance its connectivity to all major office districts and city suburbs.

    The seventeen-storey office building which includes ca. 29 900 m2 of office space, ca 1,400 m2 of archives, 235 parking spaces, staff restaurants, training facilities and an auditorium, was
    designed by two prominent Luxembourg architects. The asset, built to Grade A standard and set to achieve a BREEAM “Very Good” rating, is fully let, under a fifteen-year long term lease,
    to a single tenant, one of the top four auditing and consulting firms worldwide.

    David Rendall, Chief Executive Officer of La Française Real Estate Partners International commented,” This is the eighth European real estate investment sourced on behalf of South
    Korean Investors and the first in Luxembourg. Thanks to our international real estate investment platform with investment centers in Paris, Frankfurt and London and business development experts in Seoul, La Française has completed over €2 billion of investments across five European countries (UK, France, Germany, Belgium and Luxembourg).”

    Shawna Yang, Director of Real Estate Investor Relations for Asia concluded, “La Française is building bridges, bringing Asian investors and the European real estate market closer together.
    Our mission is to successfully source quality assets that meet and exceed local investors’ diversification requirements. In the case of D.Square, the interests of our South Korean partners are aligned with the growth prospects, in terms of expected rents and capital values, of the Luxembourg real estate market.”

    La Française and its Korean investors were advised by PwC and Dentons. The financing for the transaction was provided by the German Landesbank Helaba acting as Arranger, Lender, Facility and Security Agent.

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    news-1649 Tue, 02 Jul 2019 11:45:05 +0200 Long term governments bonds, are all countries equal? /en/who-we-are/news/detail/long-term-governments-bonds-are-all-countries-equal/ Commentary by Fabien de la Gastine 1. Long-term government bonds have performed very well since the beginning of the year. How much room for growth do you think they still have given the latest ECB and Fed statements?
     
    Since the beginning of the year, the long-term German and US government bond rates have decreased by more than 55 bps and 65 bps respectively to -0.30% and 2% (Source: Bloomberg, June 25, 2019). These levels already integrate the following market expectations of Central Bank rate cuts: -100 bps by the FED and -10 bps for the ECB until the end of 2020. If the risks surrounding the trade war between the US and China, hard Brexit and tensions with Iran cease to deteriorate more, we do not anticipate further Central Bank rate cuts or tensions on nominal yields.  Considering current USD hedge costs, the carry of the US 10y Treasury is negative. In Europe, semi-core rates are negative on all maturities up to 9 years and the yield on the German 30-year bonds is only 0.25% (Source: Bloomberg, June 25, 2019)! At this stage, many institutional investors, such as insurance funds, cannot invest in sovereign bonds with a maturity in excess of 15 years, but the very low level of rates could be an incentive to do it. This is one of the reasons why we are convinced that the 10-30 years curve could flatten. For carry reasons and despite the significant tightening of their spreads, we continue to favor Spanish and Portuguese bonds. In our opinion, these two strategies could perform in the coming months.
     

    2. Long-term BTPs failed to replicate the performance of 'long' government bonds issued by other Eurozone countries. Do you think that BTPs represent an opportunity in this sense?
     
    Unlike Spain or Portugal, the spread between the Italian and German 10-year bond rate has not tightened since the beginning of the year. The performance of an Italian 10-year bond (more than +6% year to date – Bloomberg, June 25, 2019) is almost the same as a French 10-year maturity bond and greater than a German 10-year bond. However, it is true that BTP failed to replicate the performance of Spanish and Portuguese bonds. The nominal rate of BTPs, especially on the short-term part of the curve, still represents an opportunity for carry but currently we prefer to be opportunistic on BTPs. Indeed, the relationship between the Italian Government and the European Commission is edgy; forecasts for 2019 growth are low. Moreover, if Italy does not hike the VAT in 2020, it will be difficult to satisfy EC requirements. The debate on the mini-BOTS is really a vast issue for rating agencies: Italy could lose a large part of its investor base if its rating moves below BBB-. 


    THIS COMMENTARY IS INTENDED FOR PROFESSIONAL INVESTORS ONLY WITHIN THE MEANING OF MIFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997. Internet information for the regulatory authorities : Autorité de Contrôle Prudentiel et de Résolution www.acp.banque-france.fr, Autorité des Marchés Financiers www.amf-france.org
     

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    news-1647 Wed, 26 Jun 2019 17:41:59 +0200 The G20, where the world’s two largest economies will go head to head /en/who-we-are/news/detail/the-g20-where-the-world-s-two-largest-economies-will-go-head-to-head/ By Hervé Chatot, Multi Asset Fund Manager, La Française AM. The G20 summit in Japan on the 28-29 June will take the center stage this weekend as the world’s two largest economies remain locked in an ongoing trade war.

    US President Donald Trump and Chinese President Xi Jinping are expected to meet on Saturday since trade talks broke off in May after the Trump administration hiked tariffs to 25% from 10% on about $200 billion worth of Chinese imports and China retaliated with higher tariffs.

    President Donald Trump has also threatened to impose tariffs on an additional $300 billion of Chinese imports.

    China and US trade officials are already talking ahead of the Trump-Xi meeting, which raises hopes for an easing in trade tensions, as both economies have been recently showing signs of weakness. Both countries want a deal and Donald Trump does not want to weaken the US economy before the 2020 election.

    The stakes are clearly high. This G20 summit will set the future direction of negotiations and will determine market trends and Central Banks’ reaction in the coming weeks and probably for the second semester.

    Central bankers have already signaled that they are ready to act quickly if need be and to ease monetary policy further to support economic expansion, as downside risks to the global economy remain elevated.

    In the US for example, the Fed is expected to cut the federal funds rate by 25bp or 50bp (Source: Bloomberg) in the next meeting in July and the magnitude of the cut will depend on the outcome of the G20.

    So what can be expected, what could be the most likely outcome and the market’s reaction?

    We have identified 3 potential scenarios:

    • A Ceasefire (hold off on additional tariffs): both sides agree on a truce (for a fixed period or not). Trade talks resume. 
    • A deal (de-escalation): both sides agree to reach a mutually satisfying solution with the gradual removal of a portion or most of all existing tariffs.
    • Escalation: Trade talks fail. New tariffs could be imposed by the US on part or all of the remaining $300 bn of Chinese imports in the third quarter. The Trade war escalates.

    A deal that satisfies both countries remains in our view unlikely is at this stage. We discard this possibility that we consider too optimistic. But if it were to be the case,  the market reaction could be very positive with a very strong rally in risky assets (equities markets, both EM and DM, High Yield Credit) coupled with a sharp increase in core yields as investors will reassess their views about the dovish messages formulated by Central Banks. The Chinese equity market and EM assets would benefit the most.

    The most likely outcome is a ceasefire as both sides are expressing a desire to resume talks. The US agrees to hold off on additional tariffs and to reinitiate negotiations. This outcome remains market friendly but is already well priced in by the market. The US stock market is near its all-time high. So, we think that the market could react positively, but the reaction might be muted. We do not foresee a strong rally in developed equities markets. It should provide more relief mainly for EM assets and would likely benefit the most trade sensitive names that have suffered and underperformed during the last weeks. Core government bonds are expected to sell off initially for a short period of time.

    However, we can’t exclude the escalation scenario which implies a failure in negotiations. In such a case, the US would continue to put pressure on China by imposing more tariffs. It would be very bad news and business confidence would deteriorate more quickly, dragging on the global economy. This outcome would be clearly very risk off for the markets and imply a more prolonged period of uncertainty. All risky assets would sell off sharply and safe-haven assets would rally strongly (US treasuries and gold mainly) as markets would price in a full trade war and world recession in the coming months. We think that this is the least likely scenario, because it would have very strong negative economic impacts for both countries and the global economic growth outlook.

    All that being said, I will say that we remain cautious before this meeting as it is very difficult to predict a political outcome. But, if the trade war escalates, global growth is expected to be cut by roughly - 70bp according to a macro economist consensus.

    THIS COMMENTARY IS INTENDED FOR NON-PROFESSIONAL INVESTORS WITHIN THE MEANING OF MIFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997. Internet information for the regulatory authorities : Autorité de Contrôle Prudentiel et de Résolution www.acp.banque-france.fr, Autorité des Marchés Financiers www.amf-france.org
     

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    news-1646 Tue, 25 Jun 2019 17:03:54 +0200 What has happened in the markets since 24 June 2016 ? /en/who-we-are/news/detail/what-has-happened-in-the-markets-since-24-june-2016/ By Jean-François Jolivalt, Multi Asset Fund Manager, La Française AM. On June 24, 2016, the British people voted to leave the European Union after a dramatic and longstanding political battle that nearly divided the nation. That day marked the beginning of the tumultuous Brexit journey. By July 2016, Theresa May became Britain's second female Prime Minister with a clear political mandate to negotiate with the European Union and initiate the legal process of leaving the EU. On March 29, 2017, Article 50 was officially invoked and marked the beginning of a two-year period, after which the UK would officially cease being a member of the EU. After months of negotiations, British cabinet and EU negotiators reached an agreement that would pave the way to a smooth separation. However, Theresa May never succeeded in pushing the deal through Parliament. Ultimately, the deadline was extended until October 31, 2019. Shortly thereafter, Theresa May announced on May 24th her resignation as Prime Minister after losing the support of her own party over her failure to deliver Brexit. At this time, it seems likely that pro-Brexit Boris Johnson will replace her as Prime Minister. Bearing in mind this political drama, it is interesting to look at what happened to UK markets during this same period.
     
    First and foremost, the Sterling strongly depreciated against the currencies of its major trading partners. After reaching a decade high of 0.7£ per Euro for most of 2015 the Pound quickly dropped to 0.85£ per Euro shortly after Brexit was announced (as at 06/07/16). Since then, it has been trading within a narrow range of between 0.85£ per Euro and 0.92£ per Euro. Each time the political chaos intensifies, the currency goes to higher end of that range. The same is true with the parity against the US Dollar. The Pound has depreciated to 1.26 USD, not that far from its historic 40 year low (as at 10/06/2019). In the near-term, the outlook remains unclear but make no mistake, a hard Brexit would imply a sharp drop in the Sterling. The stock market however exhibits a different trajectory. The FTSE 100, the UK’s main equity benchmark, is close to its all-time high. The stocks of export-oriented British companies, for example operating in the natural resources sector, have pushed the index higher while companies with domestic exposure are suffering. UK stocks are now trading based on one of the lowest Forward P/E ratios compared to their major developed peers and offer one of the highest Dividend Yields. This could provide some support to the market in the event of a hard Brexit. In the Rates market, the Bank of England, divided between the relative strong economy and the evolution of the exit process, has kept a neutral tone. However, the 10y GILT has followed the unprecedented global rally and reached as of late an all-time low of 0.81% in early June 2019. 

    Source: Bloomberg 

    Disclaimer
    THIS COMMENTARY IS INTENDED FOR NON-PROFESSIONAL INVESTORS WITHIN THE MEANING OF MIFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997. Internet information for the regulatory authorities : Autorité de Contrôle Prudentiel et de Résolution www.acp.banque-france.fr, Autorité des Marchés Financiers www.amf-france.org 
     

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    news-1641 Thu, 20 Jun 2019 19:01:04 +0200 Information message - June 2019 /en/who-we-are/news/detail/information-message/ A website is currently impersonating German subsidiaries of Group La Française and illegally offering to invest in financial products. Be vigilant. For more information

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    news-1640 Thu, 20 Jun 2019 16:59:12 +0200 Powell confirms the Fed’s dovish stance; rate cuts are coming /en/who-we-are/news/detail/powell-confirms-the-fed-s-dovish-stance-rate-cuts-are-coming/
  • As expected, the FED dropped the term ”patient” from its statement and instead indicated that it “will act as appropriate to sustain the expansion”. This is very similar to the language that was used in 2000/2001, right before the FED cut rates.
  • Dot plot projections were revised, with 8 policymakers dotting cuts of 50bp over the balance of 2019, which exceeds market expectations. That being said, the committee was divided, half of the board did not expect any cuts. 
  • The committee also discussed the decline in market-base expectations, as did the ECB previously, and lowered its inflation projections (2019 inflation target moved from 1.8% to 1.5%).

  • All in all, the message is clearly dovish (especially the magnitude of the decline in the dots) and confirms the will of the FOMC to cut rates in July.

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    news-1637 Thu, 20 Jun 2019 15:40:25 +0200 Innovation Independence /en/who-we-are/news/detail/innovation-independence/ This year we celebrate the 243rd birthday of the U.S. Since its founding the U.S. has beenrenowned for its democracy and capitalist system that embraces change and innovation. These factors have been the catalysts of the U.S.’s robust stock market, which outstrips that of any other nation worldwide.
    • Of the approximately $85 trillion in global stock market capitalization, the U.S. represents nearly 40% or over $32 trillion. This is significantly more than the roughly 25% of worldwide GDP for which the U.S. accounts.
    • The U.S. share of global market capitalization is more than twice that of its nearest competitor, China. More impressive is that the U.S. commands more than two thirds of global market capitalization in growth-oriented industries such as software and biotechnology.
    • But will the U.S. remain dominant in the future? The U.S. has one very strong advantage: innovation. The U.S.’s share of research and development spending among U.S. public companies is higher than its share of market capitalization—a sign that the U.S. may likely continue to lead in growth and change.
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    news-1635 Wed, 19 Jun 2019 10:31:09 +0200 La Française continues to attract South Korean capital to French Real Estate market /en/who-we-are/news/detail/la-francaise-continues-to-attract-south-korean-capital-to-french-real-estate-market/ Samsung Securities, advised by La Française, has recently engaged with ICADE, a listed commercial property investor and developer, in a promissory agreement for the purchase and sale of Crystal Park. The asset comprises a seven-story office building located 62-64 boulevard Victor Hugo, in Neuilly-sur-Seine (92), a prime business location in close vicinity to the Paris CBD and La Défense. La Française, minority co-investor, will act as asset manager. The sale (€691 million1 excluding duties) will close in July 2019. For Samsung Securities, this is the fourth investment in the Paris region and the second collaboration with La Francaise following the acquisition of the Belgian headquarters of a leading renewable energy supplier in Brussels (North Light and Pole Star assets).

    Located in a dynamic business environment, the building offers over 39.000 m2 of office space, 719 underground parking spaces and a landscaped park of two hectares. The asset was built in 2003 and heavily refurbished in 2018. The property offers extensive facilities, including a restaurant reserved for on-site staff, a cafeteria, auditorium, meeting rooms, concierge services, business center, fitness centre, etc. It is unique in offering such a high quality campus in such close proximity to the CBD and the highly sought after residential districts to the west of Paris. It has been highly successful in attracting service sector companies seeking an exceptional environment for their employees.

    The building is fully let to four quality tenants, including a leading multinational consulting firm, a listed sensory R&D firm, a listed cosmetics group and a leading French Digital and IT services provider.

    Patrice Genre, President of La Française Real Estate Partners commented,” The Crystal Park transaction illustrates well the strength and depth of our international investment and business network. From fund raising and sourcing to asset and fund management, La Française is a one-stop real estate shop. We thank our South Korean partners for their continued confidence”

    Shawna Yang, Director of Real Estate Investor Relations for Asia concluded, “For La Française, this is the single largest transaction to-date on behalf of South Korean investors, keen on diversifying their portfolios in French real estate. The French real estate market continues to show positive signs both in terms of valuations and rental values and we will continue to seek quality assets for Asian investors.”

    Samsung Securities was advised by Mastern Investment Management in Korea. La Française Real Estate Partners was advised by Maître Hervé Vinas, Jones Day (Erwan Le Douce-Bercot and Flavia Poujade), Strategies & Corp and Flabeau.

    1 before the effect of commercial benefits and miscellaneous work remaining at the expense of Icade.

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    news-1633 Wed, 19 Jun 2019 09:50:26 +0200 A very difficult mission to complete… /en/who-we-are/news/detail/a-very-difficult-mission-to-complete/ The upcoming June 19th FED meeting could be difficult. Markets are pricing in a dovish stance so the FED will have to be careful not to disappoint while simultaneously leaving enough latitude in the event of positive news flows concerning the ongoing Trade War. And if we base our analysis on past meetings and how Mr. Powell has held the pressure previously, this mission is going to be a difficult one to complete. Here is what you should have in mind:

    • Growth momentum is slowing, and inflation remains below target (and will remain below target until year end). Growth and inflation forecasts could be slightly revised downward by the Fed but it won’t be this meeting’s focus. 
    • Trade tensions are still very much alive but could also decrease significantly during the G20 on June 26-28th. 
    • The market is already pricing a full rate cut in July and almost three rate cuts before year end. With an economy growing around 2.5% this year and financial conditions showing no stress, it could be difficult for Mr. Powell to argue for such an easing bias.
    • We think the 2019 median dot will be lowered but will remain far from what the market is pricing, which is only one cut at year end.

    Mr. Powell has plenty of room to disappoint and he has not been the easiest chairman to read to say the least. We acknowledge that uncertainty is high, and we will reduce our risk budget before the event, especially given the moves we saw on fixed income markets following Draghi’s speech in Sintra.
     

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    news-1628 Fri, 07 Jun 2019 15:44:54 +0200 The New Moore's Law /en/who-we-are/news/detail/the-new-moores-law/ Moore’s Law states that the speed and ability of computers doubles every two years as the number of transistors on a microchip increases. It has been the driving force of the global digital revolution. Now a different version of Moore’s Law is set to usher in even larger, more powerful changes in technology and living standards. Exponential Growth in the Training of Artificial Intelligence Programs

    • The amount of “training” a computer program undergoes drives advances in artificial intelligence (AI). This training can be thought of as computing usage (compute for short) needed to practice and improve a program’s skill. AI is the ability of computer systems to perform tasks that normally require human intelligence and perception.
    • The chart above shows how much “training” various AI programs required over time. More available compute led to added training and better programs. Incredibly the speed of training is doubling every three to five months, faster than Moore’s Law. If sustained this greater speed is likely to lead to incredible breakthroughs in the field of AI. For example, AI recently tackled the field of radiology and proved it could analyze images better than 80% of the experts, according to Google Director of Engineering Ray Kurzweil.
    • Companies that are at the forefront of AI services, such as the major cloud platforms or leaders in the hardware that drives the cloud technology forward, may enjoy a very bright future.

     

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    news-1626 Fri, 07 Jun 2019 11:07:35 +0200 Blue tie, but dovish comments /en/who-we-are/news/detail/blue-tie-but-dovish-comments/ The ECB held its press conference yesterday:
  • As expected, the ECB extended its forward guidance until mid-June.
  • TLTRO-III terms were close to our expectations at deposit rate +10bps (basically MRO -30bps) for banks whose eligible net lending exceeds a benchmark.
  • Macro-Economic projections did not change significantly. The ranges were revised slightly upwards for 2019 and downwards for 2020, acknowledging better than anticipated growth during first quarter and rising external risks.
  • The surprise came during the Q&A, when Mr. Draghi mentioned that some members had raised the possibility of further rate cuts but also new asset purchases.
  • All in all, the Euro went up as expected but the outcome is more dovish than anticipated. We could be surprised by the next ECB forum in Sintra on June 17-19th. 


    Disclaimer
    This commentary is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-1624 Wed, 05 Jun 2019 17:49:08 +0200 High Yield Market Update - May 2019 /en/who-we-are/news/detail/high-yield-market-update-may-2019/ By Akram Gharbi, Credit Fund Manager, La Française AM We wanted to take advantage of the recent pause in the rally that we have witnessed in the Global High Yield market from January to April 2019 to explore more in detail recent developments and mounting volatility due to Trade War discussions. As you will see in our analysis, technical and fundamentals factors are still positive and valuations, which were considered a bit expensive, are slightly less so today. At La Francaise, we still believe that we could see more volatility in the days / weeks to come because of trade war discussions, the political noise in Europe, Brexit, etc. Nevertheless, there could be interesting new entry points in this strategy for long-term investors.

    Currents convictions

    1. Technical factors : well oriented

    Technical factors are supportive of the credit market and the global high yield segment. As shown in the following graph, negative nominal yielding assets have continued to grow as a % of the total fixed income universe and are now approaching 20%.

    As we have mentioned in the past, the search for assets delivering positive yields with a relatively good liquidity will favor a carry product, especially High Yield and subordinated bonds (AT1 Cocos and Hybrids).

    Another positive technical factor is Net Supply: the net supply of High Yield is widely negative in the US and flat in Europe (with a downward trend over the past three years). The factors that explain the decrease in net supply in the US and in Europe are the relative growth of new issues in the loan market versus the HY market and the increase in the number of rising stars. The combination of these two factors combined has limited the amount of available paper on the market.

     

     

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    news-1622 Wed, 05 Jun 2019 14:52:47 +0200 Will the ECB be dovish enough? /en/who-we-are/news/detail/will-the-ecb-be-dovish-enough/ The next ECB meeting will be the most interesting central bank meeting held in a while:
  • Details of TLTRO-III will likely be revealed. We expect TLTRO-III terms to be less appealing than TLTRO-II terms but better than anticipated at the beginning of the month (MRO -20bps).
  • We expect the ECB to extend its forward guidance until at least the end of March 2020: market based inflation measures (5y5y swap) are too low, and this is one of the easiest ways for Draghi to sound dovish.
  • We do not expect major changes to Macro Economic projections:
  • - On the positive side, headline inflation, GDP growth and unemployment have all surprised positively over the past few months.
    - On the negative side, downside risks have increased: trade war, political risk (UK and Italy) and weak PMI data again in May.

    Markets have already priced in a very negative outlook for the Euro Area as market expectations are more negative than the ECB’s own forecasts.

    Markets are also already pricing a probability of a further rate cut.

    We see risk rewards tilted towards a market reaction with a slightly stronger Euro and, at the margin, higher rates, although Draghi has proven many times than he can be more dovish than the market expects (tiering might be an option)

    But we think this time it will be harder.


    Disclaimer
    This commentary is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-1621 Sat, 25 May 2019 09:15:00 +0200 Is IoT the future of business? /en/who-we-are/news/detail/is-iot-the-future-of-business/ The Internet of Things (IoT) is quickly taking shape all around us. It’s important that investors understand it so they can recognize its investing implications and opportunities. IoT is expanding the power of the internet beyond computers and smartphones to a wide range of objects, processes and environments. IoT connects devices and other items to gather valuable information and send it to the cloud for analysis or even to other connected items. This increased information is already helping businesses and individuals improve decisions, efficiency and productivity.

    IoT Devices Are Rising Rapidly

     

    • Gartner estimates that there were 11.2 billion connected devices in 2018 and that number will rise to 20.4 billion by 2020.
    • When an object is connected to the internet, it can send information or receive information, or both. This capability doesn’t imply that a device has super storage or a super computer inside it; rather it means that a device can connect to super storage or a super computer.
    • Collecting and sending information require sensors that might range from temperature sensors and moisture sensors to air quality sensors and light sensors. These sensors allow us to gather data from the environment and make better decisions. Benefits can be found across all industries. For example, by sensing soil moisture and accounting for potential rainfall according to weather forecasts, crops can be irrigated as needed to avoid the costly consequences of watering crops too much or too little.
    • IoT gives businesses insight into and control over the things and environments that have traditionally been beyond the reach of the internet. For the suppliers of these devices, chips and software, it may mean higher sales and for IoT users it may mean improved profitability, while those who do not adapt may see profit deterioration.

     

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    news-1608 Fri, 10 May 2019 16:42:49 +0200 Hidden message in GDP /en/who-we-are/news/detail/hidden-message-in-gdp/ Often in economics breaking down a whole into its components tells a unique story. While overall U.S. GDP appears to be at or above potential, some of its components suggest continued growth. Low Cyclical Spending May Indicate Room for Expansion

    • When businesses and consumers are confident, they tend to make discretionary, long-term investments in things like new plants and equipment on the corporate side or new houses and remodeling projects on the consumer side.
    • These investments or cyclical components of U.S. GDP (business investment, residential investment and consumer durables) are still quite depressed even after nearly a decade of expansion. Their relatively low levels indicate potentially more investment to come.
    • These investments, which have historically climbed much higher prior to economic peaks, may drive economic growth going forward and corporate earnings as well. These components tell a more bullish story than the representation of U.S. GDP as a whole.
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    news-1606 Fri, 10 May 2019 15:39:17 +0200 La Française, exploring state-of-the-art approaches to measuring the impacts of climate change! /en/who-we-are/news/detail/la-francaise-exploring-state-of-the-art-approaches-to-measuring-the-impacts-of-climate-change/ A pilot group of twenty institutional investors, including La Française, contributed to the UN Environment Finance Initiative led project and tested first hand state-of-the-art approaches to measuring the impacts of climate change scenarios on their respective portfolios. The resulting case studies, consolidated in a guide for investors, provide valuable insight and confirm what is no longer a suspicion: the longer governments delay policy action on decarbonization, the higher the resulting costs for companies and hence the lower the returns for investors.

    Laurent Jacquier-Laforge, CIO Equities and Managing Director of La Française AM explained: “As a responsible investor, our goal is to make informed investment decisions. The further integration of climate-related risk metrics into our investment process and reporting documents is a positive step. The Pilot group has been a useful forum to challenge methodology and findings and to learn from group discussions. This report will spread the knowledge to a larger public of like-minded investors and stakeholders.”

    Download the full report

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    news-1603 Tue, 07 May 2019 11:19:21 +0200 La Française, signatory to the Transition Pathway Initiative /en/who-we-are/news/detail/la-francaise-signatory-to-the-transition-pathway-initiative/ La Française is one of the first French asset management groups to support the Transition Pathway Initiative. Launched in 2017, it is a global initiative that aims to assess companies’ preparedness for the transition to a low-carbon economy. Investors across the globe will now be able to asses how companies are managing climate change and identify the risks specific to their business model. Ultimately, it will lead to better-informed investment processes and decision making.

    Xavier Lépine, Chairman of the Board of La Française Group said, “La Française Group is proud to support the Transition Pathway Initiative, which provides a useful carbon framework. La Française already includes climate-related impacts, carbon management and low carbon scenarios in their equity products. And the group is in the process to integrate these externalities into their fixed income investment strategy.

    > Click here to learn more about the Transition Pathway Initiative

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    news-1597 Thu, 02 May 2019 17:27:03 +0200 Market rate cut expectations are not justified /en/who-we-are/news/detail/market-rate-cut-expectations-are-not-justified/ As was widely anticipated, the FOMC left the funds rate target range unchanged but unexpectedly made a technical reduction in the IOER rate of -5bps just to keep the effective funds rates, EFFR, in the middle of the 2.25-2.5% target range and to avoid breaching the upper limit of the target range. The FED upgraded its assessment of both growth and labor markets as the economic activity has risen at a “solid rate" recently. Downside risks to the outlook have diminished.
    Turning to inflation, FOMC members believe that the recent inflation softness is likely to be transitory. Factors responsible for the inflation softness should likely subside later this year, suggesting that current market expectations for a rate cut are unjustified.

    On the balance sheet reinvestment policy, the FOMC statement gave no guidance, suggesting that all the details will be forthcoming in May.

    Even if the tone sounds a little bit more “hawkish’, Chair J Powell emphasized that the current policy remains appropriate and as there is no sign of overheating in the economy, the FOMC members see no reason to change in either direction. The “patient” stance remains justified.


    Disclaimer
    This commentary is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-1596 Tue, 30 Apr 2019 15:07:36 +0200 Collecting Equities Can Pay Off /en/who-we-are/news/detail/collecting-equities-can-pay-off/ Combining one’s passion with one’s investment strategy may get some investors excited but it hasn’t turned out to be the most lucrative approach in recent years, even for the very wealthy who make up the predominant investors in collectibles. While sometimes amassing art or vintage cars, for example, can reap valuable gains, investing in equities in the U.S. during the past 10 years has proven substantially more profitable. Equities Have Eclipsed Other Investments over the Past 10 Years

    • Since the current U.S. bull market began, equities have outperformed several alternative investments by a wide margin. Some may perceive that these opportunities—mostly available to the very wealthy— are worthwhile but even New York real estate has not outperformed the S&P 500 in the last 10 years.
    • A primary issue in buying high end alternative assets is their illiquid nature. Stocks can often be sold in a matter of seconds but unloading a car or a work of art at an attractive price can take an indefinable length of time.
    • Additionally, collectibles have their own cycles with demand fluctuating over longer periods, exacerbating the difficulty of selling collectibles at a profit.
    • Collectibles are not tax advantaged in the U.S. either. They frequently entail larger capital gains taxes than stocks.
    • Although diversifying a portfolio with tangible assets may sound promising, it may only make sense for the extremely wealthy who can afford very long holding periods and the risk of selling at a loss.
      However, investing in stocks is accessible and has yielded impressive long-term results compared to other options.

     

     

     

     

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    news-1592 Tue, 30 Apr 2019 09:15:37 +0200 FOMC : Tug-of-war should keep Fed patient /en/who-we-are/news/detail/fomc-tug-of-war-should-keep-fed-patient/ The FOMC will be held on Wednesday May 1st. This time, the Fed will neither update its economic forecasts nor its dot plot. Since January, the Fed is in a “wait and see” mode and “patience” is their new moto. We do not expect any change to this stance, as there is a tug-of-war between growth and inflation.
    Inflation is decreasing. On Monday, April 29, the PCE, the Fed’s preferred gauge of inflation, came out below expectations at 1.49%. What’s more, core PCE dropped to 1.55%, the lowest reading since September 2017. This disinflationary backdrop raises the question of whether the Fed policy isn’t too restrictive. Chicago Fed President Charles Evans said mid-April that if they were to face 1.5% core inflation, they could contemplate policy easing.
    On the other hand, no matter what skeptics say, growth is decent in the US. The Q1 2019 GDP report was released on Friday at +3.2% QoQ annualized vs +2.3% expected. The labor market is strong with the unemployment rate falling back to 3.8% and wages rising by 3.2% YoY. What’s more, financial conditions eased since last meeting and therefore we think they will opt for status quo.

    Disclaimer
    This commentary is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-1587 Thu, 25 Apr 2019 12:02:20 +0200 Innovation remains key in a political environment where creativity is in short supply /en/who-we-are/news/detail/innovation-remains-key-in-a-political-environment-where-creativity-is-in-short-supply/ This first quarter of 2019 went beyond our expectations, with the markets recovering almost all of the losses of the last quarter of 2018. Equities have been rising steadily since 24 December. The quarter closed with something of a flourish: the S&P 500 has risen by more than 17% YTD (11 April) (the best Q1 since 2009) in a scenario in which monetary policy has become accommodative ‘again’. Oil prices have also shot up, reaching $68.39/barrel (+25.74%) on 29 March. In Europe, the Stoxx 600 has jumped by almost 16% YTD (+12.27% in Q1). All sectors have seen gains. Investors particularly favoured defensive growth sectors, notably consumer goods (+18%) and retail (+20.26%). Among cyclical sectors, basic resources also did very well (+19.20%) thanks to the support of China’s central bank and the positive vibes around a US-China agreement.

    While we are again close to equity market highs, the equity fundamental indicators remain stretched. Analysts continually revised down their EPS forecasts for 2019 (from +8% at endJanuary to +5% at end-March) over a quarter that saw investors triggering major outflows and stock market trading volumes remaining very low.  

    In short, everything seems to be under control from the Fed’s point of view, if we disregard the political noise.

    Elsewhere, we have been to the Hanover Messe trade show, when we observed the latest technological advances and growth drivers, particularly 5G and its use in industrial applications. In particular, we attended the presentation by Bosch Rexroth, in partnership with Qualcomm and Nokia, of a factory "of the future". The arrival of 5G will enable the creation of private networks that are essential to the safe operation of fully automated factories. Previously, with 4G, each machine had to be physically configured, together with the accompanying human-machine interactions (HMI). With 5G in factories, it will be possible to communicate remotely with several machines and robots using "network slicing" in a single HMI system, which will reduce operating costs and optimise production.

    In the case presented by Bosch Rexroth, using two key elements - a smart floor and 5G - robots can carry out production and logistics tasks by moving autonomously while avoiding the obstacles in their way and communicating with the factory’s other machines. Using a computer, a member of staff controls each machine operating on the surface while being informed of any malfunctions; the computer can also flag up the potential for a fault before it happens, enabling the staff member to take pre-emptive action. These installations are currently in the test phase, and could be on sale in a year.

    This technology will support our efforts to reduce carbon emissions, helping to cut energy consumption through the optimisation and digitisation of production processes. Innovation remains a key driver.
     

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    news-1585 Wed, 24 Apr 2019 11:36:12 +0200 New opportunities on greek debt /en/who-we-are/news/detail/new-opportunities-on-greek-debt/ Greece became the 10th member state of the European Union in 1982. In May 2010, the Troika (ECB-European Commission-IMF) agreed the first €110 billion bailout for Greece, in exchange for an economic adjustment programme.  Having failed to honour a repayment on 5 June 2015, the country’s crisis escalated further, with massive outflows from Greek banks. A new plan emerged after the Eurogroup meeting of 12 July 2017. And there was no Grexit...

    Greece has come a long way since then. Its growth forecast is 2.2% this year and next, according to Eurostat, after 1.9% in 2018, its best performance for a decade. For the first time in 15 years, Greece could post growth in the region of 2% for three years in a row, displaying considerable resilience to the economic slowdown in the eurozone over the last year. The domestic economy, which has benefited from a rise in real incomes and a marked fall in the unemployment rate (HSBC estimates a 10-point drop between 2014 and 2020), is rebounding strongly.  However, investment is still at low levels and the banking sector remains weak, although the banks have not had recourse to the emergency liquidity assistance (ELA) to access ECB liquidity since the end of 2018, and deposits by Greek households are growing, albeit slowly.

    And while its recovery in growth is gathering pace, Greece has achieved a notable fiscal performance, with a primary surplus estimated at 6.6% this year by the IMF, and debt now going in the right direction, projected to fall from 188% of GDP in 2018 to 177% in 2019, plus a budget that should be in balance from this year. Although this is extremely positive, there is an important factor to consider: whether or not the reforms passed on pensions and public sector pay cuts are constitutional. The IMF has warned that there will be a significant cost if these measures were to be deemed unconstitutional.

    The rescue plan extends until 2022, and the country is continuing to pay down its debt. Moreover, the country’s refinancing needs will be fully covered by the government’s liquidity reserves (close to €40 billion) until 2023. Greece has made its return to the bond markets and should proceed with fresh issues this year given the level of yields (3.50% on the 10Y). In view of the positive fundamentals and the appeal of Greek yields, with volatility at standard levels, Greek debt presents real investment opportunities.
     

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    news-1584 Tue, 23 Apr 2019 14:53:05 +0200 Accommodative central banks : The force awakens /en/who-we-are/news/detail/accommodative-central-banks-the-force-awakens/ The central banks took centre stage once again in March, with the ECB meeting early in the month followed by the Fed a couple of weeks later. Given the impact their decisions have across all asset classes, a number of aspects merit a closer look: The ECB has adopted an extremely accommodative tone, on a range of issues:

    • Change in forward guidance by promising not to raise its key interest rates before the end of 2019 (vs summer 2019 previously);
    • Launch of a new series of TLTROs from September, each with a maturity of two years;
    • Bigger than expected downward revision in growth and inflation forecasts.

    We could also mention the "tiering" system Mario Draghi has alluded to since the meeting, which if implemented, could enable the ECB to lower its policy rates again.

    The Fed, meanwhile, was even more accommodative than the ECB relative to market expectations:

    • End of balance sheet shrinking in October 2019;
    • Downgrade in Fed members’ median forecasts, which now indicate a single hike to end-2020, versus three previously;
    • Growth forecast for 2019 cut to 2.1% from 2.3% previously.

    These decisions by the Fed are surprising in view of the current situation in the US economy, which has barely changed since September, whereas the Fed’s message is markedly
    different.

    On the other hand, these decisions are not so surprising given the financial conditions (and movements on equity markets) over this period. However, we wonder if it was really necessary to go so far at the last meeting, when the financial conditions are already generally better than they were at the start of the year.

    The macroeconomic environment has looked to be improving in recent weeks, with reassuring figures coming out of China, which is consistent with the substantial fiscal,
    budgetary and monetary stimulus implemented a few months ago; this improvement is likely to have further to go. The eurozone seems to be stabilising, despite the German automotive sector continuing to weigh on the bloc as a whole; however, we think that the downgrades to eurozone growth forecasts are now behind us.

    What should we do in this environment? With growth stabilising, inflation risk low and the central banks extremely accommodative, the scenario for income-generating assets is very favourable overall. Moreover, this situation should also favour equity assets, provided the exogenous risks remain in check. Lastly, given the very sharp drop in returns on risk-free assets and an improving macroeconomic outlook, we could see a modest rise in these assets in the coming weeks.

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    news-1579 Mon, 15 Apr 2019 16:46:43 +0200 Recession Check /en/who-we-are/news/detail/recession-check/ When trying to understand the probability of a U.S. recession, it can be challenging to conclude much from news headlines or media stories. However, the Conference Board Leading Economic Index (LEI) has been a reliable indicator of future economic growth and its current reading implies that a recession is not imminent. Leading Economic Index Prior to U.S. Recession
    (Year-over-Year % Change)

    • Prior to the last seven U.S. recessions, the LEI, an index that tracks ten key economic variables and tends to reach peaks and troughs ahead of the business cycle, was declining.
    • While the LEI has historically declined on a year-over-year basis leading up to a recession, it is currently still rising, indicating continued economic growth.
    • The LEI tends to peak 6-18 months ahead of similar changes in corporate earnings. Therefore its current momentum suggests future earnings per share growth. As a result, stock market gains may follow.
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    news-1576 Thu, 11 Apr 2019 18:26:08 +0200 As anticipated, the ECB confirmed its dovish stance /en/who-we-are/news/detail/as-anticipated-the-ecb-confirmed-its-dovish-stance/ The ECB held its press conference yesterday. As anticipated, no significant change was announced: news-1572 Tue, 09 Apr 2019 18:12:34 +0200 Neutral tone, not much to expect /en/who-we-are/news/detail/neutral-tone-not-much-to-expect/ Here is what to expect at next ECB press conference on Wednesday:
  • M Draghi will likely re-emphasize that the slowdown is expected to be temporary, though risks remain skewed to the downside.
  • He will most likely also mention that the inflation outlook has not changed significantly, but he should remain cautious.
  • The ECB is not expected to announce the modalities of the new TLTRO.
  • During the Q&A session, questions about a tiered deposit rate are likely to come; we do not expect any formal announcement on this subject beyond the comments provided recently by Peter Praet. 
  • Overall a neutral tone, with no significant market impact.
     

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    news-1568 Mon, 08 Apr 2019 11:46:34 +0200 ESG Trends in the Real Estate sector /en/who-we-are/news/detail/esg-trends-in-the-real-estate-sector/ The real estate sector has been proactive on issues of sustainable development for many years and has improved its overall sustainability performance, particularly with regard to carbon emissions and energy management. However, it is time to look beyond climate and energy-related issues. The advent of the UN’s Sustainable Development Goals (SDGs) and a series of global megatrends will require the real estate sector to think differently about how it approaches sustainability.

    Investor pressure, risk reduction and reputation enhancement, together with a stricter regulatory environment and the need to cut costs, will continue to influence CSR practices in the sector. At the same time, new ESG factors are emerging alongside existing themes, which in our view will require more inclusive and flexible rating models that relate to the SDGs. Among these emerging themes, we have identified a number that we think are very important and which are systematically included in our assessment model:

    ENVIRONMENTAL FACTORS  

    - Certification and standards: beyond the environmental assessment systems for buildings developed throughout the world (there are more than 600 variants on BREAM and LEED, including HQE in France), other types of certification are being introduced to meet new requirements. One of these is the WELL certification, which is aimed at advancing health and well-being in buildings. Similarly, the use of community ratings is a new phenomenon that is emerging as an option for public spaces such as squares, parks and streets, as well as buildings.  

    - Energy demand and climate change: with an average life of 50-100 years, new buildings will emit CO2 over very long periods. Urbanisation is rapidly increasing all over the world, for example, in China the energy consumption of buildings could rise by 40% over the next 15 years. According to the World Green Building Council, to stay below the 2° C target, we will have to step up our efforts considerably if we are to have zero-emission buildings by 2050.  

    - Water use and waste management: the United Nations World Water Development Report revealed that global demand for drinking water will exceed supply by 40% in 2030. Climate change, population growth and human action will make water shortages increasingly common in both urban and rural environments. As surprising as it may seem, major cities, such as Tokyo or London, face a real risk of suffering water shortages. In the absence of new resources, better water management will be required, with waste water from sources such as rooftop rainwater collection, cooling towers, showers and toilets being collected and treated. Waste is also an important issue, and regulatory pressure is mounting to ban construction and demolition waste from landfills and improve recycling rates.


    SOCIAL FACTORS  

    - Health and well-being of occupants: in order to compete with today’s state-of-the-art buildings, catering to both occupants and employers is crucial. Businesses that are dealing with skilled labour shortages may be able to attract talent partly by having inspiring workplaces.  

    - Urban planning and resilience: as a result of climate change, the number of extreme weather events has risen significantly in the last few years, and continues to grow. As such, resilience should become a priority in building design and construction. Cities will have to make better preparations for such risks and become more resilient in all aspects of the urban landscape - physically, economically and socially.

    In a competitive housing market, we are seeing an arms race for new amenities. Well-equipped gyms and access to rooftops are becoming increasingly common, and developments now include cinemas, communal gardens and access to coworking spaces.


    GOVERNANCE FACTORS  

    - Management: real estate will have to be redefined to include services and infrastructure. Users want more flexibility in order to be able to meet the changing needs of the residential and commercial sectors. This will require more intensive asset management and investment.  

    - Innovation and technology: technology disruption is a factor that has to be taken into account, although it is less common in the real estate world than in other sectors. However, reputation management on social media, for example, is essential. Adaptability and responsiveness to the new world order must be part of a company’s ESG armoury.

    In sum, we think a traditional approach to ESG factors - centred essentially on energy and climate change issues - will be insufficient for a proper understanding and analysis of the future performance of real estate companies and the expectations for sustainable buildings. Investors and analysts in the real estate sector will have to broaden their horizons when developing ESG metrics in order to fully capture these new challenges.

    The full report by La Française Forum Securities (LFFS) and Global Property Research (GPR) is available online.
     

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    news-1564 Fri, 05 Apr 2019 09:51:36 +0200 Coming soon: a green taxonomy from the european commission /en/who-we-are/news/detail/coming-soon-a-green-taxonomy-from-the-european-commission/ The European commission is currently working on a green taxonomy with the aim of facilitating the investment necessary to achieve Europe’s climate targets, the transition to a low carbon economy and a sustainable development model. However, in order to respect its energy and climate targets for 2030, the European Union will require additional annual investment of €150-177 billion until 2030. As such, the finance sector has a major role to play in channelling investment flows towards activities compatible with the climate scenario of the Paris Agreement. But no agreement has yet been reached on what constitutes a "compatible" activity, which is hampering the flow of capital into such activities. An EU taxonomy would provide a remedy by giving investors, financial institutions, businesses and issuers clear and transparent information on environmental sustainability, thereby enabling informed decision-making. It could be used to define economic activities, and therefore products, rather than relating to sectors. 

    Green and sustainable activities
    The definition of a “sustainable activity" comes from a group of sustainable finance experts (HLEG) established by the European Commission, which published its conclusions in March 2018. These are based on four requirements:  

    The activity must contribute substantially to one of the six EU environmental objectives:
    1 - climate change mitigation
    2 - climate change adaptation
    3 - sustainable use and protection of water and marine resources
    4 - transition to a circular economy, waste prevention and recycling
    5 - pollution prevention and control
    6 - protection of healthy ecosystems The activity must not do significant harm to any of the other five EU environmental objectives  The activity must comply with minimum social safeguards  The activity must comply with technical screening criteria (TSC) 

    The taxonomy
    The taxonomy that the European Commission is seeking to establish will have to reflect the existing technologies and policies, and will need to be updated regularly.

    It is not a standard, nor a mandatory list in which to invest. While the taxonomy will only include activities defined as green, this does not mean that other activities should systematically be considered brown (bad for the environment). Among these other activities, some may make a positive contribution to the environment that is very limited, while some are neutral, and others are "brown".

    Lastly, the taxonomy will also include economic activities with a negative impact on the environment, where these activities have substantially reduced their negative impact. As the aim of the taxonomy is to promote the transition towards greener operating methods, and not only for activities already recognised as green, it makes sense to include sectors that need to improve their practices.

    The first version of the taxonomy will be published in July 2019, and take the form of a list of activities. Investors will then be able to use it to evaluate their portfolios and/or their investments in line with the green taxonomy, while other parties will be able to use it to create labels. It’s early days, but what we can say is that the taxonomy should serve as a basis for any number of tools yet to be devised.
     

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    news-1561 Thu, 04 Apr 2019 09:14:00 +0200 Interview with Philippe Charlez* /en/who-we-are/news/detail/interview-with-philippe-charlez/ At the last Zero Carbon Club event, which was attended by investors in our Carbon Impact Global fund, we were delighted to interview Philippe Charlez, an energy expert at the Institut Sapiens with some striking opinions on the links between growth, energy and the climate. We took the opportunity of his visit to interview him, and you will find his main comments below. Last December’s COP24 in Katowice was considered a failure. Three years after the enthusiasm of COP21, progress seems to have stalled.
    Why so much reticence and difficulty?


    I would call it "Flop 24" rather than COP24 given that nothing was decided. I would even say that we’ve taken a step back since Brazil has taken the decision not to host the COP25 next year. There are two reasons for this. Firstly, COP21 may be compared to a framework agreement without an annex. It is a catalogue of good intentions but without a precise programme. The second big problem is the wrangle between rich and poor countries. The greatest need for an energy transition is in poor countries, which consume most of the world’s coal and 60% of its oil, while the rich countries have the resources. Will the rich countries agree to fund the poor countries? I doubt it, and this is clearly a major obstacle.

    The energy transition is not only about electricity. What other sectors do you think are essential to reducing greenhouse gas emissions?

    Naturally, when we talk about energy transition, we think of it in terms of electricity and the transition to renewables, whereas there are many other crucial factors. At the top of that list, I would put transport, where 92% of the energy used is oil. Next would come homes, which consume considerable amounts of energy. Renovating homes to stop them leaking energy like a sieve could save vast amounts of energy.

    What do you think will be the main issues concerning energy in next May’s European elections?

    Behind energy, I would say that nationalism will be one of the biggest issues in the European elections. As for the energy transition, there are three key areas: energy security, the environment and the whole economic side of things. In terms of these three key areas, nationalism will only be interested in the economic aspects and energy security, at the climate’s expense. Nationalism can therefore be considered a major threat to the energy transition. To my mind, the more the election results favour nationalism, the less progress we will see in the energy transition in Europe.
     

    *  Philippe Charlez is an energy expert at Institut Sapiens. His latest book is called "Croissance, énergie, climat: Dépasser la quadrature du siècle". 

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    news-1558 Wed, 03 Apr 2019 10:25:30 +0200 Together, let's take care of mother earth /en/who-we-are/news/detail/together-lets-take-care-of-mother-earth/ This was the title of our new year message for 2019. While European students, spurred on by Greta Thunberg, have been protesting against climate change, Brazil’s new President has other priorities, citing "budget restrictions "for withdrawing the country’s candidacy to host the COP25 in 2019.

    And while, following the threat of a rise in fuel tax, the gilets jaunes have been demonstrating against their falling purchasing power, the Affaire du Siècle petition has gathered more than 2 million signatures – a record!

    The entire world is torn between wanting the benefits of a flourishing economy and consumption growth on the one hand, and the need to save the planet and preserve its natural resources on the other. But what if these two aspirations were not irreconcilable? And what if environmental and economic performance could be related?

    As a responsible asset manager, we believe that finance has a role to play in the environmental and energy transition, and in the fight against climate change. Sustainable development is in everyone’s interests from both an ethical and a financial standpoint. We now have clear evidence of the long-term impact of responsible and sustainable investment on portfolio performance. For more than 10 years, the Group has sought to develop its expertise in responsible investment, in addition to stating its convictions. We are passionate about sharing our commitments through our publications and our actions.

    To start the year with a strong statement and an invitation to our clients to join us in benefiting society, we decided to replace our traditional new year gifts with donations to charities and environmental initiatives. And so, on 18 February, La Française Group presented a cheque for €11,935 to SOS SAHEL, donated €7,098 to Green Cross France & Territoires and planted 5,200 trees with Reforest’Action. In so doing, we hope to make a difference to the environment and to society.

    But our 2019 initiatives will not stop there: we continue to play an active part in various working groups and collaborative projects. For example, La Française has contributed to the creation of an SRI label for the real estate sector as part of a working group set up by ASPIM. This new label is set to be formalised in the near future. In addition, AFG has given us responsibility for a working group on measuring the carbon footprint of management company portfolios, which we also chair.

    As we enter a new year, we are also delighted to announce that three of our funds have been awarded an SRI label.

    Lastly, we can now reveal that La Française has made a commitment to sponsor this year’s annual PRI (Principles for Responsible Investment) conference, which will be held in Paris in September. We will also hold another "Mix" event on the subject of impact investing.

    And La Française has plenty of other excellent projects for 2019 that will help us along our journey to sustainability…

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    news-1555 Fri, 29 Mar 2019 11:07:22 +0100 Small Caps Poised to Outperform /en/who-we-are/news/detail/small-caps-poised-to-outperform/ Currently in the U.S. it appears that smaller capitalization stocks may be positioned for higher returns than their larger counterparts. As fundamentals and valuation both seem to be aligned, small caps may be able to reverse a multiyear period of underperformance. Small Caps Are Growing Faster than Large Caps

    Over the next two years, small cap earnings per share growth is forecasted to double that of large caps. This would be a significant change from the past several years when the earnings growth of small caps and large caps were similar. (In spite of this, small caps underperformed during the past few years due possibly to investor pessimism driven by recessionary fears.)

    • Additionally, given the faster economic growth of the U.S. compared to the rest of the developed world, small caps’ greater domestic exposure relative to large caps (79% vs. 64%) may be an advantage.
    • Small cap stocks are also attractively valued when one compares the price-to-earnings (P/E) multiple of the Russell 1000 and Russell 2000 indexes; the P/E multiple premium of the Russell 2000 index relative to the Russell 1000 is the lowest it has been in a decade.1
    • In contrast to the past few years, small cap stocks have historically tended to outperform large cap stocks (see Alger On the Money “Looking for Higher Returns?”).
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    news-1549 Fri, 22 Mar 2019 16:09:32 +0100 Automotive sector: transition and performance /en/who-we-are/news/detail/automotive-sector-transition-and-performance/ February 2019 was another positive month for global equities. So far this year, the main indices are up by around 11-12%, with rises across the board almost wiping out the correction that took hold at the end of 2018. And although investors were actively underexposed to equities in the end-2018 downturn, this is still the case. We can also say that the fever pitch reached in December 2018 in terms of the political risks threatening economic activity and global trade is now behind us. The possibility of gaining some time (Brexit and US-China trade negotiations) and the more accommodative central banks are bolstering the markets. The issue now is whether there is a risk of underexposed investors being encouraged to return to the market because of its positive performance.

    In our view, this risk is low: the easing of geopolitical tensions has already been factored in by the market; the 2018 results season has confirmed the deterioration in growth expectations and has yet to be incorporated into the consensus; and lastly, the macroeconomic conditions are unlikely to improve before the start of the third quarter. 

    After a record high reached in early 2018, followed by a 25% drop, it is worth looking at the case of the automotive sector as a general illustration of how the markets are performing. An alignment of the planets drove the sector until the start of 2018. From a low point at the start of 2009, the automotive sector has enjoyed growth of close to 12% per year, supported by improving profitability thanks to favourable lending conditions, falling costs, underinvestment and positive currency effects favouring European manufacturers. The improvement in lending conditions on the back of the accommodative monetary policies of the central banks boosted the automotive industry’s pricing power by 2-3%. This effect, coupled with low inflation, enabled the automotive sector to expand its profitability to record levels.

    The turning point came in 2018, with one of the sharpest falls since the financial crisis: -20%.
    The performance of European vehicle manufacturers was hit both by the threat of a trade war (risk of a tariff hike of between 2.5% and 25% on European exports to the USA, with the potential impact on German manufacturers’ earnings estimated at €1.7-2.5 billion), and by the introduction of the new WLTP emissions tests. The new regulations impose a CO2 emissions target of 95 g/km in 2021, and then 75 g/km in 2025/30, and carry a fine for non-compliance of €95 per additional gram of CO2. Meanwhile, a combination of factors is weighing on the automotive industry: the slowdown in China, shrinking margins and cash flow (which in some cases will no longer cover dividends), and the biggest challenge of all, the structural transition to electric vehicles.

    Since the bottom reached in early 2019, the European automotive sector has fully participated in the market rebound, outperforming the global index by almost 3%. Attractive valuations and, in general, above-consensus 2018 results have supported the recovery, although the announcements were accompanied by some rather nuanced comments. Sector firms are anticipating an uncertain and volatile environment in 2019. As such, the strong pricing power of the top-end manufacturers makes them better placed than mass market players, whose financing margins have already begun to decline, suggesting that they will be less able to move on prices. A highly selective approach will therefore be essential given the structural challenges, the partnerships announced for electric vehicles and possible sector consolidation.

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    news-1546 Thu, 21 Mar 2019 18:11:47 +0100 Can you be more dovish? Yes I can! /en/who-we-are/news/detail/can-you-be-more-dovish-yes-i-can/ Despite our dovish expectations, the FOMC outcome is even more dovish than we expected:
  • Fed forecasts show no rate hikes in 2019 and one in 2020. This is broadly in line with our expectations (one hike in 2019 and no hike in 2020). 
  • The Fed indicated that they will stop shrinking their balance sheet in September, meaning a total balance sheet size of over $3.5 trillion and excess reserves above $1.3 trillion. This is clearly more dovish than market expectations.
  • The committee downgraded its economic forecasts from 2.3% to 2.1% this year and from 2% to 1.9% next year, given external risks (slowing growth in Europe and China, worries over tariffs). Inflation forecasts are unchanged.
  • Market reaction confirmed the dovish interpretation with lower yields and a weaker US dollar.

    Disclaimer
    This commentary is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

     

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    news-1536 Wed, 20 Mar 2019 16:25:36 +0100 Aurélie Fouilleron Masson appointed Managing Director of La Française AM GmbH /en/who-we-are/news/detail/aurelie-fouilleron-masson-appointed-managing-director-of-la-francaise-am-gmbh/ • Aurélie Fouilleron Masson is appointed Managing Director of La Française AM GmbH. • Dr. Dirk Rogowski is dedicated to development of Veritas Institutional. The Supervisory Board of La Française AM GmbH (formerly Veritas Investment) has appointed Aurélie Fouilleron Masson as Managing Director, effective as of March 18th. The Executive Board of La Française AM GmbH is now composed of Hauke Hess, Aurélie Fouilleron Masson and Hosnia Said.

    Dr Dirk Rogowski, former Managing Director of Veritas Investment, will continue to serve as Managing Director of Veritas Institutional.

    Aurélie Fouilleron Masson joined La Française in 2007 and has held various positions within the group including her current role as Head of Central Europe (covering Germany, Switzerland and Austria) and Global Accounts Business Manager. Aurélie Fouilleron Masson holds a Master’s degree in Strategic Marketing from Sciences Po, Paris and a Bachelor’s degree (BWL) from Reutlingen University. 

    As Managing Director, Aurélie will be responsible for the development strategy of La Française AM GmbH in Germany. "With the support of our local team, committed to providing quality investment solutions, and our longstanding track record, I am confident that La Française AM GmbH will continue to grow in its domestic market and abroad, and reach the ambitious development objectives that have been established jointly with La Française,” concludes Aurelie Fouilleron Masson.

    Over the past five years and despite difficult financial markets, Dirk Rogowski, thanks to his personal commitment and cutting-edge expertise, has successfully positioned Veritas Investment and its product offer within the German market. With the support of his team, he has made Veritas Investment synonymous with rule-based investments, hence contributing to the attractivity of the group and making the acquisition by La Française a reality. As Managing Director of Veritas Institutional, Dirk Rogowski will continue to support the development of La Française in Germany and promote Risk@Work abroad. 

    "We would like to congratulate Aurélie and thank Dirk for his commitment which has made the company what it is today: a respected boutique, well established in German-speaking countries. We look forward to a continued collaboration with Dirk in his role as Managing Director of Veritas Institutional," says Patrick Rivière, Managing Director of La Française.
     

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    news-1535 Wed, 20 Mar 2019 16:04:01 +0100 First non-call for an AT1 Bond /en/who-we-are/news/detail/first-non-call-for-an-at1-bond/ In the end, Santander decided not to call its AT1 bond issued in euro in 2014 on the first call date, which was a first for the asset class. This was probably a lack of foresight from the Spanish bank: it did not refinance its 2019 AT1 debt early, unlike most other banks. As a result, Santander had probably been unable to obtain regulatory approval before the redemption, which is required before each call in order to ensure the issuer has sufficient capital and that the refinancing costs are at least equal to the cost of the existing debt.

    However, this non-call was widely anticipated by the market through spread widening in 2018 (making the call less attractive) and following statements made previously by the finance director. The impact was therefore negligible, both on the non-called Santander bond (-1% after the announcement, then +0.5% in the following days) and on the AT1 market, which rose by 0.2%.

    What are the likely consequences of this first ever non-call?

    The Santander bond in question, which was issued in 2014, is callable every three months, with the next call date being 13/03/2019. Although the bank is not allowed to state its intention to exercise the call from a regulatory standpoint, we expect it to proceed at this next opportunity, as the bond appears undervalued to us, yielding 12.10% (annualised call rate) and 6.7% (perpetual maturity), with Santander having rushed to issue a new bond in early February.

    It should not be assumed that other banks will roll over their AT1 subordinated debt, and we recommend investing on a case-by-case basis, particularly on short calls, although we consider this to carry a moderate risk. It is worth keeping a close eye on UK banks with bonds maturing in the second half of 2019, given the extreme uncertainty over Brexit…unless an agreement can be reached before then.

    All in all, this event does not seem to have had a significant impact on the subordinated bank debt market, which has continued to show strong growth since the start of the year, helped by banks’ solid fundamentals, the accommodative stance of the central banks and the easing of some of the political risks at play.

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    news-1533 Tue, 19 Mar 2019 18:28:04 +0100 Fed should confirm its dovish stance and announce the end of its balance sheet run-off /en/who-we-are/news/detail/fed-should-confirm-its-dovish-stance-and-announce-the-end-of-its-balance-sheet-run-off/ What can we expect at the FOMC meeting on Wednesday?
  •  We expect the Fed to announce the end of its balance sheet run-off at year-end. That should keep excess reserves at roughly $1.2 trillion which would be consistent with recent Fed communication. They will likely invest prepayments from mortgages in treasuries. We expect the median dot for 2019 to show only one hike vs two previously. It would require seven committee members to move their dots lower to shift the median dot to zero for 2019, which is in our view unlikely. 2020 median projections should also move lower and show no hike.
  • The summary of economic projections (“SEP”) is likely to be downgraded and the Fed is likely to revise its 2019 growth estimate from2.3% to 2.2%, mainly because of disappointing retail sales in December. The 2020 growth estimate should remain stable. On the inflation front, core CPI fell from 2.2% to 2.1% in February, but wages continue to accelerate, albeit at a slow pace, meaning that the Fed has no obvious reason to adjust their inflation forecasts.
  • All in all, this meeting  should confirm the Fed’s dovish stance and could have a minor negative impact on the valuation of the US dollar.

    Disclaimer
    This commentary is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.
     

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    news-1530 Tue, 19 Mar 2019 10:36:55 +0100 The political risks have receded somewhat... /en/who-we-are/news/detail/the-political-risks-have-receded-somewhat/ February was relatively calm, enabling the rebound observed in January to continue, with the equity markets on the rise, government bond yields slightly higher and the credit markets showing a marked improvement. In the United States, Q4 GDP growth surprised to the upside at 2.6% qoq, despite the sharpest drop in retail sales in a decade (-1.2% in December). The indicators are now pointing to a modest recovery in Q1, on the back of robust industrial output numbers and a rise in the services PMI.

    Figures also edged up in the eurozone, with the services and composite PMIs at 52.8 and 51.9 respectively. Are we starting to see the reversal of the downtrend in place over the last year? It is too soon to draw any conclusions, but it looks like the European economy has moved beyond the bottom of the cycle, thanks in part to the range of budget stimuli implemented in the different countries.

    China’s economic data has not seen a rebound, but nor has it deteriorated. The various stimulus plans announced by the Chinese government are starting to bear fruit (rise in new loans), but the full effects should take a little while to emerge.

    Reassured by the slightly rosier macroeconomic picture, the markets also welcomed the progress made on some of the current political issues.

    For example, President Trump has announced that he would delay the proposed tariff hike, but without giving any more information on the postponement. Significant efforts “appear” to have been made on technology transfer and intellectual property protection. Is this real or fake news? The markets have decided that the progress is real, and are now expecting a positive outcome to the negotiations, with the various tariffs imposed being lifted. The situation in the UK also became slightly clearer with Theresa May’s announcement of a vote on her deal on 12 March, to be followed - if this fails to get through the UK parliament - by a second vote on “no deal” on 13 March. If this also fails, it will be followed by a third vote on extending Article 50. As there is very little chance of the May deal or “no deal” being approved, an extension to Article 50 seems to be the most likely option. The extension would, however, have to be for a fairly limited period.

    Lastly, and although this is currently having less of an impact on the financial markets, the political situation in Italy seems to be turning in favour of the League, after the results of elections in Sardinia which saw the Five Star Movement lose a lot of ground. This victory for the right followed a similar reversal for 5SM two weeks ago in Abruzzo. The League now seems to be well placed to form a government, if the current administration falls in the coming months. This would very likely be good news for Italian assets.

    In this environment, we are maintaining our preference for the emerging markets, although we have taken profits on Chinese assets as these have done extremely well since the start of the year. We also continue to be positive on Spain and Portugal, and on subordinated financials. European inflation expectations also seem to still be too low in our view, given the recent oil price movements.

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    news-1525 Mon, 18 Mar 2019 10:00:00 +0100 La Française announces closing of Veritas Group acquisition /en/who-we-are/news/detail/la-francaise-announces-closing-of-veritas-group-acquisition/ La Française, a multi-expertise asset management firm with total assets under management in excess of €65 billion, is pleased to announce that the acquisition of Veritas Group has been approved by the German Federal Financial Supervisory Authority (BaFin). In Europe, La Française now has investment teams located in Frankfurt and Hamburg - in addition to Paris - that provide securities and real estate asset management services. Veritas Investment GmbH, as a fully integrated entity of La Française, is rebranded La Française Asset Management GmbH, and Veritas Institutional, as an affiliate of the group, maintains its current identity. “With this acquisition we have reached a turning point. Today, La Française has two domestic markets, France and Germany, the latter represents close to €8 billion in assets (as at 31/12/18) and 12% of total group assets under management,” says Patrick Rivière, Managing Director of La Française.    
    In Germany, La Française now has 48 professionals (portfolio management, real estate investment, back-office, administration, client services, communication, marketing and sales) and three investment centers servicing three market segments: 

    • La Française AM (formerly Veritas Investment), based in Frankfurt: quantitative equities, listed real estate & infrastructure investments for retail investors;
    • Veritas Institutional, based in Hamburg: quantitative multi-asset investment solutions, that integrate Risk@Work, for institutional investors;
    • La Française Real Estate Partners International, based in Frankfurt: a full real estate investment management offer

    The group’s product line has been enhanced with 11 additional securities funds. 
    “La Française now has three asset management centers in Germany. The new quantitative investment capabilities of the Hamburg and Frankfurt based investment teams complement well our existing range of investment solutions and will be made accessible to investors worldwide,” emphasizes Patrick Rivière, Managing Director of La Française.  
    The Risk@Work method developed by the investment team in Hamburg will play a particularly important role with the institutional client segment. The innovative risk management tool enables institutional clients to control and manage risk more efficiently in times of falling markets. “We are observing a growing demand from international clients to manage the portfolio risk efficiently and reliably. With the Risk@Work method we can now offer an innovative solutions that can enable institutional investors across Europe to benefit from lower capital requirements,” concludes Patrick Rivière, Managing Director of La Française. 
    In addition, La Française, the 21st largest real estate asset manager in Europe (Source: Institutional Real Estate, Inc., Global Investment Managers 2018, August 2018), offers a wide range of real estate investment solutions to investors across the globe. With its Frankfurt based team of 12, La Française has been active on the German real estate market since 2015. 

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    news-1521 Thu, 14 Mar 2019 15:24:19 +0100 La Française Multistratégies Obligataires awarded Best Performing Fund in the Rates Long Short category, March 7 /en/who-we-are/news/detail/la-francaise-multistrategies-obligataires-awarded-best-performing-fund-in-the-rates-long-short-categ/ For the second year in a row... The Hedge Fund Journal, a global financial media, recognized La Française Multistratégies Obligataires as the Best Performing Fund over 4, 5 and 7 years in the Rates Long Short category.

    Congratulations to the fund management team!

    Past awards and ranking are not indicative of future awards and rankings. La Française Multistratégies Obligataires was approved by the AMF on 15/12/2000 and is managed by La Française AM, asset management firm approved by the AMF on 01/07/1997 under n° GP 97-76.

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    news-1520 Fri, 15 Mar 2019 12:13:00 +0100 Making better decisions /en/who-we-are/news/detail/making-better-decisions/ Choosing wisely is paramount when it comes to achieving optimal investment results. Behavioral psychology teaches us several important lessons on how investors’ minds operate. Although economics assumes humans behave rationally, relying too much on our own experience often prevents us from doing so. However, an important technique exists to help us make better decisions.

     

     

    • Based on data from Morningstar, investors have experienced a significant performance gap between their actual returns and official mutual fund total returns due to poor timing decisions. According to Morningstar, “investors large and small tend to sell after downturns only to buy back in after a rally,” which has led to a negative 137 bps per year gap over the past 10 years.
    • How can an investor beat psychological pitfalls and navigate the market better? One answer is to use the outside view. The outside view relies on data from comparable situations and utilizes evidence from the experience of others, while the inside view is derived from a specific circumstance and uses evidence from one’s own experience (see whitepaper “Looking Outside for Better Decisions”).
    • For example, when evaluating prospective equity returns, the inside view entails considering all of the current issues and trends in the economy and stock market as a typical TV pundit would do. The outside view, however, may look back at the past several decades of data and find that over 80% of the variation in 10-year annual equity returns is determined by the aggregate stock market price-toearnings (P/E) multiple. This means that the stock market’s P/E multiple may be a better indicator of future stock market returns than the issues the inside view evaluates (see Alger On the Money “Growth Stock Valuations in Perspective”). 1
    • From forecasting returns and determining asset allocation to tackling many of life’s other big decisions, using the outside view is often a better approach to decision-making.

    1 The price-to-earnings (P/E) multiple is a ratio for valuing a company that measures its current share price relative to its earnings per share.

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    news-1514 Tue, 12 Mar 2019 09:31:40 +0100 Fixed Income by La Française /en/who-we-are/news/detail/fixed-income-by-la-francaise/ Jean-Luc Hivert, Managing Director of LFAM, presents the Fixed Income Management, which represents 23 billion euros under management.

    What are the strategies covered by the management teams and how La Française is a legitimate actor on this market?

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    news-1513 Tue, 12 Mar 2019 10:00:00 +0100 High-Conviction Alger Small Cap Focus Fund Achieves Notable Three-Year Record /en/who-we-are/news/detail/high-conviction-alger-small-cap-focus-fund-achieves-notable-three-year-record/ Alger Management, Ltd. (“Alger”), along with La Française, is pleased to announce the Alger SICAV—Alger Small Cap Focus Fund (the “Fund”) has celebrated its three-year anniversary. The Fund is a focused portfolio of approximately 50 high-conviction, small capitalization stocks managed by Amy Y. Zhang, CFA, who joined Alger in 2015. Overall, Alger has over $3.3 billion in Small Cap Focus strategy assets as of 2/28/19. The exceptional track record Amy and the Alger team have built is especially notable and is garnering significant attention from all types of investors. In fact, the I-share class of the Fund had a cumulative net return of 109.3% since inception (as of 1/31/19), considerably outperforming the Russell 2000 Growth Index’s return of 54.3%.

    “We have a unique approach to small cap investing in that we look for what we believe are exceptional small companies that have the potential to grow into successful large companies. These companies are typically those that have the potential to double their revenue stream in five years.” said Ms. Zhang. “We look for companies with defensible competitive positions, sustainable revenue growth, high financial quality, and strong management teams.”

    Ms. Zhang also holds a “AAA” Citywire Fund Manager Rating for strong risk-adjusted performance (equity – U.S. small and medium companies category as of January 2019). The Citywire Fund Manager Ratings measure a portfolio manager’s performance over the past three years.

    Our investment team’s in-depth, fundamental research, which we have refined for over 50 years, enables our portfolio managers to construct ‘best ideas‘ focused portfolios with confidence,” said Dan Chung, CEO and CIO of Alger. “I’m gratified by the strong returns we have generated in this Fund for our shareholders, thereby helping them to achieve their financial goals.”

    The I-share class of the Fund has had strong performance over the last three rolling 12-month periods: 20.63% (1/31/18 to 1/31/19), 32.65% (1/31/17 to 1/31/18), and 30.80% (1/29/16 to 1/31/17). The recommended investment period for the Fund is more than five years, and it should be noted that an investment in the Fund entails certain risks including the risk of capital loss, market fluctuations, and risk associated with investing in smaller, newer issuers.

    La Française and Alger have been collaborating on fund distribution, market development, and product diversification since February 2015. Alger has partnered with La Française to distribute Alger SICAV sub-funds throughout continental Europe.

    ASSET CLASS

    FUND / SHARE CLASS

    ISIN CODE

    Synthetic risk and reward indicator: on a scale from 1 to 7; 7 representing higher risk, typically higher rewards

    Equities

    Alger SICAV-Alger Small Cap Focus Fund – Class I US (registered in AT, BE (Private Placement), FI, DK, FR, DE, IT (Registered Institutional investors), ES, SE, UK, NL, LU, PT, SG (Registered institutional investors), CH)

    LU1339879915

    6 (associated risks include: exchange rates, volatility, market fluctuations, political, social and economic risks, currency risk, risks associated with investing in smaller, newer issuers, capital risk loss)

    Past performance does not guarantee future performance.

    *Source: Alger

    Alger SICAV Prospectus, 21 March 2018, VISA 2018/111991-1918-0-PC

    Exchange rate EUR/US DOLL as at 3/7/19: 1.1205.

    Enquiries:

    La Française:

    Pascale Cheynet – 0033 1 43 12 64 25 - pcheynet@lafrancaise-group.com

     

    Disclaimer

    Past awards and rankings are not indicative of future performance or awards/rankings. 

    The information and material provided herein do not in any case represent advice, offer, solicitation or recommendation to invest in specific investments. This press release is for Professional Clients in the EC only and is not for consumer use. Past performances do not guarantee future performances. Investment products referenced in this presentation are not directed at and suitable for all types of investors. Potential subscribers are requested to carefully and independently assess the legal and commercial documentation provided and notably the risks entailed and the fees. Investors are to make their own risk analysis and not rely solely on the information that has been provided to them. The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.  Where La Française has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Issued by La Française AM Finance Services, home office 128, boulevard Raspail, 75006 Paris, France, regulated by the “Autorité de Contrôle Prudentiel” as investment services provider under the number 18673 X, affiliate of La Française. La Française AM International has a signed agreement with Alger Management Ltd, whereby La Française AM International is authorized to distribute Fred Alger Management Inc. products in Europe.

    In relation to the investment fund and share class mentioned in this document, the latest prospectus, the KIID and the annual and semi-annual reports have been published containing all the necessary information about the product, the costs and the risks which may be incurred. The latest versions of these documents are available at: www.lafrancaise-group.com, www.fundinfo.com, with our paying agents: BNP PARIBAS Securities Services, Via Ansperto no. 5 20123 Milan, Italy; Allfunds Bank, S.A. at 6 Estafeta Street - Complejo Plaza de la Fuente, Edificio 3, La Moraleja, Spain; BNP PARIBAS Securities Services S.A. - Branch Office Frankfurt am Main, Europa-Allee 12, 60327 Frankfurt am Main or with our local legal representatives: Skandinaviska Enskilda Banken AB, Bernstorffsgade 50, 1577 Copenhagen, Denmark; Duff & Phelps Ltd, 14th Floor, The Shard, 32 London Bridge Street, London SE1 9SGc, UK.

    Internet information for the regulatory authorities Autorité de Contrôle Prudentiel et de Résolution www.acp.banque-france.fr, Commission de Surveillance du Secteur Financier www.cssf.lu .

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    news-1511 Fri, 08 Mar 2019 15:11:51 +0100 ECB says we will reach 2% inflation target… one day /en/who-we-are/news/detail/ecb-says-we-will-reach-2-inflation-target-one-day/ ECB stroke us once more with a more dovish than expected stance. While downgrades to GDP and inflation outlook were anticipated by investors, the magnitude was much more significant than forecasted.

    • GDP growth for 2019, 2020 and 2021 was lowered to 1.1 (-0.6), 1.6 (-0.1), 1.5% (unchanged)
       
    • Inflation for 2019, 2020 and 2021 was lowered to 1.2 (-0.4), 1.5 (-0.2) and 1.6% (-0.2). This change is driven by a weaker outlook for core inflation (1.2, 1.4, 1.6 ie -0.2 each year).

    The eye catching figure is the outlook for core inflation in 2021 at 1.6%. This is very far from ECB’s objective at 2% and on top of all of that, ECB views downside risks to this outlook. 

    The board announced TLTROs and extended the forward guidance to the end of 2019. Rate hikes are postponed much further which is positive for carry strategies.
     

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    news-1505 Tue, 10 Oct 2017 10:00:00 +0200 La Française et GPR lancent un nouvel indice axé sur l’immobilier coté international durable /en/who-we-are/news/detail/la-francaise-et-gpr-lancent-un-nouvel-indice-axe-sur-l-immobilier-cote-international-durable0/ Les fonds de retraite, les investisseurs institutionnels dans leur ensemble et la clientèle de banque privée accentuent l’intégration de facteurs responsables dans leurs stratégies d’investissement. Du fait de son empreinte carbone particulièrement élevée, le secteur immobilier est naturellement une cible de choix dans la lutte contre les changements climatiques ; de plus en plus conscients de leur responsabilité à cet égard, les investisseurs cherchent à s’engager. Dans ce contexte, Global Property Research (GPR), fournisseur de services pour les grands établissements financiers spécialisé dans les indices de valeurs foncières sur mesure, et La Française, groupe de gestion expert en immobilier, sont fiers de vous annoncer le lancement d’un nouvel indice, dédié à l’immobilier coté international durable, pour la clientèle institutionnelle : le GPR IPCM LFFS Sustainable GRES Index, qui définit un nouveau standard en matière d’investissement responsable dans le secteur de l’immobilier coté.

    Inflection Point Capital Management UK Ltd. (IPCM) et La Française Forum Securities (LFFS), sociétés du groupe La Française, vont collaborer avec GPR sur la conception et la mise à jour continue de ce nouvel indice qui comprendra jusqu’à 150 sociétés mondiales durables, sélectionnées en fonction de leurs activités dans l’immobilier, de leur performance ESG et de leur capitalisation boursière. GPR sera chargé de constituer et de gérer l’indice. 

    IPCM, société de conseil en investissement, spécialisée dans le développement durable, du groupe La Française, a recours à son propre modèle d’analyse ESG / développement durable pour mesurer la performance des entreprises au niveau de leur empreinte carbone, de leur utilisation de matières premières, d’une utilisation efficiente de l’eau et de l’électricité ainsi que de leur efficacité énergétique, mais également sur les questions de santé et sécurité, de gestion des ressources humaines et de gouvernance globale. Afin d’établir le score final et de parvenir au classement le plus juste, IPCM rassemble et synthétise les données, informations et analyses récoltées auprès d’une large palette de sources, dont celles de LFFS, qui évalue les démarches ESG des entreprises en se fondant sur sa recherche interne et les entretiens menés avec les dirigeants. GPR calcule la performance de l’indice au moyen d’une méthodologie interne en se focalisant sur les 150 premiers composants affichant la meilleure performance ESG, et effectue un rééquilibrage trimestriel. 
    J
    eroen Vreeker, Responsable de l’équipe indicielle de GPR, a déclaré : « Le critère durabilité est de plus en plus pris en compte dans les indicateurs sous-tendant les investissements dans l’immobilier coté. L’indice GPR IPCM LFFS Sustainable GRES couvre plus de 60 % de la capitalisation boursière totale de l’indice élargi GPR General Quoted et reste hautement diversifié d’un point de vue sectoriel et géographique. Il représente un complément idéal à la gamme de solutions indicielles sur mesure de GPR. » 
    Matthew Kiernan, Directeur Général d’IPCM, a ajouté : « La demande pour des solutions d’investissement plus durables dans l’immobilier croît de manière exponentielle dans le monde entier. Les sociétés immobilières de premier plan et qui possèdent une vision de long terme ont bien identifié cette tendance et apportent de réelles innovations. Ce nouvel indice offre justement aux investisseurs une occasion unique de repérer et de se positionner sur les sociétés d’avant-garde les mieux dirigées. »

    Jana Sehnalova, Directeur Général de LFFS, a commenté : « L’indice GPR IPCM LFFS Sustainable GRES définit un nouveau standard pour les investisseurs en immobilier coté qui sont sensibles aux changements climatiques. Dans un contexte de demande locative croissante pour les biens durables et de durcissement des contraintes réglementaires, les sociétés dont les sous-jacents présentent des caractéristiques environnementales supérieures et un engagement solide sur les questions sociales et de gouvernance devraient surperformer sur le plan financier. 
     

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    news-1499 Tue, 05 Mar 2019 18:27:34 +0100 TLTRO is coming /en/who-we-are/news/detail/tltro-is-coming/ ECB Preview - The ECB will hold its press conference on Thursday March 7. Since the last policy meeting, data has continued to be weak even if more resilient lately (PMI), core inflation has not been picking up and political risk persists. What can we expect from this meeting?

    • Downgrading of growth and inflation forecasts: ECB 2019 and 2020 growth forecasts are still at 1.7%. However, we expect the ECB to revise those figures downwards to 1.4% in 2019 and 1.6% in 2020. This is widely expected by market participants and should not have significant impact. The ECB should also revise their headline inflation forecast down to 1.5% vs 1.6% in 2019, and their core inflation forecast to 1.3% vs 1.4%.
    • TLTRO: ECB speakers have been mentioning it for weeks now, including Mr. Coeuré. We think it is too soon for the ECB to announce a TLTRO but they should at least acknowledge the fact that it is an option and that more details could be communicated later on. A formal announcement could be made in April.
    • Forward guidance: There has been some market speculation that the ECB could extend how long it expects rates to stay unchanged, from “through the summer” to late 2019. However, we do not think this will be the case; forward guidance should remain unchanged.

    We do not expect this ECB meeting to have major consequences on financial markets.
     

    This commentary is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-1498 Tue, 05 Mar 2019 18:02:53 +0100 China story - will the world economy suffer /en/who-we-are/news/detail/china-story-will-the-world-economy-suffer/ After one year of ongoing trade tensions between the US and China, global growth has weakened and emerging market economies have been impacted by the tightening financial conditions. Trade policy represents a significant risk to the global outlook in 2019. However, estimating the impact of protectionism is challenging because trade is global, and economies have become highly intertwined.

    The greatest risk to the outlook would be a sharp deterioration in Chinese growth which could represent a significant risk-off shock. Given its position in the world economy, the outlook for China will be key.

    Global growth is expected to slow this year and should remain mainly driven by US-China trade relations. Growth across countries is less synchronized than it has been in the past. We are beginning to see a divergence between a still robust US economy and weakening European, Chinese and Japanese economies

    In a slowing growth environment, the US economy remains ahead of the rest of the world. China is bearing the brunt of the trade war and a more pronounced slowdown of its economy may impact European growth more severely given trade activity between Europe and China.

    The key questions concerning the trade war that are still without answer are:
    • How bad will it get?
    • How long will it last?
    • How much damage will be done to the world economy?

    That being said, let’s take a closer look at the US, China and Europe.

    First, the US economy remains quite robust even if the economy will decelerate slightly, as the boost from tax cuts is behind us. The most recent data shows that the US economy is weathering the global slowdown quite well. The economy is already operating at full employment and the services sector remains solid. We believe that economic fundamentals remain strong and that pessimism surrounding the US economy is misplaced. Moreover, the Fed turned very dovish and called for patience on rising rates this year.

    Second, the Chinese economy has weakened in recent months, but policy support provided by the PBoC, including monetary and credit-easing measures (tax and rate cuts), should have positive effects in the coming months and provide for stronger growth in the second part of the year. China has tools to stimulate its economy. We remain confident in the Chinese economy and do not foresee a hard landing in the short term.

    In Europe, we remain cautious on the growth outlook. We expect a lower trend rate of growth as downside risks are present (political risks, Brexit, trade war). Activity data remains weak, but seems to show some signs of stabilization. Nevertheless, we do not expect a major downturn at this stage

    Globally, we anticipate slower growth, but exclude the risk of a recession. Central banks will remain dovish across the world and financial conditions should ease gradually, which should support growth momentum.

    Last, President Trump just announced that he will delay the increase in tariff rates from 10% to 25% on $200bn in imports from China scheduled to take effect March 2. A potential trade agreement between the US and China is likely later this year which would be positive We think that the effects of the trade war on both economies will be limited, especially for the US, where trade is a relatively small share of economic activity.

    But, an agreement doesn’t necessarily mean a “good deal” for others countries. A big increase in Chinese purchases of US products would create non-US losers due to import substitution. The most exposed countries would include the EU (aircraft and autos) and Japan (autos, machinery, electronics), followed by ASEAN countries.

    Finally, the EU-US trade dispute will come back into focus in the coming weeks. There will be discussion concerning potential tariffs on vehicle imports into the US. Higher tariffs on EU automobiles remains a serious threat for European carmakers and the Euro area economy. Germany is the most exposed country. An increase in US tariffs on European cars to 25% could cost Euro area GDP growth between 0.2 to 0.4pp this year.

    Disclaimer
    This document is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

    March 2019 - by Hervé Chatot, Multi-Asset Fund Manager, La Française AM

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    news-1497 Tue, 05 Mar 2019 17:07:38 +0100 Emerging market debt against the backdrop of a US-China Trade war and rising FED rates /en/who-we-are/news/detail/emerging-market-debt-against-the-backdrop-of-a-us-china-trade-war-and-rising-fed-rates/ In 2018, emerging market debt was mainly impacted by the ongoing US central bank rate hike policy and the rise in customs tariffs between the US and China. As a result, the average emerging debt risk premium jumped from 280 bp on 1 January 2018 to 415 bp above US rates at the end of the year, according to the JPMorgan Emerging Market Global Diversified Bond Index in USD.  

     

    Following the latest FOMC meeting on 30 January, the Fed commented that:

    « In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes”. So, at least in the short term, the central bank has decided to take a break from its rate hiking cycle. Meanwhile, the US dollar’s surge against the other currencies has come to an end, as the widening gap between interest rates in the US and the rest of the world is no longer growing. This is a major boost for emerging markets: the borrowing cost in US dollars to refinance emerging debt has ceased to increase for the time being and risk perception is improving thanks to the fact that emerging country currencies have at last stabilised.  As at 22 February 2019, the risk premium according to the JPEMGD index had increased by 65 basis points since the start of the year, reaching 350bp.  We have seen very positive performances from countries in Latin America and Africa, which are generally rated “sub-investment grade” and commonly have significant funding requirements, and this could well continue.

    Trade talks between the US and China are edging toward an agreement. President Donald Trump has said the US will delay the tariff rise on USD 200 billion of Chinese goods scheduled for 1 March. He also tweeted on Sunday 24 February that there had been “substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues”. That said, some sources close to the negotiations say the two parties are still a long way apart on issues like technology transfer and enforcing compliance with an eventual deal. We see progress in the talks but are still a long way from a final and definitive agreement. In this environment, emerging market debt has been boosted by the outbreak of mutual understanding. But nothing has been signed yet. It will certainly be a while longer before US/China tensions are finally put to bed.

    Disclaimer
    This document is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

    March 2019 - by Georges Farré, Head of Emerging Markets, La Française AM
     

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    news-1493 Mon, 10 Oct 2016 11:27:00 +0200 The first three quarters of the year 2016 are over /en/who-we-are/news/detail/the-first-three-quarters-of-the-year-2016-are-over/ It has been a bumpy ride and volatility will continue, as we remain concerned about the strength of the global economic recovery and the outcomes of political events around world. As we start to look for return generating opportunities in the final quarter of 2016, it is important to examine the performance of different asset classes, the behavior of real estate securities over the past nine months and the outlook on yields and total return.

    This paper introduces investors to the topic of green / sustainable investing in the real estate securities sector. Readers will better apprehend the notion of “green” & “sustainable” as it applies to real estate equities. Furthermore, we will present empirical evidence that companies with a strong sustainability orientation do experience better financial performance. We will also argue that the future of real estate securities investing is in green real estate securities products – that are still hard to come by in the investment community. Undoubtedly, we would like to be considered as innovators with a cutting-edge approach to the real estate securities asset class.

    First, a few basic questions:
    1) What is a real estate security and a REIT?

    People often use the term real estate security and REIT interchangeably.
    We do not think that it is correct but understand the simplicity of using the term REIT for its brevity rather than real estate securities. In fact, the REIT is a subcategory of real estate security.

    REIT is an acronym that stands for “real estate investment trust”. There is no single definition for a REIT. Rather, they are defined by the legislation of the country of registration. However, REITs (regardless of country of origin) do share some commonalities – majority of net profits have to be distributed in the form of dividends to shareholders in exchange for tax transparency. The different legal systems may further impose other constraints such as external management, limitation on the degree of leverage, limitation vis-à-vis green field development activity, etc. Roughly, two-thirds of the global real estate securities universe can be characterized as REITs.

    Companies that do not enjoy tax transparency and do not have any specific obligations regarding distribution are not REITs, but rather real estate operating companies. They are not subject to any specific regulation vis-à-vis leverage, development activity or distribution; hence, as a result, their dividend payout ratios tend to be lower and their engagement into development activity higher. Japanese, Singaporean, Hong Kong and many European companies tend to fall into this category.

    The real estate securities universe is not limited to REITs and real estate operating companies.
    There are other types of real estate instruments that are eligible for inclusion and investment: real estate bonds and real estate preferred equity.

    In conclusion, public real estate securities can be categorized as follows:

    Geographically speaking, the real estate securities universe – as defined by the most recognized global real estate securities index, FTSE EPRA/NAREIT Global Developed Index
    – consists of 330+ real estate securities, spread across North America, Europe and Asia...

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    news-1491 Fri, 01 Mar 2019 10:47:29 +0100 What Does a Moat Get You? /en/who-we-are/news/detail/what-does-a-moat-get-you/ What is an economic moat? It’s a representation of a company’s sustainable competitive advantage, which matters because wide moat companies, whose competitive advantages are expected to be durable over the long term, have historically outperformed. Wide Moat, Wide Outperformance

    • Over the last several time periods,the Morningstar Wide Moat Index outperformed the S&P 500 and the corresponding index for companies with no moat.
    • According to Morningstar, there are five factors in determining a moat: switching costs (impediments that prevent customers from switching from one product to another), the network effect (the value of the product increases as more people use it), intangible assets (brand identity, government licenses and patents), cost advantage (producing goods at a lower cost than competitors) and efficient scale (average unit cost declines as production volume increases).
    • A wide moat has historically meant higher returns. Picking a fund manager who identifies sustainable competitive advantages resulting in wide moats as a key part of his or her investment process may offer potential benefits.

     

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    news-1485 Sun, 24 Feb 2019 17:28:00 +0100 The energy transition, led by a combination of innovative engineering and digitalization /en/who-we-are/news/detail/the-energy-transition-led-by-a-combination-of-innovative-engineering-and-digitalization/ This white paper goes through the major consequences on corporates. From energy consumer to energy prosumer

    The energy sector is in the midst of a major transition, with massive disruption occurring across the entire energy value chain. This transition is primarily fueled by efforts focused on decarbonizing the global economy and a shift toward an increasingly clean, intelligent, mobile, and distributed energy ecosystem. Linear value chains supporting one-way power flow from centralized generation to the end customer will give way to a more sustainable, highly digitized, and dynamic energy system. This system will support two-way energy flow in which customer choice (optionality), clean energy, innovation, and agility command a premium. At the same time, various energy carriers will become increasingly interconnected and integrated (including electricity, liquid and gas fuels, and heat).

    Cloud based systems allow energy managers to access information with greater flexibility. By utilizing a cloud based system, users can store information from many different data acquisition systems and access and analyze this information from different sites with one application. In fact, such a system allows for easier portfolio management as it is possible to view all managed sites at once. Because energy managers are able to access information remotely, this also reduces on-site maintenance to only when absolutely necessary, saving time and expenses associated with manual maintenance.

    Cost reduction proves to be one of the greatest benefits of cloud based energy management systems as it allows energy companies to curb costs for the development of local infrastructure. Software innovation however is crucial to remain competitive. Because these systems are generally sold as a service, the consumer does not need to take care of the maintenance and updating of the database and infrastructure which again reduces wasted time and money that could be spent on implementing energy and money saving practices based on the data received. Additionally, clients only need to pay for what they use thereby reducing excessive overhead costs. Cloud services not only do minimize costs of software development and maintenance but also direct monetary costs, the cost of time and resources on maintaining in-house IT professionals and infrastructure on gathering, storing and analyzing energy data. This proves most beneficial for sectors that do not or cannot prioritize in-house energy management software experts...

    february 2019 - by Nina Lagron, CFA, Senior Portfolio Manager, La Française AM

     

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    news-1479 Mon, 25 Feb 2019 16:56:14 +0100 On the rise in a hostile environment /en/who-we-are/news/detail/on-the-rise-in-a-hostile-environment/ Equities have rebounded strongly after a traumatic end to the year. From the 24 December 2018 low, the US market (S&P 500) jumped almost 17%, while the European (Stoxx 600 and Euro Stoxx 300) and emerging markets rose by around 9%. The S&P 500 was just 7% off its last September peak (2930.75). And yet, the markets rose against an unfavourable, even hostile backdrop, lending weight to the theory that the 4Q 2018 correction was excessive. Moreover, and aside from Apple’s profit warning (-9.7% on 3/1), conditions remain tough:
    i) the global economy is slowing, not only in Europe, but in the United States as well (although the US government shutdown has limited the production of statistics, this trend is reflected in the most recently published leading indicators)
    ii) corporate earnings forecasts have been revised down, with expectations roughly halved from +10% to +5% for 2019 for all developed markets
    iii) political risks continue to threaten global economic activity and trade, with Brexit, political upheavals in the EU ahead of the May elections and US-China trade negotiations all in play

    As with the acceleration of the downturn, the market rebound - at least from a technical standpoint - came about after the Fed softened its tone, with Chairman Jerome Powell giving a speech on 4 January in which he underlined that inflation was low and that the Fed was prepared to adjust its monetary policy "quickly and flexibly". It is also worth noting that the
    pressure from political tensions was largely reflected by the fall in market prices and that the Chinese and US governments have entered a more "constructive"phase of negotiations.

    Taking a closer look at the changes in Europe at the start of this year, we see that: commodities and oil recovered after the sharp falls at end-2018; lower interest rates are helping sectors such as real estate (+10.7%); cyclical sectors, such as commodities (+12.4%), automotive (+11.6%) and industrials (+7.7%), have bounced back; and retail (+11.3%) is doing well after its December fall (-8%), with a reassuring level of post-Christmas sales. On the other hand, defensive stocks underperformed and telecoms were down 2.4% after outperforming strongly in the previous three months.

    The extent of January’s rebound, which took many investors by surprise, will not set a trend for the coming months. We see no particular trend emerging on the markets, which are likely to remain volatile all year. The 2018 annual results season has begun, and while performances have naturally been mixed, there has been less of a knee-jerk reaction than we saw at the end of last year, which shows that the markets were overly pessimistic then, and may even have panicked.

    In these volatile markets and with economies slowing, we continue to favour growth stocks around the tech, digital and consumer goods sectors, and long-term trends related to the transformation of economies towards electrification, energy intensity reduction and carbon emission mitigation. At the same time, we are limiting exposure to equities following this upturn, as the markets may be unable to maintain this momentum and run out of steam.

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    news-1477 Fri, 22 Feb 2019 12:15:46 +0100 The Fed pauses, the ECB waits and sees /en/who-we-are/news/detail/the-fed-pauses-the-ecb-waits-and-sees/ At the start of this year, the Fed gave significant support to risk assets, which, in most cases, clawed back the November and December losses. Moreover, in a speech in early January, and again at the latest FOMC meeting, Jerome Powell said that the Fed would be flexible on balance sheet reduction, which is currently taking place at a pace of USD 50 billion per month. The Fed has changed its tone from that employed in previous FOMC meetings due to uncertainty, and despite a slight tightening in financial conditions at the end of January. In its 30 January statement, the monetary policy committee described US economic activity as "solid" (and no longer as "strong"). It also said that it would be "patient" in determining its future monetary policy adjustments. An unexpected short-term pause in the inflation index monitored by the Fed (Core PCE) suggests there will be fresh monetary tightening later in the year.

    The ECB Governing Council has decided to wait for the new economic forecasts in March before passing judgement on the persistence of the economic uncertainty weighing on eurozone activity, which now looks to be on a downward trend.

    In this environment, which shows how difficult it is for the central banks to move on from their ultra-accommodative monetary policies, investors’ search for yield is still a live issue. Emerging asset classes, high yield credit, subordinated bank debt and long-maturity peripheral debt are among the most popular sources.
    However, the search for yield is hampered by a number of risks, chief among which are the economic slowdown and political risks in the eurozone, along with the publication on 17 February of the US government’s recommendations for a wide-ranging trade agreement covering the automotive and agricultural sectors and a standardised treatment for incoming investment... Watch this space!

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    news-1474 Wed, 20 Feb 2019 11:00:45 +0100 All thanks to the Fed... /en/who-we-are/news/detail/all-thanks-to-the-fed/ After one of the worst Decembers on the financial markets for more than 10 years, we had one of the best Januarys: +7.87% for the S&P 500, after -9.18% in December, and +15.04% for the barrel price of oil, after -8.36% in December, with similar performances for most risk assets. The Fed’s change in tone played a major role in this turnaround in market sentiment, as was also the case in September and December. With a bit of hindsight, some thought the Fed had extinguished the fire it lit in September when it said it wanted to go "further than getting rates to neutral".

    All the same, the extremely accommodative message from Jerome Powell and every Fed representative, particularly with regard to balance sheet reduction, played a large part in reassuring the markets. As such, the markets can now go about their business in the knowledge that interest rates will not rise before the end of June, at the earliest.

    Another factor that probably contributed to the performance of the markets in January was their "overreaction" in the fourth quarter of 2018, and particularly at the year end, in markets that had become less liquid. Did the impact of systematic strategies amplify the market movements? Was it a capitulation on the part of institutional and private investors after a historically long bull market in US equities? Whatever the reason(s), the indicators that we follow show that all flows into non-risk assets ("core” government bonds, money market instruments) were at historically very high levels at the end of the year, which partly explains the rebound in January.

    Moreover, other more fundamental factors have enabled this rebound to continue.

    Corporate earnings releases, which are well on track in the United States, have been reassuring, at around 70% above analysts’ forecasts, which is close to the historical average. This figure should be seen in context given the substantial downgrades that had been made to forecasts, but is nonetheless reassuring overall, assuaging the fears of a collapse in earnings expressed in certain quarters.

    Similarly, the latest US activity indicators have helped to reassure investors of the low probability of a recession in the short term.

    Now that the markets seem to have corrected their excesses, what attitude should we take? As things stand, it still looks like a good time to be investing in emerging markets. The risk premia remain high, investors have been keeping their distance, and the risk of a spike in the dollar seems fairly low in light of the Fed’s recent statements. Elsewhere, we retain our positive view on Portugal and Spain, and on US inflation expectations.

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    news-1473 Tue, 19 Feb 2019 16:13:03 +0100 Together, let's take care of Mother Earth. Best wishes for a bright... and responsible year! /en/who-we-are/news/detail/together-lets-take-care-of-mother-earth-best-wishes-for-a-bright-and-responsible-year/ La Française is committed to sustainability and responsibility. And so, instead of traditional holiday presents this year, we have decided to make a donation to an association or an environmental project. It was no longer gifts in the form of wine bottles or chocolate boxes that our customers received, but an invitation to turn them into a donation for one of the projects we proposed to them. Three projects were selected for their impacts on the environment, people and climate:

    -    Reforest’Action: A key player in reforestation in France and around the world, Reforest'Action develops climate solutions based on the regeneration of forest ecosystems.
    -    SOS Sahel: SOS Sahel's mission is to improve food and nutrition security in rural communities in sub-Saharan Africa. Its approach encompasses all aspects that contribute to the sustainable development - social, economic and environmental - of the most vulnerable rural populations in the Sahel.
    -    Green Cross: Founded in 1993 by Mikhail Gorbachev, Green Cross provides the keys to foster action on ecological transition and on the links between peace, environment and climate. By facilitating access to water, food and energy and advocating for a circular economy, cooperation and solidarity, we are helping to preserve peace and quality of life.

    As a result of this action, 5200 trees will be planted, 270ha of land and forests will be restored and ecological transition actions strengthened.
     

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    news-1467 Fri, 15 Feb 2019 15:00:00 +0100 CPPIB signs partnership with La Française and its shareholder CMNE to develop Grand Paris investment vehicle /en/who-we-are/news/detail/cppib-signs-partnership-with-la-francaise-and-its-shareholder-cmne-to-develop-grand-paris-investment/ La Française and Canada Pension Plan Investment Board (CPPIB) announce the signing of a strategic partnership for the launch of a real estate investment and development vehicle: Société Foncière et Immobilière du Grand Paris. The joint venture between CPPIB (80%) and Caisse Fédérale du Crédit Mutuel Nord Europe (CMNE) (20%), La Française’s shareholder, will invest in major real estate projects linked to the Grand Paris infrastructure in the Greater Paris area. With over C$368 billion in assets under management worldwide, CPPIB continues to expand its investment program and has formed a joint venture with CMNE, La Française’s majority shareholder, to focus on Grand Paris related real estate projects – one of the most significant and prestigious regeneration projects in Europe. The parties will initially allocate €387.5 million in equity to the venture.

    With €19 billion in real estate assets under management and over 40 years of investment experience, La Française has seized the real estate investment and community development opportunities offered by the Grand Paris Express transit project over the past several years. Early on and in order to capture substantial value, the group has positioned itself on several strategic locations that are part of a broader urban regeneration initiative and close to hubs that will be serviced by the Grand Paris Express.

    La Française’s expertise and longstanding reputation have enabled Société Foncière et Immobilière du Grand Paris, managed by Guillaume Pasquier, Head of Real Estate Business Development Grand Paris Project, and Anne Génot, CIO - Grand Paris and European Real Estate Business Development Director, to secure two flagship projects: Saint-Denis-Pleyel (mixed use) and Villejuif-Gustave Roussy (office buildings).

    “This new partnership in France with a leading real estate manager and investor like La Française and its parent company CMNE allows us to invest in a strategically important development in Paris,” says Andrea Orlandi, Managing Director, Head of Europe, Real Estate Investments at CPPIB. “Through this partnership we will target regeneration and infrastructure led investments, and we expect the Grand Paris Express to significantly transform the Greater Paris market over the next decade and beyond. We look forward to growing the venture anchored by the significant development opportunities in Paris and its Grand Paris Express project.”

    The joint venture will look to grow the partnership through additional development projects beyond Saint-Denis-Pleyel and Villejuif-Gustave Roussy that are consistent with its overall investment strategy.

    “This partnership with a leading institutional investor will enable La Française, with the support of its shareholder, CMNE, to step up its real estate business development and participate, along with other public and private stakeholders, in making Paris a “Global City”, concludes Xavier Lépine, Chairman of La Française Group.

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    news-1464 Fri, 15 Feb 2019 10:00:00 +0100 The FDA Comes Around /en/who-we-are/news/detail/the-fda-comes-around/ Innovation in the health care sector is accelerating due in part to a more accommodating U.S. regulatory environment for new approaches to medical treatment. Tracking which companies are participating in novel drug manufacturing may be important for health care investors.

    • In an effort to foster competition through innovation, the U.S. Food and Drug Administration (FDA) has approved 168% more novel drugs in 2018 than in 2016.
    • Often perceived as a regulatory roadblock, the FDA has become a facilitator of innovation by trying to reduce the regulatory burden on new and novel drugs and devices that address unmet medical needs.
    • The FDA is also collaborating with companies in a more proactive way during the development process. The agency is offering more guidance and engaging in more interactive exchanges with companies prior to a product filing. In certain cases, submissions are permitted on a rolling basis as data or modules are completed, as opposed to one complete submission at the end of data collection and analysis.
    • We believe that what is taking place in health care is not only hopeful to consumers and patients, but also attractive from an investment perspective. Novel drug manufacturers and medical device companies as well as those businesses that sell products and services to aid in new product innovation are potential beneficiaries.
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    news-1459 Tue, 12 Feb 2019 09:12:16 +0100 Why integrated reporting suits our investment philosophy /en/who-we-are/news/detail/why-integrated-reporting-suits-our-investment-philosophy/ Dr Roland Rott, Head of ESG at La Française Asset Management, shares his insights into why La Française has signed the IIRC’s investor statement signalling its support for integrated reporting We are delighted to sign the Investor Statement of the International Integrated Reporting Council (IIRC) in support for integrated reporting. By doing so we want to help companies understand that, if they deliver relevant and useful information, we will use it. We require this information as part of our effort to drive the development of more sustainable and stable businesses in the longer term.

    We support the aim of the IIRC’s Framework of providing more relevant, business-focused information. We appreciate when companies clearly explain their business model, their strategy and how this is applied in practice, helping us to understand the key stakeholders on which their business relies, and the utility of the most important assets, including those not visible on the balance sheet.

    The IIRC Framework is particularly well suited for our investment philosophy. When making investment decisions we combine our assessment of financial performance and ESG performance in the context of a company’s strategic positioning. The latter comprises the ability to change and the capacity to innovate.
    We encourage companies to consider the IIRC’s Framework as a useful toolkit for reporting and a means of focusing their communication with investors. Improved non-financial reporting will help to drive better governance and stewardship practices through more comprehensive identification and management of current and future opportunities and risks.

    The unique strengths of the International Integrated Reporting Framework are in linking and demonstrating the benefits of and need for carefully assessed investment in all material capitals including natural capital, human capital and financial capital. If companies successfully apply the principles of integrated thinking and reporting and we, as investors, foster and encourage this behaviour it should make a real contribution to a better future for our clients and society.
    As investors, we have a fiduciary duty to act in the best interest of our clients. To perform this role, we need to understand the long-term return prospects of the businesses in which we invest. Therefore, we need to understand not only their immediate financial performance, but the strategy of the business, the key resources and assets to which it has access and how it intends to maintain access to these resources and maintain or improve its assets.

    We are pleased to join a growing number of investment institutions as signatory. The greater transparency and clarity of understanding of businesses, which the principles of Integrated Reporting can offer, create a great opportunity for the professional investment community to encourage better capital allocation.

    Read the Integrated Reporting news, click here

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    news-1457 Thu, 14 Feb 2019 10:00:00 +0100 La Française Real Estate Partners strengthens its investment team with a Senior Investment Manager /en/who-we-are/news/detail/la-francaise-real-estate-partners-strengthens-its-investment-team-with-a-senior-investment-manager/ La Française Real Estate Partners strengthens its organisation with the arrival of Jean-Christophe Caron-Telders as Senior Investment Manager, responsible for sourcing and underwriting real estate assets for French and international institutional clients. Patrice Genre, Chairman of La Française Real Estate Partners, stated that, “Jean-Christophe will be responsible for a new investment initiative focused on tourism and, more generally, will be involved in the acquisition of commercial property for French and international institutional clients. Jean-Christophe is taking on this role at an opportune time, after a year of solid growth and more than one billion euros invested. His extensive experience with every stage of the real estate chain, in particular in terms of fund raising and product structuring, means that we will be able to provide increasingly tailored solutions to our investors.”

    Jean-Christophe has over 18 years' experience in pan-European real estate investment. He began his career at SOFILO (EDF Group’s real estate subsidiary), then moved to Aerium in Paris. He was then involved in the opening of Aerium Finance Ltd.’s London office and covered pan-European investments for institutional investors and UHNWI. While still in London, he spent five years as Head of France for an Australian REIT, responsible for investments and the French offices. He spent the next six years as Head of Fund Management at ACOFI (collective real estate investment vehicles) and joined La Française REM in March 2017.

    Jean-Christophe has a Master’s Degree from ESSEC (Finance, Real Estate and Urban Management) and studied architecture in Paris and Rome (DPLG). He is a member of the Royal Institution of Chartered Surveyors (MRICS) and he also spent six years teaching the Master 2 – Real Estate Financing and Investment Law programme at the Université de Cergy-Pontoise Law Faculty.

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    news-1456 Thu, 07 Feb 2019 15:29:10 +0100 "When Brexit settles, we'll take a fresh look at UK" Patrick Rivière in the Financial Times /en/who-we-are/news/detail/when-brexit-settles-well-take-a-fresh-look-at-uk-patrick-riviere-in-the-financial-times/ Patrick Rivière, La Française Managing Director interviewed in the january 28, 2019 edition of the Financial Times "Winemaking is a skill rarely associated with investment managers but along with asset allocation advice Patrick Rivière can serve vintages from vineyards across France.

    Mr Rivière is chief executive of La Française, wich owns 500 hectares of French vineyards and a wine production company..."

    Written by Chris Flood

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    news-1450 Mon, 04 Feb 2019 10:37:57 +0100 Post Fed Commentary by François Rimeu /en/who-we-are/news/detail/post-fed-commentary-by-francois-rimeu/ The FOMC went beyond what public speakers had originally announced. The FOMC will now adopt a more dovish stance. Please find below a summary of their decisions:

    • They removed mention of “further gradual increases” regarding interest rates, they are now “on hold”. This was expected even if the complete removal of the tightening bias is a surprise.


    • The base case regarding the US economy remains positive but downside risks have increased. Again, this was expected.
    • The major surprise came on balance sheet policy guidance, with a separate statement:
    • The committee confirmed they will continue to use its “floor system” rather than its previous “corridor system”. This signals an earlier end to balance sheet reduction and at a higher level than previously planned.
    • The committee indicated the current pace of balance sheet normalization could be adjusted “in light of economic and financial developments” vs previously “material deterioration in the economic outlook”. The bar has been lowered.

    The press conference was also on the dovish side with Mr. Powell moving away from a tightening bias and saying the next move could just as easily be either a rate cut or hike. 

    Going forward, it seems that Core PCE will have to surprise on the upside and reach at least 2% for the Fed to hike rates again.
     

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    news-1449 Fri, 01 Feb 2019 15:05:28 +0100 Global Real Estate Securities markets in times of trade war-curse, blessing or scapegoat ? by Jana Sehnalova /en/who-we-are/news/detail/global-real-estate-securities-markets-in-times-of-trade-war-curse-blessing-or-scapegoat-by-jana-sehn/ Around this time in 2018, global real estate securities markets were under serious, short-term pressure, ahead of a series of consecutive interest rate hikes that were expected to occur throughout 2018 and potentially 2019. The anticipatory nature of public markets led to a quick market correction, albeit only in the public domain, resulting in a double-digit gap in valuation as measured by discount to net asset value in comparison to private market valuations. Pricing in the private real estate markets did not adjust for such a risk and remained steady. Publicly traded global real estate markets were thus down sharply, around -8-10%, with the US leading the way in the first two months of 2018. Real estate markets globally screened as one of the worst performing asset classes at that time. 

    We have cautioned that such severe moves are not unusual in the public real estate domain. However, we added that similar movements in previous years have not derailed the asset class. We also noted that such moments in the cycle were opportune to continue building up exposure to the asset class, in particular when a notable gap exists between the valuation of real estate equities and general equities, as well as public real estate and private real estate markets. 

    Needless to say, headlines were shortly thereafter dominated by another important theme in 2018: the trade war between the USA and China. Protectionism and the destructive potential of global trade altered the thinking and moods in capital markets starting in early March 2018. The trade war started to be perceived as more detrimental to other global equities sectors exposed to global supply chains, rather than to locally defined property markets. Even though real estate securities markets are not immune to negative consequences linked to the trade war, the defensive characteristics of the property sector, combined with relatively cheap valuations in early March 2018, led to a significant differential in performance between general equities, global fixed income and global real estate securities. 

     

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    news-1447 Thu, 31 Jan 2019 10:12:50 +0100 Gaining in a Slowdown ? /en/who-we-are/news/detail/gaining-in-a-slowdown/ Goodbye, peak growth in the U.S. Hello, equity gains? It may not make sense at first blush but slowing economic growth can, and often does, coincide with positive equity returns. Historically the S&P 500 Has Mostly Risen During Slowing GDP Growth

    • As U.S. fiscal stimulus wanes and trade issues continue to provide a headwind to growth, the momentum of the U.S. economy is expected to slow in 2019. Consensus estimates of GDP growth project a deceleration of about half a percentage point relative to the nearly 3% growth in 2018.
       
    • But decelerating economic growth does not necessarily mean weak equity returns. In the past 35 years, there have been 15 years when U.S. GDP growth materially slowed, with the vast majority generating positive U.S. stock returns. Relevant examples include 1995, when the economy slowed after Fed tightening while earnings grew strongly and U.S. stocks posted solid returns, as well as 2016, when economic growth slowed and stocks posted solid, albeit varied, returns.
       
    • Returns were negative during slowing economic growth only when accompanied by a recession (1990, 2000/2001 and 2008). If the slowing economy is able to avoid recession, history suggests that U.S. equities can indeed achieve gains.
       
    • Looking at the big picture, it is easy to see that equities have mostly gained in the past and may continue to benefit investors over the long term (see Alger on the Money “Stocks for the Long Term?”).

     

     

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    news-1444 Tue, 29 Jan 2019 17:29:41 +0100 Pre Fed Commentary by François Rimeu /en/who-we-are/news/detail/pre-fed-commentary-by-francois-rimeu/ For the first time, the Federal Reserve will hold a press conference without having an update of the Summary of Economic Projections. Mr. Powell will face a real communications challenge considering recent financial market turmoil, the lack of updated information following the shutdown and speculation about the future of balance sheet reduction after dovish communication from FOMC members in January. Here is what our thoughts are:

    • We think Mr Powell will want to buy time and thus will have a message of patience.
    • We do not expect any formal announcements on the balance sheet but Mr. Powell should reiterate his comments about the Fed being flexible if needed. 
    • The risks associated with the economic outlook should be described as roughly balanced, meaning no change since December meeting.  
    • Rate guidance will be very challenging and we think the aim will be to signal a pause but not a stop in the hiking cycle. Previous statements mentioned “some further gradual increases” would be appropriate, we expect a dovish shift here with a more data dependent approach. We doubt the Fed is ready to abandon its plan for potential further hikes later this year.

    Overall, the tone will be dovish but maybe not enough so given the market’s current mindset.

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    news-1443 Mon, 28 Jan 2019 15:46:02 +0100 La Française, official sponsor of the 2019 edition of Fonds professionell Kongress, January 30 & 31, 2019 Mannheim, Germany /en/who-we-are/news/detail/la-francaise-official-sponsor-of-the-2019-edition-of-fonds-professionell-kongress-january-30-31-2019/ Over 6.000 industry specialists (consultants, insurance brokers, institutional investors, financial advisors, fund selectors etc.) are expected at this year’s Fonds professionell Kongress. For the first time, La Française’s German International Business Development team will welcome investors on stand n°41. Senior Portfolio Manager, Nina Lagron has been invited to speak to investors about the emergence of a low carbon economy and resulting investment opportunities.

    Nina Lagron, will argue that companies with the internal policies to address climate change and cut their greenhouse gas emissions, are strategically better positioned. Lower carbon emissions can translate into higher valuations and ultimately financial performance for investors.  

    As climate change transitions from a regulatory to a business issue, companies are taking initiatives to mitigate the risks arising from climate change by considering the cost of carbon emissions. Just like a company with under-utilized capacity is deemed ineffective, excess emissions are now considered operationally ineffective and a potential liability.

    When emissions bear a cost on an income statement, it helps investors to highlight inefficiencies and reward those companies that are cutting-down on their carbon emissions.

    Fonds professionell Kongress, Mannheim, January 31, 2019 from 11:10 to 11:40
     

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    news-1439 Fri, 25 Jan 2019 09:21:08 +0100 With over €3 billion in fundraising, La Française GREIM has exceeded its 2018 objectives /en/who-we-are/news/detail/with-over-e3-billion-in-fundraising-la-francaise-greim-has-exceeded-its-2018-objectives0/ La Française GREIM has raised more than €3 billion in 2018, an almost 40% increase on 2017, bringing its total real estate assets under management to over €19 billion. 1/ 2018 Fundraising

    Institutional clients
    In the current environment, real estate, which is uncorrelated to financial markets, is a real diversification solution for investors seeking higher potential returns. In light of the uncertainty surrounding Brexit and the positive trend created by the development of the Grand Paris project, French and foreign institutional investors have demonstrated significant interest in real estate, and French real estate in particular.

    La Française, which has three investment centers capable of sourcing assets throughout Europe and a development and fundraising team covering the European, Asian and Canadian markets, has been especially active in this segment and has raised almost €2 billion from major institutional investors through mandates and the management of real estate funds, almost 40% of which came from foreign (non-French) investors.

    Among its most emblematic acquisitions under a mandate for Korean investors, La Française purchased “Le Balthazar”, an eight-story office building located on Place des Droits de l’Homme in Saint Denis (93), close to the Stade de France.

    Retail clients
    With over 40 years’ experience in creating and managing collective real estate investment vehicles, La Française is an industry benchmark for retail investors. The range of SCPIs it manages or sells, in particular theme-based funds, investing in European real estate, healthcare, or even the Grand Paris project, have raised €700 million from French retail investors. Real estate unit-linked insurance products have also been very successful. La Française manages almost €500 million in additional assets in these vehicles as of the end of 2018.

    2/ Transactions

    Thanks to its European investment platform, La Française recorded €2.5 billion in transactions, including €2.1 billion in acquisitions and €410 million in arbitrage transactions. Furthermore, in 2018, the Group continued its asset regeneration strategy, thereby underpinning the performance of its range of collective real estate investment vehicles.

    Of the acquisitions completed in 2018, 88% involved office space, 5% were for retail space and 7% involved other assets, including managed residences (for seniors or tourists), activities or residential properties. The most emblematic acquisitions included:

    • “L’Open”, a 9 158 m2 office property located in Issy-les-Moulineaux (92),
    • office space (5 645 m2) at 100-104 Boulevard de Montparnasse in Paris (14th),
    • a retail asset (5 469 m2) in Nice (06),
    • a 4 137 m2 student residence in Gif-Sur-Yvette (92),
    • a tourist residence (32 apartments totaling 1 975 m2) in Deauville (14),
    • and a number of acquisitions abroad, in Amsterdam and Germany (Essen, Bamberg, Frankfurt).

    “La Française is an asset manager, but not only! Our business consists in anticipating the needs of investors and tenants in order to make lasting investments and thereby create investment solutions for our clients that offer return potential. La Française makes every effort to achieve this objective. The company’s European real estate investment platform is a testament to this, as is its commitment to innovation. Its new securities account real estate investment solution is the most recent example of this commitment. And soon, for investors seeking more diversification, a collective real estate vehicle, invested in vineyards properties, will be launched”, concludes Marc Bertrand, CEO of La Française Real Estate Managers.
     

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    news-1422 Mon, 21 Jan 2019 10:12:26 +0100 2019 is picking up where 2018 left off /en/who-we-are/news/detail/2019-is-picking-up-where-2018-left-off/ While in 2018 the emerging markets were the precursors of the downturn, they were closely followed by the European indices, and then by a major correction on the US market (-24% between 3 October and 24 December). At the start of a new stock market year, the key issue is to work out if the bottom is close. The rebounds on 26 December (NASDAQ +6.16% and S&P +4.6%) and 4 January are indicative of both the excessive nature of the correction and the risk of adopting an excessively defensive stance.
    Despite the impact of algorithms and equity market “momentum traders” amplifying movements beyond what the fundamentals would suggest, what pointers can help us evaluate the situation?

    Global economic growth is forecast at around 3.5% and is slowing (unlike the start of 2018, when it was accelerating). While global growth has barely moved, in Europe it has declined
    significantly. The plunge in the manufacturing ISM in the first week of January (its biggest drop since October 2008) confirmed the slowdown in the US economy for 2019 and revived
    expectations of a global downturn at the end of a long cycle of growth projected for 2020.
    This slowdown should reduce US growth to around 2%, which is not a recession.

    Deteriorating prospects for growth and the markets brought down long rates (fall in the 10Y and 30Y). However, the relationship between interest rates and equities has become
    stretched during this long period with rates at close to zero.
    This decorrelation was accentuated in January 2018, when the US Treasury-financed corporate tax cut led to a
    fiscal premium being priced into long-dated government bonds. This did not prevent a fresh wave of market falls when the Fed hiked interest rates at its December meeting. The Fed has
    embarked on a phase of "quantitative tightening". It should remain pragmatic, but in this environment, we cannot expect to see growth in equity market multiples.

    Corporate earnings have been revised down. While the consensus earnings forecasts that we use show growth of around 10% for 2019 in both the US and Europe, we project 2019
    earnings growth at 4-5%, based on the assumption of a slowdown.

    Lastly, flows remain stubbornly negative at the start of 2019, with the surge of outflows from equities continuing and no signs of a move into risky assets. The increase in the proportion
    of cash being held is a clear indication of risk aversion.

    In these extremely volatile markets, many movements appear irrational, or at the very least, excessive. 2018 clearly showed us that geopolitical developments affect the economic outlook on which we base our decisions. Slowing, but positive, economic growth, along with the third consecutive year of corporate earnings growth, should support positive a market performance in 2019 following the excessive correction of 2018. Nonetheless, the combination of these positive fundamentals and the major unresolved political issues will keep volatility high, with no particular trend emerging on the markets. We are taking a cautious approach to exposure and risk management, while maintaining a selection of securities based on growth and quality, which should enable us to take advantage of the opportunities presented by the fourth-quarter falls. It is hard to see a trend reversal in the short term, although the general pessimism will undoubtedly provide some repositioning opportunities.

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    news-1420 Fri, 18 Jan 2019 15:31:07 +0100 Innovation in China /en/who-we-are/news/detail/innovation-in-china/ The mobile boom in China has driven innovation and today China possesses a host of new internet creations that lack U.S. equivalents. As a result, there may be a significant long-term opportunity in China. China's internet user base is nearly 3x that of U.S.

    Smartphones have quadrupled the number of internet users in China during the last decade, helping Chinese companies to amass large revenue streams that support experimentation and ingenuity in the internet space. Government policies and the absence of offline infrastructure, such as retail stores and an established television advertising ecosystem, have also aided in China’s rapid internet development.

    • Once known for companies that initially imitated their U.S. internet counterparts, China is now a trailblazer in the internet space with many unique offerings.

    • One China-based company, Meituan, combines food ordering, reviews, travel and delivery into one popular “super app.” Evolutionary mobile payment platforms Alipay and WeChat Pay are each approaching one billion users, enabling trillions of U.S. dollars in payment volume. Alibaba has also developed smart supermarkets, blurring offline and online commerce unlike any American retailer.

    • Despite concerns about the Chinese economy and the trade war with the U.S., investors interested in innovative technology may find the long-term prospects of China extremely interesting.

     

     

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    news-1418 Fri, 18 Jan 2019 11:36:57 +0100 Bond market performance in 2018 : against all consensus rules (and not for the first time) /en/who-we-are/news/detail/bond-market-performance-in-2018-against-all-consensus-rules-and-not-for-the-first-time/ In the end, things could have been a lot worse for government bonds. Against a backdrop of improving growth at the start of 2018, many forecasters (including us) were expecting a bad year for this asset class. But this was not the case. Overall, sovereign bonds posted positive performances in 2018. The US index returned +0.8% in USD (BoA ML); a paradox given the significant improvement in the economy and the Fed proceeding with four rate hikes as expected. In Europe, despite the deteriorating growth indicators after the fourth-quarter 2017 peak, the end of the ECB’s quantitative easing programme would suggest that rate normalisation is coming. Nonetheless, the segment returned +1% in EUR (BoA ML index) over the year. So why was everyone caught on the hop? 

    The move into government bonds could simply be interpreted as a flight to safety in a climate of mistrust of risky assets, given the sources of tension accumulating (Trump, Brexit, US-China trade tensions, oil, etc.). However, a closer reading shows that the fall in monetary expectations was the main factor influencing yields over the period. 

    Hampered by a considerable increase in supply, oil prices plummeted. This movement had a major impact on the inflation numbers, sending inflation expectations tumbling.

    Within the eurozone itself, the picture is pretty clear, with the significant underperformance of Italy over the period (-1.4%) the main factor; and it has to be said that the market rarely rewards the worst performers. The comparison with Spain (+2.6%) and Portugal (+3.1%) is stark. Also catching the eye was the performance of the eurozone’s core countries, led by Germany (+2.3%), which benefited from their safe haven status: the yield on the 10Y Bund was 0.23% at the end of the year.

    In short, the bond market swung like a pendulum in 2018, from one extreme to another.  After a fleeting economic upturn, the market is now anticipating a sharp slowdown. We will probably see something in between. Our bet as we enter the new year is that the bond market will be relatively calm and asset valuations will reconnect with fundamentals

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    news-1416 Thu, 17 Jan 2019 14:42:26 +0100 At last, some good news: 2018 is behind us... /en/who-we-are/news/detail/at-last-some-good-news-2018-is-behind-us/ A disastrous December brought to an end a year to forget for the financial markets: the S&P500 was down 9.18%, its worst month since February 2009, oil lost 10%, the US 10-year bond yield narrowed by 30 basis points, and we could go on. Last month, we said that the emerging markets could rally, and while they duly outperformed other regions (-2.9% for the MSCI EM, a positive performance for emerging bonds in strong currencies, a rise in EM currencies), they were nonetheless not immune.

    The unpropitious climate prevailing over the previous few months is still in place, but have the underlying factors remained the same? We would say they have, for the most part, but whereas political tensions dominated a few weeks ago (US-China, Brexit, Italy, etc.), concerns have mainly shifted towards fundamentals.

    The main question now seems to be: what will be the growth story in 2019? And in particular, how will US growth fare, after a record year in 2018?

    Investors have three main concerns:

    • "The positive impact of President Trump's fiscal stimulus is coming to an end, and US growth is likely to stall without it". We only partially subscribe to this view, since by our estimates, the fiscal impact boosted growth by 0.7% in 2018 and should add 0.3% in 2019 (tax cuts until April 2019 and a $36 billion increase in federal spending over the year).
    • "The flattening of the US yield curve indicates a recession is on the way". We do not share the market’s fears on this, as the yield curve can remain flat for an extended period without causing any problems. In our view, the difference between the return on capital and the cost of capital is more relevant, and this indicator is not highlighting any shortterm risks.
    • "The Fed made a monetary policy misstep in raising interest rates when the financial conditions are tightening". Of course, the Fed could have paused its rate hike programme in light of the market correction, but it would have had to prepare the markets first. And it would have also needed Mr Trump to refrain from commenting on monetary policy. From our standpoint, the misstep came in Jerome Powell’s statement in October, when he said that the Fed may go further than getting rates to neutral.

    Overall, we are not particularly worried about the global or US economy in 2019. A slowdown is highly likely, but not a collapse. The oil price slide over the last three months should have a positive impact on consumption figures by mid-2019.

    A number of political risks are continuing to affect the markets: firstly, Brexit, with the House of Commons’ vote in the week beginning 14 January, and the US-China trade negotiations. However, we don’t expect a "hard Brexit”, and we note a more constructive tone in the USChina trade talks.

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    news-1406 Fri, 04 Jan 2019 17:42:17 +0100 The Resilience of Innovation /en/who-we-are/news/detail/theresilienceofinnovation/ Did you know that during economic downturns innovation has managed to thrive? For example, throughout the Global Financial Crisis technological innovation prospered. It stands to reason that disruptive technologies may continue to flourish during future periods of market volatility and economic turbulence. Internet Businesses Outperformed During and After Global Financial Crisis

    • During the Global Financial Crisis, innovative industries, such as e-commerce and Internet advertising, grew over 30%, as retail sales and other measures of economic activity stagnated.
    • The resilience of innovation dates back further than recent events. Personal computer penetration managed to grow through the early 1990s recession and in the Great Depression automobile ownership successfully advanced. Even as the economy has contracted, pockets of ingenuity have allowed corporations to profit and improve overall productivity (see Alger whitepaper The Enduring Force of Innovation).
    • We find that the most innovative companies produce the strongest fundamentals and stock returns, and hold the key to investment performance. While investors today may have concerns ranging from where we are in the economic cycle to what actions global central banks will take, the answers to these questions do not drive long-term corporate earnings growth—innovation does.

     

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    news-1391 Fri, 21 Dec 2018 08:00:00 +0100 The market regains some life after a constructive G20 /en/who-we-are/news/detail/themarketregainssomelifeafteraconstructiveg20/ The first weekend of December’s G20 summit in Argentina was highly anticipated by investors. The key point of this meeting of leaders was the dinner between Xi Jinping and Donald Trump. It ended with a three-month truce on trade. Mr Trump postponed the effective date of a 25% tariff initially scheduled for 1 January. China, in turn, massively lowered its import duties on vehicles made in the US and sold in China.

    With a view to a longer-term agreement, the Americans want to launch discussions about three key topics: intellectual property theft, non-tariff obstacles, and “forced” technology transfers.

    Concessions from China on these issues could mean the start of a long-term agreement.

    As December gets underway, we are maintaining our ‘equity’ exposure, primarily for the following reasons:

    • attractive valuations in several geographic areas (Europe, China, and Japan);  
    • a rise in US rates that is expected to slow down, weakening the dollar and benefiting the US and emerging economies;  
    • brisk capital inflows to the US and a return to the emerging markets;  
    • and better (or at least steady) business margins, carrying over into 2019.

    Still, many political risks persist. In Europe, the situation appears to be easing somewhat, with Mr Salvini’s government ready to make concessions so that its budget will be approved by the European Commission. The main risk is still Brexit. A decisive vote is scheduled for   11 December in the UK Parliament to approve the agreement negotiated with Brussels. If it does not pass, the UK could be in uncharted waters, and headed for a “Hard Brexit”.

    Finally, while the additional time given by the US administration to negotiate with China is crucial, it is not enough by itself. A long-term agreement is necessary to keep investments from plummeting in the US. A rekindled trade war would impose a severe burden on the global economy and the financial markets. The shadow of the political risks that defined 2018 still looms over 2019 and could be the reason for the high volatility on the equity markets.
     

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    news-1390 Thu, 20 Dec 2018 09:00:00 +0100 General Electric, the next "fallen angel" ? /en/who-we-are/news/detail/generalelectricthenextfallenangel/ For more than a month, General Electric (BBB+) has been drawing the attention of the Investment Grade and High Yield markets in the US as well as Europe. General Electric is a historic American conglomerate that achieved the highest valuation in the world in 2001, with capitalisation in excess of $500 billion, and now seems to be nearing the end of the cycle. The group is also one of the most complex, operating globally on a dozen different segments, with a major financial services subsidiary, GE Capital, that has both a complex structure and enormous leverage. 

    With $115 billion in gross debt, General Electric is the 10th largest issuer of US Investment Grade bonds (BoA index).  In addition to the debt burden, the group has provisioned $22 billion for an ongoing investigation by the SEC, and has $12 billion in debt maturing in 2019. All of this together has stoked major uncertainty over the group’s situation, driving the bonds down 10-20 points in two months, according to the issuing entities, while shares have halved in value (-56% since January). Today, the group’s bonds are trading at the price of a B-rated bond (highly speculative investment). 

    Given the group’s systemic weight, the situation is worrisome to the entire High Yield market. With the debt it carries, if GE moved into High Yield, a three-notch downgrade, it would be the largest issuer with debt amounting to 3.7% of the index. Market players agree that the High Yield market would have a great deal of trouble collecting that kind of debt. 

    Nonetheless, we do not expect General Electric to move into High Yield in the short or medium term, for several reasons:

    • General Electric is still turning a profit on most of its businesses, and can – and should – restructure.    
    • GE’s capacity to deleverage will keep it out of High Yield. The group can easily reduce its debt by raising at least $20 billion in the short term, through a possible IPO of the Healthcare portion (up to 40%), or by selling its stake in Baker Hughes, cutting its dividend, etc.  
    • The weight of General Electric’s debt in the Investment Grade loan portfolios of Wall Street’s five largest banks can provide support in avoiding liquidity problems. On the single $19.8 billion line of credit expiring in 2020, guaranteed to GE by six banks (out of a total of $41 billion in credit lines), Morgan Stanley makes up 6% of its Investment Grade loan portfolio, and Goldman Sachs 4%. 

    For the above reasons, we are confident that the group is capable of deleveraging over the short and medium terms and, as a result, the market reaction seems exaggerated and more reflective of the tighter bond climate in recent months. 

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    news-1389 Wed, 19 Dec 2018 16:29:12 +0100 An end of year rally ? /en/who-we-are/news/detail/anendofyearrally/ Oil prices tumbled 22% in November, making it the worst month since October 2008. No fears of recession or systemic banking crisis this time, but a confluence of negative factors: projected growth is down, driving down oil demand; sanctions against Iran are partially lifted; production in the US is unexpectedly high; and Saudi Arabia has had record production, though it said it wanted to decrease it... not to mention the major speculative positioning on oil. Another reason for the scale of the slide is market conditions, which are still fragile due to political uncertainties.

    Logically, this movement drove core rates and inflation breakeven points down; the latter were especially bad in the eurozone, with, for example, German 10-year breakeven inflation rates down 18 bp over the month, which is the widest swing seen since early 2016.

    The Brexit debate continues, with the agreement between the European Union and the UK government reached on 25 November. The UK now needs to get this agreement through the House of Commons, which is scheduled to vote on it on 11 December. Right now, it is hard to imagine the agreement being passed. So, does Theresa May step down? Will there be new elections? Or a second referendum? We still think that a Hard Brexit can be avoided, but it could be a rocky road ahead.

    Investors were all riveted to the G20 summit slated for the end of the month in Argentina, with two key issues to address: trade tensions between the US and China, and discussions of a possible reduction in oil production by OPEC + Russia. And - for once this year - hopes were not dashed:

    • Donald Trump and Xi Jinping agreed on a 90-day “truce” in their trade war;
    • OPEC and its allies are working on an agreement to reduce production by 1.3 million barrels a day.

    The last big news item is Jerome Powell’s about-turn: after saying on 3 October that monetary policy was still far from equilibrium (hawkish), he has said that it was in the end rather close. This change in tone has gone a long way towards calming the financial markets.

    Ultimately there could be a year-end rally, especially in emerging markets (currencies, fixed income and equities), which have been the main beneficiaries of recent developments and also the markets that have suffered most this year. A rally in Europe is also a possibility, but it will depend on whether or not political issues are resolved.

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    news-1388 Wed, 19 Dec 2018 14:39:46 +0100 UK Tax Strategy 2019 /en/who-we-are/news/detail/uktaxstrategy2019/ Groupe La Francaise’s UK operations are conducted through various standalone legal entities and branches located within the UK. This tax strategy sets out the group’s approach to conducting its UK tax affairs and managing the associated tax risks. Groupe La Française regards the publication of this tax strategy as complying with its duty under paragraph 19 Schedule 19 of the Finance Act 2016.

    Tax risk management and governance:

    Groupe La Française is committed towards maintaining a responsible and sustainable corporate governance framework. Responsibility for the group’s tax strategy ultimately resides with the Board of Directors of Groupe La Française. This is a responsibility that the board take very seriously, and as such taxation features as a standard item on the agenda of board meetings. Operational responsibility for delivering on the group’s tax strategy and organising the group’s tax affairs is delegated to the group’s in house tax function, which is situated in France. The group’s in house tax function in turn utilise the support and advice of external, UK tax advisors where appropriate.

    As a global asset management business, we are exposed to a variety of tax risks. We consider our key UK tax risks to be as follows:

    • Compliance and reporting risk – This includes the risk of making late tax return filings, filing incorrect returns, and failing to make tax payments or elections within the required time frame. We seek to mitigate these risks by determining internally appropriate resources to be put in place to ensure compliance and by outsourcing our UK tax compliance process to external professional advisors. 
    • Transaction tax risk – These risks could arise if the group were to enter into business arrangements or transactions without appropriate consideration of the potential tax implications. In order to mitigate this risk, we typically utilise the services of external professional advisors before undertaking any significant business transactions.
    • Legislative risk – Tax legislation is constantly changing, and thus there is always a risk that we do not keep up to date with the latest legislation and therefore fall short of the relevant compliance requirements. In order to mitigate this risk, we seek to have appropriate internal processes to monitor tax legislative changes and by requesting that our external advisors send us frequent updates on any changes to the tax legislation.    

    Ultimately, we place great value on the firm’s reputation and as such are committed towards promoting the mitigation of any tax risks which may threaten that reputation.

    Tax Planning:

    The board of directors have a low appetite for tax risks, which is closely aligned to the overall risk appetite of the organisation.  As a group, and in the UK, we do not engage in aggressive tax planning and will only undertake tax planning opportunities to the extent that they are supported by and aligned with genuine commercial and economic business activities. Any transactions entered into between group companies are conducted on an arm’s length basis and we seek to ensure that any tax planning activity is consistent with both the spirit and letter of the law, as well as international guidelines and rules. 

    Approach to tax risk:

    As noted above, Groupe La Française is owned by a mutually owned bank widely recognised for its reputation and cooperative values. Groupe La Française conducts its operations in alignment with these values and as such the board places great value on the organisation’s reputation. The Groupe La Française board seeks to eliminate any potential threat to this reputation by promoting a low overall risk appetite across the group. 

    Groupe La Française’s attitude towards tax risk is very much structured around these wider organisational values in that we also have a low appetite for tax risks. We do not participate in aggressive tax planning or complex structured arrangements designed with the sole or main purpose of reducing our tax liability.

    Relationship with HMRC:

    Group La Française strives to promote an open, honest and transparent relationship with HMRC. The group is committed towards working proactively and transparently with HMRC and wherever possible the group endeavours to disclose any potentially contentious issues with HMRC.

    Should there be any situations where disagreements arise, the group will work proactively and transparently with HMRC to resolve them.   

    > To upload the UK Tax Strategy, click here. You can also find the Tax Strategy document in the Regulatory Information part.

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    news-1387 Tue, 18 Dec 2018 18:25:25 +0100 Preview of FOMC meeting signed by François Rimeu /en/who-we-are/news/detail/previewoffomcmeetingsignedbyfranoisrimeu/ This meeting could be one of the most interesting in recent years. The market is currently pricing a 66% chance for a FED hike on December 19th vs more than 80% at the beginning of the month, and one could make a case for the Fed not to hike considering recent developments: • Tightening of financial conditions
    • S&P 500 down 13% since beginning of October and credit spread widening
    • Oil price down 30% leading to sluggish headline inflation forecast for next year
    • President Trump saying that a hike would be a big mistake

    That being said, we still think the Fed is going to hike and in fact, they have good reason to do so: Macro figures in the US are still very solid, wage inflation is still increasing and the unemployment rate is still very low. On top of that, with the kind of communication they had over the past 3-4 weeks (never mentioning that no hike was a possibility), not moving would hurt a lot their credibility, with consequences difficult to estimate.
    The communication should be dovish, with 2019, 2020 and LT dots revised lower. The economic projections should also send a dovish message with GDP growth as well as inflation revised downwards.

    The market expects a dovish hike and we think this is what the Fed is going to deliver. 
     

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    news-1384 Fri, 14 Dec 2018 11:35:28 +0100 Next Gen is coming /en/who-we-are/news/detail/next-gen-is-coming/ It may seem distant, but there was a time before we could stream content, store data in the cloud or use apps on our phones. We had no idea such functionality existed in our future. Currently we are at a similar inflection point as we await the arrival of 5G technology. What new efficiencies and capabilities will it bring? Wireless technology speed accelerates over time

    • Wireless technology evolves in “generations,” with each generation providing faster speeds and greater capabilities. As with so many other technologies, wireless improvements have accelerated over time with the upcoming generation representing an increase in speed of nearly five million times the first wireless service (see Alger whitepaper The Enduring Force of Innovation).
    • 5G will begin a widespread rollout in 2019. It will enable a ubiquitous network that parallels the speed of a desktop with a higher and faster ability to compute and transfer data. It will also further enable the Internet of Things in which devices communicate with other devices, helping remote patient monitoring, autonomous driving and smart city wireless infrastructure monitoring to become realities.
    • The evolution of 5G is likely to cause dramatic change. Some estimates are for 5G to create $275 billion in new investment and three million new jobs. Potential investment opportunities include companies whose products are instrumental in creating the new infrastructure 5G will require: semiconductor and semiconductor equipment companies as well as wireless tower and bandwidth infrastructure providers. While we can forecast some of the impacts of 5G, its broad effects on consumers, business and the economy are likely to transform our lives once again.

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    news-1369 Tue, 18 Dec 2018 15:24:00 +0100 Sustainable, responsible & desirable Real Estate by taking on the challenges of biodiversity /en/who-we-are/news/detail/sustainable-responsible-desirable-real-estate-by-taking-on-the-challenges-of-biodiversity/ Can we still talk about a distinction between the city and the countryside in the evolving world in which we live? The distinction between city and countryside is no longer appropriate when our planet has to tackle ecology and food challenges.

    Meeting these challenges means rethinking agriculture by breaking down the barriers put up by modern urban planning and increasing dialogue between urban and rural dwellers.

    Often upstream of any political action, more and more solutions aimed at restoring a balance, providing meaning and establishing roots are starting to emerge, and they are coming not only from farmers, but also from within civil society.

    Urban agriculture is one solution, in that it helps to preserve biodiversity, reduce the carbon footprint and produce healthy food, as well as reactivating a social connection that fits perfectly with the development of the sharing economy.

    As a major player in the real estate sector, La Française REM has begun to consider the potential for developing urban agriculture on land it owns in Paris and its inner suburbs.

    A first initiative, in conjunction with the company MUGO, has just been launched in Puteaux, where 2,000 m² of urban food gardens and green space have been made available to the tenants of the Aviso Campus office complex.

    Beyond the comfort and well-being that comes from being close to nature, this garden is intended to create social connections by enabling users to get involved in growing fruit and vegetables on a community plot and by offering them educational events on a quarterly basis. The produce harvested will be sold at a weekly mini-market.

    La Française REM is pioneering this approach and aims to become a key player in the management of sustainable, responsible and desirable real estate

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    news-1368 Mon, 17 Dec 2018 15:00:00 +0100 Every half degree counts ! Valérie Masson Delmotte reports on the IPCC's conclusions /en/who-we-are/news/detail/every-half-degree-counts-valerie-masson-delmotte-reports-on-the-ipccs-conclusions/ On 18 October, we were honoured to host a discussion with Valérie Masson Delmotte*, CoChair of IPCC Working Group 1, at our Zero Carbon Club event. She shared a summary of the takeaways from the report on the consequences of global warming of 1.5°C published by the IPCC on 8 October.

    Interestingly enough, without this work the Paris agreement could not have been achieved. The countries most exposed to climate change - mainly island countries - only agreed to sign the agreement subject to an IPCC commitment to prepare a special report on the impact of a 1.5°C increase in global temperatures.

    This report draws on 6,000 publications, three-quarters of which were not included in the last IPCC report. The scientific community has therefore stepped up to the plate to study this crucial issue for the small island states, as well as for all of the 195 signatory countries.

    The main findings of the report are as follows:
    We have already reached 1°C above the pre-industrial period; and the effects of the 1°C increase have started to be felt, particularly through extended heatwaves and heavy rainfall. Climate change is not an issue for some far-off future; it is already here and it affects us all. 

    Limiting global warming to 1.5°C rather than 2°C has clear benefits. These multiple benefits may seem distanced from our everyday lives (e.g. biodiversity), but are more real to us when they relate to food security and human safety. 

    It is still possible to limit global warming to 1.5°C by halving our CO² emissions by 2030 and reaching net zero emissions by 2050:
    - This will require major changes on the supply side, in energy systems, land management, urban systems and industrial systems. Such changes will not be possible without an evolution of the financial system.
    - It will also require changes on the demand side, in energy and food demand for example. This clearly relates to all of us. 

    A major innovation of this report is that scientists and social scientists worked together for the first time. The report underlines the need for an ethical and just transition, and for a mix of mitigation and adaptation measures to limit the harmful impacts: it would not be appropriate, for instance, if adaptation involved developing greenhouse gas-emitting air conditioners that were to contribute further to global warming...   

    The conditions necessary to constrain global warming to 1.5°C will require cooperation / political will / financing. Overall, we face three major risks:

    1 - Climate risk.
    2 - The risk of delaying, placing the burden on future generations and relying on the development of carbon capture technologies.
    3 - Financial risk, as the sustainability of a number of sectors relies on the implementation of a planned, rapid and voluntary transition.

    In short, every half degree counts. Each year counts. All of our individual and collective choices count. And whatever happens, the finance sector will have an important role to play.

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    news-1367 Thu, 06 Dec 2018 14:53:31 +0100 There’s light at the end of the tunnel… /en/who-we-are/news/detail/there-s-light-at-the-end-of-the-tunnel/ By Fabrice Jacob, CEO JK Capital Management Ltd., a La Francaise group member company

    After months of writing about doom and gloom and telling investors to stay away from emerging markets in general and from China in particular, we believe light is finally appearing at the end of the tunnel. The stars seem to be moving back towards alignment.

    The most important star is, of course, the trade dispute between the US and China that has reached a 90-day truce. It is important to stress that despite what is commonly reported in newspaper articles, the slowdown of the Chinese economy this year has very little to do with the impact of trade tariffs. Actually, the trade tariffs have not slowed down exports from China to the US but accelerated them as US distributors have stocked up ahead of the tariff implementation. Instead, the slowdown of the Chinese economy is a direct consequence of the deleveraging efforts of the Chinese government over the past two years.

    Markets have been pricing a worst-case scenario, which includes tariffs to be imposed on the third and last USD270bn batch of imports by the US at a 10% rate and the second batch of tariffs being raised from 10% to 25% on 1st January 2019 (Source: Bloomberg). Any positive development such as the truce reached in Buenos Aires at the G20 summit can only be seen by the markets as good news.

    The second star is US interest rates and their impact on the US dollar. A strong dollar has always been the enemy of emerging markets as many companies in these countries have significant US dollar debt exposure and as most countries settle their oil imports in US dollars. The fact that more and more economists are anticipating a slowdown of the US economy in 2019 and a recession in 2020 has not gone unnoticed. The Chairman of the Fed, Jerome Powell, made it clear in a recent speech that current US rates were not far from their “neutral level”, hence lowering the expectations of rate hikes from now until the end of next year to two hikes. The 10-year Treasury Bond yield has come down as a result from its peak of 3.23% to 2.99% (Source: Bloomberg) as these lines are written. Even though the dollar has not reacted yet, it should weaken in all logic, bringing respite to emerging equity markets.

    The next star is the oil price. With a few exceptions, emerging countries are large oil importers, China and India leading the pack. Oil price having dropped in a spectacular way (-31%) over the past two months, we saw emerging countries’ currencies stage a nice rebound (led in Asia by the Indian rupee and the Indonesian rupiah), and the RMB stabilise. This is very good news, as long as it lasts.

    The final star is the stimulation measures of the Chinese government that are gaining traction. A vast personal tax reform was implemented which we discussed last month, and now China is about to hit the last nail in P2P’s coffin (“peers to peers”) after having already shut down 80% of the 6,200 P2P platforms that China had at its peak. Now that total P2P loans are down to USD176bn (Source: Bloomberg), 30% below the peak level, the central bank instructed the survivors to cap their outstanding exposure to their current level and to gradually reduce it. In the city of Hangzhou, the nest of China’s P2P sector, regulators have ordered all operators with less than RMB100m loan book to shut down their business. In a recent report, Citi estimated that only 50 P2P lenders will be allowed to operate in the future out of the remaining 1,200. P2P was the latest incarnation of shadow banking. We can hope that it will follow the footpath of trust funds and no longer be an issue for the financial system. This gives more leeway to the Chinese government when it comes to stimulating the economy as stimulation typically means more debt. With shadow banking issues in the process of being sorted out and deleveraging efforts having shown results over the past year, the government now has more flexibility than it used to. For instance, relaxation of home purchase restrictions and the removal of property price caps have already started in the South of China. It will very likely be extended elsewhere, knowing that the property sector is estimated to be directly or indirectly responsible for almost 20% of the economy (Source: Bloomberg & Citi).

    Stars are gradually moving to the right positions, in our view.

     

    Disclaimer:

    This document is intended for relevant professional and qualified investors only and is not for retail use. This document is provided for informational / educational purposes only and is not intended to be, nor should it be, relied upon as a forecast, research or investment advice, and does not in any case constitute advice, an offer, a solicitation or recommendation to invest in specific investments or to adopt any investment strategy. Where La Française group has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Issued outside of Hong Kong by La Française AM Finance Services, home office 128, boulevard Raspail, 75006 Paris, France, regulated by the “Autorité de Contrôle Prudentiel” as investment services provider under the number 18673 X, affiliate of La Française. Issued within Hong Kong by JK Capital Management Ltd., a La Française group member company, licensed and regulated by the Hong Kong Securities and Futures Commission.

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    news-1366 Tue, 11 Dec 2018 14:30:00 +0100 The UN is calling for urgent action on climate change and a new model for growth /en/who-we-are/news/detail/the-un-is-calling-for-urgent-action-on-climate-change-and-a-new-model-for-growth/ On 5 September, UN Secretary General António Guterres presented the latest report of the Global Commission on the Economy and Climate, which makes an urgent call for action on climate change and describes the economic benefits this could generate. Although we are seeing unprecedented progress in moving towards a “new climate economy”, the pace of this transformation is not fast enough, and urgent action is required. While the commitment to a low-carbon economy offers a raft of opportunities, the costs at stake for failing to act can now be measured. “Last year, climate-related disasters caused thousands of deaths and losses of $320 billion”, according to Mr Guterres.

    The report cautiously estimates that bold climate action could deliver at least $26 trillion in economic benefits through to 2030, the deadline set by UN member states for achieving the Sustainable Development Goals.

    Ambitious measures in the main sectors of the economy could:   

    • Generate over 65 million new low-carbon jobs by 2030. 
    • Avoid over 700,000 premature deaths from air pollution by 2030.   
    • Generate, through subsidy reform and carbon pricing, an estimated $2.8 trillion in additional government revenues per year in 2030.

    The Global Commission calls for priority action on four fronts over the next three years:

    1 -  Ramp up efforts on carbon pricing and move to mandatory disclosure of climaterelated financial risks:
    - A carbon price of at least $40-80 by 2020. Subsidies and tax breaks on fossil fuels and farming practices that cause pollution are to be gradually phased out by 2025.
    - Obligation to disclose information on the financial risks related to climate change in accordance with the TCFD recommendations.

    2 - Accelerate investment in sustainable infrastructure:
    - Make infrastructure an asset class in its own right.
    - The goal: to invest at least $100 billion per year by 2020.

    3 - Harness the power of the private sector and unleash innovation:
    - All Fortune 500 companies should have targets aligned with the Paris Agreement.
    - Commit at least $50 billion of new capital to meeting climate challenges beyond the energy sector.

    4 - Build a people-centred approach that shares gains equitably and ensures a just transition:
    - Establish energy transition plans with companies, trade unions and civil society to ensure a just transition for workers and communities.
    - Include women in this transformation to boost global GDP by $28 trillion per year by 2025. (McKinsey).
    - Place more emphasis on resilience and adaptation across policies and efforts

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    news-1364 Tue, 04 Dec 2018 17:42:32 +0100 Reflections on governance models and their impact on economic activity /en/who-we-are/news/detail/reflections-on-governance-models-and-their-impact-on-economic-activity/ The distinction between a Company and an Enterprise gradually took hold in the 19th century, with the establishment of the concept of the legal person, which already existed in Roman law with the distinction between the collective agent (universitas) and individual agent (singuli) made by the jurist Ulpian in the 2nd century.

    In this context, a Company is a legal person that owns a business plan. It is not owned, in the same way that a natural person (an individual) is not owned. The Enterprise is a nexus of contracts between stakeholders: shareholders, lenders, employees, suppliers, customers, the state, local and regional authorities, etc., all of which have their rights and responsibilities. This relationship structure reflects a balance between conflicting positions and interests. In such a structure, governance helps to maintain this balance with a minimum of friction.


    The governance of an Enterprise may be built on the inclusion on the board of directors of stakeholders, such as employees, NGOs, etc. This is the network governance model used in cooperatives, mutuals, etc., of which one of the most developed and successful examples is the Basque cooperative Mondragón.
     

    It is also possible to give an enterprise multiple objectives through its articles of association. These may encompass ESG objectives, such as the US Benefit Corporation model created in 2010, whose goals include making a positive impact on civil society, in addition to making a profit. Based on this model, France’s  ACTE (Action Plan for Business Growth and Transformation) Law provides for the creation of enterprises with a strong emphasis on social and environmental issues in their strategies and activities.

    The interests of stakeholders can also be incorporated by quantifying negative externalities, using a market mechanism for carbon pricing for example, in order to measure the environmental impact of company activities. William Nordhaus’s work in this field warranted him this year’s Nobel Prize for Economics.

    Whatever the model chosen, the way in which profits and risks are shared define the conditions for achieving a balance. A lack of governance can cause a disequilibrium that weighs on long-term economic growth. The sharing of profits between shareholders and employees is just one example. Currently, the return on equity for shareholders of listed companies is around 10% in France, equivalent to a risk premium of 9% in respect of the 10-year OAT, twice what it was ten years ago, while pay has barely risen and flexible working conditions mean that employees are shouldering an ever greater share of the risks inherent to business. This may lead to distortions that can pose an obstacle to growth maximisation.

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    news-1361 Tue, 04 Dec 2018 10:00:00 +0100 La Française Real Estate Partners International acquires QuartierWEST retail park in Essen Germany /en/who-we-are/news/detail/la-francaise-real-estate-partners-international-acquires-quartierwest-retail-park-in-essen-germany/ La Française Real Estate Partners International has finalized the acquisition from Schoofs-Gruppe of the QuartierWEST retail park in Essen on behalf of two La Française collective real estate investment vehicles.

    The retail park is within an established and further developing part within the urban area of Essen. It is part of the residential area of Altenessen and the new Wohnen am Krupp-Gürtel development and should therefore benefit from an increasing costumer basis in its direct vincinity.


    The retail park was completed in 2018 and is 100% let to six tenants with long term leases.


    The complex provides 12,125 m2 of retail and hotel space and ample outdoor (ca. 200) and underground (ca. 58) parking. QuartierWEST is ideally situated, in close proximity to the tram, just 850 m away. Additionally, the Kronenberg tram stop (lines 101, 103, 105 and 109) is directly in front of the property.


    QuartiertierWEST is a two-storey commercial property with retail spaces, ranging from 460 to 4,500 m2 in size, on the ground floor and staff rooms and hotel accommodations on the upper two floors.


    Jens Göttler, Managing Director Germany of La Française Real Estate Partners International commented, “We’re confident that the QuartierWEST park will make for a quality long-term investment for our collective real estate investment vehicles. The prime positioning of the asset and the surrounding economic and residential activity should contribute to maintaining the 100% occupancy rate.”  


    La Française Real Estate Partners International was advised by the law firm Clifford Chance and the technical consultant TA Europe. 

    1This is an example of an investment held within the portfolio. It is not indicative of future investments and does not fully reflect the composition of the funds.

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    news-1359 Fri, 30 Nov 2018 10:29:25 +0100 Spooky curve ? /en/who-we-are/news/detail/spooky-curve/ A topical discussion in many publications may have you “spooked”: the U.S. yield curve has been flattening. However, it is important to note that even if the yield curve does invert, U.S. equity markets may first deliver a “treat.” In fact, over the past few decades, investors who sold equities immediately after the yield curve inverted, in advance of an expected “trick,” would have missed out on material gains. Equity Performance after Initial Yield Curve Inversion

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    news-1343 Tue, 20 Nov 2018 10:37:00 +0100 Equity markets : Buy the dip /en/who-we-are/news/detail/equity-markets-buy-the-dip/ All the equity markets were hit by a wave of corrections in October, suffering falls ranging from -5% to -10%. This amplified the underperformance of the European markets, while the US market lost almost all its gains from the first nine months of the year as well as its previously strong resilience.

    At the end of October and in the run-up to the US mid-term elections, we think it’s a good idea to maintain significant equity exposure. The main reasons for this are:

    • with attractive valuation levels relative to all-time averages, the equity markets have entered oversold territory (RSI<30)
    • US corporate earnings look set to show steady growth in 2018 (>+20%) and 2019 (>+10%), providing firms with a far higher return on capital than cost of capital, despite the Fed rate hikes
    • emerging markets became oversold following the two shocks in April and May. This is particularly true for China, with the fall in the renminbi largely offsetting the higher import tariffs
    • potentially positive capital flows to the extent that the level of cash in portfolios is high and where firms are able to redeploy their share purchase programmes after the earnings season

    We also think that most of the political risks weighing on the markets since the summer (i.e. the China-US trade war, oil touching $80/barrel, the major risks in Europe over Brexit and the Italian deficit, etc.) have been identified and largely factored in through a record high ‘equity’ risk premium, while the government bond markets have remained relatively immune. Although the correction in February followed a a significant rise in US interest rates, this was not the case in October. Given the earnings growth reported, the most recent rate hike should not be a pretext for jumping the equity ship at current valuation levels.


    More than a further positive macro sign, an easing of the political pressures could lead to a rebound on the equity markets, especially after the US mid-term elections. A weaker US dollar would be favourable to both a pick-up in the US markets and the performance of the emerging markets.


    In a phase of market recovery, tech, industrial and consumer goods stocks should post better performances, along with commodities.

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    news-1342 Mon, 19 Nov 2018 10:25:28 +0100 Can fixed income still play its role as a safe haven? /en/who-we-are/news/detail/can-fixed-income-still-play-its-role-as-a-safe-haven/ For decades, investors have been used to managing their equity and bond allocations as two largely decorrelated asset types at times of market stress. Can this flight to quality approach still work in the current market environment, with central banks set to start shrinking their balance sheets in the coming months?

    October was a particularly difficult month for the risk asset market, especially for equities.

    At the same time, bond yields, regarded as risk-free, have hardly moved, barely reacting to current risk aversion. For example, between 3 October and 31 October, the S&P 500 shed 7.31%, while the US 10-year yield went from 3.18% to 3.14%. A similar movement was seen in the eurozone between 2 October and 1 November, with the Eurostoxx 50 falling 5.45% and the yield on the 10Y Bund edging down from 0.42% to 0.40%.

    This trend marks a departure from the correction phases of recent years, as was also the case earlier in 2018, in February. The beginning of 2016 saw yields ease significantly, as did August 2015, not to mention the 2011-2012 period. In our view, these movements are certain to continue as long as the macroeconomic environment shows no sign of a significant downturn, which is something we do not foresee at present. And this is why:

    • After implementing unprecedented balance sheet expansion, the main central banks (Fed, ECB, BoJ and BoE) have embarked on a consolidation phase. The Fed has already started to shrink its balance sheet (by $50 billion per month), the ECB should bring QE to a close at the end of the year, and the BoJ has been reducing its asset purchases since the start of the year.
    • Inflation numbers, after disappointing continually over a number of years, are showing signs of strengthening. Wage pressures in particular are clearly starting to appear in some countries (US, Germany, UK), which is not unexpected given current employment trends; this should continue in the next few months.
    • The central banks’ forward guidance has been increasingly precise in recent quarters in order to reduce uncertainty among the various financial players. On the other hand, it is difficult for the central banks to backtrack on their previous announcements. For instance, the ECB said it would phase out QE by the end of the year and implement a first rate hike in September/October 2019; it would take a significant change in the growth and inflation trajectories for this message to change. This short-term interest rate peg is naturally reflected in long rates, and prevents them from playing their role as a safe-haven security.
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    news-1341 Fri, 16 Nov 2018 10:08:00 +0100 Have we seen the end of the bull market? Probably not /en/who-we-are/news/detail/have-we-seen-the-end-of-the-bull-market-probably-not/ The accumulation of a number of stress factors has finally caused the most significant market correction for some time. The US markets took the biggest hit in October, with the S&P 500 down 7% - its worst month since September 2011.

    There are a number of issues causing concern (potential or real) at present: the US-China trade war, Brexit, Italy, the US mid-term elections, the results season, the slowdown in China and Europe...and as the catalyst, a message from the Fed that we thought was somewhat misjudged. As was the case in February, the rapid rise in US interest rates seems to have triggered this correction.

    Some of these issues now look to be real risks: growth in Europe and China, and how the current political problems play out. Is the market right to be concerned? Yes, but only in part.

    This is mainly because we think some of these concerns are overplayed.

    Part of the slowdown seen in Europe relates to the German automotive sector, which should only be transitory. Eurozone growth will probably be 1.8% in 2018; this is lower than expected at the start of the year, but is still above potential (estimated at around 1.5-1.6%).

    China’s economy is slowing, but the Chinese authorities are fully aware of this and have been implementing some easing measures for some months in order to boost growth, along the lines of 2015-2016. A Chinese hard landing has been a recurrent market fear for around 10 years now, but has yet to materialise. Will we see a hard landing this time? We are not convinced.

    This is partly because there was also some positive news in October:

    • The rating agencies did not downgrade Italy to junk status, which should help Italian yields to stabilise.
    • Although corporate earnings were somewhat disappointing in Europe, the US had another excellent results season, without any apparent fears over future earnings.
    • Lastly, we have noted a slightly less vehement tone in political discussions of late (Brexit, Italy and even President Trump).

    The sharp falls recorded in October were also due in part to major sector deleveraging, particularly by systematic funds. We previously wrote about this subject in February, and there are some similarities in what is happening now.

    We do not see the significant falls on certain markets as fully explained by their fundamentals.

    This is the case for US equities, which have reasonably attractive valuations at present, and for inflation breakevens, which were impacted by the oil price slump during the month.

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    news-1339 Fri, 16 Nov 2018 10:59:42 +0100 Will Raising Rates Hurt Stocks? /en/who-we-are/news/detail/will-raising-rates-hurt-stocks/ Will higher U.S. interest rates bring down U.S. stock prices? Many investors are concerned about rising rates but an examination of current stock valuations relative to bonds reveals that stocks haven’t priced in how low interest rates have become and therefore may not suffer as rates climb.

    Valuations May Not Be Impacted by Interest Rates

     

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    news-1331 Fri, 02 Nov 2018 10:57:30 +0100 Looking good at 100 /en/who-we-are/news/detail/looking-good-at-100/ This week marks the 100th edition of Alger On the Money, a program that strives to offer valuable insights and education to our clients. In honor of this milestone, we look back on a century of U.S. earnings growth and the stock market returns it has driven.

    • At Alger we are fond of Benjamin Graham’s remark, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.” In the chart above, the U.S. stock market has clearly weighed earnings by increasing in value right alongside earnings per share (EPS) over the past 100 years.

    • The S&P 500 has returned approximately 10% annually over the past century. An investment of $1,000 in at the beginning of 1918 would be worth more than $20,000,000 as of the end of 2017. The question investors are asking today is what should they expect in the future? Alger considers starting P/E ratios to be the best predictor of equity market returns (see Alger On the Money “The Single Greatest Predictor of Future Stock Market Returns”), and if historical correlations between starting valuation and 10-year returns continues in the future, we estimate that annual S&P 500 returns for the next ten years would be approximately 7%, attractive relative to our view of prospective fixed income returns.

    • Thank you for reading our weekly commentary; we hope you find it beneficial. Here is to the next 100 years of strong earnings and interesting, new editions of Alger On the Money.

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    news-1329 Fri, 26 Oct 2018 16:31:55 +0200 Post ECB Commentary /en/who-we-are/news/detail/post-ecb-commentary-1/ As expected, the ECB did not change its stance yesterday about forward guidance and the Governing Council confirmed the balance of risks as broadly balanced despite weaker momentum and risks surrounding the Euro zone. The ECB prefers to wait for the new forecasts that will be released on December 13th before assessing if the slowdown is temporary or more structural. Mr. Draghi was confident in underlying inflation, supported by wage growth, trending higher towards the end of the year. Therefore, net purchases should end in December.  There was no discussion on reinvestment policy. There were many questions on Italy during the press conference. Mr. Draghi repeated that there is no sign of contagion to the Euro zone. It is a fiscal problem and in a worst-case scenario, there remains an option: Outright Monetary Transactions (OMT).

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    news-1327 Wed, 24 Oct 2018 17:32:53 +0200 Preview of ECB meeting /en/who-we-are/news/detail/preview-of-ecb-meeting/ The ECB will hold a press conference tomorrow and we do not expect any change to forward guidance.

    We believe the ECB could modify, marginally, the Statement by dropping the sentence in which “incoming data” conditions the end of net purchases and points to a definitive end in December. We do not expect any details about the reinvestment program but we could have some information in the Q&A. M. Draghi indicated at the last press conference, that a taskforce was working on a new reinvestment policy. 

    The global outlook indicates downside risks rather than balanced risks: Eurozone PMI, released today, suggests moderate growth. Nevertheless, the ECB is unlikely to change its neutral stance about risks, probably waiting for more data. Economic forecasts will be updated in December. The Inflation path points to a very slow normalization: price pressures are supported by wage growth across several countries in the Eurozone and should sustain more core inflation in the coming months. The ECB should stay confident on this topic: Mr. Draghi qualified recently inflation as “vigorous”.

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    news-1326 Tue, 23 Oct 2018 09:38:17 +0200 Equity markets : Political issues are causing geographical and sector polarisation /en/who-we-are/news/detail/equity-markets-political-issues-are-causing-geographical-and-sector-polarisation/ After a difficult summer for the European equity markets, they remained lacklustre in September, despite a slight rebound in France and Italy. Global economic growth is still on track, as are expected full-year corporate earnings in Europe; however, the European market is in negative territory in 2018, while the US market continues to break new records. An analysis of stock market performances shows a clear geographical and sector polarisation caused by political announcements and situations. Put another way, the risk premium applied to the European markets, and particularly the eurozone, remains high. Moreover, capital flows are indicative of international investors’ wariness on the eurozone, although the ‘fundamentals’ appear to point to a positive performance in 2018. The three ‘political’ reasons that we have already underlined are hindering the markets: 

    Trade war
    After months of threats, recriminations and negotiations, NAFTA was replaced by its close cousin, the USMCA "US-Mexico-Canada Agreement". Canada joined Mexico in the agreement on 30 September, which should not have a major impact on the nature of trade between the three countries. This new positive for international trade was eclipsed by a fresh announcement by President Trump that he would carry through on his threat to impose an additional 10% tariff on $200 billion of Chinese imports from September, rising to 25% from 1 January 2019. China reacted by announcing new customs duties from 5% to 10% on $60 billion of US goods from October. The US had previously announced that if China retaliated, it would put tariffs on almost all Chinese imports. This escalation of announcements has once again increased the pressure and concern over the potential consequences of this opposition.

    No progress on Brexit at the Salzburg summit
    The risk of a ‘no deal’ is fairly high, and will remain in place until the December summit at best. There is no guarantee that an agreement will be found by the Brexit deadline of midnight on 29 March 2019. The UK’s International Trade Secretary, Liam Fox, estimates the probability of "no deal” at 60%. BoE Governor Mark Carney has informed the government of the economic and financial risks associated with Brexit.

    Italian budget vote
    Despite the pressure exerted by Five Star leader Luigi Di Maio, in saying that he would not vote for the 2019 budget unless all his promises (introduction of a basic income, reduction in the retirement age and higher pensions) were included, Finance Minister Giovanni Tria attempted to keep the deficit target at 1.6% of GDP. In the end, an agreement between the Five Style Movement and the League was reached for a deficit target of 2.4% of GDP between 2019 and 2021, a considerable way off the 0.8% Brussels was looking for from next year. This new source of conflict with Brussels is keeping tensions high in the eurozone.

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    news-1324 Fri, 19 Oct 2018 15:13:41 +0200 In an Internet Minute /en/who-we-are/news/detail/in-an-internet-minute/ As change accelerates and the internet brings people together, the scale at which we communicate and innovate has become much larger and faster, leaving behind a trail of information that is very valuable to many companies. ]]> news-1322 Thu, 18 Oct 2018 11:25:40 +0200 Fixed Income : Attack on Casino : Right or wrong ? /en/who-we-are/news/detail/fixed-income-attack-on-casino-right-or-wrong/ New consumption habits with a focus on local shopping and home deliveries have shaken up France’s traditional retail model. French retailers will have to evolve to survive, and at the same pace as the new shopping habits are taking hold. While most investors expect to see sector consolidation, the spectacular string of US/UK retail defaults has drawn greater attention to retailer indebtedness, as analysts look for the next company to falter.

    The Rallye Group, which includes French retailer Casino and is known for its debt at every level plus financial complexity, has crystallised the market’s fears for the retail sector. Under pressure from short selling, as of 5 September Casino shares had lost 47% of their value since the start of the year. This is no longer about fears; this is a stock under attack. We now see Casino as undervalued, with a lower market cap than the estimated valuation of Monoprix. 

    Going back to the group’s structure: most group debt is held by Casino’s parent Rallye, which forces Casino to pay a large dividend each year so that Rallye can pay its debt interest. To obtain financing, Rallye lends Casino shares to banks. The more the Casino stock falls, the more shares Rallye has to pledge in exchange for this financing. The idea of the short sellers is to drive down the Casino share price as low as possible, in order to dry up Rallye’s financing and cause its default, so that Casino no longer has to service the debt of its parent. At this stage, one theory could be that Casino has come under attack in order to protect its future and enable it to make essential investments. But it is just a theory. 

    In practice, Jean-Charles Naouri, Casino’s CEO and main shareholder has been successfully running the group’s strategy for 26 years. Yes, the group is highly indebted, but we don’t see the situation as critical. To meet the new demand, ensure its supply conditions and secure its financing sources, the group has an array of options. 

    Outside the group’s traditional support from French banks, as shown by the credit line obtained by Rally this month with no collateral, we think it likely that Casino will get together with an online player such as Amazon or a traditional French retailer that would offer synergies and greater competitiveness. Similarly, to meet its cash requirements, the group also has property and other assets it could sell in the short and medium term, such as its stakes in Cdiscount, Monoprix or GPA in Latin America. 

    Casino is still a well-known company with various possible financing sources, which should enable it to secure its future and achieve a strategic transformation, while also being a good candidate for potential sector consolidation. Casino has also revealed that it held talks with Carrefour in September, and there are market rumours of discussions between Casino and Auchan, which we think would make more sense from a competitive standpoint. 

    The 

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    news-1321 Wed, 17 Oct 2018 11:43:10 +0200 Italy, The UK, the USA... The autumn is all about politics /en/who-we-are/news/detail/italy-the-uk-the-usa-the-autumn-is-all-about-politics/ It did not take an expert to know that politics would be in the news throughout the month of September, and October looks set for more of the same.

    Let’s start with Italy. Despite Giovanni Tria’s efforts and announcements of a budget deficit below 2% of GDP, it was Matteo Salvini and Luigi Di Maio who held sway in the end, with a 2019 deficit target of 2.4%. The figure is not that alarming in itself, especially in light of the deficits France and Spain are running, but even that level may not be maintained (growth forecasts are probably too high), and it will not allow the stabilisation of Italy’s debt.

    It is likely that the European Commission will take exception to this slippage, but it only has limited sanctioning powers to apply. President Mattarella, who made no public pronouncements this summer, could be included in the discussions and use articles 81 and 97 (on debt sustainability) in an attempt to reverse certain positions, but that looks unlikely. In view of all these developments, our positioning on Italy remains unchanged: we will steer clear of the country with the political situation so unclear.

    Meanwhile, Donald Trump has renegotiated NAFTA (as the US-Mexico-Canada Agreement), and although not much has changed, it could win him some votes in the mid-term elections. Mr Trump’s threats to China have been implemented with a 10% tariff on $200 billion of Chinese imports; the market had feared a 25% rate (which is slated for 2019) and China’s retaliation has so far been modest (tariffs on imports of $60 billion), which is why the markets have barely reacted.

    The Brexit negotiations remain difficult, with the EU rejecting the Chequers plan. Theresa May has few viable options, and even if she manages to reach an agreement with the EU (at the price of significant concessions), she will find it very hard to get it through Parliament. The current impasse means that the chances of a new referendum, which was not on the cards just a few weeks ago, now seems slightly less unlikely.

    There has been some improvement in the emerging world, with Turkey’s central bank finally increasing interest rates and Argentina obtaining sufficient guarantees from the IMF ($50 billion + $7 billion) to reassure the markets. Not all of the problems have been solved, but the situation has stabilised.

    In this highly uncertain environment, dominated once again by political issues, our bets remain limited: no exposure to Italy, few short positions on core inflation and financials, and equity exposure approaching that of the indices. We continue to hold a moderately positive view on emerging markets (but on a selective basis).

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    news-1319 Tue, 16 Oct 2018 11:13:10 +0200 US rates & emerging markets /en/who-we-are/news/detail/us-rates-emerging-markets/ The Federal Reserve lifted short-term interest rates for the third time this year, giving a very positive tone for the US economy, increasing to probably more than 3% this year.

    Unfortunately, the emerging markets route is not “made in America”. The tightening cycle in US rates put upward pressure on the US currency. Some countries in EM, which need to borrow in US Dollars, should have larger external imbalances with higher costs of funding. Turkey, Argentina, and South Africa are examples. EM economies, that have suffered the most, are those with weak fundamentals, internal and external deficits, high inflation and a heavy reliance on external borrowing. One thing is different this time compared to other hiking rate cycles such as in 1994: the correlation between the Fed funds rate and EM risks is not that tight. The Fed’s current path for 2018 and 2019 has not changed significantly, from what it projected in March 2017 (0.25% higher than projected earlier) and markets have had the time to digest this issue for some time anyway. Moreover, emerging economies are fundamentally in better shape than they were before: EM economies have adopted free-floating currencies and have higher levels of reserves, lower inflation and better debt ratios in many cases.

    China has become a bigger driver on EM markets’ risk. As the biggest buyer in Asia, China’s behavior regarding imports from others emerging markets can influence global trade significantly. Trade tensions are, for sure, another risk factor for EM assets. The idea that growth in China could be slower in the coming years is just problematic for EM countries as a whole.

    The combination of various risks added to political uncertainty/concern have certainly triggered EM volatility and EM risk aversion this year.

     

    Disclaimer:

    This document is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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    news-1311 Thu, 04 Oct 2018 09:40:46 +0200 Alger Small Cap Focus Strategy Manager Amy Y. Zhang, CFA, Awarded “AA” Citywire Rating /en/who-we-are/news/detail/alger-small-cap-focus-strategy-manager-amy-y-zhang-cfa-awarded-aa-citywire-rating/ La Française and Fred Alger Management, Inc. (“Alger) are pleased to announce that Amy Y. Zhang, CFA, has been awarded the “AA” Citywire Fund Manager Rating for strong risk-adjusted performance (equity – U.S. small and medium companies category as of September 2018).

    The Citywire Fund Manager Ratings measure a portfolio manager’s performance over the past three years.


    “It’s an honor to be recognized by Citywire. Our approach to small cap investing is unique. We build high conviction, benchmark agnostic portfolios of what we believe are exceptional small companies that have the potential to grow into successful large companies,” said Ms. Zhang. “We seek to invest in companies that have the potential to double their revenue stream in five years with profitability to fuel future EPS growth.”


    Ms. Zhang is portfolio manager of the Alger SICAV—Alger Small Cap Focus Fund (the “Fund”). The Fund has a strong track record as demonstrated by its since inception cumulative return of 137.60% (net of fees and expenses), which outperformed the Russell 2000 Growth Index by more than 5,682 bps, Class I US as of 8/31/18. The Fund returned 26.40% in 2016 (1/29/16 – 12/31/16) and 29.19% in 2017*. Assets in the Fund have grown to more than $300 million and overall Ms. Zhang manages $2.4 billion in Small Cap Focus strategy assets. The recommended investment period for the Fund is more than five years.


    The Fund is a focused portfolio of generally fewer than 50 high-conviction small cap securities. Ms. Zhang and her team of analysts look for companies on the cutting edge of innovation that possess the potential to transform industries and disrupt the status quo.


    “High-conviction, focused portfolios are a core competency of Alger. The in-depth, fundamental research by our investment team, which we have refined for more than 50 years, enables our portfolio managers to construct ‘best ideas‘ focused portfolios with confidence,” said Dan Chung, CEO and CIO of Alger.

    La Française and Alger have been collaborating on fund distribution, market development, and product diversification since February 2015.

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    news-1310 Mon, 01 Oct 2018 17:26:00 +0200 La Française Asset Management absorbs its equity subsidiary, LFIP /en/who-we-are/news/detail/la-francaise-asset-management-absorbs-its-equity-subsidiary-lfip/ As part of its development, La Française Group decided to review the legal organisation of its Securities Management arm. On October 1st, the equity management activities that are presently carried out by La Française Inflection Point will be transferred as part of a simplified merger to its parent company, La Française AM, which will group together all of the Group's securities expertise. This reorganisation is purely of a legal nature and will entail no changes in the management approaches or in relation to your usual contacts.

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    news-1307 Mon, 01 Oct 2018 18:21:30 +0200 What are the current trends for subordinated debt ? /en/who-we-are/news/detail/what-are-the-current-trends-for-subordinated-debt/ Paul Gurzal, Head of Credit, La Française AM, presents his convictions.

    What was the impact of the Turkish crisis and the Italian crisis on the subordinated debt segment?

    August was a difficult month for the asset class, particularly in the emerging countries and Italy.

    However, the impact of the Turkish crisis on banks’ fundamentals is less important than it seems. Their exposures do not, in our view, jeopardise their credit profile. We believe that if the value of their Turkish subsidiaries were reduced to zero, banks' capital ratios would remain firm in relation to regulatory requirements.

    Regarding Italy, banks and insurance companies hold local public debt, which links them financially to the performance of the debt. The volatility of Italian public debt is not really a problem for the banks if we exclude the restructuring of the latter. Indeed, a significant part of the public debt held is not valued. The solvency of Italian banks such as UniCredit and Intesa Sanpaolo, could, in our view, absorb the losses from the volatility of BTP bonds, without this challenging their compliance with the regulatory requirements of the ECB, or coupon payments on Additional Tier 1 CoCos.

    In addition to the sector being weakened by macroeconomic and political events, a number of important funds in this asset class have suffered outflows for the past six months, automatically creating selling pressure, particularly on CoCos and Legacy Tier 1. These outflows peaked during the summer period, a time when liquidity is always lower.

    This strengthens our conviction that positioning on the liquid part of the segment, along with sector diversification (banks, insurance and non-financial issuers), is essential.

    Is the newsflow on the asset class negative?

    No, quite the contrary.

    From a risk perspective, the current trend is good: banking risk is falling sharply.

    The results period has been positive overall for the banking sector. Banks’ solvency remains strong with regard to the regulatory requirements. (Source: Credit Suisse - "Attractive Relative Value -Taking profits on low backend AT1 shorts" - 23 August 2018 ).

    The decrease in bad debts on balance sheets is positive for the credit quality of the peripheral banks.
    We observed a sharp fall in Non-Performing Loans in Q2 for Spanish and Italian banks, with an acceleration in sales of part of their bad loans portfolios.

    In our view, banks are therefore on a positive trajectory in terms of improving the quality of their assets and their solvency.... There remains the question of profitability. Do you consider the asset class to be attractive?
    We believe that in comparison with other segments of the credit asset class, subordinated debt does remain attractive.
    The widening of spreads has been greater with subordinated debt than with High Yield, and banking and insurance subordinated debt is now significantly discounted, with higher-rated issuers.

    Liquidity has indeed made a comeback to this segment: investor appetite for CoCos has been reflected in recent issues from Rabobank, Credit Suisse and Bankia, which were largely oversubscribed. The good performance of the market reflects the market's confidence in the asset class.

    Lastly, in a context where the ECB's first rate hike is not expected until October next year, the asset class remains a potential solution.

    Following the recent repricing, we can expect a return in euros of about 4%, which may be of interest to investors seeking returns.

    Disclaimer:

    This document is intended for professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X , a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997

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    news-1304 Fri, 28 Sep 2018 15:46:49 +0200 Slightly dovish FOMC, dropping the « accommodative” stance. /en/who-we-are/news/detail/slightly-dovish-fomc-dropping-the-accommodative-stance/ The FOMC raised the federal funds rate by 25bp to 2%-2.25% as expected. The dot chart showed a slight increase to the longer run median dot but with no change to the 2018-2020 median dots.

    The new 2021 dots suggest no additional tightening during the year. Regarding the economic outlook, the updated forecasts include upward revisions to GDP projections for both 2018 (3.1% vs 2.8%) and 2019 (2.5% vs 2.4%). Inflation forecasts were largely unchanged (-0.1% on headline inflation in 2019 was the only change).

    The main change is that no reference was made to monetary policy remaining accommodative, suggesting that the Fed is starting to foresee the end of the tightening trend, albeit still in a few years’ time.

    As a consequence of this removal, the message is on the dovish side but doesn’t change fundamentally the Fed policy going forward, with additional tightening still to come in the foreseeable future.  

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    news-1303 Fri, 28 Sep 2018 14:54:05 +0200 Growth stock valuations in perspective /en/who-we-are/news/detail/growth-stock-valuations-in-perspective/ While higher valuations for growth stocks relative to the broader market cause some investors anxiety, historical data suggests current valuations may produce solid long-term annualized returns in the U.S. For example, as of the end of August the price earnings ratio of the Russell 1000 Growth Index indicates a potential 10-year annualized return that we believe is attractive relative to our view of prospective fixed income returns, based on the historical relationship between valuation and long-term returns. Aggregate Valuation Drives Long-Term Returns

    December 1978 to August 2018

    - R-squared, or the “coefficient of determination,” denotes how much of the movement of one variable is attributable to another. In this case, nearly 80% of the Russell 1000 Growth Index’s 10-year returns can be explained by the starting price-earnings ratio (P/E).

    - Growth stock valuations are higher than those of the broad market as measured by the S&P 500 Index. There is good reason. Growth stocks have higher returns on capital, faster growth, and less debt (see p. 23 of the Summer 2018 Capital Markets Presentation).

    - The higher absolute valuations of growth stocks can cause investors apprehension. Historically speaking, however, the current 21x P/E of the Russell 1000 Growth Index (as of 07/31/18) has been correlated with an attractive annualized 10-year return of approximately 7% shown in the above regression.

     

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    news-1294 Tue, 25 Sep 2018 18:31:51 +0200 What to expect from the upcoming FED meeting /en/who-we-are/news/detail/what-to-expect-from-the-upcoming-fed-meeting/ We expect the Fed to increase the federal funds rate by 25bp (as expected by the markets).

    We also expect the median “dot” to remain largely unchanged with two more hikes this year (including this one), three in 2019 and one in 2020. We will also have the new 2021 forecasts which should be similar to 2020 forecasts. The long-term dot will change as a new voter, Mr. Clarida, will express his opinion for the first time; we think it will be revised downwards but without a significant impact on markets.

    We believe the most notable change to the statement will be to modify the reference to policy being “accommodative”; on this particular topic, Mr. Powell could describe the current situation as “somewhat” accommodative or something similar, with the aim to drop the reference later this year. 

    Economic forecasts will be updated but again, without significant changes as growth and inflation are on a trend similar to that witnessed in August. 

    All in all, neutral FOMC expected. 

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    news-1290 Wed, 19 Sep 2018 11:54:29 +0200 On the equity side, "the threat of protectionism" and "the volatility of the financial market" /en/who-we-are/news/detail/on-the-equity-side-the-threat-of-protectionism-and-the-volatility-of-the-financial-market/ As the first signs of summer arrived, we adopted a tacitly watchful – and fundamentally positive – attitude. Two months ave now gone by and we can see new clouds on the horizon. The European Central Bank, in its monetary policy statement, has identified two major risks: "The threat of protectionism" and "financial market volatility"

    On a macroeconomic level, indicators continued to decline in most of the world's regions.

    Particularly in Europe, France had to lower its GDP growth forecast by 0.3pt in 2018 and 0.2pt

    in 2019, and Germany saw a decline in its manufacturing orders.


    • "The threat of protectionism"

    The first round of the trade war is now in the books, with the second portion impacting

    $50 billion in imports just now taking effect. This brings total taxed bilateral trade to

    $190 billion. The second round could be much bigger, with $260 billion in goods affected.

    Finally, even though the spectre of taxation on automotive goods seems to be receding, it

    could involve $360 billion in US imports. This tug-of-war between the US and its trade partners

    is impacting business confidence, and business investment has dropped off noticeably

    since the beginning of this trade war.


    • The political risk or "financial market volatility"

    For the ECB, Italy still casts the biggest shadow. Aside from the structural problems of the

    Italian economy, the rise to power of a Eurosceptic coalition is helping to destabilise the

    eurozone. While the first version of the 2019 European budget is due by 27 September, Salvini

    is arguing for more fiscal largesse in hopes of increasing social spending, cutting taxes, and

    funding major infrastructure projects. These claims are putting pressure on Italian debt - not

    to mention that of the entire eurozone.


    • Performance gap between the US and European markets

    Although the dollar has appreciated since the start of the year, the S&P500 outperformed

    the Stoxx Europe 600 by more than 13 points (expressed in EUR). The comparison is even

    more blatant against the emerging markets. Now more than ever, the US market seems to

    be a safe haven for investors.

    Europe is still attractive, with a valuation at 13.7x 12-month forward earnings, compared to

    a five-year average of 14.5x. The United States is at 17x compared to a historical average of

    16.4x.

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    news-1289 Tue, 18 Sep 2018 10:11:55 +0200 Fixed income... volatility is in order /en/who-we-are/news/detail/fixed-income-volatility-is-in-order/ The emerging debt markets had a very volatile August. Risk premiums reached a high of 375 bp on 13 August (284 bp at 31/12/2017) in parallel with the latest stall of the Turkish lira, which also hit a low against the US dollar at 7.23 (the lira has depreciated 50% against USD).

    On top of the macroeconomic weaknesses, inflation above 16%, and a trade deficit of 5% of GDP, the government is losing credibility: Turkey has entered into a political conflict with the US that has brought with it trade sanctions on steel and aluminium. European countries' banking-sector exposures to Turkey as well as existing trade ties are not causing fear of contagion at this stage.

    At 30 August 2018, the EM risk premium stood at 360 bp. The risks dragging down this asset class – trade and political tensions – persist, although there has been a slight détente since mid-August. For this to last, and support valuations, Turkey will have to address a resolution plan as quickly as possible, and Argentina will still have to show itself with the IMF at its sides to regain credibility on the markets.

    Italy’s autumn budget is highly anticipated. To what extent will the Italian government use its fiscal room for manoeuvre up to the 3% ceiling imposed under the Stability and Growth Pact? The debt/GDP forecast before the government was formed was 0.8% for 2019, 2.2% would be the most “reasonable” figure. Whatever the deficit’s size, Italy’s primary surplus will be impacted, which is bad news for its debt trajectory, especially as the growth forecast has been revised down. The change in volatility trend for yields will increase the debt burden. While it is true that market positioning and valuations are offering more protection than in the days preceding the crisis in May, the marginal buyer will be difficult to find, particularly as international investors have sold record amounts of BTPs since May, while the ECB will stop its purchases in December.

    Our fundamental view is negative, and we do not expect any short-term respite on the political front: Matteo Salvini’s party, the League, is topping all the polls. The draft budget will be submitted to the European Commission on 15 October after being presented to the Italian parliament. Recommendations from the EC will start to be issued in November. The risk of fresh elections cannot be ruled out.

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    news-1288 Mon, 17 Sep 2018 17:09:03 +0200 Italy, Turkey, United Kingdom, United States... Politics are front and centre this autumn /en/who-we-are/news/detail/italy-turkey-united-kingdom-united-states-politics-are-front-and-centre-this-autumn/ The trends in place before summer have outlasted the season. Once again, we note a clear outperformance by the US equity markets and political issues still very prominent in the emerging world and Europe. However, the macroeconomic backdrop remains promising in the majority of the world’s regions, except for certain emerging countries, even though the trend is less pronounced than at the start of the year.

    Italy will be under close surveillance this quarter in anticipation of proposals on its 2019 budget. A political cacophony between leaders Salvini and Di Maio on the one hand, and Tria and Conte on the other, major uncertainties on the budget, a downward revision of growth, and the eventual risk of new elections: even though the market seems to be factoring in a certain risk premium, we are staying clear of Italy.

    On the protectionist front, Trump is still using an aggressive tone toward China. On 5 September the public consultation on the tariffs on $200bn in imported products wraps up, and there is little doubt remaining as to the result of that consultation. Since the Chinese will probably announce retaliatory measures, the situation is not expected to stabilise in the short term. There are also uncertainties about NAFTA, with heated discussions between the US and Canada; there are tensions between Washington and Brussels too, despite overtures that left room for a positive outcome a few short weeks ago.

    Neither is there any clarity about Brexit, as the time left to reach an agreement dwindles by the day. However, Michel Barnier made some reassuring statements, such as that he was ready to propose an agreement with a degree of collaboration that no third country had known. Yet the two camps' positions still seem very divided on the most sensitive issues (Irish border, free movement of people, etc.), and Theresa May's position in her own party is still just as uncomfortable.

    The emerging markets will be in the news too with an ever-worsening situation in Argentina and Turkey. While in Argentina's case the situation is expected to stabilise thanks to the IMF, the story in Turkey will depend in large part on the will of its institutions. With runaway inflation and a currency in free-fall, a very strong reaction from the central bank is required, which means that Erdogan must finally accept a little more monetary orthodoxy.

    In this highly uncertain environment, we are now maintaining very moderate convictions: equity exposure at close to benchmark, low duration exposure to “core” yields, and very specific emerging-market bets. On the other hand, we are maintaining our positive view on breakeven inflation, which has not reacted to the higher inflation outlook since the start of the year.

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    news-1287 Fri, 14 Sep 2018 17:19:56 +0200 Post ECB commentary /en/who-we-are/news/detail/post-ecb-commentary-2/ The ECB held its press conference on Thursday and updated its macroeconomic projections:
    • Growth has been lowered by -0.1% both in 2018 and 2019, which does not come as a big surprise as risk was clearly on the downside after disappointing figures over the last 2 months.
    • Headline inflation forecasts remain unchanged but core inflation in 2019 was revised downward at 1.6% vs 1.7% previously; It is still too optimistic in our opinion.

    As expected, the forward guidance did not change with the planned QE reduction in October and the end of QE at the end of the year. 

    No new information on the reinvestments front, leaving the topic for future press conference.

    Mr Draghi appeared confident regarding future inflation (despite lower projections), mentioning rising wages inflation; a 2.2% rise year on year in labor costs in the Euro area was announced this morning.

    Overall a neutral tone from the ECB.

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    news-1285 Fri, 14 Sep 2018 10:57:51 +0200 Will the market pass its mid-term ? /en/who-we-are/news/detail/will-the-market-pass-its-mid-term/ The market backdrop of low interest rates and strong earnings growth may be favorable for equities in 2018 but on November 6 U.S. mid-term elections will decide the fate of hundreds of seats in the U.S. Congress. How might the U.S. market react? The market has gained following mid-tem elections (1986-2014)

    - Given the shifting landscape in Washington, D.C., one might expect the possibility of a change of control in the mid-term election to have a negative impact on the stock market.

    - However, the U.S. market tends to cheer the clarity that follows the elections with a strong return of 6% on average in the three months following mid-term elections since 1986. In the 12 months following the mid-term elections, the average market return has been 13% since 1986. If history is any guide, the market may be comforted by the completion of the elections this year as well.

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    news-1282 Tue, 11 Sep 2018 17:38:07 +0200 Pre ECB Commentary /en/who-we-are/news/detail/pre-ecb-commentary/ The ECB will hold its press conference this Thursday and update its macroeconomic projections.
    • Growth forecast should not change significantly as 2018 and 2019 figures are broadly in line with market consensus. If there is a change, it should be of reference to a minor downward revision as macroeconomic momentum has decelerated over the last 3 months but we think Draghi will want to keep an optimistic bias.
    • Forecasting changes at the ECB on inflation is more tricky. We see good reason to revise headline inflation downwards vs June with Euro up on a trade weighted basis and commodities (ex oil) down. Core inflation numbers are also overly optimistic (ECB forecasts: 1.6% in 2019 and 1.9% in 2020). However, we doubt the ECB will incorporate those changes this week; it might more convenient to do it in December when QE ends.

    It is unlikely that the ECB will change its forward guidance given the scheduled QE reduction in October and the end of QE in December. Keep in mind, Mr Draghi said he was happy with a first rate hike priced during Q4 2019 so we do not foresee any changes on this front. 
    We do not expect new information concerning the reinvestment program (scarcity / maturity / flexibility), leaving this topic for December.
    All in all, no material change expected, but risks are on the dovish side.

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    news-1272 Mon, 10 Sep 2018 10:00:00 +0200 La Française Group strengthens its presence in Germany with the acquisition of Veritas Group /en/who-we-are/news/detail/la-francaise-group-strengthens-its-presence-in-germany-with-the-acquisition-of-veritas-group/ La Française is pleased to announce the acquisition of Veritas Investment GmbH and Veritas Institutional GmbH, respectively based in Frankfurt and Hamburg. The acquisition is subject to the approval of the relevant supervisory authorities and to the fulfilment of other conditions that are standard for such transactions.

    Veritas Group has been operating successfully in the German market since 1991, initially from Frankfurt and more recently from Hamburg. The group has more than €7 bn in assets under management and, as an asset management boutique, focusses on portfolio management with innovative risk management for institutional and retail investors.

    The acquisition of both German companies is another logical step in the French asset manager’s international development plans and underscores the strategic importance of the German market for La Française Group. Indeed, La Française will become a significant local player in Germany, with €8 bn in assets under management and forty-eight professionals operating out of 2 main locations (Hamburg and Frankfurt).

    Within continental Europe and in addition to its Paris headquarters, La Française now has two additional asset management centers (Hamburg & Frankfurt) that cover securities and real estate, thus enabling the group to significantly strengthen its international distribution platform.

    This acquisition will enable La Française Group to achieve 2 of its 2020 Medium Term Plan objectives: assets under management will grow well beyond € 70 bn, and more than 25% of assets will come from international investors. 

    “This acquisition is the conclusion of an eighteen month search for an appropriate local partner. In our development strategy, Germany was identified early on as a priority and this acquisition strengthens our positioning as a local player covering both securities and real estate. Veritas is recognized for its Risk@Work method in Germany and its quantitative multi-asset investment management approach which complement well our asset management expertise.” says Patrick Rivière, Managing Director of La Française Group.

    “In La Française Group, we have found the ideal partner with whom we can grow together in our local market and internationally, and that values our investment expertise and profound market knowledge. As part of Credit Mutuel Nord Europe, La Française offers us the best conditions in which to expand our business even further,” says Dr. Dirk Rogowski, Managing Director of Veritas Investment GmbH and Veritas Institutional GmbH, emphasising the significance of the merger.

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    news-1268 Thu, 06 Sep 2018 09:14:08 +0200 La Française announces the arrival of Tina Künnen as Sales Director for Germany /en/who-we-are/news/detail/la-francaise-announces-the-arrival-of-tina-kuennen-as-sales-director-for-germany/ La Française, an international asset management group with over €70 billion in assets under management (30/06/2018) and offices in Europe, Asia and the Unites States, continues to pursue its development strategy for Germany and has strengthened its team with a Sales Director, Tina Künnen.

    “La Française is gaining traction on the German market. Tina, along with our Head of Sales for Germany, Kay Scherf, will continue to introduce our investment expertise, namely fixed income, absolute return and sustainable equities, to the German institutional and retail markets. As a senior business development specialist, Tina is a valuable addition to our team,” says Philippe Lecomte, CEO of La Française AM International. 

    Tina Künnen has fifteen years of experience in the finance industry. She began her career in 2003 with Reuters AG as a fund analyst, an experience which certainly proved valuable to her career development thereafter. In 2008, Tina joined AXA Investment Managers Deutschland as a sales manager, before moving on to Natixis Investment Managers in 2010, acting as Sales Director and later Head of Business and Client Development.

    Tina Künnen holds a degree in Business Administration, with a specialization in Finance and Business Informatics, from Johann Wolfgang Goethe University. 


    Tina Künnen - Sales Director
    La Francaise AM International – Niederlassung Deutschland
    Tel. +49 69 29724 - 3802
    Neue Mainzer Str. 80 | 60311 Frankfurt am Main
    Email: tkuennen@la-francaise.com

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    news-1265 Fri, 31 Aug 2018 09:30:00 +0200 Doomed by Debt? /en/who-we-are/news/detail/doomed-by-debt/ Many investors are fearful of the amount of debt in the U.S. and the rest of the world. While it is true that debt levels are elevated, debt service, or the share of income used for interest payments and amortizations, is quite low relative to history. The two metrics tell very different stories about the economy. Americans Are Not Overburdened by Debt

     

    - U.S. debt of households and non-financial corporations climbed to a record of nearly $30 trillion at the end of last year. As a percent of GDP it was also quite high at 152%, up from 127% in the late 1990s but below the recent peak of 169% set right before the Global Financial Crisis in 2008.

    - However, U.S. debt service ratios are low relative to historical levels. Just prior to the past two recessions, debt service ratios peaked at 18.4% and 17.3%, respectively. Those numbers are higher than the current 14.9%.

    - The story is much the same in the rest of the world. Countries such as Germany, Japan and the U.K. have debt service ratios that are near decade lows.

    - Low debt service ratios indicate that debt payments are not a burden to household and corporate borrowers. This implies debt levels are manageable and not an impediment to the economy.

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    news-1260 Mon, 20 Aug 2018 17:23:59 +0200 Unitholder in the La Française Rendement Global 2020 fund /en/who-we-are/news/detail/unitholder-in-the-la-francaise-rendement-global-2020-fund/ You are a unitholder in the La Française Rendement Global 2020 fund. We thank you for the trust you place in us.

    Below is a presentation of the merger by absorption operation of your La Française Rendement Global 2020 fund by the La Française Rendement Global 2025 fund.

    La Française Asset Management wishes to offer you the opportunity to invest in a fund that is managed based on a similar strategy but over a longer term and with a more substantial investment universe.

    The average maturity of new issues on the market is about 5 years, and refinancings of less than 5 years are almost non-existent. In addition, the management company considers that a traditional carry strategy is not in the interest of investors as a large part of the expected performance over the recommended investment period is already captured.

    For example, the estimated return on the I unit at launch on 23 September 2013 was 5.81%, compared with an instantaneous return of only 2.19% on 25 May 2018. This represents a cumulative performance of I Units of + 25.73% over the same period, i.e. an actuarial yield of + 5.04%:

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    news-1258 Fri, 17 Aug 2018 12:07:45 +0200 A Trend Too Strong to Ignore ? /en/who-we-are/news/detail/a-trend-too-strong-to-ignore/ Various periods in history have been marked by fears of trade wars. Indeed, the cover of Time magazine on October 7, 1985, depicts Uncle Sam with arms outstretched as if to stop free trade dead in its tracks, amidst the caption, “Trade Wars.” However, before and since that period, and for much of history, tariffs have declined as the world becomes more interconnected. U.S. Tariff Rates

    As the chart above shows, duties collected as a percentage of imports declined from 4% in 1987 to under 2% in 2017, which indicates that global governments tend to favor free trade.

    • Yet there is likely to be more pain before mutually agreeable settlements can be made. As the fear of rising tariffs increases, investors may want to look to areas of the stock market that may be more insulated. Small cap stocks, for example, have outperformed large cap stocks by several hundred basis points this year, likely due to their more domestic focus (the Russell 2000 derives only 21% of its revenue from outside of the U.S. while the S&P 500’s proportion is nearly double at 39%).

    • In addition, certain industries may be less susceptible to trade issues than others. U.S. internet stocks have already been largely shut out of markets such as China and may thus be less affected by trade issues, while foreign governments may be more likely to target agriculture companies. This may create an attractive opportunity for active managers who can carefully select investments among the winners and losers.

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    news-1255 Fri, 03 Aug 2018 11:11:02 +0200 Why Life Seems Faster /en/who-we-are/news/detail/why-life-seems-faster/ Does it seem like technology is moving faster over time? It’s not your imagination; it is. Innovations are being developed more quickly and diffusing through our society more quickly than ever before with dramatic consequences for economic growth and investing. Adoption of Innovations among U.S. Households

    - By 1900, the stove had reached 10% penetration of U.S. households; it would be another 60 years before it reached 100% penetration. Newer technological innovations such as the internet, smartphone and social media achieved majority penetration in a fraction of the time.

    - As we wrote in The Enduring Force of Innovation, technological advances occur at an exponential rate, which means the rate of change is accelerating. This causes newer innovations to develop more quickly and become adopted by society faster.

    - The exponential growth of innovation should inspire confidence in the bigger picture of growth through innovation without having to predict the next invention or becoming overly concerned with the ebb and flow of economic cycles.

    - Because the rate of change is increasing, value stocks that appear cheap may simply be victims of change while growth stocks, the purveyors of change, may benefit.

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    news-1247 Tue, 24 Jul 2018 10:08:00 +0200 Equity markets… Trade tensions are impacting results trends /en/who-we-are/news/detail/equity-markets-trade-tensions-are-impacting-results-trends/ Two months ago, we adopted a cautious stance on the European equity markets, in order to reduce our exposure as the first signs of a trade war began to appear. In addition to this tactical decision, our overall opinion on the upside for eurozone equities remained positive. The eurozone economic indicators are pointing to a slowdown, but nonetheless remain compatible with a growth rate of above 2%. We are maintaining our cautious stance accordingly. Beyond the dent in consumption related to the rise in the oil price, this caution is justified by two more fundamental factors:

    • the stalling and effective slowdown of global trade
    • the associated risk of a downturn in investment

    This combination could lead to much lower-than-expected eurozone growth, and belowforecast corporate earnings growth.

    The US president has made a number of protectionist statements in recent months. We have now entered the implementation phase: since 1 June, imports from the EU, Mexico and Canada of steel and aluminium have been taxed at 25% and 10% respectively, generating retaliatory measures. Taxes on Chinese products with a potential cost of $35 billion came into effect on 6 July, and the Chinese government has promised to retaliate immediately with similar measures. Donald Trump is unlikely to leave it there, as he is threatening to add tariffs totalling $450 billion to Chinese goods (i.e. the vast majority of imports from China and $200 billion more than expected).

    The biggest risk is clearly of an escalation and the move towards a trade war that would have a negative impact on international trade and growth growth. The risk to the US economy is also high. The States that voted for Trump in 2016 are vulnerable to protectionist measures. As such, the intensity and duration of the trade tensions could be influenced by voters. The markets are now factoring in the effects of US protectionism, and trade war risks are topping the list of investor concerns, after 20 years of "certainty" around global trade growth. There was a major correction on European markets last month, particularly those most exposed to global trade, such as Germany and Sweden. The same applies to the sectors most exposed to global trade, such as base materials, technology, manufacturing and automotive, which are posting falls. In the automotive sector – the latest target in Donald Trump's sights – uncertainties are likely to persist, despite the US ambassador to Germany saying that President Trump could suspend his threat to apply a 25% tariff on imports.

     

    Our caution prior to the publication of 1H results this month (July) is more to do with the comments being made by business leaders on the effects of the rise in customs tariffs and their impact on investment, than the results themselves, which should generally be good. In June, Daimler lowered its guidance for 2018 to reflect the impact of trade tensions. ABB has also commented on the tensions, while Assa Abloy has accelerated its writedowns in China due to a slowdown in activity. Investors are already taking account of the trade war, and any developments will influence their positioning.

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    news-1246 Mon, 23 Jul 2018 10:01:00 +0200 Fixed income… An unusual situation in the eurozone /en/who-we-are/news/detail/fixed-income-an-unusual-situation-in-the-eurozone/ Unlike in the United States, eurozone growth is running out of steam (the consensus has already been revised down from 2.4% to 2.3% for 2018), while inflation is accelerating, albeit moderately, but with the trend taking it towards the ECB's target. The initial estimate for eurozone inflation was 2% y/y in June, mainly driven by positive base effects from energy prices. Underlying inflation is still low, however (1% y/y), despite the euro's recent weakness, and has so far been only minimally impacted by the second-round effects of the rise in energy prices: we should see it return towards its long-term average (1.5%) in 2019, as wage inflation picks up. The ECB has raised its forecast for underlying inflation to 1.6% in 2019 and 1.9% in 2020, thereby indicating its confidence that inflation will move towards its target in the coming months, despite the gradual reduction in its monthly purchases. Nonetheless, it does not appear to have convinced the markets as yet: inflation expectations are lagging in terms of assessing the path for inflation going forward, which we do not think is justified. With the exception of the Italian indices, it is interesting to note the relative resilience of the markets since the start of May, given all the stress around Italy and then the escalation of the trade war rhetoric favouring a flight to quality and benefiting core inflation.

    French inflation it is also accelerating, and should benefit from the rise in regulated prices (+7.45% on gas from 1 July, the biggest rise for six years). Moreover, as part of the French government's planned €5 billion cut in spending on assistance to businesses, the benefit of reduced VAT rates for certain sectors will come to an end. We estimate the potential impact of these measures as 0.25% on French inflation. Furthermore, the changes in the rules for calculating the return on regulated savings in France over recent years have dampened demand from French banks for domestic inflation, which has significantly underperformed European inflation on the inflation swap market: the spread is at its lowest level for 10 years. That makes two good reasons to favour French inflation expectations.

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    news-1245 Fri, 20 Jul 2018 09:46:00 +0200 Could the oil price reach $100/barrel? /en/who-we-are/news/detail/could-the-oil-price-reach-100-barrel/ On 22 June, the main oil-producing countries outside the developed world met in Vienna to discuss a potential increase in production quotas. Much speculation and discussion followed the contradictory messages from Saudi Arabia, on the one hand, which favours a moderate increase, and Russia on the other, which wanted to expand quotas more significantly. The agreement eventually reached was closer to the Saudi position, with the addition of 1 million barrels/day. However, this increase is only theoretical, as some countries may not use their quotas, thereby limiting the real boost to output to around 700,000 barrels.

    This figure should also be seen in context, given the successive supply shocks that have been affecting the oil market for several months now. Venezuela and Libya are being impacted by specific issues limiting their oil supplies, and Iran is likely to be affected before long too. It is estimated that these three countries have contributed or will contribute to a reduction in oil output of around 1.3 million barrels in 2018. Moreover, there has also been a sharp increase in US shale oil production, although this has been offset by the rise in global consumption.

    The oil market is ultimately still suffering as a result of a shortage of supply, and while the agreement reached on 22 June should reduce the shortage, it will not fill the gap completely. Unless there is a major slump in growth, which would reduce demand for oil, it is hard to see the barrel oil price falling significantly from its current levels. Nor do we think that Donald Trump's request to Saudi Arabia to increase production will be wholly successful: the Saudis have every interest in keeping the barrel price high ahead of the Aramco IPO planned for 2019.

    The high barrel price is a good thing for one of our key themes, inflation breakevens – with the base effects continuing to be positive in the coming months. In the longer term, however, this is not good news for the growth of importing countries, such as the European nations or Japan.

    Despite our strong conviction on inflation, our bets are currently fairly limited in view of the current uncertainty over global trade. We could be in for a somewhat volatile summer...

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    news-1233 Fri, 13 Jul 2018 11:51:40 +0200 Not Risky After All? /en/who-we-are/news/detail/not-risky-after-all/ Contrary to popular belief, focused portfolios, or those with 50 or fewer securities, have not historically produced more risk than traditional portfolios over 3-,5-, and 10-year periods according to a recent Greenwich Associates study. Additionally, institutional investors believe such portfolios offer greater alpha potential. Focused Strategies Have Typically Delivered Lower Risk

     

    1,2,3 Greenwich Associates. The Power of Focus: Looking for Alpha in a Sea of Beta, 2017.

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    news-1219 Fri, 06 Jul 2018 15:01:59 +0200 Bear or Bull: "The Coming Collapse of China" or "The Chinese Century"? /en/who-we-are/news/detail/bear-or-bull-the-coming-collapse-of-china-or-the-chinese-century/ Sabrina Ren, Portfolio Manager, JK Capital Management Ltd., a La Française affiliate

    After a strong rally in Chinese stocks in 2017, one of the most frequently asked questions during a recent European roadshow was "what next"? Are we heading towards some drastic “mean reversion” or was it the start of something big? In our view, what happened in 2017 was just the start of a multi-year re-rating story of Chinese equities driven by a number of factors. The fundamental change in China's economic growth model is the key justification.

    After high growth over the past forty years, the Chinese government has embraced a slower economic growth model that focuses on quality and sustainability. In other words, China's economic growth model is gradually shifting from high growth, low quality to low growth, high quality. During this process, a number of structural issues embedded in the previous unsustainable growth model such as high leverage, imbalanced property markets, overcapacity, resource depletion and environmental destruction are being taken care of, one by one. Meanwhile, the country will continue to foster innovation and boost research and development to improve its global competitiveness. During this process, investors will start to realize that the typical arguments presented by permanent “China bears” do not stand and that the China story is increasingly real and sustainable. We believe this change in fundamental perception of China by observers around the world will trigger a re-pricing of the risk premium of Chinese equities, leading to a sustained re-rating.

    We believe the MSCI inclusion of Chinese onshore stocks, known as "A shares", across its emerging and world indices will also contribute to the re-rating story. MSCI's indices are closely watched and trusted. By adding A shares to its indices, MSCI has indicated to the world that the A share market is not only a market that cannot be forgotten being the second market in the world in terms of size, but it is also totally investible by foreign investors either using the Stock Connect platform or QFII quotas. The inclusion of A shares in MSCI indices means that investors who are using MSCI indices as benchmarks will have to buy Chinese stocks to avoid performance deviation. MSCI kicked start in June 2018 with a 2.5 percent partial inclusion. Upon full inclusion, China A-shares will account for about 20 percent of the MSCI Emerging Markets index. Chinese equities including Hong Kong listed shares and American Depository Receipts will ultimately account for about 40 percent of the MSCI Emerging Market Index upon full inclusion, to take place probably within five to six years. As a result, we anticipate investors to spend more and more time looking at Chinese equities, both onshore and offshore, as a promising and investable asset class.

    We are optimistic on the medium to long-term outlook of Chinese equities despite the volatility we have seen recently. We, as fundamental stock pickers running concentrated strategies, believe the best way to capture the opportunities that China offers as the country moves to its next phase of growth is to analyze the key themes that drive that growth and identify the most competitive and best managed companies that will provide compounded returns over an extended period of time. We like the technology innovation theme as it is the primary driving force behind the economic development of China going forward. China aims to become a global leader in innovation by 2035 as it is already the second largest R&D spender in the world and the number one in terms of patent applications. This is well understood by Washington, which has identified the threat and is trying to stop, or at least to slow down this rise, with very few chances of success in our view. We also like the consumption upgrade theme. Companies that offer quality products and services to the rising middle class which demand more comfortable lives and a higher quality environment should excel over time. Advanced manufacturing is another theme that we favor. We believe China has entered into the same “import substitution” era that South Korea experienced in the nineties. The "Made in China 2025" strategic plan clearly aims at increasing the domestic content of core materials and components, focusing on advanced chips, memories and software that are presently the purview of foreign companies.

    The Coming Collapse of China was a book written in 2001 by Gordon G. Chang that made quite an impact when it was released. It foresaw the collapse of the Chinese economy alongside its political system by 2006, and latest by 2011. Seventeen years later, China is by all accounts on a much stronger footing than it was in 2001 and is far more stable politically than a vast number of developed countries, contradicting numerous naysayers’ predictions. By opposition to the views developed by a dwindling number of China bears about the “coming collapse” theory, we believe the Chinese economy has the means and resources to grow out of its structural issues, offering along the way great investment opportunities to early-bird investors who may realize that something big is happening in the world’s second economy. Is the 21st century going to be the “Chinese Century” as written by Oded Shenkar in 2006 when his best-seller predicted that China would take over the US and become the largest economy by 2026? It is far more likely.

    Disclaimer:

    This document is intended for relevant professional and qualified investors only and is not for retail use. This document is provided for informational / educational purposes only and is not

    intended to be, nor should it be, relied upon as a forecast, research or investment advice, and does not in any case constitute advice, an offer, a solicitation or recommendation to invest in specific investments or to adopt any investment strategy. Where La Française group has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Issued outside of Hong Kong by La Française AM Finance Services, home office 128, boulevard Raspail, 75006 Paris, France, regulated by the “Autorité de Contrôle Prudentiel” as investment services provider under the number 18673 X, affiliate of La Française. Issued within Hong Kong by JK Capital Management Ltd., a La Française group member company, is licensed and regulated by the Hong Kong Securities and Futures Commission.

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    news-1216 Thu, 05 Jul 2018 11:44:46 +0200 La Française Group's Responsible Investment (RI) Policy /en/who-we-are/news/detail/la-francaise-groups-responsible-investment-ri-policy/ La Française Group’s Responsible Investment (RI) Policy details the Group’s practices in terms of integration of environmental, social and governance (ESG) factors in its asset management business. The policy is structured into four chapters: investment concept and approach, application by asset class, implementation in the investment processes and Group level monitoring of RI policy.

    Chapter 1: investment concept and approach

    La Française Group is convinced that ESG factors significantly influence the financial performance of investments - both in terms of profitability and risk - and that this correlation is becoming stronger. This conviction is supported by the increasing number of academic papers. It is no longer appropriate to dissociate financial performance and sustainability. Responsible behaviour and sustainable finance are becoming synonymous with flexibility, responsiveness, innovation and therefore performance and profitability. Indeed, the question is not why integrate ESG factors into the investment processes, but why not?

    La Française Group believes that climate change is a pivotal component of future economic growth and social stability. Tomorrow’s society will be based on a low-carbon economy. As such, the time has come for investment decisions to take into account climate considerations. The risks and opportunities associated with climate change are likely to affect all business activities and the financial performance of investments. A growing number of scientific studies showcase the emergence of a carbon factor influencing financial markets.

    Traditional methodology applied in Socially Responsible Investment (SRI) is the exclusion of non-compliant assets based on ethical considerations. La Française Group applies such methodology to reflect internationally accepted standards like the UN Global Compact, but not only. La Française goes beyond exclusions. In its investment process, the group weighs ESG and financial factors equally. This is a positive approach that allows the exclusion of the lowest performing assets in terms of their sustainability profile.

    In practice, La Française Group has developed a proprietary approach to facilitate RI, called Strategically Aware Investing (SAI). The SAI methodology stems from a partnership established in 2014 with a research company that today has become Inflection Point by La Française1. The SAI approach associates financial, strategic and ESG factors, all equally weighted...

    1 Presentation in the appendix

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    news-1208 Thu, 28 Jun 2018 17:33:43 +0200 Turnaround in Active Performance /en/who-we-are/news/detail/turnaround-in-active-performance/ The performance of actively managed funds relative to passively managed funds has been shown to be cyclical, with recent signs indicating conditions may be ripe for the cycle to favor active managers, creating an environment for active to potentially outperform. An Active Management Comeback in U.S. Large Cap

    - For nearly 50 years, there have been clear and strong active/passive relative performance cycles. After a long cycle that favored passive, in our view active is clearly on the upswing (see Alger On the Money “What Goes Down Must Go Up”).

    - Active managers are stock pickers who tend to perform better when correlations among equities are lower. While correlations within the S&P 500 have ticked up this year, they had been trending lower and are significantly below the average over the past decade. This lower correlation cycle allows active managers with deep research abilities greater capacity to identify equities that may outperform the market.

    - Certain factors, such as small cap performance and rising interest rates, have been drivers of active/passive outperformance and may contribute to further accolades for stock pickers (see Capital Markets “Party Without the Punch?”, page 15).

    >Download Alger on the Money, A view on the U.S. Market

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    news-1200 Mon, 25 Jun 2018 11:13:40 +0200 Equity Markets: They have learned nothing and forgotten nothing /en/who-we-are/news/detail/equity-markets-they-have-learned-nothing-and-forgotten-nothing/ The eurozone is an economic power, but its survival depends on its ability to implement a common economic policy. Investors have factored in this equation since the 2011-2012 Greek crisis: how cohesive is the eurozone, and alternatively, what is its risk of breaking up? The subsidiary question is: is Italy its Achilles heel?

    While the equity markets do not like uncertainty, the Italian political situation has been a source of agitation in recent days. As such, the 10-year yield on Italian government bonds tightened by 98 bp to 3.44%, the Milan stock market fell by almost 6% and Italian banks, which hold a substantial portion of Italy’s public debt (over €600bn), fared particularly badly. Calm returned to the markets on May 30th when the Five Star Movement (M5S) and the League were able to form a government acceptable to the Italian president. It took this unprecedented political situation for the markets to take account of the political factor again, with risk peaking around the issue of eurozone cohesion. Despite this turbulent episode, equities were largely sheltered and there was no major impact on the euro, while at the same time, the Spanish prime minister lost a confidence vote in parliament. The European markets eventually bounced back, the euro picked up to 1.16 against the dollar and bond yields eased.


    The markets’ ability to absorb the events, with the ECB looking on approvingly, does not mean that the risk has disappeared. The crux of the matter for Italy is its weak growth coupled with a high level of public debt (132% of GDP). Italy is not Greece in 2012, but the coalition of two extreme parties that hold opposing views is unlikely to bring stability, nor the hope for change to address Italy’s weaknesses, such as its ability to undertake reforms. The implementation of the "common programme" proposed by the new Italian government would cost 6-7% of GDP, and while the primary budget surplus (1.7% of GDP) provides some room for manoeuvre, the opportunities for a stimulus from tax cuts are limited. The lack of flexibility in the Italian economy is weighing on its productivity, its banking system is still recovering and very few family-owned companies are capable of attaining the kind of critical mass that would attract investors.


    Italian equities represent around 7% of the Eurostoxx300. A large proportion are banks and companies that operate on international markets. These two segments put in similar performances during the eurozone’s return to a faster pace of growth at the start of the year. At this stage, and even though we can envisage some technical rebounds, we remain cautious with regard to Italian banks, which will feel the impact of each new episode in the political crisis. We are maintaining a constructive view on companies with international exposure, which will benefit from the fall in their valuation and the EUR/USD cross. Mediumsized Italian companies should receive support from the Individual Savings Plan (PIR).


    For the eurozone, the political risk premium is likely to be in place for some time to come. Although corporate earnings growth continues to encourage us to buy on weakness on a year-end horizon, we will remain cautious on this market in the coming weeks given the unfavourable trend in recent eurozone statistics along with the political risk. 

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    news-1196 Fri, 22 Jun 2018 11:21:28 +0200 Fixed income... The butterfly effect /en/who-we-are/news/detail/fixed-income-the-butterfly-effect/ There was a sudden return to risk aversion in May. Although the markets had not reacted much to the results of the Italian elections, a contagion effect finally had a significant impact on assets, especially bonds.

    We held positions on short-term peripheral debt, which we kept throughout the period of stress: we aim to remain nimble on Italy as concerns arise and ease due to the difficulties that the government will have in implementing its programme.

    The 10-year Bund lost up to 30 bp from its high in mid-May and was trading at 0.20%, benefiting from a flight to quality in the eurozone. It would seem logical, however, to now attribute a lower valuation to German yields (a reference point), in view of the potential, albeit limited, effect on eurozone growth due to a possible delay in the ECB announcing the end to its quantitative easing programme. But in a scenario that does not include a systemic issue in Italy, we are unlikely to see a significant change in the eurozone’s economic trajectory, and indirectly, in ECB monetary policy. In a historical irony, the day after the sharp drop in the 10-year Bund yield to 0.20%, an inflation figure of 2.2% y/y was published on Wednesday in Germany, significantly higher than the 1.8% forecast. The level of core inflation seems way too low to us.

    Even after the recent correction, oil in EUR has risen by 13% since the start of 2018, implying positive base effects over the entire year (if prices stabilise). 5-year inflation expectations are currently 1.45% in the eurozone: overall inflation should remain close to 2% until the summer, which has only been factored in by the markets to a very limited degree. In the USA, specific factors (telecoms price war, fall in the price of prescription drugs) had a negative impact on inflation in 2Q 2017, generating positive base effects for 2018. During the summer, with the USA in a trade war against the rest of the world and tensions on the country’s labour market, annual inflation is likely to rise towards 3%, which should drive up inflation expectations from the current 2.1% on the 10-year maturity. We remain positive on US and European inflation breakevens.

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    news-1195 Thu, 21 Jun 2018 17:46:56 +0200 A time for politics /en/who-we-are/news/detail/a-time-for-politics/ Having already covered the various stages that finally enabled Italy's political classes to form a government (Flash of 30 May 2018), we won’t repeat ourselves here. The situation now seems to have stabilised, at least for the short term, and we would highlight the following factors:

    - The two parties in the coalition, the Five Star Movement and the League, are not talking about leaving the eurozone. They have criticised it as dysfunctional, but they were not elected on a pledge to ditch the euro

    - Surveys show that a large majority of Italians want to stay in the eurozone (around twothirds)

    - The constitutional reform adopted in 2012 prohibits a referendum on eurozone membership

    For all these reasons, we do not envisage a scenario in which Italy leaves the eurozone. That being said, it should be borne in mind that the new government’s economic programme will almost certainly lead to some difficult discussions with the European authorities in the coming months. So no systemic risk, but no appetite either for long-dated Italian securities, which are likely to remain volatile.

    Moreover, this European sovereign crisis is taking place in a context of growth, which although less dynamic than at end-2017, remains steady in most developed countries. It is also worth noting the strength of US growth. In this favourable environment, it will be interesting to observe the moves of the central banks with inflation picking up, impacted by the positive base effects from commodities as well as labour market tensions in some countries. The three main central bank committees meet in June, and they will have further opportunities for discussion in Sintra on 18 June.

    We should also mention, though not for the first time, the latent trade war that is ongoing between the USA and the rest of the world. Beyond the systematic smokescreen, Donald Trump’s announcements are having a waning effect on the financial markets, but that does not mean that this state of affairs will continue in the medium term. This explains our fairly cautious positioning on the equity markets, which nonetheless showed remarkable resilience in May.

    Lastly, we think we should take advantage of May’s period of volatility to reaffirm some of our main convictions. Accordingly, we have increased our positions on inflation breakevens and our short positions on core inflation. We have also slightly increased our positions on subordinated bank debt, mainly on short-dated securities.

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    news-1182 Tue, 19 Jun 2018 10:00:00 +0200 La Française continues to attract Korean investors to French real estate market /en/who-we-are/news/detail/la-francaise-continues-to-attract-korean-investors-to-french-real-estate-market/ La Française, acting on behalf of Hyundai Investment Asset Management and a group of Korean Securities companies, has acquired “Le Balthazar”, an eight-story office building located in Saint Denis (93), Place des Droits de l’Homme, in close vicinity to the Stade de France and on the outskirts of Paris. AEW acted as seller on behalf of La Caisse des Dépôts and another prime institutional investor.

    The property is ideally situated in a dynamic and mature business environment, where a number of international groups have set up their headquarters, and accessible via public transportation (RER line B, bus and the future “Stade de France” metro station).

    This is yet another prime acquisition in a series, carried out on behalf of Korean investors, seeking to diversify their real estate portfolios and convinced of the attractiveness of the French real estate market and its upside potential given the development of the Grand Paris project and the future Paris 2024 Summer Olympic Games.

    The HQE construction, designed by Richard Meier and Atelier 2/3/4, was delivered in 2009. The property develops ca. 32.600 m2 over eight stories and is comprised of two wings, connected by an atrium. Ample parking, 430 spaces, is available on the two underground floors. The office areas are 100% let to a leading telecommunications group, under a longterm lease and the two retail units (accounting for a total of 590 m2) are let to food service practitioners. Prior to the disposal, AEW refurbished the asset and secured a new 9 year lease with the blue chip tenant.

    The Balthazar transaction illustrates well the efficiency of La Française’s global real estate investment and business network.

    La Française Real Estate Partners, platform dedicated to institutional investors and direct French commercial real estate, was once again successful in sourcing such a prime asset, whereas sister firm, La Française Real Estate Partners International, with a business development team located in Seoul, was effective in securing the commitment from Korean investors.

    Patrice Genre, Chairman of La Française Real Estate Partners, commented, “We are proud to have again served successfully our Korean clients and friends. Being accompanied by the right asset manager is key in executing such complex cross-border transaction for them.”

    Shawna Yang, Director of Real Estate Investor Relations for Asia concluded, “La Française is gaining traction in the Asian market. Korean investors appreciate La Francaise’s ability to source quality products thanks to its experienced investment teams on the ground. With a seven year long track record and €1.5bn invested across four countries in Europe, we have proven that we are able to source products that meet Korean investors’ expectations.”

    La Francaise was advised by the Capital Markets department of Cushman & Wakefield, Ashurst on all legal aspects, Flusin, Miralles et Esteve on all notarial aspects, PwC on fiscal issues, Theop for the technical due-diligence and ERM for the environmental due-diligence.

    The financing for the transaction was provided by the German Landesbank Helaba acting as Lender and Facility and Security Agent, who in turn was advised by Allez & Associés and Archers. AEW was advised by Clifford Chance, L’étude Thiberge, Fidal and Mazars.

    Download the press release

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    news-1178 Fri, 15 Jun 2018 11:56:35 +0200 Post ECB commentary /en/who-we-are/news/detail/post-ecb-commentary/ As expected, the ECB announced plans to scale back its net asset purchases from €30bn a month to €15bn after September and end them in December.

    The decision to end the QE program will be data dependent. At the same time, to offset any potential disruption in the markets, the ECB issued unusually explicit and time-specific forward guidance on interest rates, pledging to keep the benchmark rate unchanged “until at least the summer of 2019”. This statement had a clear dovish impact on financial markets with European fixed income assets rallying strongly.

    The ECB also published its updates forecasts on growth and inflation. Growth has been revised downwards from 2.4% to 2.1% in 2018, a more pronounced move than we expected. Inflation expectations were revised upwards at 1.7% in 2018 and 2019, which seems optimistic. The ECB also left its forecast for core inflation this year unchanged at 1.1% but nudging the 2019 forecast higher to 1.6%. 

    All in all, Mario Draghi’s communication is a success: The ECB announced the end of its QE program without any negative impact of fixed income markets. This is positive in the short-term for European fixed income assets, especially for peripheral countries. 

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    news-1174 Thu, 14 Jun 2018 16:32:52 +0200 Post FOMC Commentary /en/who-we-are/news/detail/post-fomc-commentary/ The FOMC raised short-term interest rates to 1.75% - 2% as expected and gave a slightly hawkish overall message.

    As expected, the updated Summary of Economic Projections showed a more optimistic view on the US economy and raised the outlook on growth and inflation. The Fed expects Core PCE to reach its target over the next 3 years.

    The median dot rose by 25bp in 2018 and 2019, which for the latter, came as a surprise. The FOMC expects now five more hikes until the end of 2019. Despite those changes, the market has not moved much and is currently pricing just over 3 hikes over the same period. The gap seems a bit too wide.

    The FED raised the IOER rate by 20bp as expected.

    The statement was also on the hawkish side: no longer making reference to market-based measures of inflation remaining low, and the statement reflects more confidence on future adjustments of short-term interest rates. 

    Finally, the Chairman J Powell said that there will be a press conference after every FOMC meeting beginning in January 2019. 

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    news-1171 Wed, 13 Jun 2018 10:44:31 +0200 Pre ECB meeting commentary /en/who-we-are/news/detail/pre-ecb-meeting-commentary/ Preview of June 14th ECB meeting

    Following Mr. Praet’s speech last week, expectations have increased on QE tapering, especially considering his previous dovish stance. There is now a possibility that the ECB will confirm tapering at €15Bn / month during Q4 2018, with QE ending in December. However, we think it would make more sense for the ECB to wait until July to give more information on the specific timing and size. 

    The ECB should raise its 2018 and 2019 inflation forecasts, taking into account strong figures in May and rising commodity prices. Regarding growth, forecasts could be lowered marginally after disappointing data over the last 3 months. 

    Overall, with the recent repricing following Mr. Praet’s comments, we do not expect meaningful movements except if the ECB announces when it will cease asset purchases.  

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    news-1168 Mon, 11 Jun 2018 17:46:23 +0200 The FOMC is widely expected to raise short-term interest rates for the second time this year with a 25-basis point hike /en/who-we-are/news/detail/the-fomc-is-widely-expected-to-raise-short-term-interest-rates-for-the-second-time-this-year-with-a/ The FOMC will also update its quarterly Summary of Economic Projections (SEP) and the dot plot. Economic data were generally better than expected. Updated forecasts are likely to show a stronger growth, a lower unemployment rate and perhaps a somewhat higher inflation rate.

    We expect the 2018 median dot to increase to four hikes this year, up from three at the previous meeting. We acknowledge that there is some risk that the 2019 median dot could also rise by a quarter of point, but this one is a close call.

    As a technical adjustment, the FED should raise the IOER (interest rate on excess reserve) rate by 20bp even as it increases the target range for the Fed funds rate by 25bp. This adjustment was largely discussed in the May FOMC minutes. The market impact should be limited.

    The press conference should confirm a gradual step towards normalizing monetary policy. Chair J Powell should repeat that the Fed will tolerate some modest overshooting of the 2% inflation target.  

    Market impact should remain muted as this hike is already fully priced. We expect a hawkish reaction if 2018 and 2019 dots increase.

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    news-1165 Fri, 08 Jun 2018 11:04:27 +0200 The bigger Picture : Earth /en/who-we-are/news/detail/the-bigger-picture-earth/ Innovation is making an impact not only on companies but also on the environment. One example of innovative technology driving sustainability is the expected reduction of carbon dioxide (CO2), a serious threat to life on our planet. The implications of this development may appeal to the increasing numbers of investors interested in harnessing the potential benefits of environmentally responsible technology. Annual Growth in Energy-Related CO2 Emissions

    • Improvements in energy efficiency and a shift toward more environmentally friendly natural gas and renewable energy sources are forecasted to cut the annual growth of CO2 emissions by three quarters over the next 20 years as compared to the prior two decades.

    • While it is difficult to reduce CO2 emissions given significant global economic growth, energy intensity, or the amount of energy used relative to economic activity, is decreasing materially.1

    • Innovation is enabling these changes. New technologies and the efficiencies they create are driving renewable energy costs lower. Wind and solar costs are estimated to decline significantly over the next several years such that their cost per kilowatt hour will be equal to or less than that of traditional fossil fuels, such as coal or gas.2

    • ESG strategies often invest in companies that deliver these improved, more environmentally friendly efficiencies. Research suggests that ESG holdings may benefit your portfolio as well as Mother Nature (see Alger On the Money, “A New Way to Lower Risk?”).


    1 U.S. Energy Information Administration, “International Energy Outlook 2017.”
    2 Nextera Energy, “February/March 2018 Investor Presentation.”

    >Download Alger on the Money, A view on the U.S. Market

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    news-1162 Thu, 07 Jun 2018 17:57:16 +0200 LFIS’ Premia Strategy Cited by One of UK’s Largest Discretionary Investment Management Firms. /en/who-we-are/news/detail/lfis-premia-strategy-cited-by-one-of-uks-largest-discretionary-investment-management-firms/ LFIS’ premia strategy is among those Quilter Cheviot is using for diversification and uncorrelated returns. Quilter Cheviot is one of the UK’s largest discretionary investment management firms with over £22.8 billion of assets under management and more than 40,000 clients.

    Nick Wood, Head of Investment Fund Research at ‎Quilter Cheviot, commented: “Having a style premia fund in the mix that has exposure to a wide range of styles, such as academic premia, can be beneficial. There’s a lot of research around what factor’s work in markets and this fund takes exposure to various ‘slivers’ of those factors. This fund is not based around just one factor, it has multiple factors in the portfolio that gives you a more balanced approach and hopefully leads to steady return over the long term. Quite a few style premia funds have been launched in recent years and this was the one we felt had the strongest capability.”

    To access the full article on FE Trustnet, click here

    For more information about LFIS’ Absolute Return Strategies, click here.

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    news-1149 Wed, 06 Jun 2018 10:00:32 +0200 Aberdeen Standard Investments and La Francaise Real Estate Partners International sell two prime retail assets in Germany /en/who-we-are/news/detail/aberdeen-standard-investments-and-la-francaise-real-estate-partners-international-sell-two-prime-ret/ On behalf of the Pan European Urban Retail Fund1, “PURetail”, a Luxembourg FCP-SIF, La Française Real Estate Partners International (LF REP International) and Aberdeen Asset Management have successfully sold a prime mixed use (retail and office) asset in Stuttgart2 to LaSalle Investment Management and a core retail asset in Lübeck2 to R+V Versicherung.

    During the holding period of the assets, LF REP International, together with Aberdeen, successfully achieved the original business plan objectives that included the stabilization and long-term extension of lease agreements.

    The PURetail fund, available only to institutional investors, has been closed to subscriptions since July 2014. Since then, the portfolio has been optimized through active asset management and the strategic sale of assets.

    Fabian Klingler, Head of Direct Real Estate Continental Europe stated: “We were able to close challenging transactions, efficiently and in a timely manner. We are delighted to have sold these properties well, taking advantage of the current market context and generating a good risk adjusted return for investors in the fund.”

    Jens Goettler, Managing Director for Germany, La Française Real Estate Partners International, said: “Once again, these sales demonstrate our ability, alongside our partner Aberdeen, to create value for our investors, thus achieving our initial business plan objective. Favorable market conditions were not the only value drivers. Despite the increasing market share of e-commerce, we were able to increase substantially the rental income of the portfolio.”

    Colliers International advised PURetail on the sale of the asset in Stuttgart; JLL advised on the sale of the asset in Lübeck. 

    Clifford Chance advised on the legal side and TA Europe was the technical advisor on both transactions.

    1The PURETAIL fund, a Luxembourg FCP-SIF available to institutional investors only, was closed to subscriptions in July 2014. La Française Real Estate Partners International is the asset manager of the fund alongside of Aberdeen, the fund manager.

    2This is an example of an investment held within the portfolio. It is not indicative of future sales and does not fully reflect the composition of the fund.

    Read more 

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    news-1138 Thu, 31 May 2018 10:32:00 +0200 Italian turbulence : The contagion between country risk and the financial sector /en/who-we-are/news/detail/italian-turbulence-the-contagion-between-country-risk-and-the-financial-sector/ Tensions on Italian government bond yields have rapidly affected the debt issued by the country's private sector. Despite the recent progress of the Italian banking sector in terms of solvency and reduction of outstanding bad loans, it is mainly financial sector debt, and in particular subordinated debt, which has been impacted. Finally, the historical link between the financial sector and government debt remains significant, which is understandable.

    As at 29 May, the credit spreads of the Markit indices “iBoxx EUR Financials Italy” and “Germany” have risen respectively by 102 bp and 20 bp since the beginning of the month. The average spread of the “Iboxx Contingent   Convertible Developed Market” index (benchmark corresponding to CoCos additional Tier 1 debt) edged up from 335 bp to 472 bp with a performance of -4.9% for the index over the period.

    The contagion between country risk and the financial sector can be seen at various levels.

    Firstly, the rating agencies assess the credit quality of a financial institution based in part on country risk. Moody's has just placed Italy’s rating under negative watch, which could have an impact on the rating of certain financial institutions in the event of a downgrading of the government rating.

    In addition, banks and insurance companies generally hold local public debt, which links them financially to its performance. Thus, UniCredit holds around €51bn in Italian government securities for a CET1 (Common Equity Tier 1) equity base of €47bn. This gives the UniCredit group a capital buffer of €13.9bn compared to the regulatory requirements. In other words, the bank could theoretically suffer a net loss of more than €13bn (i.e. a 27% loss on the €51bn held) without this jeopardising its compliance with the ECB's regulatory requirements or calling into question coupon payments on Additional Tier 1 CoCo bonds.

    Similarly, at the end of March, Intesa Sanpaolo held €29.9bn in Italian sovereign securities (excluding securities held within its insurance subsidiary), and a capital buffer of €14.6bn in excess of regulatory requirements. The Italian issuers on which we are positioned are therefore sufficiently capitalised to absorb a much larger shock on Italian government debt than that which we have just experienced. 

    Today, the capital buffers of the main Italian banks and insurance companies are significant, especially in view of regulatory requirements and previous crises. Indeed, excluding the scenario of a restructuring of Italian public debt, these buffers are largely sufficient to absorb a significant decline in the valuations of the country’s sovereign securities. In addition, the latest results published are reassuring and for several quarters have followed a positive operating trend for banks (disposals of non-performing assets and improved profitability), while Generali continues to improve its solvency margin (211% at the end of March 2018). Lastly, a significant portion of this outstanding public debt is recorded as "Held to maturity” in the banks' portfolios and therefore does not affect their income statement or their equity. The volatility of Italian sovereign securities may therefore weigh on the profitability of the banks, as this has an impact on their financing costs, and therefore on their net interest margin, but this does not currently produce a significant balance sheet effect.

    Completed on 29 May 2018

    Disclaimer

    Source: La Française 

    Promotional document aimed at professional investors. The information and material provided herein do not in any case represent advice, offer, solicitation or recommendation to invest in specific investments. All information and data included in this document is considered as accurate at the date of its preparation considering the economic, financial and stock-exchange related context at that date and reflect the perspectives of Group La Française on the markets and their evolution. The opinions expressed by La Française are based on current market conditions and subject to change without notice. Opinions may differ from those of other investment professionals. It should be noted that past performance does not necessarily determine future performance which may vary over time. With regard to financial, economic and stock-exchange related risks, no guarantee can be issued that the present products will attain their stated objectives.

    Investment products referenced in this presentation are not directed at and suitable for all types of investors. Potential subscribers are requested to carefully and independently assess the legal and commercial documentation provided and notably the risks entailed and to seek appropriate professional advice where necessary (including regulatory and fiscal aspects) in order to determine the investment product’s potential to reach predefined investment objectives.

    Published by La Française AM Finance Services, head office, 128, boulevard Raspail, 75006 Paris, France, licensed by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, subsidiary of La Française.

    Download the market flash, click here

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    news-1132 Wed, 30 May 2018 17:41:10 +0200 Italian turbulence & our convictions /en/who-we-are/news/detail/italian-turbulence-our-convictions/ Our market analyses take full account of the significant uncertainty about the situation in Italy but currently exclude the systematic risk of it leaving the Eurozone. We believe that a certain number of market movements have been exaggerated and this has opened up considerable rebound opportunities.

    The political context

    Giuseppe Conte, appointed head of government a few days ago, has this weekend given up his mandate to be President of the Council: the sticking point with President Sergio Mattarella is the future Minister of Finance, the very eurosceptic Paolo Savona. The President of the Republic has vetoed this and now has his hands free to appoint a technocrat, without having the agreement of the parties that came first in the legislative elections. This morning, he proposed as candidate for the position of the new President of the Council, former International Monetary Fund (IMF) director of fiscal affairs, Carlo Cottarelli. However, M5S and the League have already announced that they will not give a vote of confidence in the two Houses: new elections should therefore be announced, but cannot be held before September. 

    Several questions arise, it seems to us, if such a political scenario materialises:

    How would the voters react, if the President of the Republic ignores the outcome of the legislative elections of 4 March? Will the score of the right-wing coalition in the polls confirm its strong rise, which is key in the polls today? 

    This point is crucial but it is very difficult to answer. In the short term, Di Maio and Salvini have maintained their stance and are pounding out their desire to govern. Any new statement is likely to fuel volatility, especially since the volumes traded on the 10 year BTP future come largely from the hedge fund community, which calls for caution in the coming days.

    A technical government will be appointed to manage current business before the next elections, which should take place after the summer. This means that nothing will happen in terms of reforms, but it avoids the establishment of unorthodox budgetary measures. Today, the President of the Republic is blocking the application of a policy which is openly sceptical towards the Eurozone and Silvio Berlusconi, who is attached to the European positioning of his country, sided with Mattarella last Sunday. This points towards future difficulties for the right-wing coalition and probably for an election campaign that is more focused on the European project for Italy. Italy is therefore likely to remain in political limbo until the autumn, which does not necessarily mean chaos on the financial markets.

    In this context, the rating agency Moody's has placed Italy's Baa2 rating under surveillance and is particularly concerned about the potential backtracking on the pension reform and the budgetary projections of the new government.

    What about the ECB?

    Its room for manoeuvre is narrow on Italian debt (respect of the capital key in its public asset purchase program). The events in Italy make it all the more difficult as the Eurozone is experiencing a more moderate period of growth, headline inflation should accelerate to levels close to 1.8% this summer and the balance of risks is deteriorating. It may revise its growth forecasts down slightly; to be communicated on 14 June: remember it revised forecasts upwards by 1/10th to 2.4% for 2018 on 8 March this year.

    OUR CONVICTIONS

    May witnessed a sharp return to risk aversion. While the results of the Italian elections didn’t have much effect on the markets, they finally generated repricing in many assets, mainly in the bond sphere. Today, it seems appropriate to provide a factual view of these market movements and to analyse their justification, scale and coherence in order to identify, where appropriate, certain opportunities once the Italian issue has been closed:

    - This situation has logically generated a rise in the Italian risk premium since early May, but the levels reached and the flattening of the curve now reflect the fear of a systemic risk. The 2-year BTP yield is above 2.2% with a spread of 270 bp against Germany, close to the spread of 263 bp on the 10-year yield. It is always particularly difficult to express oneself in a configuration like this, but we think that the low liquidity of recent days has played an important role in this movement, with notable gaps in the trading spreads. More fundamentally, we do not consider the medium-term challenge to be Italy’s exit from the Eurozone but rather a European governance largely complicated by an Italian government that is possibly eurosceptic. Indeed, if we believe the polls, the Italian people have never wanted to leave the Eurozone and the newly elected parties are not proposing this anymore. Finally, the Constitution does not authorise holding a referendum on this subject. Thus it seems that in the event of new Italian elections in autumn 2018, the markets could, in the summer, once more focus on more global economic fundamentals and we believe that the current levels may be opportunities. We remain positive on the 2-year maturity which is our longest position on Italian debt. This topic will resurface in September with more serenity for investors as the polls are showing an exit from this political impasse with, for example, the victory of a right-wing coalition.

    - The German 10-year Bund has lost more than 30 bp since the high of mid-May and has traded at less than 0.30%, enjoying a flight to quality in the Eurozone. The German 2-year yield has returned to the lows of December 2017, to -0.7% and expectations on the increase of the ECB’s deposit rate in 2019 are now lower than 15 bp compared with 40 bp at the highest this year. It does seem logical today to value lower German yields, which are reference rates, because of a possible, albeit limited, effect on growth in the Eurozone and because of a possible communication lag from the ECB regarding the end Quantitative Easing. But in a scenario that excludes a systemic situation in Italy, it seems that the situation is not likely to significantly deform the economic trajectory of the Eurozone and consequently the ECB's monetary policy. We consider the level of the Core rates to be decidedly too low.

    - After last month's disappointing European underlying inflation figure, we expect a return to levels close to 1% this month. Even after its recent correction, oil has increased in euros since early 2018 by more than 22%, implying positive base effects over the year as a whole (if prices stabilise). The 5-year inflation expectation is currently 1.19%, whereas during the summer, total inflation should rise to above 1.8%.  This recovery is therefore only very partially anticipated by the markets. We are strengthening the long positions on 5-year breakeven inflation rates in the Eurozone via Germany. In the United States, the situation is a little different. Specific elements (telecom price war, lower drug prices) negatively impacted inflation in the second quarter of 2017 and created positive base effects for 2018. During the summer, the annual rate of US inflation will rise to 3% and will have an upward impact on inflation expectations, which are currently only at 2.1%. We remain positive on US break-even inflation rates.

    Completed on 29 May 2018

    Disclaimer:

    Promotional document aimed at professional investors. The content of this document does not constitute an offer or solicitation to invest, nor investment advice nor a recommendation to make any specific investment. The opinions expressed by La Française are based on current market conditions and subject to change without notice. Opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office, 128, boulevard Raspail, 75006 Paris, France, licensed by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, subsidiary of La Française.

    Download the market flash, click here

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    news-1127 Fri, 25 May 2018 10:45:06 +0200 A bridge to somewhere ? /en/who-we-are/news/detail/a-bridge-to-somewhere/ Infrastructure across the U.S. is failing. Scores of aging highways, bridges, airports, and water systems need repair. A government infrastructure spending package could significantly drive economic activity and revenues for companies that are involved in any future reconstruction. - The U.S. faces more than a $2 trillion infrastructure funding gap, defined as needed investment less estimated funding, through 2025. The country’s overall grade on the state of infrastructure is a D+, according to the American Society of Civil Engineers.1

    - State and local governments are responsible for public infrastructure as they own over 90% of non-defense public infrastructure assets.2 Unfortunately, state and local government spending on infrastructure is at the lowest level in over half a century.3

    - The Trump administration proposed a $1.5 trillion infrastructure plan earlier this year.However, lawmakers are currently exchanging ideas about how to fund potential legislation and a firm plan has not yet materialized.

    - Potential beneficiaries of a large infrastructure spending program may be materials companies, specifically those producing construction materials such as aggregates and cement, as well as industrial companies, including those that produce machinery.

    1 ASCE, “2017 Infrastructure Report Card.”
    2 Center on Budget and Policy Priorities calculations of U.S. Bureau of Economic Analysis data on fixed assets, 2015
    3 Based on state and local government gross investment as a percentage of GDP in 2016 using data from the U.S. Bureau of Economic Analysis.

    >Download Alger on the Money, A view on the U.S. Market

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    news-1123 Thu, 24 May 2018 14:06:18 +0200 Equity markets /en/who-we-are/news/detail/equity-markets/ Since 2017, we have been witnessing a perfect example of "economic Darwinism" in the retail sector. Over the years, the online retail platforms have grown to a level where they are directly challenging traditional firms. In order to adapt to the new consumption habits, we have redesigned the tools we use to monitor investments in this sector.

    In 2017, Europe’s retail sector underperformed the Stoxx Europe 600 by more than 13%. The diverging stock market performances shown below chiefly stem from growing investor concern over the ability of traditional players to maintain their margins and generate sufficient cash flow. For example, the operating margin of H&M has fallen from 18% in 2012 to a projected 9% this year.

    Traditional retailers are caught between:

    1) Maintaining the profitability of their bricks and mortar stores despite the ongoing drop in footfall.

    2) Trying to grow their online market share while controlling their distribution (by minimising the use of external partners such as Amazon, Zalando and Asos).

    At present, the traditional players are not managing to reassure investors of their ability to reverse this trend. However, some US retailers, such as Walmart, have decided to take on Amazon in the online space.

    The tyranny of platforms

    The arrival of internet platforms in a number of sectors has often led to the emergence of quasi monopolies, which offer the best choice of products and attract the biggest number of customers. We are investing in these platforms, as we think they will continue to win market share. They may also be the target of multinationals seeking to gain an online presence. For example, luxury group Richemont recently acquired Yoox – Net à Porter in order to develop its e-commerce channel.

    We will nonetheless keep a very close eye on their valuations, which can reach stratospheric levels very quickly. In Europe, we are positive on online fashion retailers Asos and Zalando and food ordering website Just Eat.

    The way we shop has changed

    Online and mobile are now fully integrated into the shopping process. Consumers get ideas, find information and compare prices online before buying something in a store. This applies in the widest sense to all sectors, from retail, through telecoms and media, to travel and leisure.

    A number of luxury players have confirmed to us that more than 80% of their customers making an in store purchase have previously researched the products concerned online. On this basis, we have developed expertise using data analysis tools that produce traffic estimates and other indicators. This helps us to project sales trends for the various brands.

    Read more,

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    news-1122 Wed, 23 May 2018 12:35:00 +0200 Fixed income /en/who-we-are/news/detail/fixed-income/ A paradigm shift is threatening the existence of sector stalwarts...

    Traditional retailers are currently facing a paradigm shift following the emergence of online specialists such as Amazon, Alibaba and Zalando. In this environment, many retail giants are experiencing significant operational difficulty and bankruptcy protection announcements are coming thick and fast all over the globe. The most striking example is Toys R Us, a toy retailer with global reach that had a particularly high level of debt for many years before succumbing to the impact of the internet and changing consumption patterns. Holders of Toys R Us 2018 bonds have suffered significant losses, of almost 85% since the beginning of September 2017 (source: Bloomberg). There are plenty of similar stories, such as Sears, an iconic store chain of the post-war consumer society, and RadioShack, a chain of US electronic stores, or in France, Vivarte, owner of brands including La Halle. We expect this trend to continue over the coming years, especially for the most indebted companies, as the rising default rate for US high yield issuers - now close to 11.5% - shows.

    ...as well as providing a source of investment opportunities
    Retail now offers the highest yield of any sector (the average US YTM is 8.3%). These high yields may seem attractive, but default rates are also climbing. To eliminate the issuers most exposed to the growth of online retailers, we therefore need to be highly selective, in terms of:

    1) Geography: pressure from online is far more significant in the USA than in Europe. On top of that, US firms tend to restructure their debt much more quickly. It therefore makes sense to overweight European issuers, except for UK retailers.

    2) Sector: the high yield retail universe can be split into two sub-segments – food and nonfood. Clearly, food retailers are much less affected, while in the non-food sector, there are also sub-segments that are less exposed to online competition (musical instruments, tools, etc.).

    3) Positioning: the companies that have been most impacted by online competition are mid-range players.

    4) Potential targets: the stress the sector is under will accelerate consolidation, so it will be a good idea to identify which firms are likely acquisitions.

    5) Shareholder structure: many issuers are going to need fresh cash to meet their bank covenants and investment requirements. It will therefore be worth favouring assets held by shareholders with the greatest capacity to manage these needs.

    As a result, we particularly like names such as Burger King, Casino, Picard, SMCP and Supervalu (US supermarkets), and conversely, we are far more cautious around the likes of House of Fraser (UK department stores), Fresh Markets (supermarkets in direct competition with Amazon/Whole Foods and held by an aggressive fund) and New Look (budget fashion retailer owned by a fund destabilised by the collapse of Steinhoff).

    Read more

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    news-1120 Thu, 24 May 2018 09:30:09 +0200 La Française strengthens International Real Estate Business Development Team /en/who-we-are/news/detail/la-francaise-strengthens-international-real-estate-business-development-team/ La Française, an international asset management group with over €66 billion in assets under management (31/12/2017) and offices located throughout Europe, Asia and in the Unites States, continues to pursue its European real estate development strategy and has strengthened its team with a Head of Real Estate Business Development dedicated to the European market, Anne Génot.

    Anne Génot joins La Française from SCAPRIM Asset Management, where she was CEO, leading a team of c. forty professionals and was responsible for developing asset management and investment advisory as well as overseeing acquisitions. 

    Having started her career with DTZ Asset Management France, as a financial analyst, she then joined GEMCO, a Crédit Foncier affiliate. From 2005 to 2012, Anne was Vice-President at RREEF (Deutsche Bank), based for several years in London, before returning to Paris. Anne was appointed Head of Acquisitions in France and Belgium for Allianz Real Estate in 2012 until she joined SCAPRIM in 2014. Anne holds a post-graduate degree in Real Estate Finance & Urban Management from E.S.S.E.C. Business School, as well as a building engineering degree from INSA Lyon and an urban planning master’s degree from Institut d’Urbanisme de Lyon.

    Reporting directly to David Rendall, Head of Global Real Estate Business Development, Anne Génot will pursue development opportunities with European institutional investors. She will be based in Paris and work in close collaboration with La Française’s other two European real estate investment hubs, located in London and Frankfurt. 

    Philippe Lecomte, CEO of La Française AM International and Head of Business Development at La Française said, “La Française has reached a critical stage in its development. To reach the next level we need a real estate product specialist bringing hands-on experience in the markets. With deep relationships in the French market and international experience, Anne will play a key role in developing and broadening out our relationships with institutional investors across Europe.”

    Read more, download the press release

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    news-1117 Tue, 22 May 2018 17:26:49 +0200 China deleveraging - How concerning is the issue? /en/who-we-are/news/detail/china-deleveraging-how-concerning-is-the-issue/ By Aravindan Jegannathan CFA, Senior Analyst, JK Capital Management Ltd., a La Française affiliate

    China debt to GDP surged from 162% in 2008 to 265% as at the end of December 2017. The pace of increase in the level of debt to GDP ratio slowed in 2017 to 743bps yoy compared with the past three years’ average of 1345bps1. The Chinese government aims to improve the debt to GDP ratio by growing the debt at a rate that is slower than the rate of growth in GDP (i.e. approximately 6.5% as officially expected2).  

     

    Currently, the concerns about China deleveraging have died down due to the improvement in the financial health of State –Owned Enterprises (SOE) which account for a significant portion of China’s debt burden. SOEs witnessed a strong recovery in producer prices in 2017 due to the ongoing supply side reforms that resulted in an improvement in their Return on Assets in 2017. The number of companies that witnessed credit upgrades in the past year exceeded downgrades indicating an improved financial health for Chinese SOE corporates. As a result, the urgency for SOEs to bring down leverage has decreased.  

     

    A couple of years ago, the market remained paranoid about China’s alarmingly high debt levels combined with low return ratios for SOEs. A large portion of investors were also skeptical about the ratio being understated and envisioned that a high leverage ratio and high Non Performing Loans ratio would engulf the entire banking system like a contagion. However, we have been witnessing a quarter on quarter improvement in asset quality both in terms of ratio and absolute level of bad credit over the past few quarters. At the moment, China seems to have come out of the concerns of a debt contagion.  

     

    One can also argue that China’s debt problem is not the result of mismanagement of affairs but has more to do with the government’s planned deployment of capital to maintain GDP growth at desired levels. We believe China’s capital intensity is slowing down and the leadership is well aware of the debt problem, having exhibited strong control over it. The market is also mindful of this fact as witnessed from China’s credit rating which stands at A1 for Moody’s, a significantly higher rating than other countries in the region with lower leverage ratios. With China’s low interest rate environment and low reliance on external debt (less than 5% of total debt) amidst high savings rate, the debt to GDP ratio should not be looked at in isolation. 

     

    To conclude, deleveraging remains a long-term goal. China’s Debt to GDP ratio should be read in conjunction with the country’s low interest rate, low external debt to GDP ratio, high domestic savings rate and high forex reserves. While it is in the best interest of the economy to deleverage, it will be gradual with a slower increase in the debt to GDP ratio to be expected over the coming years as already witnessed in 2017. As part of deleveraging, China’s Central bank PBoC is rightfully focusing on clamping down shadow banking to first understand where credit lies while addressing the problem of excess leverage in the economy. Deleveraging should be interpreted within the current growth context. Once the government witnesses a slowdown in growth, we believe deleveraging will slow down until growth concerns abate. Economic growth is critical for deleveraging to sustain as we believe a marked slowdown in GDP growth would magnify the debt concerns of the country.

    1 Source: Bloomberg: CHBGDTOP Index
    2 Source: National People’s Congress, 2018; https://www.ft.com/content/3cc9e6d8-2044-11e8-a895-1ba1f72c2c11 

     

    Disclaimer: This document is intended for relevant professional and qualified investors only and is not for retail use. This document is provided for informational / educational purposes only and is not intended to be, nor should it be, relied upon as a forecast, research or investment advice, and does not in any case constitute advice, an offer, a solicitation or recommendation to invest in specific investments or 

    to adopt any investment strategy. Where La Française group has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Issued outside of Hong Kong by La Française AM Finance Services, home office 128, boulevard Raspail, 75006 Paris, France, regulated by the “Autorité de Contrôle Prudentiel” as investment services provider under the number 18673 X, affiliate of La Française. Issued within Hong Kong by JK Capital Management Ltd., a La Française group member company, is licensed and regulated by the Hong Kong Securities and Futures Commission

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    news-1116 Tue, 22 May 2018 14:38:08 +0200 Oil : Outlook and consequences ? /en/who-we-are/news/detail/oil-outlook-and-consequences/ The consensus at the start of the year seemed fairly clear, with most of the investment banks expecting the barrel price of oil to move within the narrowish band of $50-65. These projections were generally supported by the following arguments:

    - Saudi Arabia would continue to play the game of reducing production to boost prices ahead of the Aramco IPO expected in the next 12-18 months.

    - A significant rise in the barrel price would lead to an increase in the supply of US shale oil, thereby limiting the potential for barrel price rises.

    However, the barrel oil price has risen steadily since the start of the year, with the price up around 20% taking Brent beyond $77, way above the early-year forecasts. There are several reasons for this, in our view. Firstly, it is worth noting the positive upgrades to global growth since the start of the year, which will push up forecast demand for oil as a result. Secondly, US shale oil is a light-density oil, which limits the possibilities for it to be used instead of OPEC oil should supplies of the latter fall; it is also more expensive to refine, requires more investment and offers a lower yield than heavier oils. Lastly, a number of specific events have impacted oil-producing countries such as Venezuela and Angola that have reduced the supply of oil.

    Will these factors disappear in the short term? We think this is unlikely, and as such, do not expect to see much of a drop in the barrel oil price over the next few months. What will be the consequences of this high oil price? The initial impact is obvious, with inflation expected to rise in the coming months, which supports our positive view on inflation breakevens. US inflation could reach 3% in July this year, for the first time since 2011. Another, less immediate consequence would be a negative impact on global growth in the longer term, i.e. the opposite of what happened after inflation nosedived in 2014-2016. However, this would take at least until 2019 to feed through.

    Meanwhile, the leading macroeconomic indicators are stable, which is reassuring and lends weight to our global growth scenario of close to 4%. We are nonetheless reducing our equity exposure after a significant rise in the markets over the last six weeks. We think European yields will continue to rise and take a positive view on inflation breakevens.

    Read more

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    news-1110 Wed, 16 May 2018 10:54:03 +0200 Increased volatility in emerging debt /en/who-we-are/news/detail/increased-volatility-in-emerging-debt/ Since the second half of April, the emerging debt market has seen a period of increased volatility. Our conviction concerning emerging market debt in Q3 2018 remains positive. The bear market we have just seen has led to a reconstitution of risk premiums, which are now back at January 2017 levels. Since the second half of April, the emerging debt market has seen a period of increased volatility. The main trigger of this emerging bond correction, over and above US 10-year interest rates which rose from 2.8% to 3%, is without doubt the US dollar’s appreciation. There are certainly many reasons behind the dollar’s rebound but for the most part, it reflects a de-synchronisation of US growth from the rest of the world. In fact, growth expectations in Europe and the emerging countries have been knocked back by slightly weaker indicators. We know that the consequences of a strong dollar for emerging markets is that currencies depreciate, mainly those of countries managing fragile balances, such as Argentina and Turkey.

    To read more, click here

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    news-1103 Mon, 14 May 2018 17:39:24 +0200 Target maturity funds: a yield-generating solution in a low interest rate environment /en/who-we-are/news/detail/target-maturity-funds-a-yield-generating-solution-in-a-low-interest-rate-environment/ Would you like to diversify your investments while looking for financial returns in a low interest rate environment?

    Target maturity funds by La Française, an approach combining several key characteristics to create a yield-generating solution while diversifying your investments.

    In less than 3 minutes, learn more about the target maturity concept developed by La Française

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    news-1102 Mon, 14 May 2018 17:19:10 +0200 Alger on the money - Weight Loss Guaranteed /en/who-we-are/news/detail/alger-on-the-money-weight-loss-guaranteed/ Later this year two major index providers will change their widely used sector and industry classification system. There will be substantial implications, given the trillions of dollars that invest according to this framework, and a potential opportunity for investors.  

    S&P 500 Sectors Due for Significant Changes

    1 The final list of changes has not yet been released.

    >Download Alger on the Money, A view on the U.S. Market

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    news-1100 Mon, 14 May 2018 15:11:27 +0200 Asian HY bonds yields soaring, time to buy? /en/who-we-are/news/detail/asian-hy-bonds-yields-soaring-time-to-buy/ By Marcus Weston, JK Capital Management Ltd., a La Française affiliate

    Source: HIS Markit Website

    Over the past few weeks, we have seen a significant sell-off in Asian high yield bonds. The benchmark Markit HY Index has seen its average yield rise from <5% in mid-2017 to recently exceeding 7.5%, the highest level since the index was launched. Asian HY has also notably underperformed US markets with the yield premium of B-rated Asian bonds (vs US issuers) increasing over 100bps since the start of the year. 

    Enticed by the more compelling valuations, this has left many investors asking if this is a buying opportunity. However, before answering this question,, it is worth understanding what is causing the sell-off. In general, Asian credit profiles have remained stable as evidenced by the recent 2017 results season and so fundamentals do not appear to be the main driver. On the contrary, we believe three main technical causes are the blame for the weakness. 

    The first is a supply/demand imbalance. Fueled by the fastest economic growth rate in the world, Asian companies have a constant need for capital that has seen the Asian USD bond market quadruple in size since 2013. However, like all rapidly growing asset classes, such expansion has inevitably hit a period of demand fatigue. In 2018, we have seen a large increase in issuance from HY companies, particularly from China. Tighter onshore liquidity has led to increased issues in the offshore USD market. This has created a vicious cycle where excessive primary offerings have repriced secondary markets lower, which in turn has necessitated ever more generous yields from new issues.  Inevitably, we believe, this will hit a level where yields become too expensive for corporates to accept and we expect a slowdown in primary activity to be a catalyst for market stabilization and recovery.

    Compounding this has been strength in the USD, which has hurt sentiment on global Emerging Market (EM) bonds. Within the Asian HY space, this has particularly hurt balance-of-payments deficit countries such as Indonesia and India, which account for 25% of the Asian HY Index.  However, it is worth noting the current account balances of Asia’s EM economies have significantly improved since the last major sell-off in 2013 and so USD impacts should be less onerous this time round. 

    Finally there are the concerns centered around the escalating trade dispute between the US and China. Given the unpredictability of global politics, we cannot exactly predict the outcome of the tensions. However, it is worth noting Asia’s HY market is dominated by domestically focused industries. A global economic slowdown resulting from a trade war would negatively impact all asset classes but Asia’s USD bond market should be more insulated than many other sectors.   

    There may be other factors in play contributing to the weakness, such as reductions in investor leverage, changes in asset allocation of major institutional investors or potential government policies impacting sovereign linked buyers. However, we are yet to see material redemptions from the asset class and our channel checks with brokers indicates that most the sell-off has been on light volumes.  We believe the market should see stabilization once the primary supply/demand imbalances have been addressed. This leaves the market at an attractive level of valuation and, while we think investors may wish to wait for market to stabilize before entering, we think this entry point is getting close.

    Disclaimer:

    This document is intended for relevant professional and qualified investors only and is not for retail use.

    This document is provided for informational / educational purposes only and is not intended to be, nor should it be, relied upon as a forecast, research or investment advice, and does not in any case constitute advice, an offer, a solicitation or recommendation to invest in specific investments or to adopt any investment strategy. Where La Française group has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Issued outside of Hong Kong by La Française AM Finance Services, home office 128, boulevard Raspail, 75006 Paris, France, regulated by the “Autorité de Contrôle Prudentiel” as investment services provider under the number 18673 X, affiliate of La Française. Issued within Hong Kong by JK Capital Management Ltd., a La Française group member company, is licensed and regulated by the Hong Kong Securities and Futures Commission.

     

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    news-1096 Fri, 04 May 2018 17:29:27 +0200 The US export ban on China’s ZTE: A blessing in disguise? /en/who-we-are/news/detail/the-us-export-ban-on-china-s-zte-a-blessing-in-disguise0/ By Gun Woo CFA, Senior Analyst, JK Capital Management Ltd. Last week, ZTE, a USD20bn market cap Chinese multinational telecommunication equipment and systems company, was hit by the re-activation of a previously suspended seven-year ban on US component sales to it by the US Department of Commerce. At a news conference, ZTE’s chairman said the US export ban has put the company “in a state of coma”. Forbes even predicted that ZTE will file for bankruptcy in the next few weeks. And many observers included the ZTE news in the “Trade war” narrative.

    We believe that the ban on US component sales to ZTE will not be generalized to the technology sector. The background of the event was that the initial ban had been put in place in 2016 after it had revealed that ZTE sold equipment that integrated American technologies to Iran and tried to cover up the transactions. The ban was later lifted in 2017 after the company agreed to pay a fine and to implement some audit and compliance requirements. The 7 year ban was re-activated last week when it appeared that ZTE had been paying full bonuses to employees engaged in the illegal sales, had failed to issue letters of reprimand to those employees and had lied about it to the US authorities. As such, we disagree that the restrictions imposed on ZTE are a blueprint of what could happen to all Chinese technology companies.

    As for the impact on ZTE, we are of the view that the “shock” talk is exaggerated and the probability of bankruptcy is close to zero. We believe the disruption to ZTE’s business as a result of the ban could be as short as one year. Around 30-40% of the ZTE’s integrated circuits (IC) purchases is estimated to come from the US. Based on our analysis, across the three business segments of ZTE, most of the chips can be sourced within the region instead, mostly within China, for the mobile phones and fixed-line equipment segments. As for the wireless telecommunication equipment segment, baseband processors for wireless base stations are mostly sourced from US companies and it is harder to find non-US alternative suppliers. But we imagine that, even in the worst case scenario, these base station baseband processors can switch to ASIC (Application Specific IC) technology which would take roughly a year for some Taiwanese suppliers to develop.

    In conclusion, we believe that the ZTE crisis is company specific and that the disruptions to ZTE’s business are not fatal. It will likely make Chinese companies want to become more technologically independent or diversified in the longer term. In fact, the Chinese government immediately asked technology players to speed up already aggressive research and development plans for the semiconductor sector to reduce its need for foreign supplies. In the end, we reckon that US sanctions on ZTE might turn out to be the best thing for China’s microchip ambitions.

     

    Disclaimer:

    This document is intended for relevant professional and qualified investors only and is not for retail use.
    This document is provided for informational / educational purposes only and is not intended to be, nor should it be, relied upon as a forecast, research or investment advice, and does not in any case constitute advice, an offer, a solicitation or recommendation to invest in specific investments or to adopt any investment strategy. Where La Française group has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Issued outside of Hong Kong by La Française AM Finance Services, home office 128, boulevard Raspail, 75006 Paris, France, regulated by the “Autorité de Contrôle Prudentiel” as investment services provider under the number 18673 X, affiliate of La Française. Issued within Hong Kong by JK Capital Management Ltd., a La Française group member company, is licensed and regulated by the Hong Kong Securities and Futures Commission.

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    news-1093 Fri, 04 May 2018 10:00:00 +0200 Pascale Auclair to be appointed to the Board of Directors of La Française Group and named Corporate Secretary /en/who-we-are/news/detail/pascale-auclair-to-be-appointed-to-the-board-of-directors-of-la-francaise-group-and-named-corporate/ Subject to the approval of the Supervisory Board in June, Pascale Auclair will be appointed Corporate Secretary of the Group, and will become the third member of the Board of Directors alongside Xavier Lépine (Chairman) and Patrick Rivière (Managing Director). Taking over from Pierre Lasserre, Pascale will oversee Internal Control and Compliance, Operational Risks and Data Protection, Legal Affairs and Group Risk Control.

    Xavier Lépine, Chairman of La Française Group says, “We are delighted that Pascale has agreed to this new role and we are certain that her experience in our business lines and her interpersonal and technical skills will serve her well in meeting her new responsibilities. Pierre has made a significant contribution working alongside us on the Board of Directors over the years and he will continue to provide support as Advisor to the Chairman and Chairman of the Supervisory Board of the La Française Global Investment Solutions division.”

    “It is a tremendous opportunity and a stimulating challenge for me to be asked to join the Board of Directors of La Française Group. I am extremely proud to be a member of La Française Group and will be able to draw on the experience gained from my previous roles in fulfilling my new responsibilities,” adds Pascale Auclair.

    Pascale's responsibilities as Chairwoman of the Board of Directors of La Française Asset Management will be overseen by Patrick Rivière, with the support of Jean-Luc Hivert and Laurent Jacquier-Laforge, who will be named managing directors.

    - Jean-Luc Hivert, Managing Director, CIO Fixed Income & Cross Asset

    - Laurent Jacquier-Laforge, Managing Director, CIO Equities

    Pascale Auclair has nearly thirty-five years of experience in finance. She began her career as a bond fund manager at Societe Generale in 1983, after which she worked at BAFIP, Cheuvreux de Virieu. In 1992, she joined Groupama as head of fixed-income investment, and in 1994 she was involved in the creation of the Group's asset management subsidiary and the development of an external client base. In 1998, Pascale Auclair was appointed manager of the bond and diversified management teams and in 1999 she joined the executive board of Groupama Asset Management and was subsequently named Deputy Managing Director.

    In 2006, Pascale Auclair joined LFP Investissements as Head of Investment Management. Following the merger with UFG Group in 2010, she was named Head of Investment Management and Managing Director of LFP, a securities asset management company within the UFG-LFP Group, which later became La Française Group.

    Pascale Auclair is an actuary, and is a graduate of the Institut des Sciences Financières et d’Assurance in Lyon.

    Read more, download the press release

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    news-1087 Thu, 26 Apr 2018 18:26:48 +0200 Post ECB Commentary /en/who-we-are/news/detail/post-ecb-commentary-3/ The European Central Bank (ECB) kept interest rates unchanged as expected. The tone of the meeting was broadly balanced and no new information was delivered. Mario Draghi acknowledged that economic momentum weakened during the last few months, but he emphasized that the ECB is still confident in the euro area’s economic health as growth remains solid and broad-based across countries. The recent slowdown should be temporary. The inflation reading is also unchanged, as inflation is still expected to converge to target over the medium-term. Headline inflation should stay at around 1.5% for the rest of year.
    Regarding the Quantitative Easing program, ECB members refrained from discussing the end of the asset purchases and reiterated that they will continue buying 30 billion euros ($36 billion USD) of assets per month until at least the end of September. Furthermore, Mario Draghi signaled that investors should not pay attention to the recent drop in corporate bond buying.
    That being said, the ECB medium-term outlook remains unchanged. We maintain our view that the asset purchases will come to an end this year.

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    news-1086 Fri, 27 Apr 2018 10:13:00 +0200 Alger on the money - Drug Renaissance /en/who-we-are/news/detail/alger-on-the-money-drug-renaissance/ Next-generation sequencing (NGS) allows for analysis of the human genome, the complete set of genetic material within a human. The ways drugs are developed and diseases researchedhave changed markedly because of NGS. Additionally, tools associated with NGS are reducingthe costs of disease while improving the accuracy of diagnosis and the efficacy of treatment.

    Sequencing Cost Per Genome Declining Rapidly

     

    > Download Alger on the Money, A view on the U.S. Market

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    news-1084 Wed, 25 Apr 2018 15:27:39 +0200 Pre ECB meeting commentary /en/who-we-are/news/detail/pre-ecb-meeting-commentary-1/ Thursday’s ECB meeting will be the focus of the week. We expect no changes and no new announcements about QE and forward guidance. Over the last few weeks, economic data has been softer than expected. Financial conditions are tighter, geopolitical risks increased with rising concerns of trade war. Nonetheless, current ECB’s forecasts of inflation are low and ECB members could be more confident about the inflation path. The normalization of the monetary policy should remain very gradual. We expect to see the end of the QE program by year-end and the first depo rate hike in the second quarter.

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    news-1075 Fri, 20 Apr 2018 09:00:00 +0200 Toward a low-carbon economy /en/who-we-are/news/detail/toward-a-low-carbon-economy/ It is our view that climate change has become a key factor in our economic and social development, and that it will most probably remain that way for a long time.

    Urgent action is needed. We face catastrophic consequences due to climate change, and immediate measures are needed to adapt to this new reality.

    In 2014, the International Energy Agency (IEA) estimated that USD 53 trillion would need to be invested by 2035 in order to meet the COP 21 targets and potentially avoid the worst consequences of global warming. This amount of money cannot conceivably be mobilised without the participation of ordinary investors. The role of finance in the fight against climate disruption is to guide investments toward companies that contribute to reducing carbon emissions in order to limit warming to under two degrees, as established at COP 21. However, current trends on the equity indexes point to a warming of at least four degrees. To prevent the worst, we need not only to slow down CO2 emissions but also to reduce emissions by 60% from current levels by 2050.

    We believe that this objective is perfectly compatible with our fiduciary obligations as asset managers: namely, to protect savings entrusted to us and to limit the costs associated with risks linked to climate change.

    This is especially true considering that our strategic analysis of companies based on innovation and the ability to adapt and respond has unveiled surprising opportunities for value generation in areas like electrification, the optimisation of resource allocation and clean technology.

    These were the factors behind our launch of the Zero Carbon global fund three years ago. This thematic fund maintains a neutral carbon footprint and invests in companies that create value through the energy transition. The core of our investment strategy is to focus on companies that provide energy solutions that generate additional growth thanks to their technologies, making it possible to transition toward a low carbon economy.

    Key themes in this regard include digitalisation, automation and renewable energies. The fund also invests in companies that have gained competitive advantages in terms of cost and productivity by reducing their carbon footprint.

    The “impact” component of this fund relates to the stated goal of reducing carbon emissions from investments and the possibility of measuring the results. Our aim is to combine strong environmental performance with strong financial performance and thereby demonstrate that using investments as a tool in the fight against climate disruption can also deliver strong financial results.

    Read more

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    news-1071 Thu, 19 Apr 2018 11:07:23 +0200 Emerging Markets : Attractive premiums and real rates /en/who-we-are/news/detail/emerging-markets-attractive-premiums-and-real-rates/ Genuine return potential on emerging local debt.

    After three years of adjustment (2013 to March 2016), the emerging economies are back on track in terms of economic activity, account balances (both domestic and external) and the accumulation of reserves.

    The macro outlook for 2018 is positive, with growth expected to be higher than 2017 across all of the emerging countries (5% in 2018 after 4.8% in 2017, according to JPMorgan). The rebound from 2017 appears to be strongest in Latin America (2.8% growth projected in 2018, vs. 1.7% in 2017). Inflation is under control across all of the emerging markets (3.3% average EM inflation in 2017; 2.9% in Brazil, 2.5% in Russia). Finally, public debt levels remain very low compared to the developed countries.

    Our macro scenario for this asset class is positive.

    Despite highly promising prospects for emerging fixed income, the uncertain future of trade agreements like NAFTA, fears of a trade war due to protectionist measures and threats by the United States and anticipations of faster policy normalisation by the Fed have all put a damper on the initial outlooks in recent weeks.

    We now believe that the markets have priced in these concerns, and that they are unlikely to fundamentally alter our baseline scenario.

    Our investment strategies focus on debt in strong currencies (EUR and USD) as well as local fixed income with or without foreign exchange risk, as the case may be.

    The risk premium on USD foreign debt currently stands at around 3% according to the JPMorgan Global Diversified Index. The historical average (2004-today) amounts to 3.25%, with the lowest point (1.67%) reached in June 2007. This risk premium is currently equivalent to 53% of the return on this asset class. In an environment of low core interest rates, bonds in strong foreign currencies offer additional yield on country risk, with solid fundamentals.

    Local sovereign debt is even more attractive, representing a rapidly growing market across all the emerging countries. In real terms2, local yields are mostly positive, ranging from 1% to 5%. The yield curves are often steep, offering more opportunities on the intermediate and long portions. These strategies may be hedged for foreign exchange risk; in this case, they would benefit exclusively from modified duration risk. Otherwise, they could be supported by foreign exchange risk and would also benefit from a highly attractive nominal carry.

    Emerging market currencies were the adjustment variables for the emerging economies over the 2013 2016 period. Many of them are currently undervalued in terms of real effective exchange rates. As a result, they represent genuine return potential in view of these countries’ satisfactory economic performance.

    Read more

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    news-1070 Thu, 19 Apr 2018 09:49:06 +0200 Reduced visibility for financial markets /en/who-we-are/news/detail/reduced-visibility-for-financial-markets/ Since the beginning of the year, a number of factors have obscured visibility on financial markets. Protectionism fears

    To kick things off, US President Donald Trump announced tariffs on imports of steel and aluminum of 25% and 10% respectively. This measure is much like that which was implemented in 2002, with the difference that this time most countries were subsequently given exemptions. In the end, less than 30% of these US imports will be subject to tax increases, mainly from China and Russia. Since steel and aluminum represent only 2% of US imports, the impact will be marginal at worst.

    The US president then announced a 25% tariff on USD 50 billion of Chinese imports, to which the Chinese countered with similar measures on US imports. It should be noted that these announcements are only baselines, open to negotiations which should last about two months.

    How do we interpret this resurgence of protectionism?

    These negotiations are, in our view, mainly political, given mid-term US elections in November. As it stands, these measures are not expected to have a significant impact on global growth: they represent USD 12.5 billion in effective taxes, or about 0.1% of Chinese and US GDP respectively.

    Even if markets remain volatile over the coming weeks, global growth remains well oriented, despite current geopolitical tensions (i.e. Syria, Russia, etc.).

    However, factors such as the risk of a trade war between the US and China, plus inflationary fears in the United States, have supported the decline in sovereign debt yields, hindering in the short-term our scenario of harmonization of interest rates of core countries and their economic fundamentals.

    Technology stocks

    After years of almost uninterrupted growth, US technology stocks have been under pressure for several weeks. The issues are multiple and generally specific to the relevant companies (Amazon, Facebook, Tesla, etc.). Several questions arise:

    Are technology stocks expensive? At first glance, they are undoubtedly expensive with P/E ratios around 25-30x, but these valuations can be explained by very high growth rates. We are not at all in a situation similar to the 1999-2000 period, as many companies have become extremely profitable.

    Are some companies at risk? We must distinguish the established, profitable business models (Amazon, Google, etc.) from those which are not yet (Tesla, Netflix, etc.) and whose market capitalizations leave only little margin for error.

    Overall, the US technology sector does not seem overvalued but some companies may show continued weakness in the coming months. On this basis, should we question the upward trend of stock market indices? We think not.

    Leveling off of economic growth

    The pace of growth in the Eurozone and in the United States clearly saw a phase of acceleration in the last months of 2017. However, confidence surveys, especially those carried out with companies, and Q1 2018 statistics (retail sales, industrial production) were mixed in the United States and below expectations in the Eurozone after the peaks reached at the end of 2017. The latest inflation figures published in these two regions came out as expected, with the exception of core inflation in the Eurozone, which disappointed slightly, at a level of 1% year-on-year.

    We do not believe there is any cause for concern: we remain in line with the 2.4% growth consensus in the Eurozone for 2018 and slightly below consensus expectations for US growth, which stand at 2.8%. Our conviction remains unchanged: US inflation numbers could exceed consensus expectations in the coming months.

    The UK economy continues to hold up well in light of Brexit: only foreign trade has been penalized. As in Japan, growth in these two countries is expected to reach an annual rate of 1.4% to 1.5%.

    Expansionary monetary policies of the BoJ and the ECB

    Powell's first committee as Chairman of the US Federal Reserve was as we expected: 25bp rate hike and raising Fed Funds rate projections through 2020, in response to the improving economic outlook. Any future adjustment to monetary policy will depend on economic data, particularly future inflation figures. 

    The renewal of two governors at the BoJ has clearly strengthened the “dovish” tone in recent weeks.

    Lastly, the ECB's latest economic forecasts are now aligned with the 2018 consensus, but inflation has been revised downward in 2019, confirming that the ECB is not taking any risk on its inflation scenario. It has abandoned the idea of any further increase in its purchasing programme, a move that we expected.

    Emerging debt markets

    Our economic scenario for emerging countries is playing out. Growth prospects for 2018 will build on the solid results of 2017: 4.8% growth in the EM universe.

    The recovery observed in Latin America over the past two years continues mainly in Argentina, Brazil and Colombia, and is expected to contribute to growth, which should be close to 3% this year in South America.

    In emerging Europe as well as in Asia, activity benefited from the good recovery in world trade and the still expansionary monetary policies (in Europe and Japan). This recovery, ongoing for two years now, is taking place under conditions rarely seen in emerging countries. The level of debt is very contained in both absolute terms (below 50% of GDP) and in relative terms compared to developed countries. External accounts are on average positive and reserve levels are at their highest (USD 2,500 billion excl. China). Inflation, averaging 3.3% in 2017 in emerging countries, has never been so low and central banks could, if needed, further ease their monetary conditions.

    Despite the very positive outlook for emerging bond markets, the questioning of trade agreements such as the North American Free Trade Agreement (NAFTA), fears of a trade war via protectionist measures/threats from the United States, as well as faster FED normalization expectations have together contributed to weakening the initial outlook since mid-February.

    The normalization of US monetary policy should continue at a pace in line with market expectations, without causing a shock to emerging markets.

    Convictions

    Absolute return Fixed Income Strategy

    Our main convictions remain unchanged, including the rise in real European rates, US short-term rates and US inflation breakeven points on long-term maturities. Finally, our view remains positive on convertible bonds and banks’ subordinated debt in the Eurozone.

    Absolute Return Emerging Market Debt Strategy

    Today, we believe that the recent upsurge in volatility has been priced into the market. It is not likely to change our central scenario. We therefore maintain a positive outlook on risk premiums and on emerging market bonds in local currency.

    Absolute Return Multi-Asset Stratgey

    For all of these reasons, and in keeping with our contrarian approach to portfolio management, we maintain a positive outlook on risk-bearing assets in general and on equities in particular.

    Disclaimer

    Source: La Française, data as at 31 March 2018, information current as at 9 April 2018. For professional investors only. The information and material provided herein do not in any case represent advice, offer, solicitation or recommendation to invest in specific investments. All information and data included in this document is considered as accurate at the date of its preparation considering the economic, financial and stock-exchange related context at that date and reflect the perspectives of Group La Française on the markets and their evolution. It is subject to change and does not represent or create contractual obligations. It should be noted that past performance does not necessarily determine future performance which may vary over time. These opinions may differ from those of other investment professionals. Issued by La Française AM Finance Services, home office 128, boulevard Raspail, 75006 Paris, France, regulated by the “Autorité de Contrôle Prudentiel” as investment services provider under the number 18673  X, affiliate of La Française.

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    news-1065 Wed, 18 Apr 2018 09:53:15 +0200 Protectionism /en/who-we-are/news/detail/protectionism/ Fears of protectionism are back on top of the agenda since late February, following decisions made by the US President. First President Trump announced taxes on aluminium and steel (10% and 25% respectively). Then he singled out China, imposing a 25% tax on $60 billion in Chinese imports.

    The impact on the markets has been significant: equities and fixed-income products have declined considerably, while credit spreads have widened. Volatility should remain high in the short term as the markets await details on the products targeted and retaliation measures by China.

    Do these new developments pose a challenge to the optimistic scenario of global growth?

    Are we witnessing the start of a trade war, or is it merely political posturing in preparation of the US midterm elections?

    • The measures adopted for aluminium and steel will not have significant impacts on growth, as the combined imports of these two commodities account for only 0.5% of US GDP. Only the automotive and construction sectors will potentially see an impact.
    • Similarly, the taxes imposed on Chinese goods are unlikely to compromise recent trends in either US or Chinese growth. A 25% tax on $60 billion in imports represents $15 billion in tax revenue. With total Chinese exports to the US of around $450 billion, this tax amounts to 3% of the total. Various studies estimate a roughly 1% impact on the profits of US companies.
    • China did not initially react to the earliest announcements, but it ultimately decided to retaliate using equivalent measures.
    • Could Trump go even further? He'd likely meet opposition from lobby groups and Congress, who are generally more favourable to free trade. But even if an open trade war with China seems an irrational move, this scenario cannot be fully ruled out.

    Surprisingly, inflation anticipations did not benefit from the news. The market seems more concerned about a possible recession than a period of stagflation—the natural consequence of trade wars.

    At this stage, we believe the impact on global growth will be moderate. The recent disappointments over economic data are also unlikely to compromise our scenario, as these figures are still broadly compatible with global growth of around 4%.

    Thus, for the medium term, we are maintaining a positive outlook on the equity markets, which are currently quite inexpensive compared to other asset classes. We are also maintaining a slight upward bias on interest rates and inflation breakevens.

    Read more

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    news-1064 Tue, 17 Apr 2018 17:57:13 +0200 Are fears of a trade war realistic? by François Rimeu, Head of Multi Asset – Senior Strategist at La Française. /en/who-we-are/news/detail/are-fears-of-a-trade-war-realistic-by-francois-rimeu-head-of-multi-asset-senior-strategist-at-la/ Fears that a wave of protectionism could lead to a fully fledged trade war are growing in financial markets. Are these fears realistic? We have tried to answer several questions: 1. What lies behind the US president’s announcements? Economic or political motives? We tend toward the political for several reasons.

    a. Protectionism was a campaign promise, pitched directly to voters. The measures taken (in aluminium, steel, etc.) seek directly to benefit states which voted for Trump and which constitute his electoral base.

    b. Midterm elections are 6 months away. The timing is thus perfect to score a political victory which will bolster his image as a deal maker.

    c. It has been empirically shown that protectionist barriers do not substantially reduce trade deficits. 

    2. Do the announced measures threaten the global growth scenario? For the moment, the answer is no. 

    a. Steel and aluminium make up just 2% of US imports. Any impact will therefore be marginal.

    b. The tariffs announced by the US and China on USD 50bn of imports represent around 0.1% of their respective GDP. We can estimate the impact on corporate profits at around 1%.

    3. Historically, what has been the impact of trade tensions and what has been the outcome?

    a. 1981: The US imposed a “voluntary” reduction on Japanese car exports. The average sale price of vehicles rose but sales volume fell and salaries stagnated (see Brookings Institute, 1987). In the end, the impact was marginally bearish on growth and inflation until the quotas were lifted. No gain in productivity or competitiveness was observed in the US auto industry.

    b. 2002: The US imposed a 30% tariff on steel imports. The impact on production prices was brief but significant, which may be explained by the fact that there were no exemptions at the time. These taxes were rapidly removed amid fears of reprisals from the European Union. Here, too, the impact on growth seems to have been marginal.

    4. How do markets react empirically?

    Protectionist fears usually have a risk-off impact on markets, at least when first introduced, with poor visibility and expectations of lower growth. Such fears generally tend to dissipate as negotiations move forward and estimates show an impact that is often weaker than markets feared. If the market impact is ultimately in most cases fairly modest, the phase of volatility may last some time, from weeks to months. 

    We can, of course, not be certain about future Sino-US relations. However, based on the historical record, the likeliest scenario in our view seems to be a phase of volatile negotiations, which should come to an end once the desired political ends are achieved. This will then allow markets to return to “normal”, if there is still such a thing as “normal”! 

    Important:

    Promotional document aimed at professional investors. The content of this document does not constitute an offer or solicitation to invest, nor investment advice nor a recommendation to make any specific investment. The opinions expressed by La Française are based on current market conditions and subject to change without notice. Opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office, 128, boulevard Raspail, 75006 Paris, France, licensed by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, subsidiary of La Française.

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    news-1060 Mon, 16 Apr 2018 15:17:15 +0200 China facilitates foreign car importation /en/who-we-are/news/detail/china-facilitates-foreign-car-importation/ During the opening day of Boao forum, President Xi Jinping announced that China will significantly lower import tariffs for imported cars, and relax the joint venture shareholding requirement (current cap is 50%) for foreign firms in the auto sector.

    The two announcements echoed President Xi Jinping’s promise last November to gradually reduce import car tariffs and allow foreign automakers to establish wholly owned facilities dedicated to new energy vehicles in free trade zones. Even though the exact magnitude of the cut was not announced or the timing, China Passenger Car Association estimated that the tariff is likely to decline to 10% from 25% currently. In 2017, China imported 1.1 million cars, accounting for 5% of total China auto sales, down from 6% in 2014 as most automakers have localized key models into China. In relation to the recent trade war talks, the auto sector is actually one of the sectors where the U.S. maintains a large trade surplus with China (not counting auto spare parts). China imported 267k cars, 1% of total China auto sales, from the U.S. in 2017, while only exporting 58k cars to the U.S.*  

     

    Lower auto tariffs and the relaxation in foreign auto ownership requirements will negatively affect luxury car joint ventures in China as foreign luxury brands can choose to export new models directly to China. Imported luxury car sales in China stand to benefit in the long run, which will benefit luxury auto dealers. Chinese local brands will also likely benefit given the large price discount relative to foreign brands and reduced competitiveness of joint ventures.  

     

    That said, there are two offsetting factors to the above: one is that China still has a cost advantage compared to foreign automakers from scale and low labour costs, and two, locally produced joint venture cars have different characteristics (such as longer wheelbase) compared to foreign cars of the same brand as a result of Chinese customer preference.  Foreign automakers are likely to maintain their existing joint ventures, as most contracts have over 10 years until expiration, and building a wholly owned new facility for non-EV cars needs stringent approval from government and takes 3 to 5 years. Experience from FAW-VW's stake change also proved a lengthy and difficult process for foreign automakers to increase their ownership in joint ventures. As a result, the overall impact from the two policy changes will take time to materialize. The changes could be considered astute political manouvers enabling China to export more cars to the U.S. and Europe, as Chinese cars become more competitive. 

     

    *Source: U.S. Department of Commerce – International Trade Administration

     

    Disclaimer:

    This document is intended for relevant professional and qualified investors only and is not for retail use.

    This document is provided for informational / educational purposes only and is not intended to be, nor should it be, relied upon as a forecast, research or investment advice, and does not in any case constitute advice, an offer, a solicitation or recommendation to invest in specific investments or to adopt any investment strategy. Where La Française group has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Issued outside of Hong Kong by La Française AM Finance Services, home office 128, boulevard Raspail, 75006 Paris, France, regulated by the “Autorité de Contrôle Prudentiel” as investment services provider under the number 18673 X, affiliate of La Française. Issued within Hong Kong by JK Capital Management Ltd., a La Française group member company, is licensed and regulated by the Hong Kong Securities and Futures Commission.

     

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    news-1059 Fri, 13 Apr 2018 11:04:47 +0200 Alger On The Money - The weighing Machine in Action /en/who-we-are/news/detail/alger-on-the-money-the-weighing-machine-in-action/ “In the short run, the market is a voting machine but in the long run, it is a weighing machine,” said Benjamin Graham, Warren Buffett’s mentor. Stock prices move on sentiment in the short term but on “weight” or earnings in the long term. The decade-long outperformance of U.S. growth vs. U.S. value illustrates the “weighing machine” in action.* Growth Has "Weighed" More than Value

    • The annual EPS growth of the Russell 1000 Growth Index (6.3%) has exceeded that of the Russell 1000 Value Index (2.6%) over the p ast decade.

    • Those nearly four percentage points of outperformance are mirrored by the 11.6% return of the Russell 1000 Growth Index beating the 7.9% return of the R ussell 1000 Value Index over these same 10 years ended February 28, 2018. Stock prices may have fluctuated in the short term due to investor reactions to news and corporate announcements, but long-term performance resembles earnings growth.

    • The underlying fundamentals of U.S. growth companies continue to be strong, as evidenced by the estimated sales growth of the Russell 1000 Growth Index (8%) nearly doubling that of the R ussell 1000 Value Index (4%) over the ne xt two years.2 This may bode well for the longer term performance of growth equities.

    * As demonstrated by the Russell 1000 Growth Index and the Russell 1000 Value Index.

    ** Sales growth represents consensus estimates from FactSet and actual future sales growth rates might be materially different from the forecasts referenced.

    > Download Alger on the Money, A view on the U.S. Market

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    news-1052 Tue, 10 Apr 2018 15:19:00 +0200 First Sharia compliant Real Estate Securities separately managed account for La Française Forum Securities /en/who-we-are/news/detail/first-sharia-compliant-real-estate-securities-separately-managed-account-for-la-francaise-forum-secu/ La Française group is committed to establishing a long-term presence in the Middle East and developing innovative investment solutions with and for GCC institutional investors.

    After the creation of the first Sharia compliant OPCI (collective direct real estate investment vehicle) dedicated to institutional investors by La Française group in 2012, Global real estate securities investment firm, La Française Forum Securities has launched its first Sharia compliant Real Estate Securities separately managed account on behalf of an Islamic banking and investment services provider, based in Kuwait.

    La Française Forum Securities, a La Française group member firm, is one of the few listed real estate investment specialists to offer an investment solution that associates the firm’s cycle-tested expertise in global real estate securities with the Sharia screening capabilities of IdealRatings. 

    IdealRatings Inc., (www.idealratings.com) founded in 2006, is a market leader in Islamic capital markets and a solutions provider for Responsible Investment solutions. They cover over 40 000 listed companies/securities, including some 2000 real estate securities, in over 150 countries. The IdealRatings  solution is able to screen global listed securities for shariah compliance in accordance with any shariah rulebook. 

    La Française Forum Securities helps define the global real estate securities universe and will select securities with an above average risk adjusted total return, from a Sharia screened pool of about 150 securities. The portfolio is a concentrated one, with about 30 to 50 stocks.

    Jana Sehnalova, Managing Director of La Française Forum Securities and portfolio manager, commented, “We have worked on developing this unique investment strategy for a few years and are very pleased to be able to bring it to life and offer institutional investors with an Islamic finance focus, from the Middle East and South East Asia or elsewhere, an opportunity to diversify their asset allocation with Sharia compliant real estate securities; this asset class is starting to be attractively valued again, with double digit discounts to NAV, and an ability to identify and exploit mispricing between public and private real estate markets globally. Recognizing the potential interest in this strategy, we are also investigating with Groupe La Francaise the viability of developing a fund as part of the existing product line managed by Groupe La Francaise.”

    Mohammad Donia, CEO & President of IdealRatings commented, “We are excited to partner with a global leader like La Francaise, who strategized with us to break the barriers and create a new, innovative product solution for the Islamic Asset Management Industry and Islamic Capital Markets.”

    Download the press release

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    news-1040 Fri, 30 Mar 2018 10:00:00 +0200 Alger on the Money - Growth Spurt Ahead /en/who-we-are/news/detail/alger-on-the-money-growth-spurt-ahead/ For the first time in more than a decade, we expect acceleration in the U.S.’s nominal GDP growth to 5%. While the media tends to reference real GDP, nominal GDP reflects the impact of inflation. Corporate revenues are defined in nominal terms and with profit margins running high, revenue growth will be a key driver of future earnings. 2018 Nominal GDP Growth Expected to Climb

    > Download Alger on the Money, A view on the U.S. Market

     

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    news-1034 Tue, 27 Mar 2018 17:46:05 +0200 La Française to take 100% control of Inflection Point Capital Management UK Ltd. joint venture /en/who-we-are/news/detail/la-francaise-to-take-100-control-of-inflection-point-capital-management-uk-ltd-joint-venture/ Groupe La Française will acquire full ownership of Inflection Point Capital Management UK Ltd (“IPCM”), its London-based joint venture with sustainability veteran Dr Matthew Kiernan. The two parties formed the joint venture at the end of 2013 to accelerate the development of responsible investment research, advisory services and related investment products. This change in capital ownership will be accompanied by a change in brand.

    The acquisition of IPCM reflects La Française’s commitment to further strengthen its Responsible Investment (RI) innovation capacity as a major European asset manager. IPCM successfully established the Strategically Aware Investment (SAI) approach at La Française in all equity portfolios and in selected fixed income products. The SAI methodology is at the core of La Française’s RI strategy. It combines the analysis of environmental, social and governance (ESG) factors alongside strategic measures of adaptability and innovation, financial fundamentals and thematic research. 


    Research at IPCM is led by Roland Rott, PhD, CFA, who has 15 years of equity research and investment experience. A team of analysts works on dedicated sectors and sustainability themes combining a broad range of skills and topics including ESG risks assessment, energy transition opportunities and portfolio analytics. The team co-operates with fund managers on company engagements. The average tenure of the analysts is more than five years in different research roles.


    IPCM’s sustainability expertise is embedded in the Group’s equity investment process through a proprietary internal research platform and the development of investment ideas and solutions with analysts, portfolio managers and product specialists working closely together. 

    Download the press release

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    news-1025 Tue, 27 Mar 2018 17:13:00 +0200 A bad day for the Hong Kong stock exchange /en/who-we-are/news/detail/a-bad-day-for-the-hong-kong-stock-exchange/ Not only was the Hong Kong market badly hit by actions taken by the US administration against China with the announcement of new import tariffs, the Hong Kong stock exchange also had a nasty reminder of how vulnerable it is.

    On Friday 16th March, Yan Qingmin, vice-Chairman of CSRC, the Chinese securities regulator, announced that China Depository Receipts (CDRs) would be launched “very soon”, which according to Reuters means by the end of this year. If China wanted to pull the rug from under the Hong Kong stock exchange’s feet, it could not have done better.

    Flashback: Hong Kong wanted to get Alibaba’s listing back in 2014, but the rigidity of the one share one vote principle enshrined in Hong Kong rules pushed its founder Jack Ma to set up his holding company offshore using what is technically known as a Variable Interest Entity, and list it in the US using American Depository Receipts (ADRs). Since then, numerous Chinese companies largely coming from the internet space took the limelight by following the footpath of Alibaba, with the massive success that we know, and to Hong Kong’s chagrin. They now collectively have a market capitalisation of USD4 trillion. After three years of soul searching the Hong Kong stock exchange finally took the step to swallow its pride and did a splendid U turn on the matter. It announced in December 2017 that it would launch soon a consultation paper to allow dual-class listings in Hong Kong, sending to the bin its sacrosanct principle of one share one vote. The purpose is not only to attract unicorns (USD1bn+ start-ups) and well-established behemoths such as Xiaomi, the smartphone manufacturer, but also to convince Alibaba and other ADR issuers to move back to Hong Kong. 

    As Xi Jinping laid out his 25-year vision for China that largely revolves around technology, the Chinese authorities were fast to react as they saw the menace coming from Hong Kong: Technology companies will soon be allowed to issue CDRs on the A share market. The reform is on a fast-track. This will allow Chinese retail investors to finally participate in the growth of their national heroes that are currently listed in New York without having to go through torturous paths meant to circumvent the exchange control system currently in place. For Tencent, the fifth largest company in the world listed in Hong Kong, issuing CDRs will give it exposure to its 900 million Chinese users who will no longer need to use the Stock Connect platform that links the mainland bourse to the Hong Kong one.

    Coincidently, the green light given to CDRs is going to happen shortly after the introduction of A shares in MSCI emerging market indices, scheduled for May 2018. 

    The day after Mr. Yan’s comment filtered out, both Alibaba and its competitor JD.com announced being ready for the CDR move. Together they account for USD500bn of market capitalisation through their existing ADRs. 

    The year 2018 is going to be a milestone year for the Chinese A share market.

    But it did not start well for Hong Kong as a marketplace. 

    Disclaimer:

    This document is intended for relevant professional and qualified investors only and is not for retail use.

    This document is provided for informational / educational purposes only and is not intended to be, nor should it be, relied upon as a forecast, research or investment advice, and does not in any case constitute advice, an offer, a solicitation or recommendation to invest in specific investments or to adopt any investment strategy. Where La Française group has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Issued outside of Hong Kong by La Française AM Finance Services, home office 128, boulevard Raspail, 75006 Paris, France, regulated by the “Autorité de Contrôle Prudentiel” as investment services provider under the number 18673 X, affiliate of La Française. Issued within Hong Kong by JK Capital Management Ltd., a La Française group member company, licensed and regulated by the Hong Kong Securities and Futures Commission.

    By Fabrice Jacob, CEO of JK Capital Management Ltd., a La Française group member company

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    news-1023 Fri, 23 Mar 2018 09:53:26 +0100 La Française Forum Securities awarded “Best Sustainable Real Estate Fund Manager of the Year” by Property Funds World /en/who-we-are/news/detail/la-francaise-forum-securities-awarded-best-sustainable-real-estate-fund-manager-of-the-year-by-pro/ At this year’s March 23rd awards luncheon, held in London, La Française Forum Securities won Property Funds World's Award For “Best Sustainable Real Estate Fund Manager of the Year”. Property Funds World, a digital magazine with c. 5,500 newsletter subscribers around the world, polled their readers for over 3 months in late 2017 and early 2018. Subscribers were asked which firms they felt excelled in 2018 in over 30 fund management, legal, technology and service provision categories. As a result of the peer review, La Française Forum Securities was named “'Best Sustainable Real Estate Fund Manager of the Year”.

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    news-1022 Thu, 22 Mar 2018 14:17:05 +0100 Post Fed commentary by Hervé Chatot /en/who-we-are/news/detail/post-fed-commentary-by-herve-chatot/ The FED hiked rates by 25bp in line with market expectations and projected a higher pace of the monetary policy in response to an improved economic outlook.

    The median federal funds rate for 2018 remained unchanged at three rate hikes but just barely, and now implies three hikes in 2019 and two hikes in 2020. The median dots for 2019 and 2020 increased by 19bp and 31bp. The median longer-run projection rose a tenth to 2.9%,

    In the Summary of Economic Projections, the FED raised their forecast for GDP growth higher for both 2018 and 2019. The path for the unemployment rate was revised lower while inflation Core PCE was revised modestly higher in 2019 and 2020.

    The FED confirmed that inflation is firming but only gradually. Three rate hikes remains the baseline scenario for this year. Chairman Jerome Powell emphasized the data dependence to adjust further its monetary policy if needed.

    Those decisions are in line with our expectations but we were not expecting a dovish market reaction considering the outcome.

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    news-1021 Tue, 27 Mar 2018 09:00:00 +0200 Structural changes in China could prove positive /en/who-we-are/news/detail/structural-changes-in-china-could-prove-positive/ By Fabrice Jacob, CEO of JK Capital Management Ltd., a La Française group member company

    China has gone, over the past two weeks, through unprecedented structural changes. The appointment of the President and the Vice-President are no longer constrained in time (even though the functions attached to these two titles remain largely ceremonial). A sweeping overhaul of the government was announced leading to the effective cutting of red tape as a number of functions (business regulations, protection of the environment, infrastructure investments among others) have now been gathered under a small number of supra-administrations. It is easy draw hasty conclusions, such as Xi becoming obsessed by power, which in so many countries (including China under Mao) has led, in the past, to catastrophic consequences. Without turning a blind eye to this worst case scenario, we are actually giving Xi the benefit of the doubt. China has a large number of structural issues that will take time to be sorted out, and certainly more than the ten years of the original tenure of the Chinese presidency. What was achieved over the past two years in terms of fight against pollution, cuts in overcapacities and deleveraging through a rebalancing of debt from the shadow sector to the official banking sector was mind-blowing, even in the eyes of China perma-bears. But it is far from being over as the debt of China remains elevated with a credit-to-GDP gap of 16.7% according to the Bank for International Settlements in its latest quarterly report. Even if the debt of China seems to be under apparent control, the risk remains the impact that a brutal deleveraging of the system would have on economic growth. Thinking that the Chinese economy could be put on the track to sustainable quality growth in less than five years was not realistic, and Xi probably did not want to see his efforts jeopardized by his successor. The fact that he just appointed his long-standing trusted advisor Wang Qishan as Vice-President “for life” is a good sign. When in charge of the anti-corruption campaign, he went straight to the heads, putting behind bars a large number of very high profile politicians when pundits were speculating at that time that he would only focus on low-level scapegoats. The fact that Liu He, Xi’s closest economic advisor and a former vice-Chairman of the powerful National Development and Reform Commission, was appointed Vice-Premier is another good sign, completing a dream team of deputies who have all built solid track records in their own fields of competence over the past five years. 

    Disclaimer:

    This document is intended for relevant professional and qualified investors only and is not for retail use.

    This document is provided for informational / educational purposes only and is not intended to be, nor should it be, relied upon as a forecast, research or investment advice, and does not in any case constitute advice, an offer, a solicitation or recommendation to invest in specific investments or to adopt any investment strategy. Where La Française group has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Issued outside of Hong Kong by La Française AM Finance Services, home office 128, boulevard Raspail, 75006 Paris, France, regulated by the “Autorité de Contrôle Prudentiel” as investment services provider under the number 18673 X, affiliate of La Française. Issued within Hong Kong by JK Capital Management Ltd., a La Française group member company, is licensed and regulated by the Hong Kong Securities and Futures Commission.

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    news-1020 Thu, 22 Mar 2018 09:31:37 +0100 US Protectionism, what to expect from China? /en/who-we-are/news/detail/us-protectionism-what-to-expect-from-china/ By Fabrice Jacob, CEO of JK Capital Management Ltd., a La Française group member company

    The threat of a trade war, launched by the United States against pretty much all its trading partners, has triggered fears for a steep correction of global financial markets. Without being named, China appears to be the prime target of the White House. China exported USD506bn worth of goods to the US in 2017, resulting in a USD375bn net goods surplus. After imposing tariffs on solar panels, washing machines, aluminium and steel that only account for USD6bn of exports to the US, the White House is now considering another train of tariffs applying this time to USD60bn worth of exports. President Trump has already said that he would go after telecommunication equipment, which may include laptops and smartphones. 

    Will China retaliate? The answer is yes, in their-own way. They definitely have the means to do it. Just look at how China has behaved in recent history with Korea and Japan. The Chinese government may simply ask industrialists and consumers to stop buying American products, using its powerful propaganda machine, coupled with the very strong sense of patriotism that exists among the Chinese population.  That being said, we reckon China will be much more careful handling the Sino-US situation simply because the US is not Japan or South Korea. We expect China to react. We will not know what is going on behind the scene, but for sure, the Chinese government will communicate with President Trump to avoid a full-blown trade war.

    Would the risk of a trade war create downside risks for Chinese stocks? Yes, in the short-term, avoiding large Chinese exporters to the US could make sense, but it is important to wait for details to be announced before jumping to conclusions. In the meantime, technology sectors focused on internal demand could offer great prospects. The same goes for discretionary consumer names pulled by rising salaries, for e-commerce players, for insurance companies benefitting from an under-penetration of savings products, among others. In the medium to long-term though, we would like to argue that one should not miss the multi-year big picture: a re-rating of a Chinese market that has suffered for years from a discount factor related to structural risks within the economy (over-leverage of state-owned enterprises, overcapacities in commodities, property “bubble” to name a few). As China has started to tackle these risks over the past few years and will continue to focus on them in the near future, we anticipate a structural re-rating driven by improved investor sentiment based on higher quality yet sustainable Chinese growth.

    Disclaimer:

    This document is intended for relevant professional and qualified investors only and is not for retail use.

    This document is provided for informational / educational purposes only and is not intended to be, nor should it be, relied upon as a forecast, research or investment advice, and does not in any case constitute advice, an offer, a solicitation or recommendation to invest in specific investments or to adopt any investment strategy. Where La Française group has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Issued outside of Hong Kong by La Française AM Finance Services, home office 128, boulevard Raspail, 75006 Paris, France, regulated by the “Autorité de Contrôle Prudentiel” as investment services provider under the number 18673 X, affiliate of La Française. Issued within Hong Kong by JK Capital Management Ltd., a La Française group member company, is licensed and regulated by the Hong Kong Securities and Futures Commission.

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    news-1019 Wed, 21 Mar 2018 11:01:56 +0100 Equity, investors' circumspection /en/who-we-are/news/detail/equity-investors-circumspection/ With all well at the start of the year, and 2018 carrying on where 2017 left off, we were expecting the equity markets to continue their progression accompanied by the synchronised global growth that was supporting activity and corporate earnings, with EPS up by some 10% more or less everywhere.

    The equity markets continued to rise until 26 January, largely unscathed by the rises in interest rates and the EUR-USD exchange rate. That date marked a significant change in mood, with an equity market correction of around 10%. While European yields remained unchanged (1.01% for the 10Y OAT at end-February), comments by new Fed chair Jerome Powell prompted expectations of recurrent rate hikes in 2018 and a rise in US 10-year yields (10Y T-bond +0.15 bp in one month to 2.87%) focused the attention. The markets underlined this change in regime with a sudden spike in volatility, which was exacerbated by technical factors. The combination of the rise in interest rates and the return of volatility logically led to higher discount rates for future earnings, and therefore a correction.

    The change in regime now seems to have been factored in by the markets, but despite a modest recovery since the end of the first week of February, investors continue to be wary. While we can say that the tensions on interest rates are still a factor, as well as concerns over a possible pick-up in inflation, it is also true that the leading economic growth indicators hit a ceiling a few days ago. However, these indicators have peaked at a high level, which is consistent with a global growth rate of more than 4% over the full year, and 2017 results releases are on a positive trend. When the markets closed on 1 March, 76% of Stoxx 600 firms and 97% of S&P 500 companies had announced their results. A majority of firms posted better-than-expected revenue and net income, on both sides of the Atlantic. In Europe, results improved after a lacklustre start to the season, with a level of positive surprises similar to that of Q4 2016. However, guidance from firms is below the targets indicated in previous quarters (30% below expectations vs 11% in Q2 2017 for example). In this climate of concern over inflationary tensions, and with results announcements coming thick and fast, rate-sensitive (long duration) sectors fell in February.

    Investors are also considerably wary of rising political tensions, particularly with President Trump saying he will increase tariffs, which could weigh on global trade. We have previously raised this potential risk to trade agreements, and it has now become a reality. The measures announced should only concern steel and aluminium imports (with some exceptions), and could be in place from the end of March. On the other hand, President Trump’s comments, combined with the recent resignation of White House chief economic advisor Gary Cohn, suggest a possible tightening of the conditions for trading with the United States and, reading between the lines, a hardening of its stance over its trade, financial and competitive relationship with China. This resignation will weigh on the risk generating pressure on the equity markets and the US dollar, and therefore on the yen, and ultimately, on Asian equities.

    Read more

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    news-1013 Tue, 20 Mar 2018 16:40:50 +0100 Rates VS inflationary risk /en/who-we-are/news/detail/rates-vs-inflationary-risk/ Volatility on the equity markets was mainly fuelled by strong inflationary fears, but movements in inflation-linked bonds convey a more moderate message.

    The latest upward move in core nominal yields, which began in early December, was more down to the rise in real rates than higher inflation expectations. Real rates have moved to reflect the upgrades to growth forecasts. Valuations therefore remain attractive on inflation breakevens, and they are likely to rebound in response to the inflation upside surprises we expect to see in the United States this year: in particular, underlying inflation, for which expectations remain modest, should be driven by the economic cycle. The inflation breakeven curve remains flat on these two areas, and the premium on the longest maturities still seems very low to us given the current stage of the economic cycle. We are therefore positive on inflation breakevens for the US and Europe, and favour long maturities.

    The new Fed chairman is now in place and has already expressed his confidence on inflation going forward. Meanwhile, an increasing number of Fed board members are talking openly of the need for more monetary tightening. And we think they have a point: the tax reform approved in December was accompanied by new budget spending measures from the start of the year, and these two factors should lead the Fed to upgrade its GDP growth forecast for 2018; inflation should pick up and wages are expected to rise given a tight labour market, which would provide sufficient grounds to quicken the pace of monetary normalisation. We should therefore see further rises in US short-term interest rates. Nonetheless, the Fed - along with the central banks of the major developed countries - will be careful not to hike rates too high, too soon, as this may weaken growth.

    In the eurozone, real rates remain very low compared with the rest of the world and in light of the economic scenario: as in the United States, normalisation will likely take place when the ECB’s QE programme comes to an end. At such a low level, they are vulnerable to any comments in this area by the ECB and to events in North America.

    The reconnection of core country rates with the economic fundamentals remains our central scenario, although we don’t see this being a linear process...

    Read more

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    news-1010 Tue, 20 Mar 2018 09:56:48 +0100 La Française strengthens its organisation in Asia with a dedicated Investor Relations Director /en/who-we-are/news/detail/la-francaise-strengthens-its-organisation-in-asia-with-a-dedicated-investor-relations-director/ La Française, an international asset management group with over €66 billion in assets under management (31/12/2017) and offices located throughout Europe, Asia and in the Unites States, continues to pursue its development strategy in Asia and has strengthened its team with an Investor Relations Director- Korea, Jennifer Choi.

    Jennifer Choi brings to La Française a wealth of experience in investment management, commercial real estate valuation and hotel appraisal. Before joining Groupe La Française, Jennifer was a Senior Manager in the overseas real estate investment team of KIM (Korea Investment Management), responsible for the sourcing and financial analysis of assets, fund raising and investor relations. Prior to KIM, Jennifer spent close to nine years in the Valuation Group of Cushman & Wakefield. For three years, she was based in their Los Angeles, CA office and specialized in hospitality valuation. Thereafter, she returned to Korea where she was appointed Head of Valuation, covering a broad range of asset classes: hotels, office, retail and industrial properties.  

    Jennifer holds a Bachelor’s degree in Hotel Management from Pennsylvania State University.

    Based in Seoul, Jennifer Choi will report directly to Investor Relations Director for Asia, Shawna Yang. 

    Philippe Lecomte, CEO of La Française AM International said, “2017 marked yet another milestone for La Française. The signing of the landmark transaction in Brussels on behalf of a club of Korean and French investors brought assets under management on behalf of Asian investors to over 1 billion euros. Considering we inaugurated our first office in Korea in 2016, the growth rate is exceptional. Jennifer is a valuable addition to the team and I am confident that she will be instrumental in further developing our real estate expertise.” 

    Download the press release

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    news-1008 Mon, 19 Mar 2018 20:34:13 +0100 Pre Fed Commentary by Hervé Chatot /en/who-we-are/news/detail/pre-fed-commentary-by-herve-chatot/ This week, the FOMC meeting will be the key event. Jay Powell will give his first press conference as Fed Chair on Wednesday

    We expect a 25bp rate hike. The tone of the meeting is likely to be more optimistic and slightly hawkish. Fed members should be more upbeat on the economy with a balance of risks now skewed to the upside.

    Since the last meeting, all economic data pointed to further recovery and the outlook has improved. The two fiscal stimuli will likely lead FED members to deliver more constructive projections for the US economy.

    Summary of Economic Projections (SEP) will be updated. We expect it will reflect the improved confidence in the economic outlook. GDP growth should be revised higher both in 2018 and 2019 in a range of 2.5% to 2.9%. Elsewhere, we think the FED will revise the path of inflation slightly higher for the next years and to lower the path for unemployment rate as the job market remains very strong.

    Regarding the dots plot, we expect a higher median dot over the next two years (+25bp) with some risk for the median longer-run dot to shift up to 3%.

    On rates, the market has already fully priced in the March hike and a total of three hikes in 2018. The press conference will be key to see if J Powell could open the door to four hikes this year, which will support an hawkish reaction of the markets.

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    news-1005 Mon, 19 Mar 2018 11:32:51 +0100 The return of volatility /en/who-we-are/news/detail/the-return-of-volatility/ As we have said several times in the last few weeks, the key theme in February was the sudden return of volatility.

     

    Aside from the technical factors that caused this spike (see Flash), let’s take a look at the fundamental factors that may explain the recent halt to the bull market in equities since summer 2017:

     

     

    The rise in interest rates? This is unlikely to be good news, but was to be expected in the current global growth and monetary normalisation environment...and a 50 bp increase in interest rates shouldn’t have too much of an impact on earnings, assuming that rates don’t go too much higher. We do not expect this level of increase to affect the buoyant real estate sector or impact significantly on the refinancing of US firms.

    The rise in inflation? The relationship between inflation and corporate earnings is not an easy one to analyse. As equities are real assets, they should benefit from inflation via an increase in their earnings. But this applies only up to a certain point, since if inflation is too high it increases uncertainty, and therefore, risk premiums. Historically, market valuations are at their highest when inflation is between 3% and 3.5%, but although rising at present, inflation is nowhere near this band and should not therefore be considered a threat.

    A reduction in excess liquidity? In general, central bank balance sheets are still expanding and should continue to do so until at least the end of the year. As such, we do not expect the excess liquidity to be cut off suddenly in the short or medium term. 

    The protectionist policies of Donald Trump? We should keep some perspective on Trump’s recent announcements: even if such policies were implemented, they would have only a modest impact on growth via global trade, and historically, have rarely triggered an escalation of protectionist measures. Nonetheless, it would be a concern if these measures were applied to key sectors.

    For all these reasons, we retain a positive medium-term view on the equity markets and see the significant share price falls as an opportunity. We are also maintaining a slight upward bias on inflation breakevens, and rates in general.

    Read more

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    news-1003 Fri, 16 Mar 2018 10:52:35 +0100 Alger on the Money - Emerging Markets Lead the Pack /en/who-we-are/news/detail/alger-on-the-money-emerging-markets-lead-the-pack/ After posting strong results last year, emerging markets equities may be poised to rise further in 2018 with the International Monetary Fund forecasting accelerated growth surpassing that of developed markets once again. Emerging Markets Earnings Outgrew U.S. and Rest of World Last Year

     

    > Download Alger on the Money, A view on the U.S. Market

     

    1 Bank of America Merrill Lynch (2017) “Two for Two: Asia/EM Equities likely to double in two years.” The Inquirer.

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    news-1000 Thu, 15 Mar 2018 14:12:28 +0100 Leading investors partner with UN to boost climate transparency by piloting Financial Stability Board recommendations /en/who-we-are/news/detail/leading-investors-partner-with-un-to-boost-climate-transparency-by-piloting-financial-stability-boar/ - UN Environment, together with nine investors from six countries – representing close to US$ 3 trillion – have formed a leadership group to promote climate transparency by the investor community.

    - The group, including Norges Bank Investment Management (NBIM), Aviva, Caisse de Dépôt et Placement du Québec (CDPQ), Desjardins Group, Nordea and Storebrand Asset Management, will pilot the recent recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).

    - The outputs and conclusions of this group will stimulate and ease TCFD adoption by the wider industry, including the 1,900 investor members of the Principles for Responsible Investment.

    Nine leading pension funds, insurers, and asset management firms, announced today they will work together with UN Environment Finance Initiative (UNEP FI) on guidelines towards a first set of climate-related investor disclosures in alignment with the recommendations of the Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosures (TCFD). 

    The investors that are joining the group today are Addenda Capital, Aviva, Caisse de Dépôt et Placement du Québec, Desjardins Group, La Française Group, Nordea Investment Management, Norges Bank Investment Management, Rockefeller Asset Management, and Storebrand Asset Management.

    “The message from these investment leaders is clear - climate change is real and it is the single largest threat to our economy,” said UN Environment chief, Erik Solheim. “At the same time, there are endless business opportunities in climate action. Transparency on how investors mitigate the risks and seize the opportunities of a climate-compatible pathway is crucial to move international markets towards actively supporting a low-carbon and climate-resilient future.” 

    This follows the work of an equivalent group of 16 banks, launched in 2017 and also convened and facilitated by UNEP FI, that will conclude its work and deliver its outputs in the second quarter of 2018.

    The Financial Stability Board, chaired by Bank of England Governor Mark Carney, mandated the Task Force to develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders. Chaired by the former Mayor of New York, Michael Bloomberg, their final recommendations were published and submitted to the G20 at the end of June 2017.

    The Investor Group convening today will focus on developing the analytical tools and indicators required to assess and disclose their exposures to the risks and opportunities presented by climate change. As such the investors not only welcome the TCFD recommendations but are also declaring their intention to - acting within their mandates - jointly pioneer, and put in place, the tools that they need to adopt and implement this ground-breaking framework. 

    "The more information investors have about the climate risks and opportunities facing companies, the smarter decisions they will be able to make, and the more efficient our markets will become,” said Michael Bloomberg, Chair of the Task Force and newly appointed UN Special Envoy for Climate Action. "This investor-led working group is an important step in that direction, and it's great to see that it's consistent with our Task Force's recommendations."

    Reliable information on investors’ exposure to climate change risks will strengthen the stability of the financial system, encourage more disclosures from portfolio companies across sectors and help boost climate friendly investments. The pilot group comprises nine of UN Environment Finance Initiative’s investment members, and the jointly developed scenarios, models and approaches will be made publicly available at the end of the project. This will enable other investors to pick up and expand on this joint work and encourage the wider investment community to assess how they can adapt to and promote a climate-resilient, low-carbon economy. 

    To that effect, this pilot group will not operate in isolation. It will closely coordinate with, and make its insights and outputs available to, the bigger networks of climate-savvy investors such as the Principles for Responsible Investment and the Institutional Investor Group on Climate Change whose new Investor Practices Programme is structured around the TCFD recommendations. It will also support and inform the global Investor Agenda through which, in 2018, the global investor community will put on display its ambition and determination to act on climate change.

    The recommendations are welcomed by investors and civil society alike, as the importance of the finance sector in supporting the Paris Climate Agreement’s goals becomes increasingly clear. The framework will help global financial markets become more transparent, stable, and better able to cope with the challenges of climate change. This first mover project to implement the recommendations puts UN Environment Finance Initiative’s members in the vanguard of this effort.

    > Click here to download the full press release

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    news-990 Thu, 08 Mar 2018 18:28:05 +0100 Post ECB commentary by François Rimeu /en/who-we-are/news/detail/post-ecb-commentary-by-francois-rimeu/ Downward revision on 2019 inflation forecast pushes rates lower.

    The ECB left  interest rates unchanged and confirmed that the net asset purchases are intended to continue, at the current monthly pace of €30 billion, until the end of September 2018 or beyond if necessary. 

    As we expected the ECB dropped its pledge to increase size of QE if needed, pushing rates initially higher. 

    The new macro-economic staff projections showed an upward revision on growth (2.3% to 2.4% in 2018) but a downward revision on inflation (1.5% to 1.4% in 2019). Even if the latest HICP figures were below market consensus, this comes as a surprise considering strong growth in the Eurozone during the last 3 months. Market reaction is dovish with rates lower than at the beginning of the press conference.

    No other material changes.

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    news-987 Tue, 13 Mar 2018 09:00:00 +0100 La Française strengthens its international development team dedicated to Asia /en/who-we-are/news/detail/la-francaise-strengthens-its-international-development-team-dedicated-to-asia/ La Française, an international asset management group with over €66 billion in assets under management (31/12/2017) and offices located throughout Europe, Asia and in the Unites States, continues to pursue its development strategy in Asia and has strengthened its team with an International Sales Manager, Kelly Choi.

    “La Française is gaining traction in Asian markets. We are glad to have energetic and passionate business development talents like Kelly joining us to continue our efforts in developing the Asia market.” said Philippe Lecomte, CEO of La Française AM International. 

    Kelly has 5 years of experience in the asset management industry and has held a number of Business Development positions covering the greater China region for a number of asset management firms including, PineBridge Investments Asia & Baring Asset Management. 

    Kelly holds a Bachelor of Law from the University of Kent and a Master of Science in Accounting and Finance from the London School of Economics.

    Download the press release

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    news-983 Tue, 06 Mar 2018 18:18:14 +0100 Ahead of the ECB meeting /en/who-we-are/news/detail/ahead-of-the-ecb-meeting/ We expect the ECB to revise just slightly higher its growth and inflation forecasts:
    • 2018 Growth forecast from 2.3% to 2.4%
    • 2018 HICP inflation forecast from 1.4% to 1.5%

    It won’t come as a surprise for the market as ECB macro-economic projections are currently below market consensus. 

    We also expect the QE easing bias to be removed (“QE can be increased in terms of size and / or duration”): we know the ECB would act if the outlook deteriorates but it is not necessary to be explicit when growth looks very strong. This would be seen as moderately hawkish.

    We don’t expect new information about whether or not the ECB is going to go for a sudden stop in September or to taper during Q4 2018. 

    We don’t expect new information regarding the exact meaning of “well past the end of QE”; the market is currently thinking about 6 months.

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    news-981 Fri, 02 Mar 2018 11:23:54 +0100 Alger on the money - AI’s Popularity Grows /en/who-we-are/news/detail/alger-on-the-money-ais-popularity-grows/ Artificial intelligence (AI) may sound like an adversary in a science fiction novel but in reality it has become an extremely valuable business tool. Companies can now process mammoth amounts of data to discern trends and develop insights that help them make real-time decisions and more accurate forecasts.

     

    • From March 2015 to September 2017, the number of S&P 500 companies making AI-related comments on earnings calls rose over 1,100%. We expect this trend to continue as more and more companies harness the vast potential of AI.
    • The Health Care industry has already experienced 30%-50% higher productivity for nurses using AI tools. Retailers report 30% less stocking time as a result of employing autonomous vehicles in warehouses and utilities companies have enjoyed a 20% increase in energy production due to machine learning technology optimizing how much output can be extracted from a resource.1
    • AI has become a rapidly growing investment theme and is a potential opportunity for growth equity investing.

    1 McKinsey.

    Download Alger on the Money, A view on the U.S. Market 

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    news-977 Wed, 28 Feb 2018 14:25:51 +0100 Alger - Right issue to watch but wrong time to worry /en/who-we-are/news/detail/alger-right-issue-to-watch-but-wrong-time-to-worry/ After hitting an all-time high on January 26, the S&P 500 Index declined into correction territory. As usual, the business media focused on the most recent data point—which in this case was wage inflation as depicted by the U.S. Bureau of Labor Statistics’ February 2 report—and rushed to create a “story” from it.

    The story isn’t really worth much comment, in our view, as there’s no real correlation between a single wage data point, or for that matter, any single data point, and the ultimate direction of the stock market. The report depicted wages increasing 2.9% year-over-year in January versus 2.7% in December and the 2.5% average rate increase in 2017. The story was that investors suddenly became anxious about robust economic growth, higher inflation, and interest rates. Wasn’t it roughly two years ago that the oft-repeated news story was that we were all supposed to be worried about economic stagnation, including wages that had failed to increase for years? And, further, that the equity rally from the lows of 2009 was a quantitative easing and central bank mirage that would end?

    What in fact has happened in the last year and a half is we’ve had a much stronger than expected economy, continued low inflation and interest rates, and a strong continuation of the bull market.

    Please click here to download the document

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    news-976 Wed, 28 Feb 2018 11:55:42 +0100 The earnings season in the US is over and has been positive /en/who-we-are/news/detail/the-earnings-season-in-the-us-is-over-and-has-been-positive/ Unlike previous ones, the last week was rather quiet. Not too much to report in terms of macro events. Let us note however:
    • Fed published on Wednesday night FOMC (Federal Open Market Committee) minutes. The tone was on the hawkish side, likewise the release. The Fed members said they were revising upward their GDP expectation, due to stronger activity figures, very accommodative financial conditions, fiscal reform and the USD300bn spending package that was approved recently. The participants said as well that a strong growth meant more Fed funds hikes than previously expected.
      Market behavior is interesting around this event: US 10 year yields rose by +5bps to 2.95% immediately, but there was no follow through. US bond yields came back afterwards and finish the week unchanged. A large part of negative newsflow is now behind us. What are the additional negative news for government bonds?
      We think the short end of the curve is now at more neutral valuations, and recovers some potential for a rally in case of a market risk off event.  
    • Concerning the Yen (JPY), figures published this week comforted our bullish view. The trade balance came out at 373bn JPY, above expectations with a strong increase of exports (+12.2% yoy)
      Furthermore, investors are currently large short JPY positions vs the dollar: USD-13.5bn on futures, just as big as at the end of 2013, when Abenomics was the main market theme. Last, but not least, the Yen is very cheap, especially vs the dollar.

    We keep our bullish equity view, and we are even more convinced since earnings season – which is close to its end – was again very good in the US (78% positive sales surprise, 76% positive EPS surprise).

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

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    news-974 Wed, 28 Feb 2018 11:15:28 +0100 “US Inflation expectations” by Gilles Seurat, Fund Manager – Cross Asset & Absolute Return /en/who-we-are/news/detail/us-inflation-expectations-by-gilles-seurat-fund-manager-cross-asset-absolute-return/ We expect US headline inflation to rise in the coming months from 2.1% in January to a figure close to 2.8% in July.

    This rise would be mostly due to base effects on energy and should be followed by a slowdown to circa 2.2% around yearend. Core inflation (ex-energy) is expected to rise slowly from 1.8% in January 2018 to 2.4% in December.

    Markets could continue to review their inflation expectations upwards moderately, but we do not anticipate any sharp move further. Long term disinflationary factors such as demography will continue to weigh on expectations for a long time.

    Nominal yields could continue to rise moderately, but we think valuations are now close to fair value on US government bonds.

    In our scenario, Fed hikes in an orderly fashion, which enables equities to continue to rise thanks to strong EPS growth and not too expensive valuations.

    We think European equities should do well in this environment, but their performance might be hampered by a stronger Euro.

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    news-971 Wed, 28 Feb 2018 10:02:19 +0100 La Française Real Estate Partners International closes a second acquisition(1) in Amsterdam /en/who-we-are/news/detail/la-francaise-real-estate-partners-international-closes-a-second-acquisition1-in-amsterdam/ La Française Real Estate Partners International has acquired, on behalf of a La Française collective real estate investment vehicle, an office building located at Muiderstraat 1, in central Amsterdam.

    The 5-storey office building, refurbished in 2012/2013, offers 2,731 m2 of lettable space and is fully leased. The asset is used as a business center for multitenant use.

    Jens Goettler, Managing Director for Germany, La Française Real Estate Partners International, said: “This is our second acquisition in the Netherlands. The limited supply of modern office space in Amsterdam combined with the current high demand should contribute favorably to the valuation of the property and to rental levels. We continue to look for investment opportunities of similar quality and type.”

    La Française Real Estate Partners International was advised by Houthoff Buruma and CBRE Netherlands.

    1This is an example of an investment held within the portfolio. It is not indicative of future investments and does not fully reflect the composition of the funds.

    Download the press release

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    news-969 Tue, 27 Feb 2018 10:18:41 +0100 High-conviction investing by Amy Zhang, portfolio manager of the fund Alger SICAV – Alger Small Cap Focus /en/who-we-are/news/detail/high-conviction-investing-by-amy-zhang-portfolio-manager-of-the-fund-alger-sicav-alger-small-cap/ Amy Zhang, portfolio manager of the fund Alger SICAV – Alger Small Cap Focus, explains the key benefits of employing a focused strategy in small cap investing. With more than 20 years of investment experience, Amy Zhang joined Alger, a pioneer of growth investing, in February 2015. The investment process aims to build a focused portfolio of exceptional small companies with proven operating histories, disruptive technologies and long-term revenue growth.

     

     

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    news-963 Thu, 22 Feb 2018 10:57:11 +0100 US CPI came out at +2.1 % vs +1.9% expected for January 2018 /en/who-we-are/news/detail/us-cpi-came-out-at-21-vs-19-expected-for-january-2018/

    Market direction was pretty clear, at least regarding equity indices with a week of strong rebound: +4% for S&P 500, +3% for Euro Area equities and +5% for emerging market equities.

    Fixed income markets behavior was harder to read: US bond yields soared after US inflation data came out way above expectations on last Wednesday. They moved from 2.82% to 2.94% on the day, and the move was mostly due to inflation component which seems quite sensible. Markets have come back since, US 10Y bond yield is trading now at 2.86%, ie very close to levels before inflation report.

    Last, the dollar continues to weaken, which seems logical given that fiscal deficit announcements at a abyssal level is under preparation by Trump’s administration. We could almost reach fiscal deficits of 2008, but without an economic crisis…

    Events to note from last week:

    • Inflation print of course (“the most important inflation figure ever” if we believe some investment banks…) which comes out at +0.3% on core inflation (+0.349% precisely) vs +0.2% expected on January 2018. Core inflation was +1.8% vs +1.7% expected and +2.1% vs +1.9% on headline inflation. It is a very good figure, which tends to confirm the very good wage growth we had two weeks ago. However, like in wage growth, we will have to wait for a confirmation given that some components look “weird” (+1.7% on the month on apparel for instance). We must not forget either that the method was changed, which blurs data analysis. But even without “weird” components, it remains a strong figure;
    • US retail sales: very disappointing with December data revised downwards. Negative impact on Q1 GDP expected. Here again, not easy to read data given that bad weather can be an explanation;
    • US real estate data: whopping data, way above expectations;
    • Euro area GDP was in line with consensus at 0.6% for Q4 (2.7% annualized). Very robust figure;
    • We must mention as well French unemployment rate that slumps from 9.5 to 8.9% this month!
    • Japanese data was weak: disappointing GDP and core machine orders below expectations.

    Markets are not easy to read currently, the day inflation dropped being a “special” one for instance (equities sold off massively and then soared…). But we keep a positive equity view over the medium term: growth is good, earnings are on a positive trend and valuations are not too expensive. Inflation is rising, yes, but breakeven inflation is already on high levels and real yields rose quite a lot too. We think US bond yields have limited room to rise over the short term. 

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-961 Tue, 06 Feb 2018 09:44:00 +0100 La Française sponsors the Trend & Morningstar Investment Summit on february 28, 2018 /en/who-we-are/news/detail/la-francaise-sponsors-the-trend-morningstar-investment-summit-on-february-28-2018/ La Française organize an afternoon conference in Brussels on february 28, 2018. Paul Gurzal, Head of Credit at La Française AM, will present "is there still juice in Subordinated debt ?"

    Given the strong performance of the asset class, is there still juice left in subordinated debt? In the wake of recent Italian an Spanish bank resolutions, investors are attentive to potential sources of risk that could disrupt the asset class. How will the subordinated space react to ever evolving regulations, challenging profitability, etc...

    Practical information:

    Date: February 28, 2018
    Time: 16:45 to 17:15
    Place: Hotel Sheraton Brussels Airport, Room 2 - Brussels National Airport, 1930 Brussels

     

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    news-955 Fri, 16 Feb 2018 10:41:01 +0100 Alger on the money - Inspired by Change, Driven by Growth. Leading Indicators Signal Stability /en/who-we-are/news/detail/alger-on-the-money-inspired-by-change-driven-by-growth-leading-indicators-signal-stability/ Currently a number of forces are weighing on inflation in the U.S., allowing the Fed to be patient in its tightening path. Given that every major recession of the past 75 years has followed significant Fed Funds rate tightening or inflation acceleration, or both, we believe a recession is not imminent.  

    Download Alger on the Money, A view on the U.S. Market 

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    news-946 Thu, 15 Feb 2018 11:51:03 +0100 La Française at Mondoinvestor Fund Forum Selector, February 21, 2018 /en/who-we-are/news/detail/la-francaise-at-mondoinvestor-fund-forum-selector-february-21-2018/ Jérémie Boudinet, Credit Fund Manager at La Française, will be present at Mondoinvestor's Fund Forum Selector event this February 21st, in Milan. In front of an audience of fund selectors, Jérémie will shed light on a critical question: Is there still juice in subordinated debt? Subordinated debt asset classes feature double digit returns in 2017, but their yields are now much lower than one year ago. Is there still potential on the asset classes? What are the risks and opportunities in the months to come?

     



    Forum Fund Selector

    February21, 2018
    Four Seasons Hotel -Milan

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    news-921 Thu, 08 Feb 2018 10:03:31 +0100 US average hourly earnings came out last Friday at +2.9% year over year against +2.6% expected /en/who-we-are/news/detail/us-average-hourly-earnings-came-out-last-friday-at-29-year-over-year-against-26-expected/ Last week there was only one topic : fixed income markets !

    The US 10y Note yield continues to go higher: 2.65% at the end of January and 2.85% last Friday, the highest since 2014. The German 10y Bund follows closely and rise from 0.63% to 0.75%, the highest since 2015. Reasons of that move?

    • FOMC was on the hawkish side. Fed’s tone was more confident on the inflation side;
    • Economic data continues to be strong (Consumer confidence, conference board, Chinese PMI, Manufacturing ISM…);
    • The most significant figure of last week was the average hourly earnings which came out at +2.9% yoy vs +2.6% expected. So far, wages failed to rise significantly in the US. Higher wages makes investors nervous about a potential surge in inflation and a stronger tightening of the Fed policy.

    The equity markets, which had been quite immune to higher bond yields before, experienced a correction last week. There must be no connection with earnings announcements, which continue to be very positive (+15% growth on Eurozone EPS yoy). 

    So THE major issue is where will bond yields stop rising?

    • Regarding the short-term rates, we think market pricing is consistent with current strong pace of macro indicators and what have been announced by various central banks. Unless a radical change in tone happens, we think there is a limited room to reprice central banks further. A radical change in tone seems not plausible to us since it would add more volatility to already volatile markets, and could harm central bank’s credibility which has been lengthily acquired;
    • Regarding the long-term rates, the issue is more difficult. The long term disinflationary trends remain valid: demography, high household and government debt burden, higher competition due to internet. On top of that, many insurance companies and pension funds which have long term liabilities should emerge to benefit from higher yields. The markets can continue to get excited, but we think valuations are starting to look more attractive (3.1% for US 5y5y forward yield).

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-915 Tue, 06 Feb 2018 13:46:03 +0100 Equities are down 5%, VIX soars… /en/who-we-are/news/detail/equities-are-down-5-vix-soars/ Investors seem to be panicking while fundamentals continue to surprise on the upside. Our take

    Monday’s S&P return of -4.1% was the largest one-day decline since August 18th, 2011. All indications point to a positioning-driven sell-off, a continuation of last week, as fundamental data remains strong, both on the macroeconomic side (strong ISM in the US, strong PMI in the Eurozone) and the microeconomic side with earnings results surprising positively. All the different regions have shown similar equity losses at the opening this morning. The recent sell-off of fixed income markets may have also been a factor, putting pressure on some systematic strategies.

    The move on the volatility index (VIX) was more extreme than any other major market with short-term VIX future-based products rebalancing. The VIX increase of 20 points was the largest absolute change ever. The current level of the VIX implies the S&P should move an average of almost 2% daily which would represent a significant change from the recent low-volatility environment if it continues; for context, Friday was the S&P’s first 2% one-day move since 2016. Current higher realized volatility (18% in 2018) is not nearly high enough to justify the current level of the volatility index.

    The debate today is whether Monday’s spike in volatility cleared the deck of volatile short-options positions or if it will lead to further buying of volatility to cover the implicit short volatility positions among investors. 

    Systematic strategies (volatility targeting, risk parity, CTA’s…) may contribute to further outflows in the days ahead. That being said, and even if in the very short-term markets may remain volatile, there has been a massive divergence between strong market fundamentals and equity price action over the last few days. Ultimately, we think that the current market correction represents a buying opportunity.

     

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    news-913 Fri, 02 Feb 2018 10:13:33 +0100 Alger on the money - Digital Empires Thrive on Users /en/who-we-are/news/detail/alger-on-the-money-digital-empires-thrive-on-users/ Digital businesses exhibit network effects, which refer to the rise in a business’s value with each additional user it acquires. Other examples include the telephone during its early days and currently the internet. Understanding the scale and growth rates that the network effect brings to today’s largest global internet companies is critical when choosing investments in these companies.

    Download Alger on the Money, A view on the U.S. Market 

    ]]>
    news-904 Thu, 25 Jan 2018 14:15:44 +0100 Citywire Fixed Income Retreat, Hampshire Four Seasons, February 1 & 2, 2018 /en/who-we-are/news/detail/citywire-fixed-income-retreat-hampshire-four-seasons-february-1-2-2018/ Fixed Income Strategy: Forget about the risk-free carry, focus on the premium!

    Prior to 2008, a government bond delivered a carry of between 3% and 4% with a volatility of around 5% and zero default risk. During that period, investors had a small but decent remuneration for a low level of risk. However, this has completely changed in today’s extremely low interest environment. 

      

    Currently, fixed income investors have two options: 

    • Invest in assets that no longer deliver sufficient yield. 
    • Accept a higher level of risk with (or without!) the corresponding returns 

    At La Française, our solution to this dilemma is an unconstrained bond fund that seeks to offer the risk return profile of a pre-crisis government bond. We achieve this by combining a fundamental macroeconomic approach with an innovative quantitative model focused on term and risk premiums.

    Fixed Income portfolio manager, Maud Minuit, will demonstrate how the combination of our macro views/in-house expertise and the search for more diversified performance drivers allows us to target an optimal fixed income asset allocation, that can generate potential performance with less sensitivity to interest rate levels.

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    news-902 Thu, 25 Jan 2018 09:26:39 +0100 The 5-year US bond yield is at 2.44%, its highest level for 7 years /en/who-we-are/news/detail/the-5-year-us-bond-yield-is-at-244-its-highest-level-for-7-years/ Financial markets were closed Monday 15th in the US due to Martin Luther King day.

    The week will not be remembered as particularly eventful. The trends remain the same:

    • US bond yields are a touch higher (+6bps). Nothing on Euro bond yields though;
    •  Market is trading 2.44% for 5-year US bond yield, the highest level for 7 years. Markets price more than three rate hikes in the US for 2018; and 2 hikes are priced with a 60% probability on June 2018. There is little room for negative surprises. What could be surprising?
      - Q1 GDP could be weaker than expected, which happens regularly in the US (often due to climate). This is why bond yields tend to rise in Q4 / Q1 and decrease later on;
      - Oil could experience a pull back. Brent rose above $70 for the first time since 2015 due to reasons that are sometimes temporary. This could reverse, especially with investors positioned very long on oil.
    • Equity markets are up, circa +1% last week.

    On the macro side, not many data releases to comment:

    • Most of the figures are from China: Q4 GDP above expectations at 6.8%, retail sales slightly below but still around 10% year over year and industrial production slightly above expectations. In short not much, the economy is doing fine;
    • US industrial production is way above expectations but previous month was revised downward. All in all, it is slightly positive;
    • Bad real estate figures in the US, with a disappointment in the construction activity
    • Last, rate hike in Canada, as anticipated by investors.

    Final point, earnings season kicked off in the US, and so far everything is good!

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-896 Tue, 23 Jan 2018 17:41:17 +0100 A year 2018 as good as 2017 ? /en/who-we-are/news/detail/a-year-2018-as-good-as-2017/ The macroeconomic environment expected for 2018 offers significant support for global equity markets and suggests another strong performance after an excellent 2017.

    Synchronized global growth of 4% will back corporate activity and margins. As such, earnings per share are expected to be up by 10%, synchronized among the geographic regions.

    Over and above the accelerated global activity, earnings per share should rise in the United States thanks to the increase in household disposable income and the finalization of the tax reform by the authorities. This profit growth should at least partially offset the American monetary policy normalization started by the Fed

    The profits of European companies, and more particularly of those in the Eurozone, should increase by more than 10% thanks to the acceleration in activity and to the Eurozone’s positive reaction to growth in emerging countries.

    Nevertheless, we must pay special attention to:

    • shifts induced by the digitalization of the economy, which, once detected, can affect an entire sector.
    • the risk associated with a strong Euro for European export companies.

    We still believe that the growth sectors should attract investors, although we could record ‘technical’ and occasional rebounds in sectors with low valuations.

    The visible growth in industrial production will support investments that have not lived up to expectations in 2017, with the usual lag of 12 to 18 months. That is why the growth differentials between the sectors must be significant, with a preference for technological and industrial stocks.

    We give priority to companies who have committed to a sustained investment policy with a profitability that far exceeds the cost of capital.

    Beyond this scenario, what are the main risks?

    In addition to geopolitical tensions (Korea, Iran, Donald Trump’s foreign policy, etc.), special attention should be paid to the normalization of the main central banks’ monetary policies, and in particular the drop in cash flow from 2018. The hike in interest rates will increase credit conditions and probably generate more volatility in the markets. These tensions will naturally highlight the historically high absolute valuation of risky assets classes. In the portfolios, we will also take care to monitor foreign exchange risks that materially affect the relative performance of the markets.

    Read more, please download the new formula of Analysis and Strategy

    ]]>
    news-895 Tue, 23 Jan 2018 10:58:36 +0100 Alger Small Cap Focus Strategy now exceeds $650mm /en/who-we-are/news/detail/alger-small-cap-focus-strategy-now-exceeds-650mm/ SICAV Alger Small Cap Focus now over $50 million in AUM

    La Française, an international multi-expertise asset management firm with total assets under management exceeding €65bn, and Fred Alger Management, Inc. (“Alger”), a leading growth equity asset management firm headquartered in New York City, are excited to announce that the Alger Small Cap Focus strategy now exceeds $650mm and the corresponding SICAV—Alger Small Cap Focus Fund (the “Fund”) has reached $52.3 million in assets under management (as at 31/12/2017).

    The Fund is a focused portfolio with generally fewer than 50 high-conviction securities. Portfolio Manager, Amy Zhang’s conviction is demonstrated in the Fund’s strong performance since its inception. As of 31/12/2017, the Fund outperformed its benchmark, the Russell 2000 Growth Index by more than 450 bps on a since inception basis and outperformed by more than 700 bps year-to- date. The recommended investment period for the Alger SICAV—Alger Small Cap Focus Fund is more than five years.

    Amy Y. Zhang, CFA, Senior Vice President, of Fred Alger Management, Inc. (the sub-portfolio manager/investment adviser to Alger SICAV) has 22 years of investment experience and is a specialist in small cap growth equities. She pursues what she believes are exceptional small companies that have the potential to become exceptional large companies. 

    “We look for companies that are on the cutting edge of innovation. These are companies that have the potential to transform industries and disrupt the status quo,” said Amy Zhang. “We look for opportunities in growth sectors, such as technology and health care.” Amy is supported by a dedicated team of four analysts (and utilizes the resources of Alger’s broader 50+ person investment team) who perform original, bottom-up, fundamental research to find high-conviction opportunities in small cap companies. Alger’s entire investment team follows the firm’s philosophy of investing in companies experiencing ‘Positive Dynamic Change,’ which has been the firm’s investment philosophy for more than 50 years.

    Philippe Lecomte, CEO of La Française AM International said, “Amy’s strategy is a focused, “best ideas” portfolio that is meaningfully differentiated from other small cap funds, which makes it of great interest to European investors.”

    La Française and Alger have been collaborating on fund distribution, market development, and product diversification since February 2015. 

    Alger SICAV, a Luxembourg UCITS vehicle, makes the Fund available to non-U.S. investors in both U.S. dollar-denominated and hedged euro-denominated classes. Alger has partnered with La Française to distribute Alger SICAV sub-funds throughout continental Europe.

     

    Disclaimer

    This press release is for Professional Clients in the UK and EC only and is not for consumer use. You are prohibited from transferring the information and material provided herein to any other person unless you have obtained the prior written approval of La Française. Past performances do not guarantee future performances. Investment products referenced in this presentation are not directed at and suitable for all types of investors. Potential subscribers are requested to carefully and independently assess the legal and commercial documentation provided and notably the risks entailed and the fees. Investors are to make their own risk analysis and not rely solely on the information that has been provided to them. The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.  Where La Française has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Issued by La Française AM Finance Services, home office 128, boulevard Raspail, 75006 Paris, France, regulated by the “Autorité de Contrôle Prudentiel” as investment services provider under the number 18673 X, affiliate of La Française. La Française AM International has a signed agreement with Alger Management Ltd, whereby La Française AM International is authorized to distribute Fred Alger Management Inc. products in Europe.

     

    Please click here to download the press release

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    news-888 Mon, 22 Jan 2018 10:58:28 +0100 How to benefit from increasingly heterogeneous emerging markets /en/who-we-are/news/detail/how-to-benefit-from-increasingly-heterogeneous-emerging-markets/ Although the economic upturn in emerging countries is expected to continue in 2018, all emerging countries will not be in the same boat. Whereas the growth differential between developed and emerging countries will continue to widen in favour of the latter, some countries will lag behind, marked by sluggish growth, significant deficits, a complicated political situation that does not allow them to successfully complete the necessary reforms, various geopolitical tensions, and even inflationary issues.

    Disclaimer:

    Promotional document intended for professional investors. The information contained in this presentation in no way constitutes an offer to sell or a solicitation to invest, investment advice or a recommendation on specific investments. The opinions expressed by La Française are based on current market conditions and are likely to change without warning. These opinions may differ from those of other investment professionals. Issued by La Française AM Finance Services, home office 128, boulevard Raspail, 75006 Paris, France, accredited by the French Prudential Control Authority as an investment services provider under the number 18673 X, affiliate of La Française.

     

    Within this environment, the total return approach seems most suitable to benefit from the heterogeneity of the emerging world. Whereas long-only benchmarked emerging sovereign debt strategies follow an index – often structured in a way that is very (or too) exposed to the most indebted economies –, a strategy independent of any index enables differentiation, which has become necessary within the world of debt and emerging currencies. 

    By favouring a risk/return ratio in a given framework of volatility or of value at risk, this approach minimises the drawdowns suffered by the asset class and could help take advantage of any brutal shocks, in particular with respect to emerging currencies. This strategy is implemented first through a detailed analysis of the general macro-economic environment, which makes it possible to determine signs of global risk in the portfolio, to achieve a level of conviction concerning the market trend in the medium term, and to identify the themes (actions by central banks, commodities, etc.) dominating the market. At the same time, a detailed study of the various emerging countries through several prisms (economic, political and geopolitical), combined with a technical analysis of all the investment vehicles (sovereign debt denominated in hard and local currencies, corporate debt, forex) highlights the opportunities to be seized by the asset manager. The flexible nature of a total return fund makes it possible to back these opportunities through three major types of strategies combined efficiently: so-called “carry trade” strategies, long or short “directional” strategies and “relative value” strategies.  

    Carry trade strategies can be applied to “frontier” emerging markets, such as sovereign debt denominated in hard African currencies when the manager considers the default risk to be very low and when the risk premium is high considering the economic fundamentals. Considering the current environment, emerging currencies, such as the Brazilian real and the Russian rouble, are also good vehicles for carry trading, insofar as they have high real interest rates. 

    When the market’s valuation no longer matches the fundamentals, as is the case for USD-denominated Turkish debt today, a “directional” strategy allows this discrepancy to be captured for the fund’s benefit. 

    Lastly, relative value strategies implemented at a lower cost by financing the purchase of an undervalued asset through the sale of an asset considered “too expensive” can be “intra-country” or “inter-country”. In the world of emerging debt, the former case could concern, for example, purchasing the debt of a company owned mainly by a government and which has a historically high risk premium compared with the actual sovereign debt, whereas the underlying risk is not fundamentally different. When a yield curve exists in hard or local currencies, an arbitrage between short and longer maturities is also possible. “Inter-country” strategies in particular can focus on differences in the economic dynamic between two companies that are not reflected in market valuations.

    Ultimately, a total return fund appears to be the most suitable vehicle to benefit from the growing heterogeneity of emerging markets, as well as the variety of available instruments, while monitoring the risk taken by investors.  

    From Marine Marciano Rimeu, EM Fund Manager at La Française

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    news-887 Mon, 22 Jan 2018 10:41:20 +0100 Linking carbon footprint and financial performance /en/who-we-are/news/detail/linking-carbon-footprint-and-financial-performance/

    Disclaimer:

    This is a promotional document for Institutional investors only. The information and material provided herein does not in any case represent advice, an offer, a solicitation or a recommendation to invest in specific investments. Where La Française has expressed opinions, they are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Issued by La Française AM Finance Services, home office 128, boulevard Raspail, 75006 Paris, France, regulated by the “Autorité de Contrôle Prudentiel” as investment services provider under the number 18673 X, affiliate of La Française.

    Do lower carbon emissions translate into financial outperformance?

    Arthur Fonck, Equity Fund Manager at La Française Inflection Point, argues that investors are increasingly recognising that companies with the internal policies to address climate change and cut their greenhouse gas emissions, are strategically better positioned, and it is starting to translate into financial performance.

    Starting from a global universe, we took a portfolio approach to analysing the impact of carbon footprint measures on financial performance. We constructed sector-neutral unbiased model portfolios, from the most carbon efficient, to the most carbon intensive companies, and the backtested results show that carbon leaders have historically outperformed carbon laggards, based on both absolute and risk-adjusted rates of returns, with an annualized outperformance1 of 2.3% and a 1.2 Sharpe ratio since 2014. What is even more striking is that this correlation has grown over the past 2 years, as investors and companies increasingly acknowledge carbon emissions as a business issue (Source: La Française Inflection Point research; period considered: three years since 2014).

    What is the fundamental rationale behind this result?

    As climate change transitions from a regulatory to a business issue, some companies are taking initiatives to mitigate the risks arising from climate change by considering the cost of carbon emissions. Just like a company with unutilised capacity is deemed ineffective, excess emissions are now considered operationally ineffective and a potential liability.

    Until recently, responsible investors found that too often, companies focused on maximising profits by meeting regulatory requirements to the bare minimum. This type of short-term focus is the result of ineffective and poor enforcement of carbon emission regulations. Well aware of the risks of climate change, some companies have not waited for regulatory bodies to take action and according to disclosures to CDP, already more than 1000 companies are using internal carbon pricing or preparing to do so by 2018.

    Carbon emission reduction can sustain profitability in the long-term

    When emissions bear a cost on an income statement, it helps investors to highlight inefficiencies and reward those companies that are cutting-down their carbon emissions. As such, La Française’s carbon neutral investment strategy recognises the impact that lower carbon emissions can have on sustaining long-term profitability. When we value companies, we adjust for new regulations that will price the ton of carbon emissions.

    The question of putting a price on carbon has gained public traction as a means to reduce emissions and drive investment towards cleaner alternatives as well as energy savings. Some companies have already taken steps to implement internal prices for carbon: LVMH has recently increased its internal price for carbon to €30/ton; Adobe charges each business unit for costs associated with energy consumption in order to favour carbon efficiency projects, reduce costs and mitigate business risks.

    Combining carbon efficiency and carbon transition, yields even better returns

    We examined to what extent a change in a company’s carbon footprint has been a predictive indicator of financial performance. Using the same portfolio construction methodology, we found that companies that are reducing their carbon footprint year-over-year in addition to being carbon leaders have outperformed significantly by an annualized 6.3% rate of return and a 1.3 Sharpe ratio over the same period.

    La Française’s carbon neutral investment strategy aims to identify those companies that are making the effort to transition to a low-carbon economy and that have the strategic positioning that will yield relative financial outperformance in the future.

    Wal-Mart, as a logistics and transportation intensive business, is a company that is seeking to reduce its emissions to mitigate the potential negative impact of costs on its value chain. Leveraging on its scale, Wal-Mart launched “Project Gigaton” and set a new goal to reduce emissions by 1 gigaton by 2030 by investing in technology to reorganise its value chain. The company is taking the strategic bet that it will reduce emissions in a manner that is difficult for smaller competitors to replicate. While Wal-Mart is not the most carbon efficient retailer today, its strong commitment to reduce the emissions of its stakeholders, as well as those it generates itself, makes it a leading transitioning company.

    Similarly, e-commerce, and its proliferation of small shipments, needs to find operational responses to address climate change. Logistics companies are implementing more-efficient deliveries, switching to alternative fuel vehicles and optimizing schedules to reduce traffic delays. UPS, which has reduced the distance driven by its drivers by 210 million miles and achieved a 210,000 metric ton reduction in CO2 emissions, has realized annual cost savings of US$400 million (Source: 2016 UPS Corporate Sustainability Report).

    Conclusion 

    Judging from the success of the One Planet Summit in Paris, the misconception that investors do not consider environmental factors in their investment decisions has been disproved. Investors are starting to realize that companies who fail to reduce emissions face increasing competitive disadvantage that could severely affect the valuations of companies.

    Initiatives such as the carbon pricing corridors already create benchmarks for investors seeking to assess climate-related value at risk. Alongside more transparency and disclosure from companies this should increasingly make for climate informed investment decisions and widen the performance gap between carbon leaders and laggards.

    1Simulated past performance is not a reliable indicator of future performance. There are risks associated with an investment in equities  which include but are not limited to: currency, equity, emerging markets, investment fund, management, market model, liquidity and operational.

     

    To download the document, please click here

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    news-885 Mon, 22 Jan 2018 10:23:31 +0100 Towards a moderate rise in rates... /en/who-we-are/news/detail/towards-a-moderate-rise-in-rates/ A reconnection between the interest rates of core countries and economic fundamentals will take time: the very clear dichotomy between the growth dynamic and the (currently disappointing) inflation dynamic will have a moderating effect on any upward trend in interest rates.

    We must also remember that the combined balance sheets of the central banks will continue to grow in 2018 before reaching a balance by the end of the year, which limits the probability of a hike in interest rates, at least during the first half of the year.

    If we continue to witness the normalization of bond yield curves, the accommodative monetary environment should support peripheral debt in the Eurozone and should be a counterforce in the event of a major shift in European interest rates. The increase in government rates that we expect should therefore be moderate which will be key for the other fixed income asset classes.

    After a year of very positive performance in terms of European credit, margins have settled at historically low levels. We expect the proportion of Investment Grade credit purchased by the ECB to increase compared with other asset classes eligible for its buyback program, thereby limiting the impact on valuations.

    We are positive on financial (bank) subordinated debt given the impact of expected reflation on bank results, the healthier state of balance sheets in the south of Europe, and easing regulatory pressure, following the signature of the Basel IV agreement.

    In terms of High Yield credit, the fundamentals are good and default rates will remain very low, well below historical averages. Valuations are high and liquidity is an issue. We will therefore follow closely:

    • Investor inflows which have dropped, given performance figures
    • The financial leverage of US companies which remains high, making the most indebted companies sensitive to a more aggressive FED.
    • The price of oil.
    • In terms of emerging markets, Investment flows will continue in 2018, since risk premiums remain very attractive relative to developed markets and to corporate debt.

    Many emerging countries will hold elections in 2018, mainly in Latin America. Within this environment, local markets meeting specific domestic requirements should continue to perform well thanks to high real interest rates.

    Read more, please download the new formula of Analysis and Strategy

    ]]>
    news-883 Fri, 19 Jan 2018 11:55:59 +0100 Positive market outlook for 2018 /en/who-we-are/news/detail/positive-market-outlook-for-2018/ The year 2017 ended with a higher growth rate than expected, due to an acceleration in the Eurozone, Japan and China, and the coming year should be equally buoyant:

    - Leading indicators for the major regions are high and indicate global growth of 4% over the next few quarters, representing the highest growth rate since 2010.

    - This growth appears much more synchronous than during previous years. Of the 25 main world economies, 24 are now showing growth.

    - Perspectives in emerging markets are positive, regardless of the anticipated slow-down in the Chinese economy.

    Inflationary pressures remain very low, whether in the Eurozone, the United States or in emerging countries. The circumstances supporting this trend will continue in 2018, but some aspects point to an acceleration:

    - The rebound in commodity prices.

    - The start of a wage inflation cycle, spurred by unemployment rates in the main industrialized countries that are close to their equilibrium levels.

    The Fed and its new Chairman, Mr. Powell, should continue to normalize American monetary policy at a slightly faster pace than expected by the market. Inflation in the US will drive the FED’s future monetary policy.

    The ECB’s asset purchases will decline quite sharply in 2018 and are expected to stop by the end of the year. Furthermore, we will monitor any change in the BoJ’s yield curve control policy.

    Read more, please download the new formula of Analysis and Strategy

    ]]>
    news-882 Fri, 19 Jan 2018 11:10:25 +0100 Alger on the money - Computing Cloud Nine /en/who-we-are/news/detail/alger-on-the-money-computing-cloud-nine/ Cloud computing provides people and companies ubiquitous access to shared resources, which has resulted in tremendous economy of scale. This scale creates a virtuous cycle of lower cost and better outcomes that is likely to allow the technology to continue growing rapidly well into the future.

    Download Alger on the Money, A view on the U.S. Market 

     

    ]]>
    news-866 Mon, 08 Jan 2018 15:50:37 +0100 Positive market outlook for 2018 /en/who-we-are/news/detail/positive-market-outlook-for-2018-1/ The year 2017 ended with a higher growth rate than expected, due to an acceleration in the Eurozone, Japan and China, and the coming year should be equally buoyant:
    • Leading indicators for the major regions are high and indicate global growth of 4% over the next few quarters, representing the highest growth rate since 2010.
    • This growth appears much more synchronous than during previous years. Of the 25 main world economies, 24 are now showing growth. 
    • Perspectives in emerging markets are positive, regardless of the anticipated slow-down in the Chinese economy.

    Inflationary pressures remain very low, whether in the Eurozone, the United States or in emerging countries. The circumstances supporting this trend will continue in 2018, but some aspects point to an acceleration: 

    • The rebound in commodity prices.
    • The start of a wage inflation cycle, spurred by unemployment rates in the main industrialized countries that are close to their equilibrium levels. 

    The Fed and its new Chairman, Mr. Powell, should continue to normalize American monetary policy at a slightly faster pace than expected by the market. Inflation in the US will drive the FED’s future monetary policy. 

    The ECB's asset purchases will decline quite sharply in 2018 and are expected to stop by the end of the year.

    Furthermore, we will monitor any change in the BoJ’s yield curve control policy.

    In light of these considerations, Jean-Luc Hivert, CIO Fixed Income & Cross Asset and Laurent Jacquier-Laforge, CIO Equities, share their convictions for 2018.

    1/ Fixed Income: our convictions 

    “A reconnection between the interest rates of core countries and economic fundamentals will take time: the very clear dichotomy between the growth dynamic and the (currently disappointing) inflation dynamic will have a moderating effect on any upward trend in interest rates,” says Jean-Luc Hivert, CIO Fixed Income & Cross Asset. “We must also remember that the combined balance sheets of the central banks will continue to grow in 2018 before reaching a balance by the end of the year, which limits the probability of a hike in interest rates, at least during the first half of the year.”

    Directional

    If we continue to witness the normalization of bond yield curves, the accommodative monetary environment should support peripheral debt in the Eurozone and should be a counterforce in the event of a major shift in European interest rates. The increase in government rates that we expect should therefore be moderate which will be key for the other fixed income asset classes.

    “In an environment where German and Japanese interest rates remain low, any significant rise in interest rates will be seen as an opportunity to invest cash in government bonds, especially US bonds,” adds Jean-Luc Hivert. 

    Investment Grade credit 

    After a year of very positive performance in terms of European credit, margins have settled at historically low levels. We expect the proportion of Investment Grade credit purchased by the ECB to increase compared with other asset classes eligible for its buyback program, thereby limiting the impact on valuations. 

    Subordinated debt

    We are positive on financial (bank) subordinated debt given the impact of expected reflation on bank results, the healthier state of balance sheets in the south of Europe, and easing regulatory pressure, following the signature of the Basel IV agreement.

    High Yield Credit  

    In terms of High-Yield credit, the fundamentals are good and default rates will remain very low, well below historical averages. Valuations are high and liquidity is an issue. We will therefore follow closely:

    • Investor inflows which have dropped, given performance figures 
    • The financial leverage of US companies which remains high, making the most indebted companies sensitive to a more aggressive FED.
    • The price of oil.

    Emerging markets

    Investment flows will continue in 2018, since risk premiums remain very attractive relative to developed markets and to corporate debt.

    Many emerging countries will hold elections in 2018, mainly in Latin America. Within this environment, local markets meeting specific domestic requirements should continue to perform well thanks to high real interest rates.

    2/ Equities: our convictions 

    “The macroeconomic environment expected for 2018 offers significant support for global equity markets and suggests another strong performance after an excellent 2017,” says Laurent Jacquier-Laforge, CIO Equities.

    Increasing Earnings per share 

    Synchronized global growth of 4% will back corporate activity and margins. As such, earnings per share are expected to be up by 10%, synchronized among the geographic regions. 

    Over and above the accelerated global activity, earnings per share should rise in the United States thanks to the increase in household disposable income and the finalization of the tax reform by the authorities. The profits of European companies, and more particularly of those in the Eurozone, should increase by more than 10% thanks to the acceleration in activity and to the Eurozone’s positive reaction to growth in emerging countries. 

    “We give priority to companies who have committed to a sustained investment policy with a profitability that far exceeds the cost of capital,” comments Laurent Jacquier-Laforge.

    Nevertheless, we must pay special attention to:

    • shifts induced by the digitalization of the economy, which, once detected, can affect an entire sector.
    • the risk associated with a strong Euro for European export companies.

    What sectors to favor?

    We still believe that the growth sectors should attract investors, although we could record ‘technical’ and occasional rebounds in sectors with low valuations. The visible growth in industrial production will support investments that have not lived up to expectations in 2017, with the usual lag of 12 to 18 months. That is why the growth differentials between the sectors must be significant, with a preference for technological and industrial stocks. 

    ***

    Beyond this scenario, what are the main risks?

    In addition to geopolitical tensions (Korea, Iran, Donald Trump’s foreign policy, etc.), special attention should be paid to the normalization of the main central banks’ monetary policies, and in particular the drop in cash flow from 2018. The hike in interest rates will increase credit conditions and probably generate more volatility in the markets. These tensions will naturally highlight the historically high absolute valuation of risky assets classes. In the portfolios, we will also take care to monitor foreign exchange risks that materially affect the relative performance of the markets.

     

    Download the full press release

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    news-862 Fri, 05 Jan 2018 10:03:48 +0100 Alger on the money - The revolution is here /en/who-we-are/news/detail/alger-on-the-money-the-revolution-is-here/ As more and more devices are created with internet access and built-in sensors, technology costs are declining and connected device adoption is expected to skyrocket. The likely beneficiaries of the mobile internet revolution are companies that thrive on the utilization of massive amounts of personalized data and those that are poised to harness widespread automation.

     

    Download Alger on the Money, A view on the U.S. Market

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    news-855 Fri, 22 Dec 2017 12:19:54 +0100 UK Tax Strategy 2018 /en/who-we-are/news/detail/uk-tax-strategy-2018/ Groupe La Francaise’s UK operations are conducted through various standalone legal entities and branches located within the UK. This tax strategy sets out the group’s approach to conducting its UK tax affairs and managing the associated tax risks. Groupe La Française regards the publication of this tax strategy as complying with its duty under paragraph 19 Schedule 19 of the Finance Act 2016.

    Tax risk management and governance:

    Groupe La Française is committed towards maintaining a responsible and sustainable corporate governance framework. Responsibility for the group’s tax strategy ultimately resides with the Board of Directors of Groupe La Française. This is a responsibility that the board take very seriously, and as such taxation features as a standard item on the agenda of board meetings. Operational responsibility for delivering on the group’s tax strategy and organising the group’s tax affairs is delegated to the group’s in house tax function, which is situated in France. The group’s in house tax function in turn utilise the support and advice of external, UK tax advisors where appropriate.

    As a global asset management business, we are exposed to a variety of tax risks. We consider our key UK tax risks to be as follows:

    • Compliance and reporting risk – This includes the risk of making late tax return filings, filing incorrect returns, and failing to make tax payments or elections within the required time frame. We seek to mitigate these risks by determining internally appropriate resources to be put in place to ensure compliance and by outsourcing our UK tax compliance process to external professional advisors. 
    • Transaction tax risk – These risks could arise if the group were to enter into business arrangements or transactions without appropriate consideration of the potential tax implications. In order to mitigate this risk, we typically utilise the services of external professional advisors before undertaking any significant business transactions.
    • Legislative risk – Tax legislation is constantly changing, and thus there is always a risk that we do not keep up to date with the latest legislation and therefore fall short of the relevant compliance requirements. In order to mitigate this risk, we seek to have appropriate internal processes to monitor tax legislative changes and by requesting that our external advisors send us frequent updates on any changes to the tax legislation.    

    Ultimately, we place great value on the firm’s reputation and as such are committed towards promoting the mitigation of any tax risks which may threaten that reputation.

    Tax Planning:

    The board of directors have a low appetite for tax risks, which is closely aligned to the overall risk appetite of the organisation.  As a group, and in the UK, we do not engage in aggressive tax planning and will only undertake tax planning opportunities to the extent that they are supported by and aligned with genuine commercial and economic business activities. Any transactions entered into between group companies are conducted on an arm’s length basis and we seek to ensure that any tax planning activity is consistent with both the spirit and letter of the law, as well as international guidelines and rules. 

    Approach to tax risk:

    As noted above, Groupe La Française is owned by a mutually owned bank widely recognised for its reputation and cooperative values. Groupe La Française conducts its operations in alignment with these values and as such the board places great value on the organisation’s reputation. The Groupe La Française board seeks to eliminate any potential threat to this reputation by promoting a low overall risk appetite across the group. 

    Groupe La Française’s attitude towards tax risk is very much structured around these wider organisational values in that we also have a low appetite for tax risks. We do not participate in aggressive tax planning or complex structured arrangements designed with the sole or main purpose of reducing our tax liability.

    Relationship with HMRC:

    Group La Française strives to promote an open, honest and transparent relationship with HMRC. The group is committed towards working proactively and transparently with HMRC and wherever possible the group endeavours to disclose any potentially contentious issues with HMRC.

    Should there be any situations where disagreements arise, the group will work proactively and transparently with HMRC to resolve them.   

    > To upload the UK Tax Strategy, click here. You can also find the Tax Strategy document in the Regulatory Information part.

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    news-854 Fri, 22 Dec 2017 11:15:36 +0100 Alger on the money - An Expected Driver of Growth /en/who-we-are/news/detail/alger-on-the-money-an-expected-driver-of-growth/ The resurgence in U.S. earnings combined with future potential tax cuts may drive an acceleration in business spending that could outpace the broader U.S. economy. Gains in labor productivity would likely follow, creating an opportunity for investors to reposition themselves for a new wave of growth.

    > Download Alger on the Money, A view on the U.S. Market

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    news-853 Fri, 22 Dec 2017 12:05:06 +0100 Xavier Lepine Interview - “The success of Grand Paris also requires innovation in real estate.” /en/who-we-are/news/detail/xavier-lepine-interview-the-success-of-grand-paris-also-requires-innovation-in-real-estate/ Xavier Lépine, Chairman of La Française, comments on the challenges of the Grand Paris project, a project of a scale not seen in Paris since 1860. He also talks how the group will meet those challenges.

    What are the challenges of Grand Paris and in what ways is this project significant?

    Since 1860, Paris has not experienced any major changes on such a scale. The aim is to double the existing railway network via a 200 km extension and the construction or expansion of 68 stations. Alongside the cultural and architectural dimension, it is an important structuring project. The ambition is to both facilitate and streamline the daily movements of 2 million people but also to create hubs of activity at the regional level. Innovation and research in Saclay, health in VilleJuif, aeronautics in Bourget, TV and cinema in Saint-Denis Pleyel, etc. The challenge lies in the creation of value. The works, with a budget of between €25 - €30 billion, should generate investments in the construction of housing and offices amounting to €75 billion. Moreover, these developments will clearly be a vector of wealth when we consider that the GDP per capita is 15% higher in the major developed cities. Finally, with Brexit and the 2024 Olympic Games, the project benefits from a buoyant context that could allow Paris to become the European capital.

    How will La Française participate in the Grand Paris project?

    Our group is not just active in asset management. 

    With real estate assets under management of €15 billion in Europe and more than 500 assets in the Paris region (Ile-de-France), we also possess a significant amount of land assets. 

    It was therefore natural for us to participate in this monumental project, which has no equivalent in Europe. In concrete terms, following the consultation launched by Métropole Grand Paris regarding 57 sites aiming to build a resilient, innovative and sustainable metropolis, La Française has won three sites within the business group. 

    These are the “Franchissement Pleyel” in Saint-Denis, the Ardoines in Vitry-sur-Seine and the Rungis Bridge in Thiais and Orly. In addition to these projects, we also want to position ourselves on the eco-districts that will be created to support these major projects. It is indeed likely that land is ultimately the key to this project. 

    To do this, we will created an unlisted real estate company in which we will make a €50 million commitment with the objective of generating €1.5 billion in inflows within two years.

    How does your approach stand out?

    The jury of the requests for proposals was particularly sensitive to our innovative proposals for offices and housing. In a deflationary context, there is the problem of the solvency of demand. Regarding offices, we propose introducing flexibility in leases and renting premises that can be converted and transformed for a fixed period. The owners will have to organise themselves to meet the demand. This notion of evolution towards turnkey services is a challenge for Grand Paris. And regarding residential property, two solutions are proposed. The first is a scheme of property "for life". Inspired by a model in place in the UK, it is an alternative to property "for eternity" and simple rentals. The idea is to acquire a property from an institutional investor for use during a very long predefined period. The second proposal is the "partially perpetual loan" which echoes existing systems in Switzerland and the Netherlands. The borrower repays a portion of the capital over a period of time after which he only pays the cost of interest.

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    news-852 Thu, 30 Nov 2017 11:40:00 +0100 Find the JNI Interview of Marc Bertrand, CEO of La Française REM /en/who-we-are/news/detail/find-the-jni-interview-of-marc-bertrand-ceo-of-la-francaise-rem/ How are you positioned in real estate? Of the EUR 64 billion that La Française has under management, EUR 15 billion is invested in real estate.

    Half our clients are institutional investors (two-thirds French, one third international) and the other half are French retail clients investing via collective real estate investment vehicles. We mainly invest in office property (two thirds of AUM) but we also have commercial assets (one quarter) and the rest is in residential and other sectors (logistics, hotels, etc.).

    In France, we are 50% exposed to the Paris region and 50% to the provinces. In 2017, we invested EUR 2 billion in France and the euro zone. This substantial long-term commitment means we are invited to tender for all major projects in the market.

    Our real estate investment arm is managed by a 140-strong team, of whom 120 are based in France, 15 in Germany (Frankfurt), and 5 in the UK. 

    How do you see the European market?

    Overall, our investments are 80% French with the remaining 20% mostly in Germany and the Benelux countries, and to a lesser extent the UK and Ireland. Over the last three years, we have used our presence in the German market to launch three collective real estate investment vehicles covering the whole of Germany, which have been enthusiastically received by French retail investors. 

    Today, we see the market in real estate investment management going through an intense process of diversification. Diversification has been made necessary partly by the rising volumes of inflows. Investing elsewhere in the euro zone does not bring any great change in returns as yields in Europe’s major cities are broadly comparable, ranging from around 3.70% to 4.50%. However, it allows us to take positions in markets at different stages of the economic and rent cycle, which vary considerably from country to country. The UK, for instance, is at the peak of its cycle, Germany is still in a growth phase and in France rents remain low but growth prospects are clearly improving. 

    Have you noticed any Brexit effect over the past year?

    First, we need to remember the context. The London market bounced back relatively fast after the financial crisis and was recently yielding low returns on very high rents. This cyclical rally prompted a surge in the construction and delivery of new buildings between 2013 and 2016. At the same time, however, Brexit incentivised certain companies to leave the country resulting in a simultaneous drop in demand. Plentiful offer and stuttering demand means the London market is close to a turning point. The new factor is that Brexit uncertainty is making investors more cautious and this will not help any rapid rebalancing of the market.

    How can an investor diversify his or her portfolio while remaining within the French market?

    Investors should ask themselves which of the major French cities outside Paris have a prospering economic activity, developing infrastructure, etc. This requires an analysis of “metropolization”. Lille is a good example and has potential. Just one hour from Paris and only a quarter hour more from London, it has made the most of its location. The urban renewal projects in the metropolis are very promising. Similarly, Bordeaux and Nantes, two towns with good TGV services offer excellent opportunities in their town centres. Conversely, Rouen and Orleans, although only an hour from Paris, have seen part of their economic activity sucked out by the Paris region.

    An analysis of these different markets involves analysing the towns’ development policies. Specifically, we need to look at the team in charge of urban development across the whole urbanised area. In this respect, Lyon is the model to follow. Its urban community policy sets it apart in the market, notably as regards business real estate. In terms of dynamism, it is easily the equal of European cities like Milan or Dusseldorf.

    What opportunities will the Grand Paris project bring?

    This is an ambitious and high-quality urban project that will nearly double the transport infrastructure around Paris. Some zones in particular should benefit well from the massive investment involved, such as Saint-Denis Pleyel, which will get a giant rail station, an interconnection on the same scale as Paris St Lazare.

    However, we reckon that the Grand Paris project currently has a glut of office development, particularly around second-string stations. In these zones, we would rather invest in housing developments where demand remains strong. This rebalancing is necessary but still tricky for the municipalities for which residential development inevitably entails major investment in public infrastructure with little in the way of additional resources to fund it.

    What about sector diversity?

    Investors have numerous options. They should keep in mind that social and demographic trends drive demand for buildings. Therefore, we see interesting opportunities in student or young worker residences, tourist accommodations, non-medical senior homes for people who are still independent but looking for leisure services and EHPAD-style dependency homes for seniors. True, none of these asset classes offer very high returns, but the cash flow is highly visible and very long-term. 

    Are you investing in connected buildings?

    It is obvious that these days, any building that is not connected, in other words a building where Wi-Fi and mobiles do not work, is not going to be let. But this is only the tip of the iceberg. Recent buildings include highly sophisticated building management systems (BMS). I note with a degree of amusement that there is still a big mismatch between the way buildings are built and the way they are used. For instance, a consultant might rate the energy consumption of an office building at a very different level from what it actually consumes when occupied. You have to make sure the technology in place remains within the reach of users. If they do not understand the technology, people try and improvise which generally proves pretty costly in energy terms.

    We also see a rapid change in the use of spaces and services within office buildings. Company restaurants are no longer canteens but have become living spaces, used all day long, with creative decor and a convivial atmosphere that better suit the way companies are organising themselves and working now. A single space can therefore serve multiple uses. This is the biggest change we have seen. Going further, beyond this approach of optimising space usage, we are seeing new living spaces appear: a vegetable garden in the courtyard, a gym on the ground floor, a music room, etc. These new services come with an operating cost and we have found that only significant-sized buildings can absorb these new expenses. Streamlining and developing these services in a way that makes them accessible to smaller buildings is a key issue for managers like us. 

    Are investors including new sustainability criteria in their demands?

    Generally, the bigger the investor the likelier they are to take a mature approach to SRI. Demand for reporting on SRI criteria is on the rise, driven by new regulations. Today, for a northern European investor it is unthinkable to invest in a non-SRI asset or fund. Small investors take a different approach. Not that they are in any way opposed to SRI, but they are waiting for clear proof of the economic case. It is our job to explain the virtuous circle created by renovating buildings to the new standards. Such renovation means they can be let faster and sometimes for higher rents. Tenant demand for buildings that are compliant with new standards is also pushing the market forward much faster than legislation alone could have done.

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    news-850 Thu, 21 Dec 2017 10:43:26 +0100 La Française Real Estate Partners International acquires a retail warehouse in Bad Kreuznach /en/who-we-are/news/detail/la-francaise-real-estate-partners-international-acquires-a-retail-warehouse-in-bad-kreuznach/ La Française Real Estate Partners International has acquired, on behalf of a La Française collective real estate investment vehicle, a retail warehouse located at Schwabenheimer Weg 5, in a commercial zone, north-east of the town center of Bad Kreuznach. The retail activity of Bad Kreuznach is largely concentrated in this commercial area, which extends from the railway station to the northeastern city limit of Bad Kreuznach.

    The retail warehouse is easily accessible by highways B428, BAB61 and BAB60. Bad Kreuznach is about 80 km away from Frankfurt am Main and about 40 km away from Mainz, the capital of Rhineland Palatinate and 40 km from Wiesbaden, the capital of Hesse. 

    The fully refurbished 15 400 m2 retail warehouse (ground floor and first floor) offers both retail and storage space and has 560 outdoor parking spots. The asset is 100% leased, under a 13-year firm master lease, to a single tenant, one of the leading German grocery retailers.

    Jens Goettler, Managing Director for Germany, La Française Real Estate Partners International, said: “Following the successful office investments in Germany, La Française is seeking to diversify its French collective real estate investment vehicles both from a geographic and asset type perspective. As German consumer spending is increasing, more and more, we will be competing in the German retail space in order to secure quality assets such as the retail warehouse and high quality inner-city retail assets.”

    La Française Real Estate Partners International was advised by Clifford Chance LLP and TA Europe.

    Download the full press release

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    news-849 Thu, 21 Dec 2017 10:14:49 +0100 Fed increased its policy rate and continues to reduce its balance sheet /en/who-we-are/news/detail/fed-increased-its-policy-rate-and-continues-to-reduce-its-balance-sheet/ As mentioned in our last macro news, last week was very busy with many central banks’ committees.

    Last week there was a Fed conference: last show for Janet Yellen before handing over the power to Jerome Powell.

    • As expected, they increased the policy rate by +0.25% and decided to continue their policy of balance sheet reduction;
    • Strong 2018 GDP upward revision from +2.1% to +2.5%. Unemployment rate has been revised downwards by -0.2% to reach 3.9% for 2018 and 2019. The statement is more optimistic on US labor market;
    • Dot plot (Fed’s hikes anticipations) is unchanged.

    Fed acknowledges the US economy’s good health without being worried at all about a possible overheating. Overall, markets do not move much.

    Last Thursday, we had Mario Draghi’s conference following ECB’s board meeting:

    • They revised upward their 2018 GDP forecast from +1.8% to +2.3%. The speech tone regarding Eurozone activity was very upbeat. This is rightly pointed, since we have a composite PMI at 58!
    • Upward revision as well of 2018 headline inflation forecast from +1.2% to 1.4%, but this is not a real surprise. However, we had ECB’s first 2020 inflation projection at +1.7%. This is a disappointment, as we do not reach yet central bank’s inflation target … in 3 years!

    ECB was clearly not hawkish. Euro bond yields are falling, driven by lower real yields. German bonds valuations are back to March levels. For instance, when an investor buys German 2026 inflation indexed, he/she is guaranteed to lose more than 10% of purchasing power at maturity. From our point of view, this valuation does not fit with Eurozone economy which is in a very good shape.

    At last, a quick word on Sweden. The currency is undervalued, inflation reaches central bank’s target and growth is excellent… we expect less accommodation from Riksbank soon.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

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    news-835 Wed, 13 Dec 2017 10:50:53 +0100 Unemployment rate is unchanged but wages growth remains stuck at +2.5% year over year /en/who-we-are/news/detail/unemployment-rate-is-unchanged-but-wages-growth-remains-stuck-at-25-year-over-year/ On both sides of the Atlantic last week, news flow was mostly about politics.

    On both sides of the Atlantic last week, news flow was mostly about politics.

    In the US, two good news:

    • Senate voted on Friday, December 1st its fiscal reform. This vote helped markets to erase completely the micro stress event we had on Friday afternoon due to General Flynn. Therefore equity indices opened last Monday at their new historical high. US equities have exhibited an impressive performance since Mr Trump’s election: +29% with very minimal pullbacks (-3% max),
    • Last week Congress passed an extension bill to avoid a shutdown until December 22. A bipartisan deal remains to be made on this topic.

    In the UK, situation seems to be unlocked with a deal between the UK and EU. Brexit bill seems to be settled, as well as the Irish border and the European foreign residents status. At last! This deal was much longer to come than we expected. Now true negotiations start with a deal to be found on bilateral trade. The Pound moderately appreciated vs the Euro (+1.4%) following this news. 

    On the macro data side, we had the US employment report. Unemployment rate is unchanged at 4.1%. However, we are again disappointed by stagnant wages (+2.5% yoy).

    This week will be very busy: BOE, Fed, Banxico, ECB, SNB…

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S 

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

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    news-831 Tue, 12 Dec 2017 14:00:00 +0100 With nearly €2.2 billion* in fundraising, La Française Global REIM has exceeded its 2017 objectives /en/who-we-are/news/detail/with-nearly-eur22-billion-in-fundraising-la-francaise-global-reim-has-exceeded-its-2017-objectives/ With the development of its European real estate platform, La Française Global REIM raised nearly €2.2 billion in 2017, bringing its total real estate assets under management to close to €16 billion.

    2017 marked the start of a new positioning for La Française, which was awarded three sites as part of the request for proposals for “Investons la Métropole du Grand Paris”. La Française is now enhancing its core business activity as a specialist in investment and third-party management. It is adopting an investment approach aimed at creating value around infrastructure projects associated with the Grand Paris project by purchasing greenfield and brownfield development sites.

    1/ 2017 Fundraising

    In the current environment of stable interest rates and stronger growth, real estate offers a genuine opportunity for diversification to investors seeking higher potential returns.

    Institutional: La Française pursued its real estate development strategy in France and internationally among institutional clients and has raised close to €1.2 billion in funds. 

    The internationalisation in market trends seen in 2016 continued: Asian clients seeking diversification dominate, representing more than 16% of funds raised. Total European assets under management for Asian institutional investors represent close to €900 million. Through its international real estate platform with management centres in Paris, Frankfurt and London, La Française can offer investors, looking to access the main European markets, diversified investment solutions, by geographical region, strategy and theme, in a variety of forms (open-ended funds, dedicated funds, mandates and club deals).

    In 2017, La Française closed its largest single transaction to date, a new co-investment on behalf of two leading Korean institutional investors. It concerned “North Light & Pole Star” in Brussels and is a perfect illustration of La Francaise’s capacity to source quality assets and meet the needs of investors seeking both diversification and potential returns. 

    With €1 billion in fund raising through mandates in 2017, La Francaise has demonstrated the relevance of its tailored-made investment solutions.

    Retail: La Française continued to register growth among retail investors. Fundraising increased by 25% in 2017, reaching close to €1billion: 

    • Like the overall collective real estate investment market, which saw record inflows in the first half of 2017, La Française raised close to €800 million in 2017 across its range of collective real estate investment vehicles. Fundraising activity especially targeted those vehicles invested in the major European markets: Germany notably, because of the investment potential and attractive tax framework. 
    • Fundraising of close to €200 million on unit-linked insurance products, reflecting continued growth in 2017. 

    2/ Transactions

    In addition to finalising a development project initiated more than three years ago (IPSO FACTO in Montrouge, southern Paris), 2017 saw high activity levels with nearly €2.8 billion in transactions, of which €2.3 billion in investments and more than €400 million in arbitrage operations. Hereafter the breakdown of acquisitions by asset type: 68% for office buildings, 13% for retail premises and 19% for other assets, including managed residences (facilities for seniors and tourism), activities, residential and diversification assets.

    In France, La Française confirmed its position as a major real estate player with €1.6 billion in acquisitions, the most notable of which are: a retail asset in Paris (19e), “Le Hub” office building in Levallois Perret (92), “Cityscope” in Montreuil (93), a holiday residence in Cavalaire-sur-Mer (83), etc.

    Growth in acquisitions in the rest of Europe continued, with nearly €700 million in new acquisitions. The group's collective real estate investment vehicles invested notably in Frankfurt, Stuttgart, Hamburg, Berlin and for the first time in Ireland.

    “Our real estate activity is overseen by a team of 140 people, 120 of whom are in France, 15 in Frankfurt and 5 in the UK. Thanks to the synergies created with all of our teams we have been able to meet our growth targets and are in a position to successfully navigate through this intense phase of investment diversification,” says Marc Bertrand, CEO of La Française Real Estate Managers.


    “La Française is a major real estate investment player. The development of metropolitan areas, such as the Grand Paris region, creates opportunities for international investors. The manner in which public authorities proceeded, by sending out a request for proposals, also required a new organisation from us; instead of developing or acquiring individual assets, we are building entire “green” districts. In this manner, La Française can position itself well upstream via its land development activities,” stresses Xavier Lépine, Chairman of La Française.

    *Forecast based on inflows already recorded at 30/11/2017, data not definitive.

     

    Download the full press release

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    news-827 Fri, 08 Dec 2017 10:11:00 +0100 Alger on the money - Why tax repatriation matters /en/who-we-are/news/detail/alger-on-the-money-why-tax-repatriation-matters/ Washington lawmakers are considering changes to the tax code that could result in a large amount of cash returning to the U.S. According to Goldman Sachs, nearly $1 trillion could be eligible for repatriation, allowing U.S.-based companies to deploy more money in even more productive ways at home. Why does this matter and where should investors look for investment opportunities?

    1 Goldman Sachs (2017) “Overseas Cash Repatriation Would Boost Shareholder Returns and Growth Investments.” US Equity Views.

    > Download Alger on the Money, A view on the U.S. Market

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    news-824 Wed, 06 Dec 2017 18:49:52 +0100 Eurozone Core Inflation disappointed and came in at +0.9% vs +1% expected /en/who-we-are/news/detail/eurozone-core-inflation-disappointed-and-came-in-at-09-vs-1-expected/ On the macro side, data is robust, and we feel that we have been writing this sentence every week for months now!
    • US: better data in real estate is getting confirmed with pending home sales soaring and positive construction spending. The consumer confidence index is at its highest point, Q2 GDP has been revised slightly upwards and ISM Manufacturing index is at 58.2, a very high level,
    • Eurozone: disappointment on the headline inflation which stands at 1.5% vs 1.6% expected, moreover core inflation is at 0.9% vs 1% expected. PMI Markit manufacturing indices remain strong at 60.1 and GDP continues to be revised upwards,
    • China: PMI index is in line with overall consensus.

    Mr. Powell was confirmed by Senate and gave his first official speech. There is nothing new, it is the same speech as Mrs. Yellen, that means continuation in gradual rate hiking, inflation oversight, balance sheet reduction under way, etc.

    First good news for the UK for a long time: it looks like European and British authorities have reached a deal regarding breakup fee. It should be around €50bn.

    The next fortnight will be busy with macro data and central banks. Indeed, markets could move more than the last two weeks.

    No significant move on equity markets last week, neither on fixed income markets with Bund close to 0.30%, a level we still consider far too low.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

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    news-817 Fri, 01 Dec 2017 09:00:00 +0100 La Française Real Estate Partners International acquires an office property* in Hamburg /en/who-we-are/news/detail/la-francaise-real-estate-partners-international-acquires-an-office-property-in-hamburg/ La Française Real Estate Partners International has acquired, on behalf of two La Française collective real estate investment vehicles, Victoria Office, an office property located at Heidenkampsweg 73-79 in Hamburg City South, a sought-after and upcoming business district.

    Hamburg has one of the most prospering economies and is the largest city in northern Germany. Companies operating in a variety of sectors such as aerospace, renewable energy and science have chosen Hamburg for their headquarters.

    The six-story building was constructed in 1992 and offers ca. 19,400 m2 of office area and 293 parking spaces. The asset was conceived for multi-tenant use and is currently multi-let. The four anchor tenants are: a German railway company, a logistics services provider, an international trade journal publisher and an online investment solutions provider.

    Jens Goettler, Managing Director for Germany, La Française Real Estate Partners International, said: “City South is an innovative and constantly evolving real estate location, blending residential and office properties, in order to promote a pleasant work-life environment. The limited real estate development activity and local market demand should continue to support rent levels.”

    La Française Real Estate Partners International was advised by Clifford Chance LLP and TA Europe GmbH.

    *This is an example of an investment held within the portfolio. It is not indicative of future investments and does not fully reflect the composition of the funds.

    > Click here to download the full press release

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    news-815 Wed, 29 Nov 2017 17:49:22 +0100 US core inflation came out slightly above expectations, at 1.8% vs 1.7% expected /en/who-we-are/news/detail/us-core-inflation-came-out-slightly-above-expectations-at-18-vs-17-expected/ Last week was volatile as was the week before, with equities correcting like the credit spreads.

    The true genesis of this slight correction is difficult to identify but from our point of view, it is due to:

    • A classical correction after a sharp increase
    • Earnings season was a bit below expectations in euro zone, with some specific risks that have awoken markets concerning assets overvaluation (Altice for instance), 
    • News flow coming from emerging markets is still bleak with significant specific risks and weaker Chinese data. Chinese bad news were expected, however it is still not good for the market

    The U.S. inflation came out slightly above expectations with core inflation at 1.8% vs 1.7% expected, whereas headline inflation has been at 2% as expected. Retail sales are in line and real estate data is well oriented. In the meantime, fiscal reform passed its first milestone (the easiest one…) with a House vote. Therefore last week was constructive in the U.S.

    Euro zone activity data continues to be decent (Zew – level of investors’ confidence, industrial production, German GDP…) with current account balance at the highest point ever and with Mr. Draghi increasingly confident about GDP growth over the next years.

    Furthermore, data coming out of China was weaker with retail sales and industrial production below expectations. China is the only major area where economic surprises are negative (data coming out below market expectations).

    Turkish state of affairs is not getting better with Mr. Erdogan criticizing publicly his central bank (admittedly, he has a long history on this). There is little chance that the latter will intervene in the short term, however it is in our eyes the only way to fight current market mistrust. The currency is cheap, but news flow is negative and should remain so at least until next inflation print early December. Thus we have cut the position.

    NAFTA fifth round negotiation began last week. Nothing has leaked for now but there is no doubt that Mexican assets will be impacted this week one way or another.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S 

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

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    news-809 Fri, 24 Nov 2017 17:34:28 +0100 LFIS Named Best Hedge Fund Group /en/who-we-are/news/detail/lfis-named-best-hedge-fund-group/ On November 23rd, LFIS was named Best Hedge Fund Group at the Hedge Funds Review European Performance Awards 2017. These awards celebrate the best of Europe’s hedge fund industry and winners are selected by a jury of asset management peers, leading consultants and journalists. Hedge Funds Review specifically cited the significant progress LFIS has made since its launch and the success of our differentiated business model.

    Since its launch in February 2013, LFIS has seen assets under management grow to $9.4 billion(1).  Both our flagship credit and premia strategies have been recognized repeatedly by the industry and peers for their market-leading risk-adjusted performance.  LFIS’ client base now extends throughout Europe and to Asia and North America.

    This success testifies to the trust our clients have placed in us. We would like to address a special thank you to all of our investors and partners for their support.

     

    (1) Assets under management figures are unaudited and as of October 31, 2017.

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    news-808 Fri, 24 Nov 2017 11:11:11 +0100 Alger on the money - You get what you pay for /en/who-we-are/news/detail/alger-on-the-money-you-get-what-you-pay-for/ Investors generally expect growth stocks to have higher price-to-earnings (P/E) ratios than value stocks but not everyone is aware of the reasons why. To understand this difference in valuation, consider the variables that drive P/E multiples: growth, profitability, and risk. Given how favorably growth stocks rate across these measures compared to value stocks, their higher P/Es may be warranted.  

     > Download Alger on the Money, A view on the U.S. Market

     

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    news-800 Tue, 21 Nov 2017 17:33:07 +0100 The art of diversification /en/who-we-are/news/detail/the-art-of-diversification/ Almost half the companies listed on the major developed country indices have published their third-quarter 2017 results. The good growth figures of recent quarters are, logically, now bearing fruit, with a marked rise in revenue (+5% in Europe; +7% in Japan) and earnings up by between +7% in the USA and +16% in the eurozone.

    However, there were more positive surprises in the USA than in Europe. Meanwhile, bond yields are still at record lows (0.38% for the 10Y Bund) and the ECB announced on 26 October that it would reduce its monthly asset purchases, but extend the programme until September. Investors will therefore be tempted to be strongly overweight in equities - particularly Japanese and eurozone securities - and underweight in the bond markets. Each of these bets is highly logical in view of the fundamentals, although the construction of a portfolio that is well balanced portfolio in terms of risk cannot be seen as just a simple sum of fundamental convictions, since these may potentially be correlated.

    Moreover, the strong dollar is boosting export earnings and Japanese and European equities in turn. A strong dollar is often linked to a more expansive fiscal programme or a more restrictive monetary policy, and therefore higher government bond yields. As such, holding Japanese and European equities and at the same time being low in duration does not provide sufficient diversification. This correlation was particularly apparent in early 2017, with the combination of a drop in bond yields, the underperformance of Japanese and European equities and the fall in the dollar.

    Beyond our management convictions, a crucial part of our asset allocation work involves identifying the key exogenous factors that will influence the performance of the various asset classes, in order to construct a balanced risk allocation in relation to these factors, while it is difficult to anticipate the path such factors will follow.

    For now, we remain positive on eurozone equities, which are benefiting from strong growth. We are maintaining diversification in Japanese equities, which have been boosted by the highly accommodative monetary policy of the Bank of Japan and a sharp rise in earnings. Diversification in emerging equities and emerging debt is still a relevant issue for us, given the ongoing rebound in activity, especially as these asset classes are benefiting from a weaker dollar, unlike our bets on eurozone and Japanese equities.

    In the developed market bond component, we remain negative on German bonds, as their level does not reflect the marked improvement in the eurozone economic cycle. On the other hand, we see the very long end of the US curve as attractive, as it can be a shock absorber for any equity market bumps, and is also much cheaper than the German curve in view of its fundamentals.

     

    To download the november edition of Analysis & Strategy, please click here

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    news-798 Wed, 22 Nov 2017 10:09:00 +0100 La Française strengthens its investment team with the recruitment of a Head of Fixed Income /en/who-we-are/news/detail/la-francaise-strengthens-its-investment-team-with-the-recruitment-of-a-head-of-fixed-income/ In order to further develop its fixed income expertise, representing close to €9 billion in assets under management, La Française has recruited a Head of Fixed Income, Maud Minuit, to join its Fixed Income and Cross-Asset Division led by Jean-Luc Hivert.

    Based in Paris, the Fixed Income and Cross-Asset team of La Française comprises twenty-two managers grouped into three specialist divisions, covering all fixed-income asset classes. The team represents around 45% of the Group’s assets under management and intervenes on a range of open funds but also on dedicated funds and mandates for both French and international clients.

    Maud Minuit has 18 years’ experience in multi-asset fixed-income management. In her previous position as Head of Fixed Income and FX at Groupama AM, she developed an expertise in inflation-linked bonds in particular, through her management of the Euro fund, followed in 2009 by the launch of the Global fund. She also gained expertise in total return management, having worked on the launch of one of the first absolute return bond funds, in 2009. From 2012 onwards, Maud Minuit headed up the six-member fixed-income and FX team. 

    In addition to her technical expertise in fixed income, Maud Minuit has acquired a solid background in customer relations (reporting, tenders, road shows, product development, etc.), which she will bring into play in support of the France and International sales teams. 

    Maud Minuit holds a postgraduate professional degree (DESS) in Financial Strategy and Mutual Savings from the University of Poitiers.

    Maud Minuit’s profile and skills thus represent a genuine asset for the Group’s strategy and development in this field: conviction management, technical ability and the embodiment of expertise.

    As Head of Fixed Income, Maud will supervise a team of managers and will be responsible for money-market, fixed-income, Total Return Bond and Inflation-linked asset management. Her experience will contribute to establishing the Group’s convictions and know-how, and will be reflected in allocation decisions.

    Download the full press release

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    news-796 Mon, 20 Nov 2017 10:31:30 +0100 Introduction to the Grand Paris Project by La Française /en/who-we-are/news/detail/introduction-to-the-grand-paris-project-by-la-francaise/

    How is La Française involved in the Grand Paris project ?

    The Grand Paris project is the largest European infrastructure project of the 21st century, designed to maintain the status of Paris as a world city.  

     

    To enhance the status of Paris, regional actors have started construction of the Grand Paris Express, a new, automated metro system in Greater Paris, representing an investment of 32 billion euros. In the coming ten years it will double the size of the existing metro nework. 200 km of metro lines and 68 new stations.

    The project, along with the context of Brexit and the 2024 Olympic games will support the ongoing economic recovery and future growth prospects of the Paris region.

     

    La Française, through our Chariman Xavier Lépine, has been a passionate ambassador of the Grand Paris project and the continuing development of the Paris region.

     

     

    What steps have already been engaged?

    At La Française, our experience in real estate investment and asset management in the Paris region dates back over 40 years. La Française is the number 1 collective real estate investment manager in France, with a portfolio of over 1 million square meters in the Greater Paris region and over 750 completed acquisitions of office and retail assets in Ile-de-France. With our background and deep roots in our home market, we are well positioned to be first movers when it comes to investment strategies tied to the Grand Paris project. La Française has created a new real estate operating company, broader in scope than our traditional investment funds, that we call “Foncière de Grand Paris”.

    We have already defined our criteria and investment strategy:

    o We want to invest in neighborhoods with strong value creation potential, due to proximity to future metro stations

    o We want to take positions at an early stage, including the acquisition of properties or land to be developed or redeveloped 

    o Our strategy will include a diversified portfolio of housing, office, retail and industrial uses, with innovative financial strategies to bring our products to market

    o We will continue to focus on sustainability, as La Française is committed to our focus on Strategically Aware Investing

    La Française participated in the request for proposals organized by the Metropolitan authority for Greater Paris alongside our partners. In October 2017, we found out that we were awarded three sites around Greater Paris.These sites are both iconic of the Grand Paris and the good demonstration of our investment strategy. They are part of major urban devlopment plans and will be served by new metro lines.

    Where do we go from here?

    We continue to analyze additional sites related to the Grand Paris project, with a potential for large-scale and long-term urban developments. At the same time, La Française is continuing to look for investors that believe in our strategy, with the ambition to grow our new operating company in scale to reach 1 billion euros or more. What we offer is the possibility to invest in the neighborhoods that will benefit the most from the new infrastructure. This project is a real opportunity for La Française and our partners to contribute to their development and to reap the rewards in the long-term.

     

     

     

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    news-791 Wed, 15 Nov 2017 18:25:03 +0100 Eurozone GDP is now expected to reach +2.2% for 2017 (versus +1.7% in the Spring projections) /en/who-we-are/news/detail/eurozone-gdp-is-now-expected-to-reach-22-for-2017-versus-17-in-the-spring-projections/ The US fiscal reform is underway, but is difficult. The US Senate has made an offering which is quite different from the House’s, which means implementation could be delayed to 2019.

    The market impact is so far quite surprising, with the dollar coming back slightly and US bond yields moving higher, which is counterintuitive. Logically, equities are down even though the move had begun before the news broke: all ECB increase has now been erased.

    The European Commission revised upwards its Eurozone GDP estimates: +2.2% vs +1.7% for 2017, +2.1% vs +1.8% for 2018. It is logical given that GDP is currently running around +2.5%, and it confirms European economy’s good health.

    Last week was scarred by disorder in the Middle East and by Saudi Arabia crackdown. Overall, state of play is unstable between Iran, Lebanon, Saudi Arabia and Yemen, which is pushing oil prices higher. 

    On the macro side, little data last week, but what we got was well oriented. 

    The markets are moving a bit these days: after a sharp downward move following ECB’s announcement, bond yields are moving back up over a few days without any event to report. In the meantime, equities are decreasing and credit is suffering, which has been very rare in recent past. There has been some volatility as well on peripheral spreads which has tightened by 9bps in a day, and moved the other way round the next day.

    We increased our short duration trade at the beginning of last week, as well as our long USD vs EUR trade. We are beginning to buy as well some Euro equities after their drop, given that we had zero exposure there.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-787 Tue, 14 Nov 2017 14:07:29 +0100 Why investing in emerging debt markets still makes sense today /en/who-we-are/news/detail/why-investing-in-emerging-debt-markets-still-makes-sense-today/ With investors struggling to find attractive yields without drastically increasing their risk levels, the emerging sovereign debt market warrants closer inspection.

    Although this market has shown sharp growth over the last two years, and the central banks of developed countries are looking to exit their quantitative easing programmes, this asset class could fulfil at least four objectives of any investor: invest in a sector that shows solid growth, benefit from solid economic fundamentals, obtain an attractive yield, and diversify their investments.

    The steady expansion in the emerging sovereign debt market warrants a closer look at this asset class. The market denominated in hard currencies (USD, Euro and Yen) has grown to $900 billion today from $400 billion in 2004, while the local currency denominated market has grown to $7,500 billion this year from $1,600 billion in 2004.

    Moreover, emerging countries’ solid economic fundamentals continue to attract strong interest from investors, with good reason. The overall growth differential in relation to developed countries continues to widen: 2.3 points in 2016 (real growth of 1.6% for developed markets versus 3.9% for emerging markets) versus 2.4 points anticipated this year (2.1% for developed markets versus 4.5% for emerging markets). This is without any widening of the fiscal deficit, which should remain at around 3.5%. The level of debt is still half the size of that of developed markets at 47%. Moreover, four years after the “taper tantrum”, the current accounts of the main emerging countries have improved (South Africa, Brazil, India, Indonesia, Turkey). And, last but not least, inflation is set to remain at around 3% for 2017, which leaves significant leeway for the central banks of these countries. 

    A selective approach is, of course, necessary when considering this highly-diversified market of more than 60 countries across all continents, and englobing the entire gamut of ratings from investment grade through to high yield. All the more so in the current global environment of large central banks looking to exit their quantitative easing programmes. With price growth struggling to revive in the developed world, “aggressive” exit strategies by the FED or the ECB seem unlikely. Moreover, synchronised action by the latter would limit the impact on the currencies of the G3 and thus the volatility of emerging currencies. 

    Against this backdrop, yields on emerging debt should continue to attract investor interest: a yield of 5.50% for dollar-denominated debt (J.P. Morgan EMBI Global Diversified Composite) with an average rating of BB+ and 6% for local currency debt (J.P. Morgan GBI-EM Global Diversified Unhedged).

    Marine Marciano-Rimeu, 

    Emerging Markets Manager  

    The current management team may change over time.

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    news-784 Fri, 10 Nov 2017 10:30:56 +0100 Alger on the money - The benefit of 1% More /en/who-we-are/news/detail/alger-on-the-money-the-benefit-of-1-more/ Many people perceive the act of saving as requiring the sacrifice of current pleasures amid the uncertainty of predicting an unknowable future. Fortunately, even a minor adjustment to an existing savings plan combined with smart investing can yield material results.

    1Assumes annual household income increases of 2%.

     > Download Alger on the Money, A view on the U.S. Market

     

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    news-780 Tue, 07 Nov 2017 17:21:37 +0100 Eurozone core inflation at 0.9% short of the estimate of 1.1%. /en/who-we-are/news/detail/eurozone-core-inflation-at-09-short-of-the-estimate-of-11/ This week was pretty busy because of new elements:
    • Mr. Trump has picked Mr. Powell as next Fed chairman. The markets have not moved much on the news which was rather well anticipated. The monetary policy should not be much different from what it has been previously, since Mr Powell shares Ms Yellen’s philosophy. However we must note that he is a lawyer by training and not an economist as usual. We can therefore expect that he will be more active on the financial institutions’ regulation. Thus, potential market impact is more on US banks equity prices.
    • US employment report was rather weak (average weekly earnings +2.4% yoy versus +2.7% expected) and US ISM non-manufacturing reached 60.1 (highest point since 2005)
    • Eurozone core inflation flash estimate was way below market expectations at +0.9% versus +1.1% yoy. We will scrutinize official data since consequences on ECB policy can be very large
    • FOMC has almost endorsed December hike. The markets clearly received the message and are pricing this hike’s probability at 92%. However the dollar is not rising versus euro this week and we have therefore decided to take profit on our tactical long (USD vs EUR)
    • Bank of England “Super Thursday” with inflation report and monetary policy decision. The committee vote was 7 against 2 in favor of a 25bps hike to 0.5%. However, Mr. Carney’s speech was not particularly hawkish and the pound dropped. The markets anticipate few hikes (2 over the next 3 years) and we think this prudence is justified by Brexit, weak growth and a restrictive public spending policy

    The markets have reacted with a decrease in bond yields (-6bps for US 10 years note and -7bps for British 10 years gilts). The euro peripheral area performed well too, with -16bps for Italy 10 years.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

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    news-775 Tue, 31 Oct 2017 18:02:07 +0100 Even though it was widely expected, QE extension announcement pushed peripheral bond yields much lower /en/who-we-are/news/detail/even-though-it-was-widely-expected-qe-extension-announcement-pushed-peripheral-bond-yields-much-low/ The week was definitely not favorable for the fund as emerging markets currencies are suffering a lot and the ECB delivered a dovish message.

    Regarding emerging market currencies, a few reasons explain the pressures currently faced. In general, US government bond yields are rising because of strong economic data but also because of the next Fed chairman nomination that is still uncertain, leading to a strong USD. On top of that, some of our positions are impacted by specific issues (NAFTA agreement for the Mexican Peso, diplomatic tensions around the Turkish Lira). Where do we stand? 

    • 10-year US government bond yields are at 2.47%, which is almost the highest for the year. At this level there is little room for further yield increase, especially with European and Canadian central banks delivering dovish messages last week 

    • Does it make sense for emerging market currencies to go down in this kind of environment? Absolutely – and specific risks are real. But the magnitude of the adjustment is already quite significant especially for countries with strong macroeconomic data 

    Speaking of carry positions, we still believe that those assets are today quite appealing compared to other assets. It may take some time, but we do think that the “carry trade” will come back at some point in the markets, and those assets should be well positioned.

    The ECB held its committee last week: 9-month extension (until sept 2018) and reduction to €30bn from €60bn. It is broadly in line with the market’s expectations in general but the reaction has been rather cautious with a global decrease of government bond yields (especially Italy and Spain) and a decrease of the euro from $1.18 to $1.16. The latter had a very positive impact on euro equities, up by more than 2%. 

    According to an article published last week by Politico, Yellen and Warsh seem to be out of the race for the Fed chairman nomination with now only Powell and Taylor remaining. 2018 budget has also been adopted in the US, that was a must before potential tax reform. 

    More about:

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

     

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-771 Fri, 27 Oct 2017 09:36:03 +0200 Alger on the money - Leading Indicator Inspires Confidence /en/who-we-are/news/detail/alger-on-the-money-leading-indicator-inspires-confidence/ The Conference Board Leading Economic Index (LEI) is designed to capture peaks and troughs in the U.S. business cycle and help forecast turning points. Its favorable performance this year implies positive news for investors.

     

    1 The LEI is a composite of 10 indexes measuring economic indicators such as manufacturing hours and building permits.
    2 Evercore Group LLC (2017) “Special Economic Report.” Evercore ISI.

     

     > Download Alger on the Money, A view on the U.S. Market

    ]]>
    news-769 Thu, 26 Oct 2017 09:53:31 +0200 Wiztopic raises $4.4 million from NewAlpha Asset Management and business angels /en/who-we-are/news/detail/wiztopic-raises-44-million-from-newalpha-asset-management-and-business-angels/ Via its dedicated FinTech* venture capital fund, NewAlpha Asset Management is the lead investor in the $4.4 million fund raising carried out by Wiztopic. The fund has thereby made its first investment in a Franco-American company.

    Created in Paris in 2014 by Jérôme Lascombe and Raphaël Labbé, Wiztopic is the publisher of an SaaS solution dedicated to corporate and financial communication executives. Wiztopic’s platform helps them to streamline content management, SEO, social and multichannel distribution, stakeholder relationships and performance assessment, in full compliance with their sectors’ constraints.

    Alongside NewAlpha Asset Management, business angels from the financial sector also participated, namely Pierre-Antoine Dusoulier (Saxo Bank, Ibanfirst), François Le Corno (3i), Gérard Augustin-Normand (Richelieu Finance) and Didier Rousseau (Weave).

    “Our aim is to become the homepage and daily tool of all communication executives of listed companies and of the financial industry, in Europe and the USA,” says Jérôme Lascombe, Chairman of Wiztopic. “We were looking for investors capable of accelerating our growth in the financial sector and abroad. NewAlpha Asset Management quickly established itself as the obvious choice.”

    “By signing agreements with leading European players in the banking, insurance and asset management industries, Wiztopic has already demonstrated impressive results. We are pleased to be able to contribute to the company’s development,” says Jonathan Cohen Sabban, Investment Director at NewAlpha Asset Management.

    “From the outset we chose to concentrate on the most demanding clients, those who produce and manage sensitive, restricted or regulated information,” explains Raphaël Labbé, CEO of Wiztopic. "We are helping these large international companies, the majority of which are listed, to digitise the management and distribution of their information with a data-focused approach. The volume of content managed by Wiztopic’s users doubles every quarter.”

    “Wiztopic helps major players in finance and listed companies to transform a key function: the communication and management of corporate and financial information,” adds Lior Derhy, Managing Director, Head of Private Equity at NewAlpha Asset Management.

    *This fund is exclusively reserved for French domiciled professional clients within the meaning of the MIF Directive and is closed to subscriptions

    To download the press release, please click here

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    news-765 Wed, 25 Oct 2017 17:55:49 +0200 The earnings season continues in the US and is positive as expected /en/who-we-are/news/detail/the-earnings-season-continues-in-the-us-and-is-positive-as-expected/ This week, fixed income markets moved in the opposite direction to last week: US 10 years bond yield was up 10bps and German bund yield 5bps to 2.37% and 0.45% respectively. These moves can be explained by the following things:
    • 2018 US budget vote passed. This was a milestone to US fiscal reform implementation
    • Donald Trump and John Taylor meeting went well. Since the latter is considered as a hawk (see "Taylor rule"), it pushed bond yields higher
    • Rumors that ECB purchases would be capped at EUR 200bn for 2018, which would lean towards EUR 30bn a month for 6 months. That is below market expectations

    Equity markets were flat last week, apart from Japan (+1.5%). This is explained by Japanese elections last Sunday, where Abe won (and can win a super majority). The monetary policy is therefore expected to remain stable.

    Earnings season in the US with 78 firms reported among the S&P 500 (78% beat estimates, 9% are in line and 12% below, EPS are in average 1% above expectations). In short, it is a good season, as expected. At the moment, US equities are not particularly rallying.

    A few words on NAFTA negotiations between Mexico, Canada and the US. Talks are tough, Trump said US partners must pay for their positive trade balance with the US (sic), which is obviously declined by Canada and Mexico. In short, they will meet at next negotiation round next month, we do not believe in a NAFTA breakup by the US.

    Next Thursday we will have a major ECB meeting, with tapering announcement. We do not have a strong opinion on what will be decided.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-763 Wed, 25 Oct 2017 12:19:43 +0200 NewAlpha founding member of "Swave", the new start-up incubator entirely devoted to FinTech /en/who-we-are/news/detail/newalpha-founding-member-of-swave-the-new-start-up-incubator-entirely-devoted-to-fintech/ NewAlpha Asset Management (“NewAlpha”), an expert in investments targeting the entrepreneurial financial industry worldwide, launched the first French venture capital fund* dedicated to FinTech companies in November 2015.

    NewAlpha is proud to announce the launch of Swave, the first physical incubator, entirely dedicated to FinTech firms and managed by Paris&Co with the support of the French government.

    This new platform, fostering “innovation”, will offer 2,500 m² of office space in the Grande Arche, in the heart of La Défense. The objective is not only to create an innovation-friendly business environment but to attract European FinTech firms to La Défense which is Paris’ main financial district.

    Swave, founded by NewAlpha, Societe Generale, Crédit Municipal de Paris and Exton Consulting, will work closely with the research and higher education bodies (Institut Louis Bachelier) as well as territorial authorities.

    "An actual physical platform for the incubation of Fintech start-ups fits perfectly in the array of services offered by NewAlpha. Joining forces with Paris&Co and the other founding members seemed ideal, because the project is part of a real public-private commitment to promote the FinTech sector internationally.” says Lior Derhy, Director of Private Equity at NewAlpha AM.

    "The historical positioning of NewAlpha as an emerging manager incubator and its capacity to connect with institutional investors convinced us in our quest for the right partner for Swave" adds Edouard Plus, Head of Swave.

    NewAlpha has met with more than 150 start-ups over the last twelve months. Its FinTech analysis and selection expertise, as well as potential financing from its Venture Capital NewAlpha FinTech* fund are valuable strengths.

    More than thirty start-ups, from four different sectors of innovation, will constitute the first “class” to be admitted to Swave.

    • Neo-finance: new ways to conceive traditional banking and insurance models
    • Cybersecurity: data access, data encryption, anti-hacking, blockchain
    • Artificial intelligence, big data and machine learning
    • The finance of tomorrow: sustainable finance, climate finance, impact investing, regtech

    Applications are to be submitted by 17 November 2017. Swave will open its doors on 8 December 2017.

    > Click here to download the full press release

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    news-757 Tue, 24 Oct 2017 09:32:28 +0200 The Consortium Les Lumières Pleyel, represented by Sogelym Dixence, has won the call for proposal for the Pleyel Crossing in Saint-Denis in connection with the « Invent the Grand Paris Metropolis » competition /en/who-we-are/news/detail/the-consortium-les-lumieres-pleyel-represented-by-sogelym-dixence-has-won-the-call-for-proposal-fo/ The Group Les Lumières Pleyel, represented by Sogelym Dixence, has won the call for proposal for the Pleyel Crossing in Saint-Denis in connection with the “Invent the Grand Paris Metropolis” competition.

    Les Lumières Pleyel is composed of a multidisciplinary team brought together by several properties operators: Europequipements, Crédit Agricole Immobilier, Engie Avenue, NFU (Urban New Functions), and the Group Arcade, as well as the group representative Sogelym Dixence. The operators have brought together more than a total of 50 partners (including architects, real estate operators, investors, cultural stakeholders, innovative start-ups, research offices and builders).

    Les Lumières Pleyel are situated in the Pleyel suburb, along the railways North-Europe and extents to both sides of the Grand Paris Express train station in Saint-Denis Pleyel (core junction between the Grand Paris Express lines 14, 15, 16, 17, the subway 13 and the Ile-de-France train lines D and H, which are planned for 2023).

    The project is a mixed-use program composed of more than 176.000 squares meters of offices, accommodations, hotels, student residences, stores, cultural and sports facilities which are expected to be finalized between 2023 and 2028. The site includes a bridging building which crosses the rail lines and is planned to become the entrance door to Grand Paris. Moreover, the project will become a strong architectural symbol at the scale of the Metropolis. The area will be complemented by a park of 7.000 square meters. 

    This new district emerges halfway between the Stade de France and the docks of Saint-Ouen, very close to the future Olympic Village which is foreseen for the Paris 2024 Olympic Games.

    Les Lumières Pleyel want to pave the way for a new manner of co-building cities. They are eager to invent a new urban model for Saint-Denis and the Grand Paris Metropolis and are guided by a set of overarching ambitions: 

    • To invent a new quality of life and city
    • To create a new urban image for the Grand Paris Metropolis 
    • To offer an open architecture which is rich in natural light and connects territories.
    • To encourage public spaces and new motility
    • To organize a virtuous and airy urban density
    • To compose the first neutral carbon and reversible area in Ile-de-France
    • To encourage sharing across the Territory of Culture and Creation.

    The jury of « Invent the Grand Paris Metropolis » choose an ambitious proposal which provides an outstanding new urban image to the territory, both on an architectural, a social and a cultural plan ». This is the reward of an intense collaboration between the companies that we have gathered, a team which is warmly committed to this project and this dynamic territory”, Founding Chairman of Sogelym Dixence, Jean-Claude Condamin, shares enthusiastically surrounded by his operating partners, Euroequipments’ President, Olivier Pelat, Engie Avenue President, Sylvie Dao, Credit Agricole Real Estate Managing Director, Marc Oppenheim, and NFU/HABX President, Benjamin Delaux.

    > Click here to download the full press release

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    news-755 Fri, 20 Oct 2017 09:46:19 +0200 Inventons la Métropole - La Française is awarded 3 iconic sites for the Grand Paris /en/who-we-are/news/detail/inventons-la-metropole-la-francaise-is-awarded-3-iconic-sites-for-the-grand-paris/ Following the consultation process launched by the Métropole du Grand Paris covering 57 sites as part of a project to build a resilient, innovative and sustainable metropolis, La Française has been selected as part of the winning consortium for 3 of these sites.

    By participating in these iconic projects, La Française has reinforced its role as a major actor in the development of the Grand Paris project and pledges upstream commitment to the construction of this project over the long term.

    The Grand Paris project is the largest infrastructure project of the 21st century and will position Paris among the five largest metropolises in the world. The Grand Paris project is gaining traction with the consultation process launched by the Métropole du Grand Paris (the metropolitan authority for Paris and its inner suburbs) and La Française is proud to partake in this project for an inclusive city.

    This new positioning further enhances La Française’s core business as a specialist in real estate investment and third-party management. “La Française applies an investment approach aimed at creating value around infrastructure projects associated with the Grand Paris project by purchasing greenfield and brownfield development sites. These 3 projects mark a key milestone in the building of our project for a Grand Paris themed real estate investment & development vehicle”, explains Xavier Lépine, Chairman of La Française. 

    La Française will hence be able to offer access to iconic assets of the Grand Paris project. The portfolios will include residential assets, offices, retail and business outlets and will favour the creation of “green” districts that meet the highest of environmental standards and which dovetail with La Française’s investment philosophy. 

    “These projects will crystallise our property development activity: we offer real visibility on key construction sites in the Grand Paris region to institutional investors who wish to participate in this large-scale project, and we will continue to scout additional development projects”, emphasises Guillaume Pasquier, Head of Business Development, Grand Paris Project at La Française.

    Partnering with real estate and planning professionals (building and public works groups, real estate developers, architects, town planners, landscape architects, engineering firms, innovative users, etc.), La Française is now positioned on large-scale sites of 30,000m² to 150,000m² selected based on the following criteria:

    - Proximity to a metro station
    - Large-scale and long-term urban transformation
    - The construction of different asset types.

    The projects awarded to consortiums including La Française are:

    • “Le franchissement Pleyel” in Saint-Denis with Sogelym Dixence (representative of the “Les lumières Pleyel” group)
      The future “Saint-Denis Pleyel” station will be one of the main transport hubs of the Grand Paris Express metro lines. The environment is already promising, most notably thanks to the amenities planned for the 2024 Olympic Games and the major surrounding developments. This is therefore one of the largest urban development projects in the Paris region.
    • Les Ardoines in Vitry-sur-Seine with LinkCity Ile-de-France (representative of the “Démonstrateur métropolitain” group)
      The arrival of the Grand Paris Express metro will underpin the transformation of this vast industrial zone. The goal is to create a business district to meet the needs of the many pharmaceutical and biotech firms in the area. The new residential district, already under construction close-by, will reinforce the site’s expansion potential.
    • Pont de Rungis in Thiais and Orly, with LinkCity Ile-de-France (representative of the “Parcs en Scène” group)
      A new, mainly residential district will emerge around the “Pont de Rungis” station on metro line 14, between the two employment hubs of Orly and Rungis. The project is planned to be a unique destination in Greater Paris with the construction of facilities targeted in particular at “e-sport” events and the entire ecosystem around this new discipline. 

    To download the press release, click here

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    news-751 Tue, 17 Oct 2017 09:35:33 +0200 La Française rethinks the fund prospectus as a tool to support business goals and engage clients /en/who-we-are/news/detail/la-francaise-rethinks-the-fund-prospectus-as-a-tool-to-support-business-goals-and-engage-clients/ In theory, every investor must read the prospectus before investing their money. In practice, it is generally accepted that few investors do. The document is considered too long, too disjointed and too full of legalese to be accessible to most investors.

    That may be changing. This month, La Française is releasing a completely new — and far shorter — prospectus for its flagship SICAV in Luxembourg.  The firm is one of the first asset managers in Europe to completely reengineer its prospectus to be more useful to investors as well as others who may refer to the document, such as intermediaries, service providers and regulators,  

    “We undertook this substantial endeavor because we felt our prospectus did not send the right message to our clients,” said Isabelle Kintz, Conducting Officer at La Française AM International. “The language in the document wasn’t accessible or very helpful, and the entire look and feel – and length – of the document sent a negative message of its own.” A growing set of new regulations has also made product disclosure much more complex and challenging to manage for asset managers. 

    The new document uses only 26% of the pages of the old one, yet it is considered legally sufficient by the firm’s internal and external lawyers, and the CSSF considers it to be fully compliant with regulations. The language is written and structured so that specific modules can be exported to related documents, such as KIIDs, fact sheets, notices and marketing material. “The prospectus becomes more than just a compliance document,” says Kintz. “It becomes a tool that helps us manage content across documents and ensure consistency of language.”

    La Française developed the prospectus in conjunction with More Carrot, a clear language and information design firm that specialises in this type of work for financial services firms. More Carrot recently invented a process for “re-engineering” SICAV prospectuses, and the La Française project team was keen to use and adapt the new More Carrot model.

    Prospectuses in general are rather far from being investor-friendly, so anything less than a complete transformation would not really be enough,” says Bernard Lambeau, Head of European Operations at More Carrot. “For this project, we used a clean-sheet process, which involved the collaboration of many different people at La Française. They were a great team, fully committed and highly knowledgeable, which is reflected in the final product.”

    La Française Lux SICAV Prospectus By The Numbers: 

    > Click here to discover the new prospectus

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    news-750 Mon, 16 Oct 2017 15:13:47 +0200 Central banks ? still the focus ? /en/who-we-are/news/detail/central-banks-still-the-focus/ Over the last week I’ve been asked what the monthly newsletter will be about, replying "the central banks of course!", with inevitably, the same reaction each time: "again??". Well, yes - the central banks are still the focus.

    We could talk about North Korea, the Catalan referendum or the elections in Germany, but in the end, understanding what the central banks are up to is essential for an effective asset allocation.

    So, what did the central banks do in September? The Bank of England surprised the market by adopting a much less accommodative stance due to persistently high inflation, which naturally triggered a sharp rise in short rates. Meanwhile, the Bank of Canada hiked rates for a second time, in another move the market had not anticipated. The last of the surprises to mention is that the US Federal Reserve did not seem particularly concerned by the disappointing inflation figures, calling them "temporary" and reaffirming that a rate hike in December was likely. In the end, only the ECB delivered a more accommodative message, although this can probably be attributed in large part to the strength of the euro.

    Moreover, with the announcement of an outline for US tax reform, Federal Reserve balance sheet reduction and rumours of the appointment of Kevin Warsh as Fed chairman, it was not much of a surprise to see rates increasing by around 30bp in September. Since the macroeconomic data remain pretty good in Europe and the US, it is legitimate to ask if the stars are finally aligned for a more significant rate rise than we have become accustomed to. In answer to this question, we would tend to reply “not really”...

    This is because inflation is still below central bank targets and on course to be negative in year-on-year terms by March 2018. Central bankers are therefore unlikely to accelerate the pace of rate hikes in six months’ time. In Europe, the output gap remains very wide, with unemployment still considerably far off 2007 levels, which gives the ECB some time to gradually rein in its extremely accommodative policy. Lastly, the size of central bank balance sheets continues to increase (€19 trillion and counting...) and this liquidity has to be invested somewhere.

     

    To download the october edition of Analysis & Strategy, please click here

     

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    news-749 Mon, 16 Oct 2017 14:55:26 +0200 The new sustainable global real estate index of La Française & GPR /en/who-we-are/news/detail/the-new-sustainable-global-real-estate-index-of-la-francaise-gpr/ We have devoted a significant amount of time to the analysis of sustainability within the real estate sector. It was not necessarily our primary goal to create a sustainable index. However, as our works progressed and our ambitions rose, we decided that we want to set the standard of sustainability within global listed real estate sector. Given our long-standing relationship with GPR and GPR’s interest to be also an innovator in the index field, we joined forces to produce the first sustainable global real estate index. 

    The index is capped at 150 constituents. It includes the best in class companies based on their ESG ranking and free-float adjusted market cap. GPR uses it eligibility criteria to screen out names that may not meet the criteria for inclusion. IPCM produces up-to-date ESG scores. La Francaise Forum Securities is in frequent touch with corporate management and helps source additional, very important qualitative input for our models. It is an important addition to the listed real estate securities industry and an important step forward in its development.

    It was our general expectation that a sustainable strategy would be more suitable for institutional clients with a sustainable mind-set or policy in place. However, to our positive surprise, we are also finding good reception to the topic within private banks, where today’s younger generations are looking to explore products beyond the general asset allocation model.  This means they are looking for products with more than just a financial appeal to meet their needs and aspirations. We are more than happy to play a role here and help satisfy growing client demand.

     

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    news-748 Mon, 16 Oct 2017 14:37:42 +0200 Jana Sehnalova presents La Française Lux Sustainable Real Estate Securities /en/who-we-are/news/detail/jana-sehnalova-presents-la-francaise-lux-sustainable-real-estate-securities/ This product is beautiful representation of the strengths of the multi-expertise business model, where different skill sets come together to create a genuine innovation for the industry and clients. Inflection Point Capital Management is La Française’s sustainable expertise pillar, a group with over 20 years of analysis in this field. IPCM contributes its proprietary ESG scoring system based on a thorough analysis of 3 sustainable pillars:

    -              The Environmental pillar focused on understanding of efficiency of energy, materials, water and carbon emissions

    -              The second pillar is focused on social aspects such as engagement with broader community stakeholders, human resource management and well-being of users

    -              And last but not least, the third pillar focuses on the analysis and understanding of corporate governance

    The second pillar, La Francaise Forum Securities, contributes financial analysis and dialogue with company management that help to secure a more in-depth access to sustainable data and real interactions with regards to sustainable DNA at a corporate level.

    La Francaise Group as a third player has been very supportive of launching the product by contributing seed capital and providing additional support including risk management and reporting.

    It is quite important to highlight that the process is fully integrated under one roof and fully transparent, with frequent exchanges on how to achieve the most precise results, thus highlighting the robustness of our multi-expertise business model.

     

     

     

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    news-745 Fri, 13 Oct 2017 10:38:19 +0200 Alger on the Money - Inspired by Change, Driven by Growth. Big Potential, Small Caps /en/who-we-are/news/detail/alger-on-the-money-inspired-by-change-driven-by-growth-big-potential-small-caps/ Small cap equities have historically been less followed by Wall Street research analysts than large cap equities. The scarcity of small cap coverage creates opportunities for investors and portfolio managers who are committed to doing in-depth research on these companies.

    1 Callan (2017) “Historical Active Management Premiums by Asset Class and Style.” Fourth Quarter 2016.

     

     > Download Alger on the Money, A view on the U.S. Market

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    news-744 Fri, 13 Oct 2017 09:29:43 +0200 Early closure of subscription period for La Française Rendement Global 2022 /en/who-we-are/news/detail/early-closure-of-subscription-period-for-la-francaise-rendement-global-2022/ The target maturity fund, La Française Rendement Global 2022, was launched in September 2014. Due to the strong growth of its assets, the Asset management Company has decided on an early closure of the subscription period at 31 October 2017. This decision aims to preserve the interest of the existing shareholders, the Asset Management Company considering the current AUM as the level at which the fund can be optimally managed.

    As indicated in the prospectus and in the interest of shareholders, the valuation method of the fund will change at the end of the subscription period. Beginning on November 2, 2017, the fund will be valued at bid price. 

    The regulatory information is available on the fund’s dedicated webpage

    In order to satisfy investor demand for this strategy and confident of its relevance in the current environment, La Française launched a new  target maturity fund in August 2017:  La Française Rendement Global 2025. 

    For more informations about La Française Rendement Global 2025 :

    Discover La Française Rendement Global 2025 Share Class I

    Discover La Française Rendement Global 2025 Share Class D

    Discover La Française Rendement Global 2025 Share Class R

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    news-742 Thu, 12 Oct 2017 10:54:00 +0200 Decrease in unemployment in the US and rise in wage inflation… Hurricane impact ? /en/who-we-are/news/detail/decrease-in-unemployment-in-the-us-and-rise-in-wage-inflation-hurricane-impact/ Robust data this week with US ISM at a 10 year high and an employment report hard to read, although it shows clearly an increase in wage growth.

    We knew storms would add noise to September data, that proved to be right.

    Employment report detail exhibits a large decrease in unemployment rate from 4.4% to 4.2%. The participation rate rises, which is positive as well, but we have a net job loss which makes this report hard to understand. Therefore we do not give much credit to this report, including the average hourly earnings at 2.9% year over year. That being said, taken together with two very high ISM figures (figures have been distorted too, previous high was in 2005 with Katrina), it is pushing the dollar and US bond yields higher.

    Another topical issue for the next few weeks is who will be the next Fed chairman. Four candidates stand out: Yellen, Powell (who shares the same philosophy), Warsh (hawk) and Cohn (harder to read). Given their view on various Fed issues, it will probably have consequences for bond yields, the dollar and banks equities.

    Last, but not least, fiscal reform could be voted before year end, but it remains very unclear.

    In short, US state of affairs is currently hard to decrypt with many unknowns.

    In Europe we had ECB minutes, which did not bring much new and few major macro data (apart from disappointing retail sales). The news were dominated by Catalonia indepence push, which had a brief negative impact on Spanish assets (equities and bonds). We are on the sideline, hoping for stress to rise further in order to profit from that (given Catalonia independence probability is very remote), but we might not have the chance.

    Earnings season in the US is starting next week. Expectations are for +5.5% year over year EPS growth, which is rather low and should be beaten as usual.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

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    news-737 Tue, 10 Oct 2017 09:48:11 +0200 La Française & GPR launch new sustainable global real estate index /en/who-we-are/news/detail/la-francaise-gpr-launch-new-sustainable-global-real-estate-index/ Pensions, other institutional investors as well as private banking clients are more and more integrating sustainability factors into their investment strategies. With one of the highest carbon footprints, the real estate sector is naturally the first place to look in order to curb climate change; and investors, increasingly aware of their responsibility, are embracing this challenge.

    In this context, Global Property Research (GPR), a service provider for leading financial institutions, specializing in customized property indices, and real estate expert La Française are pleased to announce the launch of a new sustainable global real estate index designed for institutional investors: GPR IPCM LFFS Sustainable GRES Index, which will set new standards in terms of sustainability in the listed real estate sector.

    La Française member companies, Inflection Point Capital Management UK Ltd. (IPCM) and La Française Forum Securities (LFFS), together with GPR will collaborate on the creation and maintenance of this new index consisting of up to 150 global sustainable real estate securities, selected based on their real estate activities, ESG performance and market capitalization. GPR compiles and administers the Index. 

    > Click here to download the full press release

     

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    news-734 Wed, 04 Oct 2017 10:00:00 +0200 La Française Real Estate Partners International Secures Landmark Transaction in Brussels /en/who-we-are/news/detail/la-francaise-real-estate-partners-international-secures-landmark-transaction-in-brussels/ La Française Real Estate Partners International, representing a club of Korean and French investors, has acquired the 60% interest of Belfius in the joint venture with AG Real Estate owning the Belgian headquarters of ENGIE.

    AG Real Estate will continue to manage the asset on behalf of the joint owners. The financing for the transaction is provided by the German Landesbank Helaba.

    The asset comprises two buildings, North Light and Pole Star, located in the North Station area of Brussels. Together, the properties make up a high quality “green” office complex of 77,000 m² constructed in 2011 and 2014. The asset is fully leased to ENGIE on leases with unexpired terms of approximately 13 years. The buildings have a number of sustainability features, including optimized geothermal energy, geothermal heating and cooling, solar panels, and a sophisticated climate control system, which have enabled the newest tower of the complex, Pole Star, to achieve a Breeam “Very Good” rating. 

    The North Station area is experiencing a renaissance, with an influx of new public and private occupiers that include the Flemish Government, Allianz, Beobank, Accenture and Publicis One. The area is benefiting from the consolidation of business activities from smaller offices to larger new developments, and the best public transport connections in the Belgian capital. Real estate investment capital is also flowing into the area with recent significant transactions.

    > Click here to download the full press release

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    news-733 Mon, 09 Oct 2017 09:35:47 +0200 La Française Real Estate Partners International acquires an office property in Stuttgart /en/who-we-are/news/detail/la-francaise-real-estate-partners-international-acquires-an-office-property-in-stuttgart/ La Française Real Estate Partners International has acquired, on behalf of two La Française collective real estate investment vehicles, an office property located, at Mittlerer Pfad 13-15, in Stuttgart Weilimdorf.

    Stuttgart is one of the leading office locations in Germany, characterized by low vacancy and stable rents. 

    The 30.270 m2 office complex comprises two buildings. The main building, built in 1993, provides a lettable area of 22.960 m2 over six stories. The annex, built in 2001, offers 7.310 m2 of lettable area over five stories. Both buildings are let to the car manufacturer, Dr. Ing. h.c. F. Porsche AG, under a 9.5 year lease.

    Jens Goettler, Managing Director for Germany, La Française Real Estate Partners International, said: “This is our second acquisition in Stuttgart for La Francaise collective real estate investment vehicles and we are expecting rents to increase in this area. Due to the low level of construction in the area and the stability of demand, vacancy rates should remain low which could contribute to generating interesting long-term returns. This is the fourteenth acquisition made in Germany for our French parent’s collective real estate investment vehicles. We now have a total of twenty assets in Germany representing over ca. €800m.”

    > Click here to download the full press release

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    news-729 Thu, 05 Oct 2017 09:24:16 +0200 La Française launches a new fixed maturity fund, La Française Rendement Global 2025 /en/who-we-are/news/detail/la-francaise-launches-a-new-fixed-maturity-fund-la-francaise-rendement-global-2025/ Bolstered by the commercial success enjoyed by the previous vintage, La Française Rendement Global 2022, and the relevance of this investment solution in the current interest rate environment, La Française is launching a new edition of its fixed maturity fund: La Française Rendement Global 2025. Since fixed maturity funds have a known and fixed issue maturity date, the investor benefits from visibility with respect to the fund's performance as it approaches maturity. The fund’s profitability will depend on both the valuation of the bond coupons included in the portfolio, and changes in capital due to fluctuating interest rates and/or credit spreads.

    The management strategy is discretionary and concerns a portfolio of international bonds with a maximum maturity date of December 2025. The strategy consists of combining the carry and arbitrage of securities, in the event of new market opportunities or an increased risk of default of a portfolio issuer. Accordingly, it relies on a thorough knowledge of the companies’ balance sheet positions and the fundamentals of the countries selected. 

    La Française Rendement Global 2025 has a capacity for diversification and may invest1:

    • up to 100% in bonds issued by public and/or private entities in OECD countries;
    • up to 100% in bonds issued by public entities outside of OECD countries (emerging) and up to 50% in private entities outside of OECD countries (emerging);
    • up to 100% in Investment Grade2 or High Yield3 issues (of a speculative nature) or in unrated issues.

    The fund marketing period will end no later than on 31 March 2020.

    Jean-Luc Hivert, CIO Fixed Income of La Française, comments: “In the quest for performance, we believe the credit sector and especially BB or B rated issues offer the best risk/return ratio, especially since the default rates are still relatively low: the average long-term default rate is 4.3% (over 20 years as of September 2017)4. The fund will be positioned mainly on European/US credit and emerging debt, two of La Française’s core areas of expertise in fixed income.

    > Click here to download the full press release

    1 For more information on the investment strategy, check the fund’s prospectus.
    2 rating equal to or exceeding BBB- at Standard & Poor’s or Baa3 at Moody’s, or equivalent according to the management company’s analysis
    3 rating below BBB- or Baa3, or equivalent according to the management company’s analysis)
    4 source: Bank of America

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    news-724 Mon, 02 Oct 2017 15:30:19 +0200 François Rimeu’s take on this week’s markets /en/who-we-are/news/detail/francois-rimeus-take-on-this-weeks-markets-2/ This week was a calm one, with very few macro data publications, as usual on month end. The next week will be very busy with ISM and employment report in the US, even though data will be clouded due to September storms. Key points to note this week:
  • Durable goods orders are solid in the US, above expectations
  • Euro Area inflation comes out slightly below expectations
  • Fiscal reform announcement by Mr. Trump. Quite logically US bonds sold off, but nothing dramatic given markets have been disappointed several times by Mr. Trump. At best, this reform will be adopted around year end
  • Yellen speech mid-week confirms the latest FOMC slight hawkish tone
    In short, not much and markets did not move that much either, apart from some profit taking in EM. The only notable move was the dollar up from €1.195 to €1.18.
    We used this dollar move to take some profits in our short fixed income pocket and reduce our long USD versus EUR position. We booked profits as well on our long Russell 2000 versus S&P.
  • Generally speaking, in September we had :

    • A 20-25bps move higher in core bond yield
    • Central banks on the hawkish side
    • The lower dollar move pausing

    We must now wonder about what will come next. The short fixed income trade risk reward deteriorated since the beginning of the month, in order for this evolution to continue, activity and inflation data will need to remain consistent.
    Since base effects are rather positive for the months to come, especially after the surge in crude oil prices last week, we should be comforted by October mid-month US CPI publication, even though it should be transitory. We therefore keep our trades on, but with a lower risk.

    We should not forget corporate earnings season starts within 15 days, and that should be positive for equities as usual.

     

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

     

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

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    news-722 Fri, 29 Sep 2017 11:28:00 +0200 Alger on the money - Style Divergence Favors Growth /en/who-we-are/news/detail/alger-on-the-money-style-divergence-favors-growth/ Growth investing has produced persistent and robust outperformance relative to value investing during the past decade. We believe the economic developments that have supported this style divergence appear to be on a steady course that may continue to bolster growth over value. Growth and Value Have Diverged Over Time

     > Download Alger on the Money, A view on the U.S. Market

    ]]>
    news-719 Tue, 26 Sep 2017 14:27:40 +0200 Following the Portugal credit rating upgrade, the move in bond yield has been quick and brutal /en/who-we-are/news/detail/following-the-portugal-credit-rating-upgrade-the-move-in-bond-yield-has-been-quick-and-brutal/ This week, FOMC delivered a speech in line with previous statement, which can be viewed as slightly hawkish because weak inflation figure could have made them soften their tone. Few points to keep in mind :
    • Dots are unchanged for 2017 and 2018, but have been revised slightly for 2019 and long term 
    • Upbeat comments on the economy, including labor market with lower unemployment rate forecast
    • "Classical" comments regarding Hurricanes: impact is hard to estimate and should be transitory, with a V shape growth impact
    • Fed balance sheet reduction has started with $10bn a month as planned

    The markets had a slight hawkish reaction, however very short lived, and we are now almost back to pre FOMC levels. In short, markets do not believe the Fed so far. While December Fed hike probability rose from 50% to 65%, 2018 and 2019 paths remain very far away from the dots.

    Economic data out of Europe remain robust with PMI way above expectations at 56.7. These data are still strong in Germany and France. That being said, we cannot afford to ignore the news that made everyone happy here, Portugal credit rating upgrade from S&P !

    The market reaction was brutal, with a 50bps spread contraction versus Bund this week. We are awaiting the same type of move on Mexico now !

    The move does not seem to be finished, and our target is now for Portugal to trade as tight as Italy, which is another 30bps left in spread.

    Generally speaking, we think Central Banks are close to tightening policies a bit faster:

    • Growth is widespread (in Eurozone) and strong
    • Fed is no longer alone in the tightening camp: Canada hiked twice, the British are not far from it and ECB would love to (but very carefully, Euro must not rise to much…)
    • Commodities are holding up well

    The issue remains of course the inflation, but a couple of figures above expectations should give credit to the tightening thesis.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

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    news-712 Tue, 19 Sep 2017 18:09:20 +0200 UK unemployment rate reached its lowest level since 1975 /en/who-we-are/news/detail/uk-unemployment-rate-reached-its-lowest-level-since-1975/ While bond yields have pushed down from early July to last week, we saw the yields rise sharply this week : +13bps for US 10 years, +10bps for German bunds and especially +24bps for British gilts.
    • British news flow was quite busy : unemployment rate came out at a lowest point since 1975 at 4.3%. More of the same with the inflation, which beats expectations at 2.9%. British yield curve moved dramatically when BOE changed radically its stance. While it had remained so far very accommodative, the Bank is now hawkish, and we even heard Gertjan Vlieghe, its most dovish member, say : If the economy continues apace, the appropriate time for a rate hike “might be as early as in the coming months”. Markets repriced immediately the rate hike, moving from 20% to 70% probability of a rate hike until the end of the year. 
    • US inflation came out above expectations as well (+0.4 vs +0.3% MoM), which pushed bond yields higher. The dollar rose as well thanks to this figure and is finally up this week. 
    • North Korean missile launched surprisingly did not push bond yields lower. It looks like markets were warned enough about the danger and now think there will be no escalation. It is a major behavioural shift with the previous weeks when the impact was more dramatic.
    ]]>
    news-705 Mon, 18 Sep 2017 11:36:46 +0200 VIA AM, selected by Emergence for its 16th investment /en/who-we-are/news/detail/via-am-selected-by-emergence-for-its-16th-investment/ The incubator and accelerator fund Emergence2 has allocated €50 million, its biggest investment to date, to VIA AM based on the quality of its systematic equity strategy and innovative approach to financial and accounting analysis.

    Paris, 18 September 2017 - Emergence, the incubator and accelerator for entrepreneurial managers in the Paris market, and NewAlpha Asset Management, the SICAV's delegated manager, have announced the selection of VIA AM(1) as the first investment by Emergence's new European equities fund, launched in June 2017 with a target of €300 million, now closed to subscriptions(2).

    Emergence will put €50 million into the fund VIA Smart Equity Europe(3) the biggest investment made by Emergence since its inception in 2012. The VIA Smart Equity fund was launched in March 2016 and targets long-term outperformance of the MSCI Europe, net dividends reinvested, with a similar risk profile.

    This injection will take the VIA Smart Equity Europe fund above €150 million of AUM, giving it critical mass to build up its base with international investors, and will add the caché of the Emergence label awarded by the SICAV's Investment Committee composed of France's leading institutional investors.

    VIA AM has developed systematic equity and absolute return strategies based on proprietary technology that systematically analyses the economic and accounting data of 3,000 listed companies across the world (including 600 in Europe). The approach yields an exceptionally objective financial analysis and facilitates inter-company comparisons.

    This “economic accounting” gives a better analysis of companies’ profitability and value before any selection across a very wide universe. Accounting standardisation means VIA AM can limit risks of errors of judgement and free itself from reliance on traditional accounting ratios.

    Less than 18 months after its creation, the company now has a range of 4 funds (European, US and global equity and multi-strategy absolute return) with a total of more than €450 million under management.

    Thanks to its founders’ track record and distribution through Eric Sturdza Group, VIA has attracted interest from investors mainly based in France, Switzerland and Luxembourg who have contributed to the firm's rapid growth.

    (1) VIA AM is authorised by the AMF, number GP-15000029
    (2) The sub-funds of Émergence SICAV cannot be marketed outside France and are closed to subscriptions
    (3) VIA Smart-Equity Europe (SI) was launched in March 2016 with ISIN LU1369528622

    > Click here to download the full press release

    ]]>
    news-702 Fri, 15 Sep 2017 09:00:00 +0200 Alger on the Money - Champions of Change /en/who-we-are/news/detail/alger-on-the-money-champions-of-change/ Innovation is happening at an exponential pace and is changing industries faster than ever before. This has profound implications for where investors are likely to find potential opportunities. The Rate of Innovation Adoption Is Accelerating

     

    > Download Alger on the Money, A view on the U.S. Market

     

    ]]>
    news-697 Tue, 12 Sep 2017 14:46:21 +0200 Activity remains robust in Eurozone /en/who-we-are/news/detail/activity-remains-robust-in-eurozone/ This week was busy on several topics :
    • On the macro side, economic data continues to show robust growth in Eurozone (PMI 55.7, retail sales +2.6%) and in the US (ISM services 56).
    • ECB took into account this healthy dynamic and revised upwards its GDP projections, but revised downwards future inflation path due to the Euro strength. That being said, Mario Draghi did not give more clarity on future ECB actions. We will have to wait until October 26 for announcements about tapering
    • Bank of Canada surprisingly hiked for the second time in a row. The markets had only a 50% chance priced in due to weak inflation. BOC did not care and concentrated on business activity which is doing very well             
    • Last, heavy news flow in the US with Debt Ceiling resolution, Stanley Fischer resigning (Fed number 2) and Hurricane Irma coming in the next hours…

                                                                                                 
    Markets reacted with a sharp decline in bond yields : US T Note -14 bps and German Bund -8 bps. The ECB rate hike expectations have been pushed further down the road with a mere 34% probability for a hike before december 2018.

    We think this repricing has gone too far and have used the very low level in German bund yields to add to our short.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-688 Wed, 06 Sep 2017 15:01:41 +0200 Eurozone inflation exceeds expectations and accelerates gradually in August /en/who-we-are/news/detail/eurozone-inflation-exceeds-expectations-and-accelerates-gradually-in-august/ The market sentiment remains volatile this week. Geopolitical tensions escalated sharply at the beginning of the week as North Korea launched a missile over Japan.

    But macro took the central stage quickly. Incoming data remained strong and the global growth recovery is firming up.

    In US :

    • Second quarter growth was revised upward to 3.0% from 2.6% with stronger household spending and a bigger gain in business investment. Momentum accelerated clearly into the second half of the year. Consumer spending, biggest part of the economy, grew by 3.3%. However, fallout from Hurricane Harvey could trim third quarter growth
    • Manufacturing sector accelerated sharply in August as ISM Manufacturing index rises to 58.8 at the top the year
    • However, US jobs report for August was weak. Payrolls missed expectations (156.000 jobs created vs 180.000 expected) with higher unemployment rate (4.4% vs 4.3% in July). Also, wage growth remained weak. This figure has to be consider with caution as payroll numbers have been often volatile during summer                                                                                                           

    In China, data continues to be supportive. The manufacturing PMI came in stronger-than-expected at 51.7 in August from 51.4 in July. The growth outlook remains robust for the second part of the year.

    In Europe, all lights are green before the ECB meeting next week, apart from the rise of the euro that could become a concern for central bankers as discussed in the minutes.

    • Inflation is slowly rising, driven primarily by the energy prices. The Eurozone inflation picked up more than expected in August and rose to +1.5%, with a strong support coming from German inflation at +1.8%
    • Economic confidence rose to the highest level in a decade. Euro economy is booming. Growth accelerated in the second quarter, spreading to more countries. But that has not yet translated into significantly faster inflation and rising wages

    Market sentiment remains very positive in Europe but euro strength began to hit European equities and could put economic recovery in danger and impact the inflation.

    Next week, all eyes will be on the ECB monetary policy meeting. ECB will update economic forecast:

    • Projections are likely to see a cut in the September inflation mid-points for 2018 and 2019
    • Overall, we expect no change in the ECB’s communication regarding the exit strategy (QE tapering). The ECB has been quite clear that there will be no change in policy stance before the autumn
    • Mario Draghi is likely to keep a cautious stance as underlying inflationary pressures (core inflation) still remain too low and the trend is far from anchored

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-684 Tue, 05 Sep 2017 15:27:35 +0200 La Française Acquire 21 Charlemont for approx. €45m /en/who-we-are/news/detail/la-francaise-acquire-21-charlemont-for-approx-eur45m/ Forward-purchase agreement for 37,000 sq. ft. office building Building is pre-let to communications company, ViaSat

    Savills Ireland has today, Tuesday 5 September 2017, announced the acquisition of 21 Charlemont, Dublin 2 on behalf of La Française Group – a French-based asset management firm with €64bn in assets. The forward purchase agreement, which was completed in the region of €45m, represents La Française Group’s first entry into the Irish market.

    Situated in the heart of Dublin’s central business district overlooking the Grand Canal, the Grade A property comprises 37,000 sq. ft. of office space in a 6-storey over basement office building. Its corporate neighbours include a whole host of multinationals, including Zendesk, Google, Amazon, KPMG, Deloitte, MetLife and Accenture.

    21 Charlemont – developed by Rohan Holdings – was one of the first speculatively developed Dublin office buildings to proceed in the current cycle. The project commenced in April 2015 and is due for completion in the coming days. It was announced in June that the building has been fully pre-let to communications company, ViaSat at a rate of €55 per sq. ft.

    Brendan Delaney of Savills Ireland comments:

    We’re delighted to have represented La Française Group in their entry to the Irish market. 21 Charlemont is a quality asset with the benefit of a pre-let agreement to a reputable multinational firm. The buildings central location, and the variety of transport links and amenities on its doorstep, provided prospective buyers with a rare opportunity to acquire one of Dublin’s best new-builds. We look forward to continuing our relationship La Française Group and supporting them on any further investments in the Irish market.

    La Française is 92% (as at 16/03/2017) owned by Credit Mutuel Nord Europe (CMNE), a banking and insurance group present in Northern France and Belgium. It has a multi-affiliate business model organised around four core activities: real estate, securities, investment solutions and direct financing. With 566 professionals and offices in Paris, Frankfurt, Geneva, Greenwich (CT, US), Hong Kong, London, Luxembourg, Madrid, Milan, Seoul and Singapore, La Française manages over €64bn in total assets, of which over €15bn are real estate assets.

    Marc Betrand, CEO/CIO of La Française Global Real Estate Investment Managers, comments:

    On behalf of La Française Group, it is a pleasure to announce our entry into the Irish market with the purchase of 21 Charlemont from reputable developer, Rohan Holdings. We are very impressed with the high quality of the development, which benefits from superb transport links and a pre-letting to a leading US broadband and communications business. These excellent fundamentals will ensure long-term, sustainable returns for our investors.

    Jamie Rohan, Managing Director of Rohan Holdings, comments:

    We are delighted to have completed this office deal with leading fund La Française. It has been very satisfying to transform another vacant site into a prime HQ facility and we continue to seek out new opportunities in this sector.

    > Click here to download the full press release

    ]]>
    news-682 Fri, 01 Sep 2017 17:14:40 +0200 Alger on the Money - Are We Exuberant? /en/who-we-are/news/detail/alger-on-the-money-are-we-exuberant/ Despite perceptions that investor confidence may be too high, the U.S. market now lacks the exuberance that traditionally accompanies a market top. U.S. equities have typically experienced very large increases during the final years before their peaks and it does not appear that today’s market has reached that threshold. Median Two-Year Return of S&P 500 Preceding Peaks and Current Two-Year R

     


    > Download Alger on the Money, A view on the U.S. Market

     

    1 Through 6/30/17.

    ]]>
    news-679 Mon, 28 Aug 2017 18:33:26 +0200 The manufacturing sector remains very dynamic in Eurozone /en/who-we-are/news/detail/the-manufacturing-sector-remains-very-dynamic-in-eurozone/ The main focus this week is the annual Jackson Hole Economic Symposium, one of the biggest events of central banks each year that begins today until tomorrow.

    The topic of the conference is “Fostering a Dynamic Global Economy.” No major policy changes from the central bankers are expected as discussion should focus on financial stability and growth.

    • Janet Yellen kicked off the event with opening speech. No surprise, she stuck to the topic of financial regulation as expected. The speech delivered nothing new on the economy and monetary policy

    • Mario Draghi will speak this evening, low expectations too as the ECB has already said that there will be no change in policy stance until the September meeting.                                                                                                        

    Our view remains unchanged for one more interest rate hike this year in the US and the beginning of the balance sheet reduction.

    We think that market expectations remain too low as probability for a December rate hike is only at 30%.

    Aside that, US political risk has picked up again as President Donald Trump threatened to shut down the government in front of discussions on raising debt ceiling in Congress.

    On the macro side, activity data for the Q3 was released this week.

    • In Europe, data confirmed that economic outlook is definitely improving. The manufacturing sector remained very dynamic, as PMI rose to 57.4 in August from 56.6 in July

    • US data was mixed, housing market slowed down. New home sales declined by 9.4% in July, falling to 7 months low.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-675 Wed, 23 Aug 2017 14:54:36 +0200 Acceleration of growth in Eurozone /en/who-we-are/news/detail/acceleration-of-growth-in-eurozone/ The risk sentiment remains volatile this week. After a rebound at the beginning of the week, as geopolitical tensions between US and North Korea ease, markets complete the week on a negative note.

    The equity markets drop following the rise of US political turmoil and the terror attack in Barcelona.

    US equities sold off sharply amid worries that White House advisor Gary Cohn and others would leave the administration, leaving his pro-growth agenda in doubt.

    Moreover, we are through the end of the earnings season. Second-quarter earnings have been satisfying, especially in US, most companies topping profit and sales estimates. It has been a good support to the market, and that is now behind us.

    The minutes of Central Banks meetings published this week raised some concern :

    • FED minutes showed that discussions have been heavily focused on inflation, with some increased concern about inflation outlook. FOMC members appeared to be more divided over the recent weakness in inflation

    • ECB minutes showed that policymakers expressed some concern about a possible risk of euro overshoot that could impact financial conditions.

    On the macro side, data released this week were balanced :

    • In US, retail sales were robust and rose stronger than expected at +0.6% mom in July, that should support Q3 GDP growth

    • In Europe, economic growth for the second quarter accelerated. The updated flash estimate confirmed GDP growth at +0.6% q/q in the second quarter, up from the +0.5% q/q growth in the first quarter

    • In China, all activity data in July slowed more than expected, and were weaker than the average Q2 print. Both industrial production and retail sales have stated to show some signs of slowdown

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-669 Thu, 17 Aug 2017 09:24:37 +0200 La Française Real Estate Partners International acquires an office building1 in the Schwedler Carré, Frankfurt from Deutsche Asset Management /en/who-we-are/news/detail/la-francaise-real-estate-partners-international-acquires-an-office-building1-in-the-schwedler-carre/ La Française Real Estate Partners International has acquired, on behalf of two La Française collective real estate investment vehicles, a six story office building from Deutsche Asset Management.

    The property is located, at Ferdinand-Happ-Strasse 53, in the mixed use east end district of Frankfurt-am-Main, one of the most dynamic submarkets of the Frankfurt area. The European Central Bank, which established residence in the east end in 2010, has attracted many high quality office and retail tenants, including fintech and service providers.

    The building, named Campus 53, was built in 2011 in a newly developed urban retail, office and residential neighborhood (Schwedler Carré), located off the main road, Hanauer Landstrasse, and just 500 meters from the Ostbahnhof railway station. 

    The 6.730 m2 building is 100% leased, within a ten-year agreement, to a single tenant, a global advertising agency.

    Campus 53 has a loft style entrance on the ground floor, modern office spaces on floors one to five and co-working spaces (conference rooms, lounge and cafeteria) on the sixth floor. The overall technical installation is deemed very good and includes a geothermal heating and cooling system. The office space is easily divisible and hence could be adapted to the needs of multiple tenants. 58 parking spaces are available on the two basement levels.

    Jens Goettler, Managing Director for Germany, La Française Real Estate Partners International, said: “Campus 53 is a valuable addition to our existing portfolio. The long-term performance of the asset is promising: given the limited availability of space in Ostend (east end), in the future, we should witness upward pressure on rents, which will positively impact our return on investment.”

    1This is an example of an investment held within the portfolio. It is not indicative of future investments and does not fully reflect the composition of the funds.

    La Française Real Estate Partners International was advised by Ashurst LLP and TA Europe.

    > Click here to download the full press release.

    ]]>
    news-667 Wed, 16 Aug 2017 14:53:42 +0200 US inflation came in below market consensus expectations of +0.2% mom /en/who-we-are/news/detail/us-inflation-came-in-below-market-consensus-expectations-of-02-mom/ This week markets were rocked by macroeconomic data and geopolitics :

    On the economic data side, we could not help smiling as we watched the dollar rally after a better than anticipated JOLTS report. Why were we amused? Simply because usually markets completely ignore this data, which is a secondary US labor market report. Investors were just heavily positioned long EUR/USD and took profits, which pushed the EUR down. JOLTS report was a mere excuse.

    The figure this week was US inflation, which comes out below expectations at +0.1% versus +0.2% expected. Oddly enough, the dollar does not fall that much, -0.15% versus EUR. Fed members have a very dovish stance : Mr. Kaplan used to anticipate two rate hikes, and now thinks they should be “patient”.

    Markets anticipate now less than two hikes until end of 2019. We think they are overly pessimistic, especially considering labor market is getting tighter and the dollar has weakened this year.

    Regarding geopolitics, Mr. Trump’s “Fire and fury” hurts badly of course risky assets, with equities lower this week (Eurostoxx 50 -2.5%, Chinese equities -4%). We think fundamental good news on the macro and micro side should have the final say.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-663 Fri, 11 Aug 2017 09:48:43 +0200 Alger on the Money - Waiting Can Be Costly /en/who-we-are/news/detail/alger-on-the-money-waiting-can-be-costly/ Identifying equity peaks and valleys has traditionally confounded scores of investors eager to position their portfolios based on their market outlooks. Many investors are now watching for a market decline to create a “buying opportunity” but history suggests that the current bull run may still have legs.

     

    > Download Alger on the Money, A view on the U.S. Market

    ]]>
    news-660 Tue, 08 Aug 2017 11:30:03 +0200 U.S. manufacturing sector remains dynamic while services disappoint /en/who-we-are/news/detail/us-manufacturing-sector-remains-dynamic-while-services-disappoint/ As usual, we have a heavy set of US data during the first week of the month :
    • ISM advanced indicators, which gives short term information about US economy. Manufacturing sector remains dynamic (56.3, close to the highest level), while services disappoint at 53.9. We note as well that price component is moving higher, which bodes well for future inflation prints. These decent pieces of data were not enough to break the relentless move lower in USD and US bond yields until Thursday
    • Today, employment report was out and came as a positive surprise : payrolls are high, and average hourly earnings slightly better than expected. Shortly thereafter, Gary Cohn, Trump’s administration man on economic issues, said they were working on a plan to reduce corporate taxes and boost cash repatriation. These events broke the trend and the dollar ends the week close to its beginning level.

    This data strengthens our view that the American economy is in good shape. We continue to think that markets do not anticipate enough Fed hikes.

    We note as well the sharp move higher in Euro inflation breakevens, helped by the rise of Brent.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-654 Mon, 31 Jul 2017 17:39:17 +0200 Macroeconomics data confirm that US economy is doing well /en/who-we-are/news/detail/macroeconomics-data-confirm-that-us-economy-is-doing-well/ A few things caught our eyes this week :
    • Oil inventories released Tuesday were well below expectations. Crude oil is up +8.4% on the week, and this pushed US bond yields higher

    • US economy data with the Q2 GDP release, which was long expected. It rebounded to +2.6% vs +2.7% expected. We have confirmation that Q1 weakness was temporary. US economy is still performing well. The negative point was the Employment Cost Index which continues to grow at a very slow pace. Wage growth, the main inflation driver, is still missing

    • As expected, Fed kept its rate unchanged on Wednesday night, the accompanying statement was perceived as dovish by investors

    • Eurozone inflation data surprised on the upside. Germany, in particular, is up +1.7% year over year. Nevertheless, German bond yields are up only a mere +2bps on the week

    • Last but not least, corporate earnings were decent on average. 57% positive surprises in Europe, 77% in the US. That helped the S&P to a new all-time high

    Our convictions remain unchanged. We continue to think US bond yields are too low and markets should anticipate more Fed hikes. We therefore remain bullish on the dollar. 

    Our view is right, US 10-yr yields are +6bps vs +2bps for bunds this week.

    We remain bullish on Euro equities and Emerging markets. These two areas exhibit solid macro performance and we think they should continue to attract inflows.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-650 Mon, 31 Jul 2017 09:23:33 +0200 Carbon: a new performance vector on the equity markets /en/who-we-are/news/detail/carbon-a-new-performance-vector-on-the-equity-markets/ Equity management based on specific performance factors is enjoying growing recognition among investors. Exposures to market anomalies which are statistically identified and explained through behavioural or regulatory biases generates over-performance. Five key factors are highlighted by the world of academic finance as well as practitioners: growth vs value, high vs low momentum, small vs big caps, low vs high volatility, high vs low quality. Some factors are more prevalent than others at certain times depending on market conditions. 

    Until 2014, the academic literature did not recognise the existence of a low vs high carbon footprint factor on the equity markets that was significant or sufficiently stable in terms of risk-adjusted return. However, the presence of a risk premium on the anticipated profitability of high-carbon companies is identified as well as the fact that transparency of information on carbon emissions benefits the valuation and liquidity of these companies. 

    Nevertheless, by analysing the most recent data on global equity markets, it seems that the carbon factor is about to become an important source of performance. Considering the universe of the MSCI ACWI index, two portfolios are set up depending on companies’  carbon footprints: a low carbon portfolio with the quarter of the companies presenting the lowest carbon footprints, and a high carbon portfolio with the quarter of the companies presenting the highest carbon footprints. Over the past four years, the low carbon portfolio has generated an outperformance of 2.9% relative to the high carbon portfolio with a lower level of volatility. Compared to the MSCI ACWI index, the low carbon portfolio’s performance is 1.9% higher and the high carbon portfolio 1% lower.

    The presence of a carbon factor on global listed real estate is even more long-dated and more significant. Considering the EPRA Global index, a low carbon portfolio, made up of half the stocks presenting the highest environmental rating, has generated a performance 5.0% higher than the index over the past 11 years for an equivalent level of volatility. 

    The carbon factor is definitely a performance element to be taken into account in the management of a portfolio invested in equities, and even more so in listed real estate. For the latter, it is actually not so surprising as 40% of anthropogenic emissions of greenhouse gases come from the building sector. Considering the differences in performance between low and high carbon portfolios, the equity market is implicitly pricing the carbon at around €100 per tonne, anticipating future taxation or the implementation of a real emission rights market.

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    news-648 Fri, 28 Jul 2017 11:41:14 +0200 Alger on the Money - A New Way to Lower Risk? /en/who-we-are/news/detail/alger-on-the-money-a-new-way-to-lower-risk/ ESG investments have strong potential for mitigating risk by providing earnings stability. Highly rated ESG companies may do more than benefit society—they may benefit your portfolio too.

    Source: Bank of America Merrill Lynch (based on median EPS performance over 5-year periods from 2005-2015)

    1 Bank of America Merrill Lynch (2016) “ESG: good companies can make good stocks.” Equity Strategy Focus Point.

    > Download Alger on the Money, A view on the U.S. Market

    ]]>
    news-646 Wed, 26 Jul 2017 10:09:02 +0200 Tough week for Mr. Trump with the vote on the health reform cancelled /en/who-we-are/news/detail/tough-week-for-mr-trump-with-the-vote-on-the-health-reform-cancelled/ This week was quiet in terms of data publication, newsflow was more concentrated on politics and central banks.

    First of all, politics, with Mr. Trump who, once again, had a terrible week: on Monday, two additional Republican senators announced they were not supporting healthcare reform bill. The vote on the “Better Care Reconciliation Act”, better known as “Trumpcare” vote, was cancelled rapidly thereafter. With literally no law voted in Congress since he arrived out of 42 bills, the beginning of Trump’s term is clearly a failure. The end of week was not better, with FBI announcing Trump's real estate transactions with Russians would be investigated.

     

    This political climate negatively affected the dollar and US government bond yields. We continue to think US yields are too low and markets should anticipate more Fed hikes.

    On Thursday, Mario Draghi did his best to look dovish. Fixed income markets reacted well, but surprisingly the Euro continued to rally after the speech. This divergence adds conviction to our thinking that the Euro must go down again, and we added to that trade by taking advantage of good market opportunities.

    The earnings season is under way, we will have 40% of Stoxx 600 publishing this week. We think earnings should be on the strong side given how positive macro data was.

    ]]>
    news-644 Tue, 25 Jul 2017 14:25:26 +0200 Gilles Seurat's take on this week's market /en/who-we-are/news/detail/gilles-seurats-take-on-this-weeks-market/ This week was quiet in terms of data publication, newsflow was more concentrated on politics and central banks.

    First of all, politics, with Mr. Trump who, once again, had a terrible week: on Monday, two additional Republican senators announced they were not supporting healthcare reform bill. The vote on the “Better Care Reconciliation Act”, better known as “Trumpcare” vote, was cancelled rapidly thereafter. With literally no law voted in Congress since he arrived out of 42 bills, the beginning of Trump’s term is clearly a failure. The end of week was not better, with FBI announcing Trump's real estate transactions with Russians would be investigated.

    This political climate negatively affected the dollar and US goverment bond yields, which hurts us this week. We retain our positioning because we think the political noise will not last, and fundamentals should return to the forefront. We continue to think US yields are too low and markets should anticipate more Fed hikes.

    On Thursday, Mario Draghi did his best to look dovish. Fixed income markets reacted well, but surprisingly the Euro continued to rally after the speech. This divergence adds conviction to our thinking that the Euro must go down again, and we added to that trade by taking advantage of good market opportunities.

    The earnings season is under way, we will have 40% of Stoxx 600 publishing this week. We think earnings should be on the strong side given how positive macro data was. We increased slightly our exposure to this theme.

     

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

     

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-638 Tue, 18 Jul 2017 14:23:11 +0200 First major Central bank after Fed to hike, despite low inflation. /en/who-we-are/news/detail/first-major-central-bank-after-fed-to-hike-despite-low-inflation/ After a quiet start this week, Wednesday was an interesting day:
    • Janet Yellen had a dovish speech, she stressed that economic projections are highly uncertain. In particular, she said “there is uncertainty about when - and how much - inflation will respond to tightening resource utilization”. This lack of confidence in inflation pushed US TNote 5 bps lower and propelled EM markets much higher

    • Bank of Canada held its committee and hiked as expected. They prepared markets in the previous weeks, but tone was even more hawkish than expected and that pushed CAD and Canadian yields higher. We think the move is very strong, especially given that inflation remains weak in Canada. We have therefore opened a short CAD/NOK, given that NOK did not react to an elevated inflation point.

    All in all, global bond yields were a touch lower after the move higher in previous weeks. This move was driven by real yields. Equity markets exhibit a nice performance (+1.7% for Eurostoxx, +3.9% for MSCI EM).

    EM foreign exchange is strong (TRY +1.3%, BRL +2.3%, MXN +1.7%). We keep our holdings in these currencies that exhibit a high carry in a context of falling inflation in Emerging markets. We like the trade even more because of the cheap valuation in real effective exchange rate.

    We keep as well our Euro equities exposure (15%). The earnings season is coming up and should be a positive catalyst for this theme. We expect a solid 11% EPS growth.

    This week, the main move was the short CAD/NOK.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-633 Thu, 13 Jul 2017 11:39:40 +0200 Alger on the Money - Mind the Output Gap! /en/who-we-are/news/detail/alger-on-the-money-mind-the-output-gap/ The output gap is a powerful tool that currently indicates the U.S. economy has potential for expansion, which could support equities in the foreseeable future. Output Gap Implies the Economy Has Room to Expand

     

     

    > Download Alger on the Money, A view on the U.S. Market

    ]]>
    news-626 Tue, 11 Jul 2017 12:11:55 +0200 Increase in the ISM non-manufacturing index at 57.4 in United States last month /en/who-we-are/news/detail/increase-in-the-ism-non-manufacturing-index-at-574-in-united-states-last-month/ The move higher in bond yields has continued last week with German yields 10bps higher, reaching their YTD high at 0.56%, we see the same movement in the United States, Canada, etc. However, no specific news this week but large positions from investors seem to be unwound, which explains current moves.

    ECB is trying to soothe tensions by saying accommodation withdrawal will be gradual, support is still justified, etc. For the moment, impact is close to nil.

    Euro curve implies today a first hike in June 2018 and 25bps hikes in total in 2018. This would imply quite a brutal end to QE (from 60 billion Euros per month until December 17 to 0 in June), since Mister Draghi always said rate hikes will come after QE end. This scenario is not impossible, but looks quite an aggressive one. Given where inflation is, we do not think German front end will go much further from here. Regarding the long end, there is still some room left, real rates are still pretty low but here again, we are close to target and a short position does not look very asymmetric. On the other hand, we think there is still room to go on US short end.

    Eurozone macro data stayed decent with strong German and French industrial production. In the United States, we observe a stunning 57.4 ISM figure coupled with good employment report, even though wage growth did not tick up, once again.

    Equities are flat this week, and Eurostoxx is stuck to post election level 3440. We continue to keep the same view : macro is good, micro as well with EPS expected to grow 15% this year. Eurostoxx is up a mere 5% YTD and valuations are close to their historical average. In a world where excess liquidity will continue to flush and be invested, we think Euro equities remain attractive. We could however experience some volatility if fixed income market sell-off persists.

    We made modifications this week, taking profits in Euro banks and Euro yields notably.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-621 Mon, 10 Jul 2017 10:42:37 +0200 Grand Paris and housing - Property & Outlook /en/who-we-are/news/detail/grand-paris-and-housing-property-outlook/ Housing has always occupied a special place in France. Apart from the values it conveys, real estate in its broadest sense and housing in particular embodies many attributes.

    The residential market is sustainably supported by several structural factors: an active demographic compared with other Western European countries, a rising trend for household division, retirement preparations and, more broadly, a desire for homeownership. In economic terms, for the last few quarters acquisitions have been driven by the low level of credit rates, despite an increase seen at the end of last year. These very low credit rates have also been helping to rebuild householder solvency.

    Furthermore, in the context of continued high volatility in the financial markets, the real estate asset class continues to represent a refuge value. These many supporting factors have ensured consistent activity in the house acquisition market and their combination has encouraged a considerable upturn in prices, particularly in the Greater Paris Region.

    This high demand from French house buyers is increasingly concentrated in cities, as are populations, which are attracting the lion’s share of activity. Over the years, regional imbalances therefore become exacerbated, leading to diverging trends in terms of residential pricing: large cities have seen strong growth in house prices, whereas demand for more secondary areas has slowed considerably leading to a decrease in values. 

    The most striking example is undoubtedly the Greater Paris Region. Despite a series of crises since 2008, there has only been a slight decrease in prices and only for a very short time. Levels have generally since risen again and estimates forecast new record prices in Paris at €8,800 per sq m for July 2017. Price increases in Paris have also had a ricochet effect on the suburbs. The stakes are enormously high. Over the last few decades, the share of expenditure on housing has risen considerably and this has had a substantial impact on householder budgets allocated to other areas. For example, this has driven a downturn in consumption which has slowed the French economy and all its constituent parts. Analysts therefore point to the strength of the German economy which is particularly attributable to a better distribution of activity and residential areas across the country (despite having a considerably higher density than France), as this increases the competitiveness of companies and boosts household consumption by maintaining rents in the various cities at reasonable levels.

    The Grand Paris project has been developed to confront these challenges. The construction of 200km of automated metro lines along with 68 new stations around Paris will greatly improve accessibility to certain areas that currently receive little interest from householders. This will contribute to broadening the sites available for construction and increase the housing stock. 70,000 new homes should therefore be developed every year for the next 25 years to meet the needs of the rising population in the Greater Paris Region (population of 13 million expected by 2030, compared with 12 million recorded in 2014) and create better fluidity in the residential market by reducing inequality.

    From the institutional investor’s point of view, the substantial decrease in yields for offices and retail have made the returns from residential assets increasingly attractive as they have become close to those offered by commercial real estate investments. In addition, the low rates of return offered by government bonds have automatically made the risk premium far more attractive. 

    Line 15 of the Grand Paris, the only metro line that will not run through any station in the capital itself, reflects the drive to look beyond the ring road and to incorporate the inner suburbs. 

    La Française is keen to be actively involved in the development of Grand Paris. We are therefore considering innovative means of offering householders easy access (due to the low cost) to new housing, including homes in the Paris region. The Grand Paris project offers a unique opportunity to break down the barriers between territories, make them more accessible, increase the overall supply of housing and improve living conditions for many more people.

    Read more

    ]]>
    news-615 Tue, 04 Jul 2017 14:58:25 +0200 Strong reaction in sovereign fixed income markets after central bankers’ speeches /en/who-we-are/news/detail/strong-reaction-in-sovereign-fixed-income-markets-after-central-bankers-speeches/ Change in tone this week! We already had a few tweaks in central bankers’ speeches in the last few weeks, but it became much clearer during ECB Forum in Sintra

    Mario Draghi gave the first shot, while Mark Carney (Governor of the Bank of England) confirmed Andy Haldane (Chief Economist of the Bank of England) speech, and Stephen Poloz (Governor of the Bank of Canada) renewed the change in BoC policy stance. With Fed viewed as hawkish in the latest FOMC, we have now four major central banks pointing to reduce their very accommodative policies.

    Furthermore, Eurozone inflation came out above expectations, and bond yields reaction was stark: +22bps on Euro and British yields, +14bps on US yields and +30bps on Canadian yields. Consequently, the dollar weakened versus EUR, GBP and CAD, due to yield spread compression.

    At the same time, oil price is recovering, which obviously keeps the trend in bond yields.

    Nothing changed on the macroeconomic side, and inflation, even if higher than expected, does not show any sign of significant recovery.

    This stark move is probably as well attributable to the very high leverage in systematic funds (risk parity, min var strategies, etc) who were all very long equities and bonds. These aggressive positions are probably still there and could push markets further next week. One must remember May 2015 when Bund yields shot up 100bps.

    The Euro equities are back to a mere +5% YTD, even though microeconomic results are very robust.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-608 Fri, 30 Jun 2017 11:52:00 +0200 Alger on the Money - Opening the Throttle for Corporate Earnings /en/who-we-are/news/detail/alger-on-the-money-opening-the-throttle-for-corporate-earnings/ The volume of U.S. regulations is at a historical high. Thus, the potential for Washington to initiate reforms that can reduce regulation and help lower costs for U.S. businesses is also high. This has benefits for many companies, small or large, and for equity investors.

     

    > Download Alger On the Money, A view on the U.S. Market

    ]]>
    news-604 Wed, 28 Jun 2017 17:25:31 +0200 After Spain, it is Italy’s turn. What future for the banking sector? /en/who-we-are/news/detail/after-spain-it-is-italys-turn-what-future-for-the-banking-sector/ In the wake of Banco Popular, the European banking sector has suffered its second bank failure in a few weeks.

    This time it was two Italian banks from the Veneto region, Banca Popolare di Vicenza and Veneto Banca, whose financial solidity has been under severe pressure for several quarters from numerous and poorly provisioned non-performing loans, which heavily undermined solvency ratios at both banks. This despite repeated interventions by the Atlante fund1.

    On Friday 23 June, the ECB said the two Venetian banks were failing or likely to fail2. As these were small-scale non-systemic banks, the ECB’s Single Resolution Board decided to allow the Italian national authorities to wind them up3.

    First, shareholders and subordinated bondholders (mainly Tier 2) will take a hit from the cost of winding up the banks and will be hived off into a bad bank with assets drawn from the NPLs of the two banks, following the Banco Espirito Santo model and indicating recovery rates will undoubtedly be meagre. Small individual holders of subordinated debt could seek compensation after the event, but the proportion they can hope to receive is yet unknown.

    Second, Intesa Sanpaolo – Italy’s leading bank – is to buy the "healthy" parts of the two banks' balance sheets4  for a notional euro, which means it will get:

    - €26.1 bn of healthy loans and €4 bn of performing but risky loans (totalling around 8% of Intesa Sanpaolo’s loan book);

    - €8.9 bn of other financial assets;

    - €1.9 bn in tax assets;

    - €25.8 bn of customer resources (deposits);

    - €23 bn in off-balance sheet savings (indirect deposits);

    - €11.8 bn of senior debt issued by the two banks;

    - 960 branches and around 10,840 employees.

    This is capital neutral for Intesa Sanpaolo, as the Italian government will pay around €4.8 bn to cover recapitalisation and restructuring costs (branch closures and redundancies) on the assets acquired and provide a €1.5 bn public guarantee against any legal contingencies resulting from the acquisition. The Italian government has also committed up to €12 bn against potential losses on the newly acquired healthy loan book. Finally, Intesa will be able to transfer any of the performing but risky loans (total of €4 bn) to the bad bank if their quality becomes impaired before 2020.

    This resolution to the Venetian bank crisis is in our view good news for the Italian banking sector. First, two non-viable bank balance sheets have finally been cleaned up and transferred to a sounder institution. For the buyer, Intesa, the deal was done on highly advantageous terms without harming solvency ratios. Finally, the senior creditors of the two little banks survive despite everything. This quells fears of contagion, given that many were small individual savers. 

    The next hurdle in cleaning up the Italian bank sector is Banca Monte dei Paschi di Siena. On 1 June, the European Commission approved a preventative recapitalisation which allows the bank to access state aid and safeguard the interests of senior creditors, while unloading its NPLs to the Atlante fund (negotiations on this point are ongoing). Here again, the subordinated debtholders and shareholders will take a hit, in accordance with European law, as a condition of unlocking state aid.

    In light of these latest events, we reaffirm once more our philosophy of taking only premium positions in subordinated debt, as recovery rates in the event of default are near-zero on either Tier 2 or Additional Tier 1 debt. The only subordinated debt we hold is in Intesa Sanpaolo and UniCredit in the La Française AM fund. Both names were boosted yesterday by the action of the European and Italian authorities and their financial strength has been significantly bolstered in recent quarters.

    The content of this presentation does not constitute an offer or solicitation to invest, nor investment advice nor a recommendation to make any specific investment. Information, opinions and numerical data are thought to be well-founded and accurate on the day the presentation was written in light of the economic, financial and stock market circumstances at the time and reflect the view at that date of the La Française Group on the markets and their trends.

    1 A fund constituted by Italy's leading financial institutions, including UniCredit and Intesa Sanpaolo, to recapitalise struggling banks and buy out their doubtful loans. 

    2 https://www.bankingsupervision.europa.eu/press/pr/date/2017/html/ssm.pr170623.en.html

    https://srb.europa.eu/en/node/341

    4 http://www.group.intesasanpaolo.com/scriptIsir0/si09/contentData/view/content-ref?id=CNT-05-00000004DDFB6

    ]]>
    news-602 Tue, 27 Jun 2017 18:00:34 +0200 Oil prices continues its downtrend and fell to new lows this year /en/who-we-are/news/detail/oil-prices-continues-its-downtrend-and-fell-to-new-lows-this-year/ The week was relatively light with few macro data released and no major events, as central banks are behind us.

    Crude oil was the first market driver this week and weighs on global market sentiment. Oil prices remained under pressure and fell to new lows.

    On a YTD basis, oil prices are down 20% as oversupply concern remains. This is the biggest price drop in the first half of the year since 1997.

    We need to monitor closely this point because if downtrend deepens, it might be a major concern with potential impacts on all asset classes and central banks, and could weigh on growth forecast and global macro outlook. At time of writing, we still view this dip as temporary.

    Brexit talks with the European Union began this week. David Davis (U.K. Brexit secretary) outlined hopes for a " strong and special partnership " with the European Union once Britain leaves the union. That’s probably a step in the right direction. Theresa May is in a precarious position following the election disaster.

    We think that it is not impossible to see a shift in market sentiment towards a more softer Brexit in the coming months, but we don’t forget that negotiations are just at the beginning and uncertainty should remain in United Kingdom.

    Looking towards the Chinese market, MSCI announced the inclusion of China A-Shares to its MSCI EM Index. It will be done incrementally, in a two-step procedure, following reviews in May-2018 and then August-2018 and will represent 0.7% weight in the MSCI EM Index. It is a long-awaited decision, so we do not expect significant implications or impacts on the market.

    In Europe, the main focus was on preliminary June PMI release. Euro zone June flash composite PMI came in softer than expected and falls to 55.7 from 56.8 in the previous month. The services PMI slowed this month and came in at 54.7, below expectations. The manufacturing activity hit a 6-year high, and rose to 57.3 from 57.0 in May. This is the highest reading since April 2011.

    Despite this dip, this report remains robust, as the average expansion in the second quarter has been the strongest for over six years with a broad based recovery.

    Moreover, ECB published its economic bulletin this week and confirmed that inflation is likely to remain around recent levels in the coming months.

    In United States, PMI growth slowed as well. The United States June Flash Composite PMI came in at 53.0 vs 53.6 for the previous month, but subcomponents on employment and new orders remain strong.

    Equities markets traded range bound this week with outperformance of EM. Core yields fell slightly.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-598 Tue, 27 Jun 2017 09:19:00 +0200 NewAlpha receives the support of the ‘French Tech Acceleration fund’ and announces the final closing of its Fintech Venture Capital fund /en/who-we-are/news/detail/newalpha-receives-the-support-of-the-french-tech-acceleration-fund-and-announces-the-final-closing/ NewAlpha Asset Management (“NewAlpha”), an expert in investments targeting the entrepreneurial financial industry worldwide, launched the first French venture capital fund dedicated to Fintech companies in November 2015. Following the injection of €15m in capital by the French Tech Acceleration fund, managed by Bpifrance as part of the French Tech initiative and financed by the Investments for the Future Programme (PIA), NewAlpha has closed, within the timeframe originally anticipated, its first venture capital fund at €56 million.

    The fund, targeted to French institutional investors (banks, insurers, pension funds), aims to build and develop a diversified portfolio of innovative FinTech and InsurTech startups. Additionally, it allows limited partners to keep a close eye on the technological changes affecting banking, insurance and asset management.

    Primarily invested in un-listed French FinTechs, the fund benefits from a strong European deal flow generated by the unique ecosystem that NewAlpha has developed with its shareholders, investors, affiliate asset managers and NewAlpha’s expertise in structuring seeding and incubation deals in France and abroad.

    NewAlpha FinTech was the most active French Capital Venture fund dedicated to FinTech in 2016. Most notably, it was the lead investor in several startups, including Heoh, iTrust, Unilend, Lydia, TrackInsight and most recently Wikifolio, the fund’s first European investment.

    These start-ups benefit from the financial and business support that NewAlpha has been providing for several years to its other incubation funds, dedicated to emerging asset managers.

    The French Tech Acceleration Fund, created within the framework of the French Tech Initiative in 2014 and funded with €200m over 5 years, is managed by Bpifrance. The Fund is financed by the Investments for the Future Programme (PIA), overseen by the General Commissariat of Investment (CGI) to invest in private acceleration structures (accelerators, startup studios, acceleration investment funds ...). Nearly €70m have now been committed by the French Tech Acceleration Fund in more than 10 investments.

    Lior Derhy, Director of Private Equity at NewAlpha: « With our NewAlpha FinTech fund, we wanted to combine our expertise in the financial industry with the best practices of Venture Capital and incubation. We met with several hundred startups since the end of 2015, which confirms the depth and dynamic of FinTech opportunities in France and Europe. The constructive evolution of the relationships between the industry’s established players and startups should lead to a strong democratization of FinTech innovations and offer attractive investment opportunities. »

    Bpifrance adds: «We are happy to support NewAlpha’s team and their FinTech fund, which is based on a model of operational support via immersion in NewAlpha’s ecosystem in the financial industry. »

    Antoine Rolland, CEO of NewAlpha concludes: «NewAlpha’s development strategy is based on the broadening of our innovation-oriented areas of expertise.  Our FinTech fund’s positioning, now well-established, reflects our expertise and our ability to offer investment solutions that create value for both institutional investors and entrepreneurs.» 

    *This fund is exclusively reserved for professional clients as defined by the MiFID Directive.

    > To download the press release, please click here

    ]]>
    news-588 Wed, 21 Jun 2017 09:25:07 +0200 Strong disappointment on US inflation, which slows down significantly /en/who-we-are/news/detail/strong-disappointment-on-us-inflation-which-slows-down-significantly/ The highlight of the week was the June FOMC meeting.

    As expected, the Federal Reserve raised interest rates by a quarter point for the second time this year. Despite softer-than-expected inflation data, the Fed kept its path of policy rates essentially unchanged. Most of the FOMC members still forecast one more rate hike this year.

    In the summary of economic projections (SEP), the Fed projected a tighter labor market over the forecast horizon, and a lower inflation forecast only in 2017. The Fed continues to see the recent inflation softness as transitory. Inflation should return to 2%. Dots remained unchanged.

    The change in the reinvestment policy is likely to be announced at the September meeting. The balance sheet reduction could begin before year end, but should proceed at a moderate pace.

    The tone of the meeting is viewed as slightly “hawkish”. Core yields bounced back from lows and the dollar rebounded sharply. But, the likelihood of a December rate hike remains below 50%, markets don’t believe the Fed and remain cautious. We continue to think that markets are too pessimistic on the economy. We keep our view short duration unchanged.

    Otherwise, the Bank of Japan maintained its same monetary policy .

    On the macro side, incoming data in the United States continued to disappoint. Retail sales in May were weaker than expected and dropped by -0.3% month over month but prior month was revised higher.

    Inflation missed expectations and continues to disappoint in May. Headline CPI slowed significantly to +1.9% year over year from +2.2% previously. Core CPI was weaker than expected for the third month in a row at +1.7%, suggesting that inflation pressures are subdued.

    In Europe, macro environment remains supportive. Industrial production rose in line with expectations (+0.5% month over month) mainly driven by the rebound in the energy sector. Eurozone May final CPI was released at +1.4% year over year, as expected.

    In China, retail sales and industrial output remained resilient in May. Industrial output rose +6.5% from a year earlier. Retail sales increased +10.7% in line with expectations.

    Equities markets and core yields fell slightly this week. Oil prices continued to drop as global inventories remained high.

    Next week should be more quiet as central banks meetings are behind us.

    We made a few changes in the portfolio this week:  

    • We slightly increased our exposure on the Canadian dollar and initiated a short position on Canadian rates against US rates, following the hawkish comment from the governor of the Bank of Canada.
    • We bought Brazilian real (BRL) against the dollar.
    • On the UK, we continued to take some profits on our short Gilt position.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-576 Fri, 16 Jun 2017 15:59:38 +0200 Alger on the Money – Money in Motion — ESG is a Destination /en/who-we-are/news/detail/alger-on-the-money-money-in-motion-esg-is-a-destination/ One of the largest transfers of wealth—an estimated $30 trillion over the next few decades—will occur as Baby Boomers pass money to younger generations. What do you think the younger generations value?

     

    1 U.S. SIF Foundation, “Report on Sustainable and Responsible Investing Trends in the United States,” 2016
    2 2016 U.S. Trust Insights on Wealth and Worth Survey, 2016. Of Millennials, 28% own ESG, 57% are interested in adding ESG. Of Generation X, 24% own ESG, 31% are interested in adding ESG.
    3 The Journal of Investing, “Can ESG Add Alpha,” Zoltan Nagy, Altaf Kassam, Linda-Eling Lee; Summer 2016

    > Download Alger On the Money, A view on the U.S. Market

    ]]>
    news-568 Tue, 13 Jun 2017 10:49:25 +0200 Upward revision of GDP, with domestic demand as main contributor /en/who-we-are/news/detail/upward-revision-of-gdp-with-domestic-demand-as-main-contributor/ The main focus last week were the ECB June meeting and the United Kingdom election.

    As expected, ECB kept interest rates unchanged. The overall tone of the meeting remains dovish. The ECB did not exceed consensus expectations on changes to the forward guidance and made only a marginal change by removing the easing bias on policy rates. 

    Regarding economic forecast, the ECB slightly upgraded the growth outlook and sees risks to growth as “broadly balanced” now, but downgraded its inflation forecasts (mainly due to lower energy prices) for 2017 by -0.2pp to +1.5%, for 2018 by -0.3pp to +1.3%, and for 2019 by -0.1pp to +1.6%. This downward revision was higher than expected.

    ECB kept a cautious stance. The president Draghi emphasized that the Governing Council will need to be patient and confident as inflation stays subdued. At this stage, Draghi said that the ECB didn’t discuss about the timing for the removal of the stimulus.

    The early General Election in United Kingdom has sprung a major surprise as Theresa May's Conservative party is losing its outright majority in parliament. The Conservative Party has won 315 seats while the opposition Labour Party, led by Jeremy Corbyn, has 261 seats. After results, the pound drops more than 2% but other markets remain quiet with no contagion risk.

    As no party has secured an outright majority, United Kingdom is facing a hung parliament. This means multiple parties have to hammer out a coalition government, which could delay Brexit negotiations with the European Union.

    We think that political uncertainty will remain over medium term. We don’t have strong convictions on United Kingdom. We keep a small bias long GBP as we still expect some appreciation, and a short view on Gilt with limited risk budgets.

    On the macro side, the main economic data released this week were ISM Nonmanufacturing Index in Unites States and the final first quarter GDP growth in Eurozone.

    The ISM Nonmanufacturing Index for May came in slightly below expectations at 56.9 from 57.5 in April. The employment subcomponent rebounded strongly to 57.8 from 51.4 in the previous month, and points to a robust activity in services.

    The final first quarter GDP growth in Eurozone was revised higher to +0.6% (+0.1pp) as domestic demand remains the main contributor to growth.

    Global market sentiment was balanced this week. Equity markets traded flat and core yields rose slightly. Oil prices continued to drop after an unexpected increase in US crude inventories. OPEC cuts are not having the intended effect so far.

    This week, focus will shift to June FOMC meeting. The FED is likely to raise rate by another 25bp as widely expect by markets and will update summary of economic projection.

    Few changes in the portfolio : we have slightly increased our exposure to European equities and our short Euro exposure.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-563 Thu, 08 Jun 2017 09:30:46 +0200 NewAlpha appoints Adrien Auric as Director of Operational Due Diligence /en/who-we-are/news/detail/newalpha-appoints-adrien-auric-as-director-of-operational-due-diligence/ NewAlpha Asset Management, the Paris-based global emerging manager acceleration specialist and innovative Private Equity player, has appointed Adrien Auric as Director of Operational Due Diligence.

    Given the diversification of its business activities, New Alpha AM has chosen to reinforce its team in order to increase its investment analysis capabilities.  

    Prior to joining NewAlpha, Adrien Auric was in charge of Investment Due Diligence at Reinhold & Partners, a specialized consultancy firm working for top tier institutional investors. He also served as Independent Funds Director in various jurisdictions, including France, Ireland and Luxembourg.

    Adrien has spent 7 years with JP Morgan, initially (2007-2009), as Head of Investment Due Diligence of J.P.Morgan Mansart Investments (JPMMI), the dedicated and regulated Asset Management Company of the IB. In 2009, he was appointed Executive Director and COO of JPMMI. He was instrumental in developing the Structured Funds business and launching the new alternative UCITS Funds ‘platform, overseeing in particular all risk and support functions.

    Priorly, Adrien spent 3 years at Olympia Capital Management as COO in charge of Investment Due Diligences, Middle and Back offices teams and 8 years with Ernst & Young where he held a variety of management positions both in Banking, Insurance and Real Estate Audit and Corporate Finance practices.

    Adrien graduated from Sciences Po Paris (major in Economics and Finance) and holds a Master’s degree in Business and Tax Law from the University of Law of Paris II, Assas. 

    Antoine Rolland, CEO of NewAlpha comments: “NewAlpha is dedicated to discovering and supporting tomorrow’s best investment talents. With over 23 years of experience in finance, out of which over 12 years in the hedge fund space, Adrien complements very well NewAlpha’s know-how regarding due diligences and further enhances the strength and depth of our due diligence process. Adrien has a longstanding expertise in the alternatives space, capturing aspects such as risks, middle office and operations. His prior audit and accounting expertise will be a valuable asset to seamlessly understand and deliver on clients’ objectives”

    Adrien Auric adds: “I’m extremely excited to join such a fast moving organization which has built an excellent reputation in sourcing and selecting emerging managers across the world. Smart investors are allocating increasingly to smaller and newer managers to get differentiated and innovative sources of performance. A strong and efficient due diligence process is necessary to catch the best talents before they get established”

    As Director of Operational Due Diligence, Adrien Auric will report to Antoine Rolland, Chief Executive Officer of NewAlpha.

    > To download the press release, please click here

    ]]>
    news-561 Tue, 06 Jun 2017 16:56:41 +0200 No inflationary pressure on wages despite lower unemployment rate /en/who-we-are/news/detail/no-inflationary-pressure-on-wages-despite-lower-unemployment-rate/ Last week we had US activity data. Firstly, personal income has risen by +0.4% on the month, which is higher from Q1.

    Manufacturing ISM, Chicago PMI and ADP were decent as well in the middle of the week but on the opposite, US non-farm payroll was a major miss today, with average weekly earnings still soft at +2.5% year over year. This week we have American figures, with non-manufacturing ISM and durable goods orders.

    Labor market data pushed the dollar and bond yields lower, which hurts us. However, we keep our positions, bearing in mind a few things :

    • Investor positioning is clean on those assets. The market is no longer net short duration. Investors are no longer long on the dollar, but they are heavily long EUR (highest since 2013) and short on Canadian dollar (lowest point ever)
    • US activity data confirms so far a pickup in US Q2 GDP, and Q1 data has been revised upwards
    • Fed market pricing is still on the low side with a mere 3 hikes anticipated until end of 2019. With an economy at full employment, GDP stable around 2% and inflation close to target (even if latest short term data was softer), we think this is too low.

    In a nutshell, these themes show a positive asymmetry in our favor (investor positioning, technical indicators, sentiment).

    In Europe, PMI came out well oriented again. Portuguese GDP was above expectations and Italian GDP was revised upwards. On the political side, Italian risk is getting higher with a possibility to have snap elections as soon as this year. Chinese data was in line with consensus and rather comforting.

    Market volatility remains low, on equities, fixed income or exchange market. ECB next Thursday could bring some more volatility with a potential change in tone, even if inflation data we had this week (below expectations, 0.9% on core CPI) should temper ECB board. On the very same day, June 8, we will have British elections with polls getting much tighter. We went into this topic and it looks like turnout is going to be key: if strong, the outcome will be a close call, if low then Theresa May should secure a large victory.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-555 Fri, 02 Jun 2017 10:34:11 +0200 Alger On the Money - Small Caps May See Big Gains Under New Tax Proposals /en/who-we-are/news/detail/alger-on-the-money-small-caps-may-see-big-gains-under-new-tax-proposals/ Some proposals by the new administration and House of Representatives Republicans lower corporate tax rates, making U.S. tax rates more in line with global peers. How can you benefit as much as possible from the potential change?

    > Download Alger On the Money, A view on the U.S. Market

     

    ]]>
    news-553 Thu, 01 Jun 2017 14:24:04 +0200 François Rimeu's take on this week's market /en/who-we-are/news/detail/francois-rimeus-take-on-this-weeks-market/ Global market sentiment was balanced last week.

    Investors’ focus seems to have shifted from US political uncertainty to strong macroeconomic fundamentals and a more constructive global growth forecast. US equities rallied to a new record high post FOMC minutes, EM markets rebounded strongly despite Moody's downgraded China's credit rating (from Aa3 to A1). Only European markets traded lower and core yields fell slightly.

    The main focus this week were the OPEC meeting and the FOMC minutes in US.

    As expected, OPEC members had agreed to extend oil production cuts for an additional 9 months through March 2018, but the market seems to be disappointed with oil prices dropping again below 50 USD.

    FOMC minutes confirmed that the outlook justifies taking another step quite soon in the tightening of monetary conditions. A June rate hike remains on the table and is largely priced in by the market.

    In Europe, all macro data continued to be very robust. PMI surveys indicate that the Eurozone growth remained very strong as Manufacturing PMI rose to 57.0 after reaching 56.7 for the previous month. Furthermore, IFO German business confidence rose to the highest level since 1991.

    In the US, economic data published last week was rather mixed. The real estate market remained weak in April as both new home sales and existing home sales surprise significantly to the downside.

    Markit flash composite PMI surveys showed few signs of improvement of business activity following the weak start of the year. The index rose for the second month to 53.9 in May.

    Finally, US growth for the Q1 was revised upwards. GDP rose at +1.2% annualized rate, revised from +0.7% as consumption and business investment contributed more than expected.

    That said, our investment themes are still the same with no significant change in the portfolio.

     

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

     

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-551 Thu, 01 Jun 2017 09:52:47 +0200 NewAlpha announces its sixth Fintech investment in austrian start-up wikifolio.com /en/who-we-are/news/detail/newalpha-announces-its-sixth-fintech-investment-in-austrian-start-up-wikifoliocom/ NewAlpha Asset Management (“NewAlpha”), an expert in investments targeting the entrepreneurial financial industry worldwide, launched the first French venture capital fund* dedicated to Fintech companies in November 2015.

    NewAlpha announces the sixth investment to its fund, the first outside of France, in wikifolio.com to accelerate the international development of its online innovative trading platform.

    wikifolio.com is a leading social trading platform aimed at democratizing financial investments. The company offers an online financial platform allowing both investment professionals and private individuals to conduct their investment strategies on virtual portfolios, called wikifolios. Each portfolio constitutes the basis for an exchange traded financial product (wikifolio certificate) with an individual security number (ISIN) listed on the Stuttgart Stock Exchange (EUWAX). Through these wikifolio certificates, investors automatically “follow” trades in the respective wikifolios and participate in their performance. In addition, all trades and comments made by the social traders can be viewed in real time on the online platform.  

    wikifolio.com started in Germany in 2012 and can now look back on a five-year success story. The results to date: more than 17.500 wikifolios, over 6.300 listed wikifolio certificates and a 12 billion € worth of traded volume. Based on customer orders, wikifolio’s certificates are among the most frequently traded products on EUWAX in “the index and participation certificates” segment. In 2017 wikifolio.com already recorded a 40%-increase in assets under management.

    NewAlpha is the leading investor in this fund raising operation, which also involves existing investors of wikifolio.com, whom have confirmed their interest in continuing to fuel its development.

    Andreas Kern, founder and CEO of wikifolio.com, is pleased about the platform’s new investor: “NewAlpha Asset Management brings international expertise and experience to us – in terms of the French market in general but also regarding joint global growth initiatives”. 

    Since its launch, wikifolio.com has delivered an outstanding performance. We have been particularly impressed by its innovative business model that will revolutionize the investment management industry by opening up the routes adapted to the next generation of individual investors”, comments Jonathan Cohen Sabban, Investment Director at NewAlpha.

    This is the first international investment of our Venture Capital fund dedicated to FinTech start-ups and I believe it will pave the way for the fund’s international expansion. We are eager to deal with the best Fintech companies in Europe and we are glad to start with wikifolio.com, as asset management is our core expertise”, adds Lior Derhy, Managing Director Head of Private Equity at NewAlpha.

    NewAlpha was the most active Fintech VC investor in France in 2016.

    Invested in by institutional investors, including the Credit Mutuel Nord Europe, the fund managed by NewAlpha aims to build and promote a diverse portfolio of investments in innovative Fintech and Insurtech companies. It also aims to provide active monitoring of changes in financial services (innovative initiatives, new uses) and of technological changes affecting the banking, insurance and asset management industries. 

    * This fund is exclusively reserved for professional clients as defined by the MiFID Directive.

    > To download the press release, please click here

    ]]>
    news-544 Tue, 30 May 2017 16:03:43 +0200 The US growth in the first quarter has been revised upwards (+1.2% vs +0.7% initially estimated) /en/who-we-are/news/detail/the-us-growth-in-the-first-quarter-has-been-revised-upwards-12-vs-07-initially-estimated/ Global market sentiment was balanced last week. Investors’ focus seems to have shifted from US political uncertainty to strong macroeconomic fundamentals and a more constructive global growth forecast.

    US equities rallied to a new record high post FOMC minutes, EM markets rebounded strongly despite Moody's downgraded China's credit rating (from Aa3 to A1). Only European markets traded lower and core yields fell slightly.

    The main focus this week were the OPEC meeting and the FOMC minutes in US.

    As expected, OPEC members had agreed to extend oil production cuts for an additional 9 months through March 2018, but the market seems to be disappointed with oil prices dropping again below 50 USD.

    FOMC minutes confirmed that the outlook justifies taking another step quite soon in the tightening of monetary conditions. A June rate hike remains on the table and is largely priced in by the market.

    In Europe, all macro data continued to be very robust. PMI surveys indicate that the Eurozone growth remained very strong as Manufacturing PMI rose to 57.0 after reaching 56.7 for the previous month. Furthermore, IFO German business confidence rose to the highest level since 1991.

    In the US, economic data published last week was rather mixed. The real estate market remained weak in April as both new home sales and existing home sales surprise significantly to the downside.

    Markit flash composite PMI surveys showed few signs of improvement of business activity following the weak start of the year. The index rose for the second month to 53.9 in May.

    Finally, US growth for the Q1 was revised upwards. GDP rose at +1.2% annualized rate, revised from +0.7% as consumption and business investment contributed more than expected.

    ]]>
    news-541 Wed, 24 May 2017 17:31:18 +0200 Emmanuel Macron: neither luddite*, nor rentier /en/who-we-are/news/detail/emmanuel-macron-neither-luddite-nor-rentier/ Emmanuel Macron is the youngest president in any of the great western nations. Neither right nor left, or, conversely, both right and left, the real significance lies in the French people’s decision to raise Emmanuel Macron to the presidency of the world’s fifth-largest power, a country with a seat on the Security Council, co-founder of Europe...a decision we can only applaud.

    Eight years on from the worst recession since the Second World War, it seems clear that we have two cycles running in opposite directions: a global economy which is coming good, in the United States, emerging markets and the euro zone, and the a global politics that is backsliding into populism of both right and left amid fears for the future: Brexit, Donald Trump, Austria,Italy, Germany, Islamism in the middle East, North Korea, etc. and a broad critique of the globalisation choices made in the post-war years: international agreements, free trade, etc. The liberation from poverty of millions in the third world, particularly China, is being eclipsed by growing inequality, loss of national identities and industrial restructuring in western countries.

    In other words, the world is moving in two opposing directions as the global economy corrects its excesses and moves back toward growth while global politics deteriorates, advocating a return to the past and, ultimately, a protectionism which can, in the end, offer people little protection.

    In this respect, the election of Emmanuel Macron has resonances far beyond France. The challenge for the next presidential term is to avoid current divisions blowing the process ofEuropean reconstruction off course and, with it, France’s chance to adapt to twenty-first century realities.

    Opposition to reforms has intensified. Ricardo-ite Luddites who, as Daniel Cohen has commented, feel menaced by new technologies that threaten their jobs and want to tax robots, or rentiers who fear competition that will erode their rents and would like protectionism to shore up their margins. In general, both “parties” see Brussels as the incarnation of their evils. Hereditary enemies are joining forces and rallying around Jean-Luc Mélenchon and Marine Le Pen.

    The uberisation of society is in a sense the quintessence of these changes where the new work environment, driven by technology, is ramping up competition and mounting a frontal attack on rents. The “worker of tomorrow” will be facing their customers rather than their employers.

    So, for the first time in history, Luddites and rentiers are making common cause against the reforms imposed (and facilitated) by technology and social change, with a good dose of hypocrisy in the case of rentiers who are trying to give a social spin to their push for protection.

    Our new progressive president, by definition controversial for Luddites and rentiers, therefore bears a key responsibility for the changes to come. The outcome of the legislative elections will either help or hinder France’s transformation and Europe’s adaptation to the new paradigm shifts: following the rise in unemployment linked to delocalisation societies must now adapt to digitisation, artificial intelligence, robotisation and the urgent need to transform our economies to meet environmental challenges.

    * A member of one of the English bands of textile workers, led by Ned Ludd, who, from 1811 to 1813 and in 1816, organised to smash machines, which they held responsible for unemployment.

    To download the entire letter, please click here

    ]]>
    news-538 Tue, 23 May 2017 11:23:15 +0200 Consequence of a corruption scandal involving the actual Brazilian president /en/who-we-are/news/detail/consequence-of-a-corruption-scandal-involving-the-actual-brazilian-president/ Political risk was back last week, and this time it is not coming from Europe. Donald Trump is being attacked on 2 fronts:
    • He reportedly asked James Comey, former head of FBI (fired by Trump since then) to stop investigating on Michael Flynn (former National Security Adviser), this is an obstruction of justice
    • He reportedly shared classified information with Russia via Sergueï Lavrov (the Russian Foreign Minister)

    Market reaction has been quite dramatic on Tuesday and Wednesday, US 10 years yield dropped 20bps, Yen shot up 3% (which penelized us) and equities were down 3%. Markets have been coming back since then, mainly because of a video showing James Comey declaring he was never asked such thing. In short, markets needed an excuse to correct after several weeks of euphoria. To our eyes, it does not change the big picture and the trend is still there. We think as well that the chance to see Trump impeached is very low, just like fiscal reform by the way…

    The second political stress last week was coming from Brazil, with President Michel Temer being involved in a bribery scheme (he said “great” when a CEO told him he was paying off two judges and he reportedly took bribes from a company between 2010 and 2015). Market reaction was huge with Brazilian equities down 10% and the currency down 7%... Next step should be Michel Temer out and possibly millions of people in the street with new elections.

    On the macro side, not much highlights for markets:

    • Portuguese GDP at 2.8%, above expectations
    • Average US data (Philadelphia Fed above, but real estate disappoints)
    • Chinese data was slightly disappointing, especially industrial production. Retail sales were broadly in line
    • Last, French unemployment rate at 9.6%, lowest since march 2012. The former president François Hollande managed to make unemployment rate go down during his tenure

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S 

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-536 Tue, 23 May 2017 11:02:51 +0200 La Française Investment Solutions adds to Quantitative Research and Development Team /en/who-we-are/news/detail/la-francaise-investment-solutions-adds-to-quantitative-research-and-development-team/ $6.4 billion asset manager La Française Investment Solutions (“LFIS”) announces the hire of a senior quantitative analyst, part of a broader recruitment drive to cement LFIS’ existing quantitative asset management capabilities and position the firm for further growth.

    Christian Naumovic has joined the LFIS Quantitative Research and Development team as a senior quantitative analyst. An additional hire is planned in the coming months, which will bring the team to five professionals.

    Christian’s career includes many years of experience as a quantitative analyst, most recently with Thomson Reuters and previously with Deutsche Bank and Natixis Asset Management. Christian’s hire is expected to accelerate enhancements to LFIS’ screening, portfolio construction and portfolio optimization models. His work will support LFIS’ range of alternative and dedicated funds, including flagship credit and premia strategies. Christian will be based at LFIS’ headquarters Paris and report to the Head of Quantitative Research and Development, Guillaume Garchery.

    Sofiene Haj-Taieb, CIO of LFIS commented: “A quantitative approach is an essential part of our DNA at LFIS. We are market-neutral, screening and analyzing the range of instruments and asset classes to find authentic opportunities to secure absolute returns. Our investment and risk management processes are similarly quantitatively-driven, offering our clients a consistent and repeatable roadmap for performance. Christian’s hire significantly strengthens our capacity to provide specialist quantitative capabilities across all areas of our business as we continue our expansion.”

    To download the press release, please click here

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    news-532 Fri, 19 May 2017 08:45:00 +0200 Alger on the Money - Is this trend your friend ? /en/who-we-are/news/detail/alger-on-the-money-is-this-trend-your-friend/ This earnings season, Wall Street analysts expect S&P 500 EPS growth up 12% year-over-year in 1Q17, marking the longest period of earnings acceleration in over five years as well as the highest growth rate. The trend remains positive for several reasons.

     

    > Download Alger On the Money, A view on the U.S. Market

    ]]>
    news-526 Tue, 16 May 2017 12:04:28 +0200 MPC* keeps its very accommodative stance for the time being /en/who-we-are/news/detail/mpc-keeps-its-very-accommodative-stance-for-the-time-being/ French elections came as no surprise, and markets did not react, given they had anticipated the outcome.

    Earnings season continues and is close to its end : it is the best since 2008 in almost all areas, especially in Europe and Japan where reports are quite impressive. Another positive feature is that EPS estimates for 2017 and 2018 have not been revised downwards, unlike the past five years.

    Bank of England delivered a dovish speech with a 7-1 vote for keeping policy stance unchanged (markets expected 6-2 or 5-3). Logically GBP sold off and UK bonds rallied. We had as well a very low Japanese CPI print, which was no surprise since Tokyo area inflation data was reported on the soft side earlier. Here again, markets reacted in a logical manner with lower JPY. Last, most expected data came out Friday afternoon with US inflation – disappointing – and retail sales – disappointing too, but positive revision. All in all, data is not great but not terrible either. Bond yields are down markedly on this.

    Elsewhere, we must point out that commodities are once again a hot topic for investors: oil has come off, iron ore too and soft data came out of China. The market has slowly focused again on China / commodities for the last couple of weeks. We think we are in a traditional Chinese “stop and go“, with heavy inventories in the beginning of the year and an unwinding of speculative positions. We keep our long stance on European basic resources equities.

     

    * Monetary Policy Committee (Bank of England)

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    news-524 Mon, 15 May 2017 16:28:20 +0200 La Française partners with Investeam Canada /en/who-we-are/news/detail/la-francaise-partners-with-investeam-canada/ La Française, asset management firm headquartered in Paris, continues to pursue its ambitious long-term international expansion strategy alongside Investeam Canada.

    After five years of successful development across Europe and more recently in Asia with the opening of a local office in Seoul, South Korea, which now represents close to €1bn in real estate assets under management, La Française, after carrying out the necessary due-diligence, has signed a third-party marketing agreement with Investeam Canada. Together, they will promote, to the Canadian institutional investor community, the European real estate expertise of La Française. 

    Building on over forty years of investment management experience, La Française manages over €63bn in assets, €15.3bn of which are in real estate. La Française offers a complete investment management service in both direct and indirect commercial property investments for institutional and private clients across continental Europe, Asia, the UK and the Middle East. La Française, as a group, is a recognized specialist in core and core plus as well as value-added and opportunistic investment strategies, in the French, German, UK and Swedish real estate markets. Additionally, La Française is the leading collective real estate investment manager in France.1

    Philippe Lecomte, CEO of La Française AM International and Head of Global International Business Development, said, “It is true. La Française’s international business development strategy is ambitious. However, as a group, we are committed to expanding our business to Canada, the fourth largest pension market in the world, and are prepared to make the necessary investments in order to create and cultivate longstanding business relations with Canadian institutional investors. We have handpicked Investeam Canada to assist us along the way. Their track record, as well as the quality of their people, speaks for itself.

    Christophe Vandewiele, Managing Director of Investeam Canada, added, “La Française is a newcomer to the Canadian market, and we are certain that the quality of their real estate capabilities, as well as their credentials, will meet with the approval of institutional investors.”

    1 Source: IEIF, as at 31/12/2016, in terms of assets under management; vehicle “Société Civile de Placement Immobilier”.

    > To download the press release, please click here

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    news-521 Wed, 10 May 2017 17:44:15 +0200 The price of oil decreases and is at its lowest since November 2016 /en/who-we-are/news/detail/the-price-of-oil-decreases-and-is-at-its-lowest-since-november-2016/ Interesting points to note this week :

    Brent below 50 dollars, lowest since November 2016. The collapse happens with rising bond yields, which is a rare thing to see. However, inflation breakevens are lower which means markets are rational.

    American economic data was in line with expectations :

    • Manufacturing ISM was below expectations, while service ISM was above
    • Employment report showed an outstanding 4.4% unemployment rate (lowest since 2007) but large disappointment on average weekly earnings (+2.5% year over year, lowest since early 2016). Fed gets comfort in its gradual hike strategy

    FOMC was pretty dull. Fed deems Q1 GDP weakness as transitory. Market prices a full hike of 25 bps for next meeting in June.

    Significant compression in periphery bond spreads: Portugal -25 bps, Italy -20 bps, Spain -18 bps. Political risk in Eurozone gets revised down markedly.

    Euro area equities, and particularly banks, outperformed.

    This "risk on" tone was observed as well on foreign exchange markets with JPY much lower. We keep this trade on, we have the position since last week after the elections.

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    news-515 Fri, 05 May 2017 15:37:51 +0200 Alger on the Money - Reaping the Rewards of Innovation /en/who-we-are/news/detail/alger-on-the-money-reaping-the-rewards-of-innovation/ The most innovative companies grow their sales—and their stock prices—faster.

    LEARN MORE

    Read Capital Markets: Observations and Insights—Earnings Resurgence


    > Download Alger On the Money, A view on the U.S. Market

     

     

    1 Baruch Lev and Suresh Radhakrishnan, “The Stock Market Valuation of R&D Leaders".

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    news-511 Wed, 03 May 2017 11:55:52 +0200 La Française attracted inflows of more the €3 billion during the first quarter of 2017 /en/who-we-are/news/detail/la-francaise-attracted-inflows-of-more-the-eur3-billion-during-the-first-quarter-of-2017/ La Française generated inflows of €3.1 billion in the first quarter of 2017 from its wide range of investor segments. Group inflows thus climbed an impressive +6%, increasing from almost €60 billion at 31 December 2016 to €63.7 billion at 31 March 2017, with international investors accounting for more than 14%.

    Inflows since the beginning of the year have been driven by strong interest in the Group’s flagship areas of expertise, which cover:

    • long-term investments in securities, including multi-strategy fixed income investments,
    • real estate - which remains a highly sought after asset class in the current economic environment,
    • continued appetite for La Française Investment Solutions funds,
    • and money market investment solutions.

    The contribution to this result, of each of the group’s poles of activity and of all customer segments, highlights and confirms, once more, the relevance of La Française’s business model.

    La Française maintains its strong growth thanks to an activity that has exceeded its objectives and a positive market effect.

    > Click here to read the press release

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    news-507 Tue, 02 May 2017 15:59:37 +0200 This level of earnings above expectation has not been reached since 2009 /en/who-we-are/news/detail/this-level-of-earnings-above-expectation-has-not-been-reached-since-2009/ This week was very busy with obviously the first round result of the French presidential election, but not only.

    Markets cheered results in line with polls that show little chance to see Marine Le Pen elected. Market reaction was quite dramatic at the open:

    • +4% Euro area equities
    • +7% Euro area banks
    • -20bps on OAT/Bund spread

    Markets do not seem to price any risk of a Front National victory. 

    Many economic data came out last week.

    Eurozone inflation erased the seasonal effect coming from Easter with a 4 year high print on core inflation (1.2%) while headline reached 1.9%. This figure did offset the ECB speech on the day before which was rather dovish, with Mario Draghi insisting on inflation being low and taking a long time to reach a level “below, but close to 2%”.

    US data publications were heavy with Q1 GDP report. The figure was expected on the low side, as usual for first quarters, which proved to be right with 0.7% (vs 1% expected). This figure is to be relativised due to the effect of inventories (-0.9%) and Employment cost index above expectations (+0.8%, highest since 2008). The Fed having said that one should look above transitory GDP factors, we think the combo GDP + Employment cost index is dollar and yield positive.

    Last week we had as well the announcement of the tax reform from the Trump administration. If enforced as such, it would be the biggest ever and would cost 20% GDP over the next 10 years… which would of course balloon US debt. There is no chance the reform gets passed as such, which is why markets didn’t react after the announcement. After the healthcare bill debacle, markets will now wait to see bills actually voted, which could take some time.

    In the meantime, earnings season continues and is robust in the Eurozone: 75% positive surprises on revenue, highest score over the last 10 years.

    It is hard to put a lot of Eurozone risk back in portfolios after the elections, given markets moved dramatically in the open. The risk we added was more on the Japanese side, and especially Yen. The latter rose a lot versus USD this year, japanese equities are down YTD, and micro data is robust. In short, we think this area could outperform. We preferred to sell JPY rather than buying Nikkei, but it is actually very much the same trade.

    We also sold a bit of US duration and bought some US breakevens. 

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-503 Tue, 25 Apr 2017 17:41:33 +0200 Despite a few disappointments, US earnings seasons starts well /en/who-we-are/news/detail/despite-a-few-disappointments-us-earnings-seasons-starts-well/ We had a blank week with little volatility and investors waiting for French elections.

    Implied volatility came off slightly and Euro yields went a tad higher (+6bps) after Benoit Coeuré declared risks for the Euro area were not anymore on the downside, opposite to what Draghi and Praet said. Chinese data surprised to the upside (retail sales/industrial production/GDP), on the contrary to British retail sales.

    Theresa May decided to call for new elections on June 8th to try and have a clearer majority, which she should get. This was taken positively by markets (GBP +2% vs EUR) and triggered some strategists to change their view on gilts and GBP.

    US earnings are uninspiring so far with few misses (GS and IBM) but in general EPS are decent (75% are above expectations, it is in line with usual reporting seasons).

    Last, US tax reform could/should arrive before end of year if we believe US Treasury secretary and the rumor that says D. Trump could have Obamacare reform voted again soon.

    ]]>
    news-500 Tue, 25 Apr 2017 10:29:11 +0200 New technology companies, major players in the rental markets - Property & outlook n°27 /en/who-we-are/news/detail/new-technology-companies-major-players-in-the-rental-markets-property-outlook-n27/ In recent years, new technology companies have been one of the main drivers of growth in most of the main European economies. At the end of 2016, three of the five largest stock exchange capitalisations in the world and seven of the ten largest start-ups in the world were ‘multi-sided platforms’.

    According to Jean Tirole, the 2014 winner of the Nobel Prize for economics, “a multi-sided platform is an intermediary that enables users to interact”. In addition, these companies play a major role in office demand and have had a strong impact on transactions.


    Since the financial crisis, there has been a considerable change in the structure of take-up by sector in the main European markets. While financial institutions dominated transactions in 2006, they were only in third place in 2016 as their level of take-up had halved. Transactions are currently evenly split between four sectors: service companies, new technology companies, finance and industry. This balanced distribution significantly reduces the risk of strong variations in transaction volumes and rents.

    In 2016, new technology companies accounted for 20% of take-up in Germany with levels having increased considerably over the previous three years. In London and Amsterdam, these companies accounted for the majority of transactions. Leases by new technology companies saw the strongest increases in the London and in Berlin. In the Greater Paris Region, the main office occupiers were traditional players such as financial institutions and service companies. New technology companies have accounted for an average of 9% of take-up for the last 10 years. In terms of volume of space leased, Paris is the second most sought-after city in Europe after London, followed by Berlin, Munich and Amsterdam.


    These digital companies look for space in the most active districts of Paris that offer a combination of offices, restaurants, bars, public transport and housing. Examples include Facebook, Airbnb, WeWork and Blablacar who have recently taken space in the 2nd and 4th districts of Paris at very high rents (€770 per sq m per year). Accessibility and user-friendliness are the main drivers, although less and less space is being allocated per employee.

    Running against the trend seen at the beginning of the millennium, current activity by these companies has had far more of an impact on the market in terms of their behaviour rather than the volume of pace leased. These companies place the well-being of their employees and innovation at the centre of their strategy, shaking up traditional formats and are increasingly adapting to employee needs. This means that office space needs to be modular, highly connected and offer break-out areas that encourage exchange, relationship building and creativity to attract the increasingly demanding industry talent. These behaviours are gradually being adopted by many other companies, including those in more traditional sectors who are gradually adapting their office space.


    In addition, at the early stages of their development these companies are making the most of new intermediaries offering office accommodation. These ‘hosts’ have demonstrated their confidence in these early-stage companies by renting large spaces on long-term leases. WeWork, the global leader in co-working, has rented an office of over 1,000 sq m in the 9th district of Paris on a 12-year fixed-term lease. The owner therefore deals with the world leader in co-working rather than a multitude of more fragile entities.


    In 2015, new technology companies contributed 5.5% to European GDP compared with 7.5% in the United States - and this share continues to grow. These companies should therefore continue to drive activity in European rental markets. They will mainly be interested in the bestlocated, high-quality buildings. Over the next few years, these buildings will therefore benefit from falling levels of incentives and market recovery in rental values.

    > to download Property & Outlook letter, please click here

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    news-498 Mon, 24 Apr 2017 07:48:03 +0200 Flash - 2017 French presidential elections - A sign of relief after the 1st round of the French presidential election /en/who-we-are/news/detail/flash-2017-french-presidential-elections-a-sign-of-relief-after-the-1st-round-of-the-french-pres/ The French electorate has spoken. The result of the 1st round of the French presidential election has reduced the risk of a French exit from the Eurozone. Expectations for the endorsements of the eliminated candidates create a real sense of market optimism leading up to the second round of the election on Sunday, May 7th. La Française will gradually be able to return to portfolio management that is more in line with our economic forecast and base-case scenario.

    Tight results of the 1st round of the election…

    We were expecting scores that narrowly divided the four leading candidates in the 1st round, and the election results were relatively in line with recent polling. The 2nd round will be composed of the far-right Marine Le Pen and the centrist Emmanuel Macron. In light of the ongoing endorsements from the French political establishment, we have more and more visibility for the 2nd round. The main stakes for the President-elect will be to win a strong majority in French parliamentary elections in June 2017. Until then, there may be continuing fluctuations in financial markets to which we will continue to be attentive.

    … do not fundamentally change the general environment for the 2nd round of the election

    Trading last week saw French equities indices realize higher returns than their European counterparts. The spread in the government bond market between 10-year German and French interest rates (Bund/OAT Spread) has tightened anew. Furthermore, French and peripheral country bonds should continue to gain from reduced political uncertainty.

    Against this backdrop, we will return to portfolio positioning in line with the improving economic trends seen since the beginning of the year

    At the beginning of the 2nd quarter of 2017, economic indicators are showing positive signs. Corporate earnings releases are in line with or above analyst expectations. Medium-term trends are also promising. Barring an unpredictable event, and assuming the election of Emmanuel Macron, a pro-European candidate, markets should give him a relatively warm reception.

    We are now choosing to adopt a more optimistic stance in the short-term insofar as the major fears have evaporated. Our investment strategy is largely guided by economic fundamentals and less marked by political risk in France.

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    news-495 Thu, 08 Jun 2017 12:23:00 +0200 Alger on the Money – What Goes Down Must Go Up /en/who-we-are/news/detail/alger-on-the-money-what-goes-down-must-go-up/ The percentage of active-fund assets outperforming the S&P 500 moves in cycles with outperformance recently hitting a trough. There are reasons to expect improvement.

     

    • Active performance relative to passive looks to have bottomed out and may be moving higher as it has done several times in the past.
    • Given that the economic cycle is in a more mature phase, macroeconomic factors should give way to more stock-specific drivers of return.
    • This should lower correlations among equities (see March 15, 2017, Alger On the Money) and increase return dispersion, allowing stock pickers to perform better relative to their passive benchmarks.

    > Download Alger On the Money, A view on the U.S. Market

    ]]>
    news-494 Wed, 19 Apr 2017 14:57:06 +0200 2017 presidential elections - Political risk still a factor in the campaign /en/who-we-are/news/detail/2017-presidential-elections-political-risk-still-a-factor-in-the-campaign/ Markets may have seemed less preoccupied with the French elections of late but as the race narrows, with the top four candidates all polling between 18% and 24%, the first round of the Presidential elections is too close to call.

    What are the risks if a euro sceptic wins?

    Reports by institutional research departments suggest that market operators see around a 20% probability that a Euro sceptic candidate will win the presidency in France. We consider this probability has now edged up to 25%.

    While the chances are slim that such a candidate would actually embark on a programme to leave the euro zone, the probability is not zero.

    The impact of a pro-Frexit president is hard to evaluate but seems highly likely to trigger a major period of stress across all European markets. Our scenario has the spread between French and German government debt increasing from 65 basis points to 200 basis points, equity markets falling sharply and a slump in the euro.

    Should we protect ourselves from “France” risk?

    The assumptions can be debated, but the real question is how to limit the scale of any negative impact on the portfolios, while retaining an appropriate asset allocation if the risk fails to materialise.

    The answer will obviously vary from portfolio to portfolio, but in most cases we recommend partial protection of risky assets. In fact, since we see current market levels as rather expensive and with little sign of the political risk being priced in (low volatility, low level of hedging, etc.), the risk seems to us asymmetrical to the disadvantage of the investor. This does not mean we believe a euro sceptic will come to power on the second round but merely that today’s markets are not paying us enough to run this extreme risk without taking precautions.

    The economic environment remains fundamentally positive

    Leaving aside this binary risk, March was notable for some strong economic figures. These seem to confirm an acceleration of overall growth during the first quarter, which has also helped the German short rates we wrote about last month return to less extreme levels in relation to their fundamentals.

    March also brought disappointing inflation figures in the euro zone, quashing rumours of early tapering by the ECB. This, coupled with the risk that Mr. Trump may disappoint in implementing his program, was another reason why we have adopted a more defensive stance ahead of the French elections.

    Our risk is now concentrated on equities, preferably European, emerging assets (equities and fixed-income) and our bond components remain low in duration on government bonds, although this bias has been reduced since last month.

    We will be writing regularly on this issue to keep you abreast of our views on the situation and any changes in the investment strategy for our portfolios. You can find all our investment convictions and our detailed economic scenario in the April edition of Analysis & Strategy.

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    news-490 Tue, 18 Apr 2017 14:09:31 +0200 Clearly below expectations, both core and headline inflation disappoint investors. /en/who-we-are/news/detail/clearly-below-expectations-both-core-and-headline-inflation-disappoint-investors/ Not much to say this week on the macroeconomic side. Inflation numbers close to expectation in the UK, strong ZEW (economic sentiment indicator) in Germany and Michigan sentiment (consumer trust indicator) still rising in the US. The most important number of the week is the US inflation with both PPI and CPI well below expectations. Core CPI is now at 2% and headline CPI at 2.4%. In a nutsheel, the macro picture is still positive but positive base effects on inflation are fading, little by little. We will see next month if it was just one miss (Easter base effect?) or more significant.

    It is also the beginning of the earnings season in the US, with financials being the first to report, with good numbers. As usual, this earnings season should be above expectations and should support the market in the next 2-3 weeks.

    But those news were clearly not what people were talking about this week. Geopolitics came back with Mr Trump still doing the exact opposite of what he said before being elected. A summary of this week:

    • He has decided to send an “armada” close to North Korea, to bomb Syria and to launch the biggest non-nuclear missile in Afghanistan, which is the contrary of the “non-interventionism” he was asking for.
    • Nato is no longer obsolete.
    • China is not manipulating its currency at all.
    • He has a lot of respect for Mrs Yellen.

    It leads to some degree of confusion in the financial markets: Rates are down, yen is up and equities are a little bit lower. And obviously, French election is still one of the main risk coming in the next 3 weeks. German rates are back to their annual lows and Us rates have broken their 2.30/2.60 range trading now at 2.23%.

    Low volume next week due to Easter.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-486 Thu, 13 Apr 2017 14:44:43 +0200 Is protection required against "France risk" ? - Analysis & Strategy No. 178 /en/who-we-are/news/detail/is-protection-required-against-france-risk-analysis-strategy-no-178/ This month it’s hard to look beyond the French elections, even though the markets seem less focused on the upcoming poll than they were a few weeks ago.

    To go by the various research institute publications, market operators assess the probability of a Eurosceptic candidate winning the election at around 20%. It is difficult to evaluate the impact of a victory by a candidate who wants France to leave the eurozone, but it seems highly likely that this would trigger a major period of stress across all European markets. Our projections have the spread between French and German government debt increasing from 65 to 200 basis points, the equity markets plummeting and the euro in free fall.

    Given these assumptions – which are by no means certain – how do we limit the negative impact on portfolios, while maintaining an allocation structure with an appropriate exposure profile in case these risks do not materialise?

    The answer to this question obviously depends on each portfolio under consideration, although in most cases, we recommend partial protection of risky assets. Moreover, considering that current market levels are rather high and that this political risk has not been factored in to any great extent by the markets (low volatility, low level of hedging, etc.), we think the risk is currently asymmetric to the disadvantage of investors. This does not mean that we think a Eurosceptic candidate will win, but simply that, at present, the markets are not paying us enough for us to shrug off this extreme risk without any precautions.

    > Click here to donwnload Analysis & Strategy No. 178

     

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    news-485 Thu, 13 Apr 2017 10:24:55 +0200 La Française strengthens its equities team /en/who-we-are/news/detail/la-francaise-strengthens-its-equities-team/ As part of the development of its SRI equities range, La Française has strengthened its investment management team by hiring Nina Lagron as Senior Portfolio Manager reporting to the CIO Equities, Laurent Jacquier-Laforge. Nina is tri-lingual and comes to the group with more than twenty years’ experience in financial markets. She is a recognised expert in emerging market equities investments. Laurent Jacquier-Laforge, CIO Equities, said, “She will be a major asset who will help La Française achieve its ambitions in responsible equities investments while also broadening its global management capabilities, particularly with respect to the Zero Carbon investment strategy.”

    Before joining La Française, Nina Lagron held various positions: emerging equities manager at Amundi for more than seven years looking after the Europe, Middle East and Africa regions. She was the first woman to run an equities fund investing solely in the Middle East, primarily in Saudi Arabia. Nina then moved on to co-manage the GemEquity fund at Gemway Assets for more than two years.

    She has a Masters in Management and a postgraduate degree in Finance from the Université Paris IX - Dauphine. She is also a Chartered Financial Analyst.

    > Click here to read the full press release

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    news-478 Mon, 10 Apr 2017 14:53:26 +0200 Considerable drop in unemployment despite low job creations /en/who-we-are/news/detail/considerable-drop-in-unemployment-despite-low-job-creations/ This week we had many economic data sets published. US data with disappointing ISM non-manufacturing and NFP far below expectations That being said, all was not dark since durable goods orders were in line and while job creations were soft, unemployment rate collapses to 4.5% in the US. All in all, this data was pretty neutral. Similarly in Eurozone, with final PMI close to flash estimates and industrial production (solid in Germany, soft in France). Last, Chinese PMI was on a slower tone, but nothing dramatic.

    News was concentrated in the political/central bank areas:

    • FOMC minutes begin discussions about balance sheet reduction. This topic will be significant for markets for many months: how is the Fed going to shrink its balance sheet? At what pace? How will they communicate? What will be the impact on Fed policy rate path?
    • The European central bank continues to clarify its message, still dovish, with comments from Praet and Draghi 
    • Meeting between Trump and the Chinese President with nothing new so far 
    • And of course we must mention as well Philippe Poutou

    Nothing new on the equity side, but fixed income markets rallied nicely with core bond yields a chunky 10bps lower almost everywhere

    François RIMEU, Portfoliop Manager La Française Allocation
    Head of Total Return & Cross-Asset 
    The current management team may change over time.

    Key information
    Key objectiveAchieve, over the investment horizon, a net return higher than that of the 1-month Euribor + 3.5%

    Recommended investment horizon: 
    2 years

    Ex-post volatility: 10% maximum (in the case of outstanding market conditions, this volatility level may not be guaranteed

    Risk/Return profile : 
    7 = Highest risk
    1 = Lowest risk, which doesn’t mean « no risk »
    This level cannot be guaranteed and may change over time

    Main commercial information:

    Share Class:
     I

    ISIN Code: FR0010158220

    Allocation of amounts available for distribution: Capitalization

    Min. value of initial subscription: € 150 000 

    Subscription fees: 4% max.

    Redemption fees: None

    Ongoing charges: 2.18%

    Management fees: 1.4% max.

    Performance fees*: 0.00%

    * Stated above are expenses incurred for the year ending on December 31st 2016 and may vary from year to year. Ongoing charges include management fees and operating costs (audit, custody, distribution…), indirect fees related to investments made in other UCITS or investment vehicles as well as turnover fees.

    The performance fees will amount to a maximum of 20% of the excess return of the fund vs. 350 basis points over the 1-month Euribor with a 2% cap.

    La Française AM Finance Services receives a commission for the distribution of this product in compliance with the distribution agreement signed between La Française AM Finance Services and La Française Asset Management.

    Risk factors - For more information on these risks, please refer to the Fund’s prospectus

    • The Fund offers no guarantee nor protection of the invested capital; investors are exposed to a risk of capital loss.
    • The portfolio may not be invested at all times in the best performing asset classes and volatility evolution may be unfavorable to the implemented strategies. The Fund’s net asset value per share may fluctuate depending on market conditions.
    • Equity markets, interest rates, corporate debt and forex may vary unfavorably to the portfolio’s exposure.
    • This effect may be increased for either less transparent or more volatile assets such as High Yield debt with a lower rating or emerging market securities
    • Over-exposure may amplify market movement, both upwards and downwards; arbitrage operations may suffer from unfavorable trends; the counterparty may default in the case of financial derivatives traded on OTC markets; potential conflicts of interest may arise in the case of temporary securities purchase/sale transactions.

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.

    Want to know more about La Française Allocation, please click here

    Get in touch with your financial advisor to analyze a possible fit with your current financial situation. Before subscribing, take the time to read the Key Investor Information Document (KIID) and Fund’s prospectus, notably the section regarding associated risks to this investment and its fees

    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive.  The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

     For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.

    ]]>
    news-475 Thu, 06 Apr 2017 08:23:21 +0200 Small Caps, Big Deals /en/who-we-are/news/detail/small-caps-big-deals/ Growth, synergy, scale and diversification are among the reasons why many large companies engage in mergers and acquisitions. Smaller companies are frequently their targets.

     

    > Download Alger On the Money, A view on the U.S. Market

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    news-473 Thu, 06 Apr 2017 10:00:00 +0200 PURetail Fund sells a prime high-street retail portfolio in Linköping, Sweden /en/who-we-are/news/detail/puretail-fund-sells-a-prime-high-street-retail-portfolio-in-linkoeping-sweden/ On behalf of the Pan European Urban Retail Fund, “PURetail”, a Luxembourg FCP-SIF available to professional investors only and closed to subscriptions since July 2014, La Française Real Estate Partners International (LF REP International) and Aberdeen Asset Management have successfully sold the “Estelle/Oscar”-Portfolio, a high-street retail portfolio located in Linköping, the fifth largest city in Sweden. The portfolio includes three properties, for a total lettable area of 8.647 sqm, let to national and international brands and retailers.

    The Fund, managed by the joint venture between Aberdeen Asset Management and LF REP International, recorded a successful four year holding period. LF REP International was responsible for the Asset Management and reduced vacant areas through successful re-lettings to international brands creating a well-balanced tenant mix of retail, office and restaurants. Smart value-creating capital expenditures were made. The sale illustrates LF REP International and Aberdeen’s ability to create value for existing PURetail investors.

    Jens Goettler, Managing Director for Germany, La Française Real Estate Partners International, said: “This first sale of properties from the PURetail portfolio demonstrates the capability of the joint venture partners to create attractive returns for the investors in the fund and to realize the original business plan. Urban retail properties have benefitted from the upswing in the investment and occupational markets. The joint venture has been able to implement successful asset management initiatives which have led to the desired results.”

    > Click here to read the full press release

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    news-469 Mon, 03 Apr 2017 14:40:53 +0200 Slightly below expectations, this figure should slow down tapering rumors /en/who-we-are/news/detail/slightly-below-expectations-this-figure-should-slow-down-tapering-rumors/ Much economic data was published this week :
  • Robust set in the US with consumer confidence at 15y high and core PCE slightly above expectations.
  • German IFO as well above expectations but inflation on a very soft tone in Eurozone. This undershoot comes from Germany, Spain and Italy. Headline inflation was 1.5% vs 1.8% expected, and core inflation was 0.7%. This should reduce tapering rumors from European central bank. Regarding ECB, we must as well mention a rumor this week that ECB considers Mario Draghi’s speech was ill-understood by investors. This was taken as a dovish surprise by fixed income markets.
  • Chinese PMI was comforting, once more.
  • All in all, even if movements this week have been shallow, data was dollar positive and euro negative

    We ought to say as well that oil inventories were lower than expected, and consequently the barrel surged. In the meantime, Organization of the Petroleum Exporting Countries discussions seem to be constructive, which makes us think that the deal could be extended.

    Last, Theresa May officially triggered article 50. Now starts a long period of negotiations. Some of our trades will probably be more volatile but we think we are well compensated for it.

    Kinds Regards.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-457 Tue, 28 Mar 2017 11:28:55 +0200 Flash - 2017 French presidential election /en/who-we-are/news/detail/flash-2017-french-presidential-election/ 2017 French presidential election: With the race now officially on for the Élysée palace, La Française takes the opportunity to summarise its management strategy in this unprecedented electoral climate. A black swan circles the campaign: the risk of a victory for an extreme-wing party...

    The black swan, in the theory developed by philosopher Nassim Nicholas Taleb, represents an event the probability of which is extremely low but for which the consequences, were this event to occur, would be significant.

    As things stand, this is exactly how we view the possibility of the victory of an extreme-wing party in the French presidential election to be held in April/May. None of the surveys currently predict the victory of an extreme-wing party in France. However, such an event would have both a major immediate and medium-term impact, as it would lay the foundations for a collapse of the euro zone. In our view, this has two implications: this extreme scenario cannot be ignored; but it cannot dictate the focus of our management strategy either.

    ... but at the same time, a fundamentally favourable economic climate

    It is important to recall that our relatively positive core scenario is based on a synchronised improvement in the global economy. This can be seen in the strong performance of flash and leading growth indicators (PMI, consumer confidence) throughout the world, including emerging markets. In the United States, this trend is driven by an already strong job market, which contributes to the rebound in inflation towards a level close to the Federal Reserve’s target of 2%.

    This fact fully justifies the recent 0.25% hike in key interest rates announced by the Fed which marks the normalisation of its monetary policy, albeit with a certain level of caution maintained. On the other side of the Atlantic, we expect the European Central Bank to follow suit and a gradual moving away from non-conventional measures, with a time lag of around two years.

    This favourable trend encourages us to look forward to riskier assets

    Thanks to this strong trend over recent quarters, deflation fears are subsiding. Taking a position in line with our core scenario means limiting duration risk and, on the contrary, increasing the share of equities, high-yield credit and financial subordinates. The current economic climate encourages greater risk taking within our portfolios, deliberately placing them in an uncomfortable position in the event of a major market shock, the onset of this infamous black swan...

    What are the potential impacts on the markets in the event an extreme-wing candidate is elected?

    To solve this difficult equation, we must first carry out stress tests on our portfolios, considering the main consequences such an event would have.

    Firstly, we would see a major impact on French interest rates, which could climb to 3%: the spread with German rates would widen even more rapidly in that it is likely that the latter would serve as a defensive investment and could fall to 0%.

    Moreover, the euro would come under pressure and, in our view, could depreciate 10% against the dollar and even more against sterling, due to an increase in the perception of a risk of the euro zone collapsing.

    The CAC 40 could fall by 20%, triggered by a more significant fall in banking stocks (of around 30%) and the Italian market would follow a similar trend. 


    Assets such as residential property and financial subordinates would also be affected, by both a drop in valuation and a liquidity crisis.

    Finally, volatility would obviously fly off the scale.

    What portfolio investment decisions to favour in this binary situation?

    Having made this observation, the first step for us is to move away from our core scenario and trim down our exposure each time the risk of loss, in the adverse scenario, exceeds the tolerance level which we have set for each portfolio. This position is even more justified in that the return on risk has been good in recent months: it will allow us to draw profit from a share of the performance of recent weeks.

    The second approach which we have started to implement includes introducing a portfolio protection strategy, through the purchase of highly out-of-the-money puts for example: providing efficient mechanical protection in the event of a major market slump (10% or more) at a relatively low cost, thanks to volatility which, for the moment, remains weak.

    These protection strategies are obviously implemented on a case-by-case basis, according to the risk tolerance of each strategy/investor; they are made to measure.

    > Click here to read the full flash

     

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    news-455 Tue, 28 Mar 2017 10:58:59 +0200 Markets remain quiet facing this positive figure, still waiting for visibility on the US politics. /en/who-we-are/news/detail/markets-remain-quiet-facing-this-positive-figure-still-waiting-for-visibility-on-the-us-politics/ It’s been a quiet week on the macroeconomic side but with some interesting figures concerning the UK:
  • Inflation data have surprised positively with core inflation at 2%, a 3-years high, and headline inflation at 3.2%
  • Retails sales came above consensus, at 4% growth YoY
  • Everything is still going fine in the UK. Despite those numbers (and hawkish ECB commentaries last week), markets have been moving sideline. For the first time since the Brexit, some investment banks are starting to advise buying GBP vs EUR and USD (Morgan Stanley and Barclays).
     
    PMI in the Eurozone have also been released with very strong numbers (PMI Composite at 56.7), highest since 2011. Again, almost no reaction on the markets.
     
    This lack of reaction can be explained by the vote on the Healthcare reform going on in the US. This bill has to be voted by the congress before any work on fiscal measures and infrastructure spending. Considering how strong expectations have been since the election of Mr Trump, markets may be disappointed if those reforms are delayed.

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    news-449 Mon, 20 Mar 2017 17:11:40 +0100 As expected, the Federal Reserve increases its rate driven by strong macroeconomic data. Our insight: /en/who-we-are/news/detail/as-expected-the-federal-reserve-increases-its-rate-driven-by-strong-macroeconomic-data-our-insight/ Fed hiked as widely planed, with a dovish speech. Consequently US bond yields and the dollar went down.

    This hike happens in a positive macro context but we must mention however there is a slight divergence between robust soft data (ISM and other leading indicators) and weaker hard data (like Industrial production, which measures what really happened in the previous months). For instance, Atlanta Fed publishes a Q1 GDP estimate based on data that was released in 2017, and the latest estimate was close to 1%, way below market expectations. Investors could therefore well be disappointed in the coming months, without mentioning uncertainties related to Mr. Trump.

    Another hot topic is US debt ceiling. The latter was reached this week, which means the US cannot increase their debt without asking permission to congress. They have cash and other ways to pay bills until June, but this could become again a market issue in the coming months. Mr. Trump must get this limit extended, which should not be impossible since Republicans have a majority; however they will probably make sure debt does not goes through the roof. Yet, Mr. Trump’s program requires much larger debt. Here again, there is room for deception, and surprisingly this issue has not been discussed much.

    Bank of England surprised markets slightly; no change in policy but wording was much hawker than expected. 

    Dutch elections have in the end been a non-event, with a very  low score from anti-Euro party. It is a good piece of news even though there was no impact on OAT/Bund spread.

    Last, we note some hawkish comments from an ECB member that weigh on Euro yields and Crude oil continued to drop at the beginning of the week. It stabilized since and comments from Saudi Arabia are constructive. We think the 14% plunge in the last two weeks should be over.

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    news-445 Mon, 20 Mar 2017 14:40:54 +0100 Uchronia and Marine Le Pen: but what about the markets? /en/who-we-are/news/detail/uchronia-and-marine-le-pen-but-what-about-the-markets/ If Pétain had had a heart attack in 1940, we would all be Communists today: the June 1940 armistice would not have been signed, leaving the USSR time to rally to defeat Hitler without the help of the Americans. And Western Europe would now be part of the USSR, which would not have collapsed.

    So what would have happened if Marine Le Pen had been elected in May 2017? The question is obviously highly speculative, and that is why it enters the realm of utopian uchronia: everyone knows that none of this will ever happen… “This is clearly not the most probable outcome,” cries the chorus of political scientists. The National Front gets all of its votes in the first round; it would need an abstention rate of 60% for it to win the run-off. Once political uncertainties have receded in Europe, the markets, which have been on a resolutely upward trend since August – shrugging off Brexit, the American elections and the Italian referendum – will welcome the resumption of European integration that we will surely see in conjunction with the reforms that will undoubtedly be undertaken.

    However, in today’s B-series soap opera of a presidential campaign, the collapse of incumbent political parties, the populist wave in the West and a wave of attacks orchestrated by DAESH could cause the implausible to become feasible.

    How would the markets react if the implausible did indeed transpire and the National Front’s promise of monetary, legislative, territorial sovereignty became reality?

    All the big asset managers and the economic and political institutes unanimously conclude that the unprecedented situation with which we would be confronted in that case would at best result in national paralysis throughout the National Front’s term of office and at worst in a collapse through a decision tree:

    • Would Ms Le Pen win a parliamentary majority under the current electoral system? The answer is no.
    • Could she change the parliamentary electoral law between her election and the June parliamentary elections in order to usher in a preferential system and win an absolute or relative majority? The answer is again no.

    Constrained from the first day of her term by an unprecedented form of cohabitation in view of the split between the various tendencies of the left, right and centre – not forgetting “En Marche” – a National Union led by Marine Le Pen would be impossible, leaving the populist president to govern by referendum.

    Clearly anti-European, Marine Le Pen could call a referendum on “Frexit” (in the probable absence of a three-fifths majority of the joint houses of Parliament) by virtue of Article 11 of the French Constitution, which gives the President the power to hold referendums on matters relating to the organisation of government – relying on a groundswell of popular support. Let us suppose that the Constitutional Council does not invalidate the referendum leading to an exit from the euro...

    To download the entire letter, please click here

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    news-443 Tue, 21 Mar 2017 10:00:00 +0100 La Française reinforces its Frankfurt-based team to accompany its development /en/who-we-are/news/detail/la-francaise-reinforces-its-frankfurt-based-team-to-accompany-its-development/ La Française, an international asset management firm with close to €60 billion in assets under management (31/12/2016) and offices located throughout Europe, Asia and in the Unites States, continues to pursue its development strategy for Germany.

    After a successful collaboration with accelerando associates for close to three years and in light of development perspectives in the local market, La Francaise has decided to further invest in its sales force and has appointed Kay SCHERF as Head of Sales - Securities for Germany. Indeed, international business development (excluding France) generated over 25% of 2016 inflows and there are considerable growth opportunities in the German market with notably La Française absolute return fixed income investment strategies.

    “With twenty three years of experience in the asset management industry, occupying senior investor relations positions (addressing the wholesale and institutional segments) and as a portfolio manager specialized in the selection of Pan-European equities, Kay’s knowledge of the German market will be crucial in achieving our development objectives.” said Aurélie Fouilleron, Head of Sales for Germany. 

    Kay Scherf began his career in 1994 with J.P. Morgan Investment Management as an equity trader. Thereafter, he occupied various positions within the portfolio management team, both in London and Frankfurt, before being promoted to Portfolio Manager – Equities in 2001. In 2006, he joined AXA Investment Managers as Senior Sales Manager for the banking segment. Kay was promoted to Director of Wholesale for AXA Investment Managers Deutschland in 2011. During his 10-year career with AXA Investment Managers, Kay acquired a solid experience in investor relations, covering a variety of client segments.

    To download the press release, please click here.

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    news-441 Thu, 16 Mar 2017 14:20:05 +0100 How low will German yields go? - Analysis & Strategies n°177 /en/who-we-are/news/detail/how-low-will-german-yields-go-analysis-strategies-n177/ The French elections have rarely been so closely followed by the financial markets as they were in February. On the fixed income markets, the OAT/Bund spread reached more than 80 basis points, before dropping back to around 64 basis points at the end of the month. These were the only markets to properly reflect this "risk", while there was barely a ripple on the equity and currency markets.

    Against this backdrop, the most surprising movement was probably from German short-term yields, which headed downward all month long, to a record low of -0.95% for the 2Y, with the 5Y close to its record low at 0.60%.

    These yields cannot be easily explained by the macroeconomic data, which show that European growth has been accelerating for several months, while activity indicators are at very high levels (eurozone PMI at its highest since 2011).

    > Click here to read the full letter Analysis & Strategies

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    news-438 Thu, 16 Mar 2017 10:04:40 +0100 Discover the new brochure La Française GREIM /en/who-we-are/news/detail/discover-the-new-brochure-la-francaise-greim/ La Française Global Real Estate Investment Manager, a global real estate platform generating investment solutions and opportunities. Thanks to its team and various expertise, La Française GREIM is a recognized expert and a complete real estate product offering.

    Discover the business team, the solid asset management platform, various business of La Française Global REIM and its investment capacity in the new brochure 2017.

    To discover the new brochure, please click here.

    ]]>
    news-436 Mon, 13 Mar 2017 12:19:39 +0100 The US employment report leave the door right open for a rate hike /en/who-we-are/news/detail/the-us-employment-report-leave-the-door-right-open-for-a-rate-hike/ Global market sentiment was positive this week. Bond yields rose and major equity indices traded higher except EM who stayed under pressure. European equities rallied after the European Central Bank (ECB) meeting with banking sector outperforming.

    The main focus this week was the ECB meeting and the employment report in the US.     

    The European Central Bank kept its quantitative-easing program and rates unchanged as expected but rose inflation and growth forecasts for 2017-2018 and maintained it for 2019

    • ECB sees 2017 GDP growth at 1.8% vs 1.7% and 2018 GDP growth at 1.7% vs 1.6%
    • ECB sees 2017 inflation at 1.7% vs 1.3% and 2018 inflation at 1.6% vs 1.5%

    The ECB acknowledged that the economic situation has improved, the cyclical recovery is gaining momentum, but underlying inflation pressures remain subdued. Economic risks are starting to recede but not fast enough to end stimulus.

    We find that the ECB is starting to slightly change the tone of its communication, moving away from the dovish stance. We see this speech as a first taste of a more hawkish tone and think that it’s a first step towards a less expansionary stance. Nevertheless, the ECB should remain cautious until political risk are not behind us.

    On the macroeconomic side, mixed activity data was released this week:

    • German: mixed data with disappointing factory orders that recorded the sharpest fall since 2009, (dropping 7.4%) but industrial production surprised to the upside (rising 2.8%) and was mainly driven by the manufacturing component
    • Euro area: 2016 last quarter GDP was confirmed at 0.4%, a similar growth pace as Q3 2016: domestic demand strengthened while the net trade contribution to growth came in on the weak side, due to strong imports
    • China: trade balance and inflation data was released this week. Trade balance fell into deficit for the first time in three years, with exports undershooting while imports increased strongly. But data was likely affected by the timing of Chinese New Year. PPI inflation accelerated to 7.8% y/y in February but CPI inflation slowed to 0.8% y/y in February from 2.5% in January
    • In US, the employment report was robust. Payrolls climbed by 235 000 in February, followed a 238,000 rise in January. The unemployment rate fell to 4.7 percent. Wages improved modestly, with average hourly earnings climbing 0.2 percent from a month earlier. This report keeps the Fed on track for rate increase next week. There is no doubt that the Fed will hike rate next week. The odds of a March hike increased to 98%. Rate hike is now fully priced in by the market. Fed speakers have been hawkish recently. We believe that the change in the tone of FOMC communication was driven by strong economic data and now expect two additional hike this year.

    For the week ahead, focus will shift to central banks: FOMC meeting will be key but there are also number of other central bank meetings such as England and Japan.

    Kinds Regards.

     

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S 

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    "

    ]]>
    news-428 Mon, 06 Mar 2017 12:27:51 +0100 All Fed speakers seem to agree on a rate hike coming fairly soon, supported by positive macro data /en/who-we-are/news/detail/all-fed-speakers-seem-to-agree-on-a-rate-hike-coming-fairly-soon-supported-by-positive-macro-data/ This week was marked by the reduction in political stress around French elections and by Fed speakers preparing markets for a hike on March 15th. Dear all,

    Markets want Fillon, Juppé or Macron as president, and polls are going into this direction with Le Pen odds getting toppish. In a nutshell, elections are no longer a major issue and Bund/OAT spread is coming back below 60bps.

    Regarding the Fed, following additional positive macroeconomic data (ISM manufacturing at 57.7 and ISM non-manufacturing at 57.6), all speakers on the air before the blackout period had a hawkish tone, in order to prepare markets for a hike. Even usual doves leant towards a hike. In short, barring a cataclysm in the next 10 days, the Fed will hike.

    On the data side, we had Eurozone countries inflation prints which show headline higher, reaching 2% for the first time since 2013. Nevertheless, core inflation remains weak at 0.9%. ECB will publish its new macroeconomic forecasts during its meeting on March 9th. Even if they will probably revise upward their 2017 forecasts, weak core inflation should make them keep a neutral stance. US Core PCE (Fed’s favorite inflation indicator) came out stable at 1.7%. Last, activity data out of China was slightly above expectations, which helps markets keep a positive mood.

    The only slight deception was on the political side with no precision from President Trump during his long awaited speech. For the moment, markets continue to buy his promises but time could come when “buy the rumor, sell the fact” materializes.

    In the next 15 days were are awaiting:

    • ECB: Slightly hawkish. Speech will confirm the pickup in European growth and macroeconomic forecasts should be revised upwards. Probably no major announcement before French elections, keeping in mind that core inflation is still low on top of that.
    • Fed: Hike is priced in, we are waiting for the speech to see whether we head for 3 or 4 hikes this year. We lean on the “data dependent” side, waiting for clarity on D. Trump policies.
    • Bank of England: Here again, probably “ wait and see “ before article 50 activation and the beginning of talks with EU. Macro data continues to be on the strong side but less so than at the end of 2016. Markets keep a very bearish stance on the UK, this week was no different with US vs UK spread moving from 121 to 130bps.

    Kinds Regards.

     

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-424 Mon, 27 Feb 2017 16:38:17 +0100 Avoid Market Pitfalls /en/who-we-are/news/detail/avoid-market-pitfalls/ Equally as important as focusing on what to invest in is avoiding market pitfalls. Traditional brick-and-mortar retail, under stress from excess square footage and e-commerce competition, is one example.

     

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    news-423 Mon, 27 Feb 2017 16:03:15 +0100 German short yield keep going down despite an improving macroeconomic situation /en/who-we-are/news/detail/german-short-yield-keep-going-down-despite-an-improving-macroeconomic-situation/ More of the same: the rally in German 2Y bonds continues, even more than last week. Reasons? French elections of course, but also asset swap spreads widening due to central banks purchases. We have now extreme German bond yields that are completely disconnected from macroeconomic fundamentals:

    • Europe GDP is expected in Europe to reach 1.5%
    • Inflation in 2017 is expected at 1.5%
    • Leading indicators : Eurozone PMI at 56 (5 years high) ;  Zew, IFO are robust, etc

    Macro fundamentals improve, everything is going into the right direction, but German bonds rally nonetheless. On the other hand we must admit core inflation remains only at 0.9%, and there is some political risk but these things seem to be priced extremely dearly in German front end while other markets do not show any stress (EUR, equities, volatility…). Here is a graph with German 2&5yr bond yields and inflation (we could have done this chart with Zew, IFO, PMI, you name it).

    Next 3 coming weeks will be filled with political and macro news:

    • Euro inflation on February 28th
    • ECB on the 9th, Fed/BOE/BOJ on 16th March
    • Article 50 activation on 9/10th March
    • Dutch elections on 15th March
    • Trump fiscal plan announced around mid-March
    • ISM US on March 1st

    Kind Regards.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-416 Wed, 22 Feb 2017 14:46:28 +0100 The consensus : a false friend - Analysis & Strategy n°176 /en/who-we-are/news/detail/the-consensus-a-false-friend-analysis-strategy-n176/ The market movements observed for the main financial assets since the start of the year belie both the trends in place at the end of 2016 and the generally optimistic forecasts around at that time. Can this consensus, which continues to hold firm, be shaken? Following the election of Donald Trump, the consensus had coalesced around the theme of reflation and its corollaries: higher US yields, overweighting of cyclical and bank stocks, dollar appreciation, underperformance of emerging markets, etc. A month later, most of these expectations were contradicted by the financial markets, with the dollar tumbling and emerging market equities rising at a time when their developed country counterparts were, at best, treading water.

    No more than a pause after the sharp year-end swings or deeper doubts over the trend seen in recent months?

    On the one hand, the macroeconomic data are still upbeat in the US, as well as in Europe and China, while thus far, corporate earnings remain on track – all of which is reassuring and limits the potential for a market reversal.

    > Click here to read the letter Analysis & Strategy

    ]]>
    news-413 Tue, 14 Feb 2017 17:51:38 +0100 With still high uncertainty on markets, the spread keep widening slowly with French election coming up /en/who-we-are/news/detail/with-still-high-uncertainty-on-markets-the-spread-keep-widening-slowly-with-french-election-coming/ After American politics, markets are now focused on European politics with risks surrounding the French election.

    Bund / OAT spread is widening slowly a bit more each day: it was 30bps early November, 50bps early 2017 and 73bps today. Markets fear that the winner could be a party in favor of returning to the French Franc, and given the very high uncertainty, this scenario will probably be hard to get rid of before the election. In short, if we follow this logic, there is not much good news to be expected from Euro politics over the short term and it is hard to imagine French spread coming back significantly.

    Logically, this backdrop weighs on Euro equities and banks, even though micro earnings are decent. That is probably the most difficult issue today: macro data is robust, micro data is decent, but there is a sword of Damocles hanging over our heads.

    Even if it is impossible to have a clear cut view regarding political risk, we think we will probably see things deteriorate. That is why we have cut our equity risk, periphery spread risk and moved some of our BOBL shorts (German rate future) to OAT shorts. We have in the meantime increased our exposure to short Gilt vs T-notes spread.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-406 Thu, 02 Feb 2017 09:33:50 +0100 Trends & Morningstar Investment Summit 2017. Meet more than 40 experts of the world of investment funds. /en/who-we-are/news/detail/trends-morningstar-investment-summit-2017-meet-more-than-40-experts-of-the-world-of-investment-fu/ On Wednesday February the 15th, Trends and Morningstar are organizing the 11th edition of Trends & Morningstar Investment Summit 2017 at the Sheraton Brussels Airport Hotel.

    The central theme of the Trends & Morningstar Investment Summit 2017 is “Game changers driving the investment industry”. Who or what are the game changers for investors and the investment industry in 2017, what challenges and opportunities will they bring?

    Jens Goettler, CEO – Germany for La Francaise Real Estate Partners International has been invited to discuss how global capital is changing European real estate.

    Andrea Bertocchini, Head of Benelux, Nordics and Italy, and Bram Op de Beeck, International sales Manager for Belgium and the Netherlands, will be available throughout the day to welcome investors and present La Française investment solutions.

    ]]>
    news-403 Mon, 30 Jan 2017 17:37:38 +0100 Slightly below expectations, this figure benefits from a rebound in investment. Our insight: /en/who-we-are/news/detail/slightly-below-expectations-this-figure-benefits-from-a-rebound-in-investment-our-insight/ This week was busy with macroeconomic data publications: In the US, we had Q4 GDP report below expectations at 1.9%, which does not mean the US economy is slowing significantly. This figure was penalized by larger than anticipated trade balance deficit. The good news is that investment picked up, which bodes well for the next quarters. On top of that, PMI came out above expectations, which says basically the same thing: the US are doing fine.

    In the UK, Q4 GDP came out better than expected. The economy grew 2.2% in 2016. Nice performance in this Brexit referendum year! Logically, investors have unwound some more short GBP trades, which pushed sterling +1.6% vs USD and EUR this week.

    Eurozone economy continues on its improving trend, with this week PMI indices. We had a very solid German manufacturing PMI and good figures as well coming from France. French consumer confidence reached its 2007 high.

    • Regarding bond yields, the move higher extended. Our medium term view remains unchanged, we continue to think German bonds are too expensive.
    • We remain positive on Euro equities, we think investor positioning is on the low end and that EPS growth should help make a good year.

    Kind Regards.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-396 Mon, 23 Jan 2017 12:19:24 +0100 Relief for financial market after a rather positive speech from the British Prime Minister on Brexit /en/who-we-are/news/detail/relief-for-financial-market-after-a-rather-positive-speech-from-the-british-prime-minister-on-brexit/ After a quiet Monday (Martin Luther King Day, bank holiday in the US), the week started with the much expected Theresa May speech on Brexit on Tuesday.

    Markets were very worried about it (overnight implied volatility was at a 5 month high) but in the end the tone was rather positive: “June the 23rd was not the moment Britain chose to step back from the world. It was the moment we chose to build a truly Global Britain.” Markets were relieved and GBP shot a nice 3% vs the dollar on the day. 

    The other major event this week was the European Central Bank meeting. Nobody expected anything from Mario Draghi… and we have not been surprised! The speech was very neutral and Q&A did not bring color about a potential tapering. Nonetheless, the move higher in bond yields that began on Tuesday carried on. 

    The last event this week is under way while I am writing. D. Trump’s speech will obviously be analyzed very thoroughly.

    Kind Regards.

     

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-388 Thu, 19 Jan 2017 14:03:58 +0100 La Française and amLeague enter into a strategic partnership and launch a new offer replicating the amLeague_Euro 45 index /en/who-we-are/news/detail/la-francaise-and-amleague-enter-into-a-strategic-partnership-and-launch-a-new-offer-replicating-the/ amLeague has entrusted La Française – a historic member and founder of its platform – with the fund management and distribution of the investment strategy aiming to outperform the Euro Stoxx 50 index by replicating its amLeague_Euro 45 index. In so doing, initially institutional investors will be able to invest in active asset management grouping together amLeague’s best managers. Antoine Briant, CEO and founder of amLeague, explains: “The infrastructure of the amLeague platform has proven its worth, and the same goes for the amLeague_Euro 45 index. By entrusting our partner, La Française, with the strategy’s management and its distribution to institutional investors – a segment where La Française is particularly active – we are meeting a dual goal of quality and expertise in management and distribution."

    With this new strategy, which will be managed by the experienced team of Laurent Jacquier Laforge, CIO Equities, La Française is diversifying its European equities offer. “Customers are seeking innovative investment solutions, and we are convinced of the value of transforming amLeague’s research into buyable products,” added Patrick Rivière, Managing Director of La Française. “Our common objective will be to generate alpha by replicating the amLeague_Euro 45 index and to provide an effective and differentiating investment solution to institutional investors.”

    As such, the goal is to replicate the proprietary strategy of the amLeague_Euro_45 index, comprising 45 securities that represent the equity universe of the Eurozone. Past performances do not prejudge future performances, but the strong results of the amLeague_Euro 45 index must be acknowledged: since its creation on 5 October 2010, it has seen growth of +71.36%, versus +44.63% for the Euro Stoxx 50 NR index.

    > Click here to read the full press release

    ]]>
    news-385 Wed, 18 Jan 2017 09:48:52 +0100 La Française reorganises its Securities Fund Management division /en/who-we-are/news/detail/la-francaise-reorganises-its-securities-fund-management-division/ Over the last five years, La Française has experienced strong growth through its expansion and through the internationalisation of its expertise, thanks to its strategic partnerships that have allowed the group to strengthen its skills. So as to create synergies between the various group affiliates and divisions, La Française has reorganized its Securities Fund Management Division.

    Accordingly, under the leadership of Pascale Auclair, Global Head of Investments, Jean-Luc Hivert and Laurent Jacquier Laforge are heading the two divisions of expertise: “Fixed Income and Cross Asset” and “Equity”, respectively.

    Laurent Jacquier Laforge, with more than thirty years of experience, becomes CIO Equities Global. He is responsible for the entire SRI Equity range offered by La Française, small caps management and the monitoring of partnerships, such IPCM, an extra-financial research firm, Alger and JK Capital Management. For several years, La Française has been building strategic partnerships with specialised foreign management companies. As group CIO Equities Global and in the interests of investors, Laurent Jacquier Laforge will identify potential collaborations on products and research synergies.

    Jean-Luc Hivert, with nineteen years of asset management experience, becomes CIO Fixed Income & Cross Asset. He is responsible for €30 billion in assets under management and heads a team of twenty-six experts. Accordingly, he is entrusted with the Group’s Cross Asset management, discretionary portfolio management and targeted management, for which Odile Camblain-Le Mollé holds operational responsibility.

    > Click here to read the full press release

    ]]>
    news-382 Mon, 16 Jan 2017 15:48:21 +0100 Figure that might influence ECB’s tapering decision /en/who-we-are/news/detail/figure-that-might-influence-ecbs-tapering-decision/ This week was very quiet, with no Central bank, no major macroeconomic data and little market movements. Developed equity markets were slightly down, emerging market equities up, bond yields lower as well as the dollar. Yet small, these moves are more or less offset by Friday’s trading session. Still, we should note :

    • Mr. Trump’s press conference was a great Trump moment but nothing that can give us some precision about measures that will be taken when he gets into the oval office.
    • US retail sales, overall in line with consensus
    • ECB minutes informed us that tapering decision was taken with a large consensus and “some” were in favor of a harder move. This supports our bearish view on Euro fixed income 
    • Chinese FX reserves continue to go down, which is logical with a currency under pressure and a central bank forced to intervene to support its currency. It is more or less the same that happened early last year, and it has been going on for months, but markets are now convinced that everything is under control…
    • The beginning of the earning season in the US with banks starting off. Earnings are decent, hence supporting the market; for the moment it’s as usual.

    Next weeks will be dominated by more earnings releases, that we anticipate to be positive and act as a support for equity markets, at least from a short term point of view. We will as well have the ECB on Thursday, which should not announce anything. There is however a possibility that journalists ask Mr. Draghi about inflation data that came out above expectations, especially in Germany.

    Kind Regards.

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

    ]]>
    news-375 Tue, 10 Jan 2017 12:19:09 +0100 A vital sign for healthcare /en/who-we-are/news/detail/a-vital-sign-for-healthcare/ Current discount plus growth potential creates opportunity The underperforming Healthcare sector is likely poised for a turnaround. The last time the sector's valuation discount to the market was this wide, it outperformed the S&P 500 bu over 700 basis points annually over the subsequent five years.

    ]]>
    news-374 Mon, 09 Jan 2017 10:00:00 +0100 Outlook and convictions for 2017 /en/who-we-are/news/detail/outlook-and-convictions-for-2017/ Despite generally positive expectations of growth in 2017, we should bear in mind certain factors that indicate uncertainty: President Trump's protectionist tendencies and the potential difficulties to realize his proposed program, the European elections, and the consequences of Brexit. Nevertheless, global growth seems to continue at a faster pace, which is still moderate at this stage, but sustained by several positive signals :

    Accordingly, the United States is experiencing rapid expansion – consistently driven by domestic consumption – whereas China is controlling the expected slowdown in its growth while also rebalancing export and consumption trends within its economy.

    Although the eurozone is still threatened by the possibility of a negative outcome in the upcoming elections, it shows signs of improvement. The consistent decline in unemployment rates will bolster household income, thereby establishing a solid basis for growth through consumption. Lastly, the United Kingdom has shown astonishing resilience faced with the prospect of Brexit.

    Last month, the US Federal Reserve, to some extent, reinforced these positive expectations with a planned acceleration, in 2017, in the normalization of US monetary policy.

    The ECB, on the other hand, has announced a major turning point in its monetary policy. The reduction – albeit conservative – of its asset purchases is a first step towards the reorientation of its Quantitative Easing programme, which should show a gradual decline over the next two years.

    > Click here to read the full press release

    ]]>
    news-373 Mon, 09 Jan 2017 16:24:56 +0100 Strong acceleration of headline inflation, factor that could support a potential ECB tapering /en/who-we-are/news/detail/strong-acceleration-of-headline-inflation-factor-that-could-support-a-potential-ecb-tapering/ The year starts just like 2016 ended, with solid growth data almost everywhere and positive leading indicators.

    As an example :

    • US non-farm payroll: job creations as expected but with higher wage growth at 2.9% YoY, this confirms rising tensions in the labor market and is pushing the Fed to be less accommodative
    • Euro Area Inflation: 1.1%, slightly above expectations (with German inflation at 1.7%, way above expectations). This matters for many reasons: on the one end it reaffirms deflation risk has almost disappeared in the Eurozone, on the other end this could put ECB into a difficult position if German inflation continues to go up. German authorities are beginning to make more noise regarding that topic, arguing that Germans earn -2% real rate on their deposits. In short, the probability to have an early taper has increased, and that is not priced in markets

    Interestingly this year we had the now notorious tweets from Mr. Trump who makes announcements regarding China, Mexico, GM… and made Ford cancel a plant construction in Mexico. We will have to get used to it; some people have already developed algorithms based on these tweets…

    The consequence of a stronger dollar and outflows from China is that the monetary market is under pressure in China. Authorities have intervened boldly to punish short sellers in hiking massively repo rates. The objective is to dampen capital outflows and to reduce Yuan depreciation. The move have worked over the last two days with Yuan recovering strongly, but it will be difficult to hold if the dollar continues to appreciate.

    Now that most important data is out for the month, investors will focus on :

    • Earnings season in the US which starts on January 13th
    • Trump gets into the office on the 20th
    • Central banks of course with ECB starting on the 19th

    In terms of market views, this strengthens our bearish view on Euro area core fixed income, which is expressed significantly in our portfolio. Equity markets may continue to grind higher, but recent performance and high expectations reduce short term potential to our eyes, even if on the macro side, all is going into the right direction. We continue to have mixed feelings about the dollar which remains expansive and is heavily owned.

    Kind regards.

    ]]>
    news-365 Mon, 26 Dec 2016 14:20:45 +0100 Inflation, asset class that should keep attract investors in 2017 /en/who-we-are/news/detail/inflation-asset-class-that-should-keep-attract-investors-in-2017/ Extremely quiet week in this holiday period.

    Yields have retrace part of their move (–7bps on the German 10Y and -4bps on US rates) while equity indices are showing little evolution (+0.9% for the EuroStoxx 50, +0.2% for the S&P 500 but -1.8% for the MSCI EM). 

     

    Few macroeconomic publication. The US service indicator came to confirm the good holding of the country’s macroeconomics. Seen as a whole, indicators remains positive and beat the consensus. For each of the globe’s major geographic areas, we have a positive economic surprise meaning that in average, each zone’s macroeconomic data beats the consensus. 

     

    While some markets remain on extreme levels (overbought Euro and US equities, oversold US rates), it’s interesting to note the strong come-back of the German 10Y with a Relative Strength Index coming back to median levels. 

     

    The current global context is oriented towards reflation and term premiums reconstruction. Monetary policies anticipations remain somewhat accommodative. Furthermore, economists forecast a 2.5% inflation for early 2017, which should make investors' enthusiasm for this asset class continue next year.

    ]]>
    news-358 Tue, 20 Dec 2016 15:29:35 +0100 Strongly surprised by the Fed hawkish tone, markets react quickly: USD and yields both increase /en/who-we-are/news/detail/strongly-surprised-by-the-fed-hawkish-tone-markets-react-quickly-usd-and-yields-both-increase/ Global market sentiment was positive this week.

    All major equity indices increased except emerging markets who stayed under pressure: US equities rallied to new record high and European markets erased 2016 losses. Bond yields rose sharply.

    This week markets' attention was focused on the US Federal reserve meeting :

    • The FOMC meeting caught markets by surprise with an hawkish shift. As widely expected, the Federal Reserve raised the target range for the federal funds rate by 25bp to 50-75bp for the second time in this cycle but announced faster than expected tightening of the monetary policy
    • The major change came in the Summary of Economic Projections, which showed a faster path of rate hikes in 2017. Policy makers now anticipate three hikes for each of the next three years
    • This shift was hawkish and markets reaction was strong :  the dollar jumped to highest since 2003 (against Yen and Euro mainly) and the US2Y treasury yield hit a seven year high. Moreover, Janet Yellen, chair of the Fed, highlighted that FOMC projections do not incorporated any fiscal policy expansion and any potential Trump stimulus yet 
    • Nevertheless, Chair Yellen downplayed the change, saying the firming in the median rate path in 2017 was modest and only represented a small shift in the thinking of several committee members 

    In the macro economical side, surprises continued to be positive and supported the global market sentiment :

    • In the US,  inflation pressure increased further as positive energy base effects continue to boost the Consumer Price Index (fourth consecutive month of increase) and Producer Price Index rose at a solid pace in November and exited form deflation (+1.5% YoY). Moreover, expectations of restrictive trade policies and substantial fiscal spending should support inflation over the medium term
    • Following the earlier strong manufacturing indicator (PMI) and trade data, Chinese activity data came in better shape than expected. All of that suggest upside growth momentum for the fourth quarter 
    • In Europe,  manufacturing indicators continued to show improvement of activity for the end the year. The full 4Q average is the best quarter this year, standing at 53.7 (composite PMI) compared with 52.9 in the previous quarter
    • Moreover, oil prices remained firm this week supported by the decision of non-OPEC producers to join OPEC in the production cut 

    All that being said, what do we think?

    • Regarding inflation and growth: Inflation outlook has firmed since mid-year and should continue to improve. The path of rate hikes is modestly steeper than in September as the US economy remains strong 
    • One of the questions is to know if this reflation rally could continue much longer or is overdone?
    • The hawkish shift from the Fed could support a continuation of the reflation theme in a short term  
    • But, when we look at markets, we think that an important part of the post-election market re-pricing is based on speculation about what the President or Congress could implement. Many of potentials positive effects of Trump’s policy seems to be already priced by markets 
    • This bullish run was both quick and strong but tax reform and more expansive government spending are more likely to influence the 2018 outlook rather than 2017 
    • At time of writing, technical indicators telling us that markets are overbought (equities, dollar) and treasuries yields oversold. Sentiment is very greedy and markets stayed in a very positive mood for the moment. Some valuations are expensive and market positioning is not light. 
    • There is few place for potential disappointments. Policy normalization should remain very gradual. Some headwinds remain: strong dollar, weak international growth/geopolitical risk 
    ]]>
    news-356 Mon, 19 Dec 2016 16:09:59 +0100 Hervé Chatot's take on this week's markets /en/who-we-are/news/detail/herve-chatots-take-on-this-weeks-markets/ Global market sentiment was positive this week. All major equity indices increased except emerging markets who stayed under pressure: US equities rallied to new record high and European markets erased 2016 losses. Bond yields rose sharply. This week markets' attention was focused on the US Federal reserve meeting :

    • The FOMC meeting caught markets by surprise with an hawkish shift. As widely expected, the Federal Reserve raised the target range for the federal funds rate by 25bp to 50-75bp for the second time in this cycle but announced faster than expected tightening of the monetary policy
    • The major change came in the Summary of Economic Projections, which showed a faster path of rate hikes in 2017. Policy makers now anticipate three hikes for each of the next three years
    • This shift was hawkish and markets reaction was strong :  the dollar jumped to highest since 2003 (against Yen and Euro mainly) and the US2Y treasury yield hit a seven year high. Moreover, Janet Yellen, chair of the Fed, highlighted that FOMC projections do not incorporated any fiscal policy expansion and any potential Trump stimulus yet
    • Nevertheless, Chair Yellen downplayed the change, saying the firming in the median rate path in 2017 was modest and only represented a small shift in the thinking of several committee members

    In the macro economical side, surprises continued to be positive and supported the global market sentiment :

    • In the US,  inflation pressure increased further as positive energy base effects continue to boost the Consumer Price Index (fourth consecutive month of increase) and Producer Price Index rose at a solid pace in November and exited form deflation (+1.5% YoY). Moreover, expectations of restrictive trade policies and substantial fiscal spending should support inflation over the medium term
    • Following the earlier strong manufacturing indicator (PMI) and trade data, Chinese activity data came in better shape than expected. All of that suggest upside growth momentum for the fourth quarter
    • In Europe,  manufacturing indicators continued to show improvement of activity for the end the year. The full 4Q average is the best quarter this year, standing at 53.7 (composite PMI) compared with 52.9 in the previous quarter
    • Moreover, oil prices remained firm this week supported by the decision of non-OPEC producers to join OPEC in the production cut

    All that being said, what do we think?

    • Regarding inflation and growth: Inflation outlook has firmed since mid-year and should continue to improve. The path of rate hikes is modestly steeper than in September as the US economy remains strong

    One of the questions is to know if this reflation rally could continue much longer or is overdone?

    • The hawkish shift from the Fed could support a continuation of the reflation theme in a short term 
    • But, when we look at markets, we think that an important part of the post-election market re-pricing is based on speculation about what the President or Congress could implement. Many of potentials positive effects of Trump’s policy seems to be already priced by markets
    • This bullish run was both quick and strong but tax reform and more expansive government spending are more likely to influence the 2018 outlook rather than 2017
    • At time of writing, technical indicators telling us that markets are overbought (equities, dollar) and treasuries yields oversold. Sentiment is very greedy and markets stayed in a very positive mood for the moment. Some valuations are expensive and market positioning is not light.
    • There is few place for potential disappointments. Policy normalization should remain very gradual. Some headwinds remain: strong dollar, weak international growth/geopolitical risk

    That’s why we remain cautious about this euphoric environment post-election and maintain a low risk level in the fund.

    Kinds Regards,

     

    More about:

    • La Française Allocation Share Class R
    • La Française Allocation Share Class I
    • La Française Allocation Share Class S

     

    The information and material provided do not, by any means, represent advice, offers, solicitations or recommendations for investing in specific investments. All statements reflect the opinions of their authors at their publication date and do not constitute a contractual commitment on behalf of the management company. These assessments are subject to change without notice, within the prospectus’ limitations, which is the only legally binding document. La Française Group declines liability in any form for any direct or indirect damage resulting from the use of this publication or the information that it contains. This publication may not be reproduced in full or in part, disseminated or distributed to any third party without the prior written consent of La Française Group.  
     
    La Française Allocation is a French UCITS in regards to the 2009/65/CE Directive. The Fund received AMF authorization on July 15th 2003 and was launched on July 31st 2003. The strategy changed as of July 19th 2012. Management company : La Française Asset Management – Paris – approved by the “Autorité des Marchés Financiers” under N GP97076 on July 1st, 1997.

    For more information regarding the French regulatory authority - Autorité des Marchés Financiers (AMF) – please visit www.amf-france.org.www.amf-france.org.

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    news-353 Thu, 15 Dec 2016 10:21:12 +0100 La Française Real Estate Partners International erwirbt erstklassiges Bürogebäude in Amsterdam /en/who-we-are/news/detail/la-francaise-real-estate-partners-international-erwirbt-erstklassiges-buerogebaeude-in-amsterdam/ La Française Real Estate Partners International (ehemals La Française Forum Real Estate Partners) hat von der Real I.S. Investment GmbH die Liegenschaft „Hollandia“ erworben, ein nachhaltiges Bürogebäude (Energielabel A) auf der Insel Oosterdokseiland, einem großen innerstädtischen Entwicklungsprojekt im Zentrum Amsterdams. Die von dem niederländischen Architekten Jo Coenen und Co-Architekten entworfene und im Jahr 2007 fertig gestellte Immobilie bietet eine vermietbare Nutzfläche von 9.950 qm über zwölf Stockwerke mit Blick auf den Fluss IJ. Die Immobilie besitzt eine ideale Lage und ist nur zehn Minuten von der Ringstraße A10 und nur wenige Gehminuten vom Hauptbahnhof entfernt.

    Hollandia ist an TomTom International B.V. vermietet. Die Oosterdokseiland ist ein äußerst populärer Standort mit einer Vielzahl an Mietern aus dem Technologiesektor.

    Jens Göttler, Deutschland-Geschäftsführer von La Française Real Estate Partners International, kommentiert: „Dies ist unser erster Kauf in den Niederlanden im Auftrag der kollektiven Immobilieninvestmentvehikel von La Française. Die zentrale Lage wird von der Eröffnung der Metrostation im Jahr 2018 profitieren und durch den flexiblen Grundriss können qualitative Mieter gewonnen und gehalten werden. Dieser Erwerb passt perfekt zu unserer Strategie, in dynamische innerstädtische Standorte zu investieren.“

    > Klicken Sie hier um den vollständigen Pressekommunique zu lesen

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    news-352 Thu, 15 Dec 2016 10:14:22 +0100 La Française Real Estate Partners International acquires a prime office building in Amsterdam (Netherlands) /en/who-we-are/news/detail/la-francaise-real-estate-partners-international-acquires-a-prime-office-building-in-amsterdam-nethe/ La Française Real Estate Partners International (formerly La Française Forum Real Estate Partners) has acquired from Real I.S. Investment GMBH the “Hollandia”, a sustainable (Energy Label A) office building located on the Oosterdokseiland, a major inner-city development project, in the city center of Amsterdam, the largest city in the Netherlands. Designed by the Dutch Architect Jo Coenen & Co Architecten and completed in 2007, the asset provides lettable floor space of 9,950 sqm across twelve floors, overlooking the IJ-river. The asset is ideally situated, just ten minutes from the ring-road A10 and within walking distance of the Central Station.

    Hollandia is let to a single tenant, TomTom International B.V. The ODE sub-area is an extremely popular location with a variety of tenants including those from the Tech sector.

    Jens Goettler, Managing Director-Germany, La Française Real Estate Partners International, said “This is our first acquisition in the Netherlands on behalf of La Française’s collective real estate investment vehicles. Its central location which will benefit from the opening of a metro stop in 2018, and flexible floor plan are certain to attract and retain quality tenants. This acquisition fits perfectly with our strategy of investing in dynamic inner-city locations”

    > Click here to read the full press release

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    news-350 Tue, 13 Dec 2016 09:23:43 +0100 With nearly €2 billion* in fundraising, La Française Global REIM continues its strong growth in 2016 /en/who-we-are/news/detail/with-nearly-eur2-billion-in-fundraising-la-francaise-global-reim-continues-its-strong-growth-in-2016/ La Française Global REIM relied on its international platform to raise nearly €2 billion in 2016, thereby increasing its total real estate assets to more than €14.5 billion. International investors, a third of them from Asia, account for close to 19% of total assets under management. Within six years, La Française Global REIM assets under management have been multiplied by two and half. 1/ 2016 Fundraising

    In the current environment of low interest rates and geopolitical uncertainty, in particular in the wake of BREXIT, and more recently the US presidential elections, real estate offers a diversification solution for investors seeking higher potential returns.

    In accordance with its development strategy in France and abroad, La Française Global REIM's real estate expertise has been recognised by institutional investors, as reflected in the over €1.2 billion in funds raised

    In 2016, Asian customers stood out and accounted for nearly 25% of funds raised. Indeed, La Française Global REIM is able to provide diversified investment solutions by geographic area, strategy (Core/Core +, value added, opportunistic) and theme (offices, retail, managed property) to investors seeking to enter the main European markets through various vehicles (open-ended funds, dedicated funds, mandates and club deals): 

    • This year was marked by the penetration of Asian markets and the acquisition of new blue-chip customers. Via its subsidiaries La Française Real Estate Partners and La Française Real Estate Partners International, La Française Global REIM currently manages nearly €1 billion in European property assets (United Kingdom, Germany and France) for Asian investors. Recent property acquisitions – So Ouest Tower in Levallois-Perret (92), and 115 rue Montmartre in Paris (2nd arrondissement) – perfectly illustrate our ability to source high-quality assets and to support the leading international investors with their search for assets in the European market.

    • The creation of local funds (tailored to local demand) or European thematic funds for which the sourcing and asset management are entrusted to La Française Real Estate Partners International teams based in Frankfurt, are solutions meeting the requirements of international investors.

    In a market comprising retail investors with a strong appetite for this asset class, La Française REM continues its growth among this target, and has recorded an increase of more than 30% to achieve fundraising of nearly €800 million:

    • More than €650 million for its range of collective real estate investment vehicles, which has been substantially renewed, in particular with vehicles with an original positioning that invest in the major European markets for their investment potential and attractive tax framework. 

    • With €130 million raised from unit-linked sales, the phenomenon that started in 2015 has continued in 2016. 

    • €10 million for vineyard diversification products, a record year with three products marketed. 

    > To read the full press release, please click here.

    *as at 30/11/2016

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    news-348 Mon, 12 Dec 2016 11:59:22 +0100 Although it is being extended, the ECB purchasing program is lowered in its size, upsetting investors’ views /en/who-we-are/news/detail/although-it-is-being-extended-the-ecb-purchasing-program-is-lowered-in-its-size-upsetting-investor/ Italian referendum results matched polls, and that could almost be viewed as a surprise! As we highlighted repeatedly, the outcome was widely anticipated by investors, thus market impact was logically tiny, not to say non-existent. It does not mean that there are no medium term implications, but for the time being, markets are not focused on them.

    ECB meeting was the second event this week, and we had a bit of a surprise. Markets were expecting 6 months extension with unchanged amount. They had 9 months but with smaller amount (EUR60bn instead of EUR80bn, starting from march). No increase in purchases of non CAC bonds, but a possibility to buy below ECB depo rate. This was first taken as a hawkish move: bonds sold off, but they came back very quickly.

    Since the meeting, here are the moves:

    • Bear periphery on longer dated maturities  that’s logical since below deposit rate purchases are more positive for the short end, while the long end will get less bids, as well due to the fact that non CAC bonds purchases have not been increased
    • Bear Euro  that’s the most puzzling reaction at first sight, but it is probably explained by lower short term rates
    • Bull Euro equity and banks  logical for banks, since yield curves have steepened. That’s less clear for Euro equities, but they benefit from solid activity data recently, a weaker Euro and some uncertainties now being behind us

    In short, there is a bull market on equities, including – and that’s new – Euro equities. Bonds are still oversold, and the dollar is stronger, more than ever.

    What do we think?

    • Still the same on bond yields: in the US, inflation looks properly priced and investors euphoria regarding Trump seems at least premature to us. On the Euro curve, we continue to think that yields are still too low
    • Regarding equity markets, we continue to deem US too expansive, and earnings growth should be reviewed on the downside (+12% EPS growth expected for 2017). Here again, Trump effect looks more than priced in. Euro area equities should continue to behave well if Euro keeps its downtrend.
    • Last, regarding FX, we still cannot share investors dollar hype… for reasons we have repeatedly argued.

    Next week we have the US federal reserve, with almost no uncertainty. The speech will probably have some interest though.

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    news-343 Thu, 08 Dec 2016 15:53:00 +0100 La Française Real Estate Partners International acquires a prime office building in Stuttgart /en/who-we-are/news/detail/la-francaise-real-estate-partners-international-acquires-a-prime-office-building-in-stuttgart/ La Française Real Estate Partners International (LF REP International) has acquired the “Porticon, an eight-storey office building located in the “Lowentorzentrum” office park at Presselstrasse 17, directly adjacent to Stuttgart’s city center. La Française Real Estate Partners International (LF REP International) has acquired the “Porticon, an eight-storey office building located in the “Lowentorzentrum” office park at Presselstrasse 1The city of Stuttgart is located in the heart of one of the most innovative high-tech regions in Europe and strongest export regions in Germany.7, directly adjacent to Stuttgart’s city center.

    The building, constructed in 2002/2003, offers total floor space of approximately 11,150 m2 and provides flexible office layouts that subdivide down to units of 500 m2. The building is currently let to Deutsche Bahn Group, an international supplier of mobility and logistics services, under a long-term lease.

    Jens Goettler, Managing Director-Germany, La Française Real Estate Partners International, said: “This is our second acquisition in Stuttgart. It is one of the most attractive sub-markets in Stuttgart because of the excellent access to public transportation. As the European Quarter continues to develop, pushing the city center North, the location will further improve. Porticon provides us with further diversification of La Française’s collective real estate investment vehicles.”

    The broker was Colliers International Stuttgart.

    > Click here to read the full press release

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    news-341 Tue, 06 Dec 2016 09:36:59 +0100 Oil is coming back to 2016 highs after an unexpected OPEC deal /en/who-we-are/news/detail/oil-is-coming-back-to-2016-highs-after-an-unexpected-opec-deal/ The major event this week was the unexpected deal resulting from the Organization of the Petroleum Exporting Countries (OPEC) meeting in Vienna.

     -1.2M barrels production cut (including non OPEC countries). Markets reaction was brutal: +12% on crude over 2 days, back to 2016 highs. Given fixed income markets were already under pressure, bond yields climbed 15bps in 2 days. Over the week, bond yields moves are smaller though.

    US macro data continues to come out robustly: Manufacturing indicators, Gross Domestic Product revision… all were above expectations. The only weak piece of data was consumption and wage growth. Similarly in China we had solid activity data.

    In a nutshell, markets are still going in the same direction: reflation, higher yields, US equities higher and a stronger dollar, even if this week’s moves are limited.

    Markets have been focused on two major events:

    • The December 4th Italian referendum: The “No” won as markets expected.
    • The December 8th ECB meeting. Many uncertainties regarding this meeting. How about tapering rumors? Technical adjustments? Is status quo a possibility? Many questions for a probably key meeting for early 2017.

    We continue to think markets are going too far in the reflation / pro growth trade and that they will be disappointed by hard data early 2017.

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    news-338 Mon, 05 Dec 2016 16:29:10 +0100 Fitch Affirms La Francaise Global AM at 'High Standards' /en/who-we-are/news/detail/fitch-affirms-la-francaise-global-am-at-high-standards/ Fitch Ratings has affirmed La Francaise Global AM's Asset Manager Rating at 'High Standards'. The Outlook is Stable.

    Fitch’s key rating drivers include: ”The affirmation reflects La Francaise Global AM's specialised investment capabilities, reasonably diversified asset mix, strong governance standards supporting alignment of interests with clients and long-standing committed shareholder. A strengthened best execution audit trail and trade control management complement the robust compliance and control framework. Well-resourced investment teams and disciplined decision-making process further underpin the rating”…

    > To read more, please click here 

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    news-336 Mon, 12 Dec 2016 09:43:00 +0100 La Française appoints new Country Head for Italy /en/who-we-are/news/detail/la-francaise-appoints-new-country-head-for-italy/ La Française, an international asset management firm with over €58 billion in assets under management (30/09/2016) and offices located throughout Europe, Asia and in the Unites States, continues to pursue its development strategy in Italy and has appointed Luigi Brunetti as Country Head. With seventeen years of experience in the asset management industry, occupying senior investor relations positions, covering both the retail and institutional segments, Luigi’s knowledge of the Italian market will be crucial in achieving our development objectives.” said Andrea Bertocchini, Head of Northern Europe, Benelux & Italy.

    Luigi Brunetti began his career in 2000 with ING Group as Account Manager. In 2002, he moved to Aletti Gestielle as Senior Relationship Manager and was promoted to Head of Retail Business Development soon thereafter. In 2008, he joined Aviva Investors as Business Development Director, responsible for the institutional and retail segments as well as a wide range of investment solutions: hedge funds, UCITS, Real Estate funds and other asset management services. Prior to joining La Française in Italy, Luigi was a Senior Sales Manager for Raiffeisen Capital Managerment. Luigi’s extensive work experience and more particularly, his acute knowledge of both the retail and institutional investor segments, will contribute to further expanding business in Italy.

    > Click here to read the full press release

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    news-333 Fri, 02 Dec 2016 12:14:00 +0100 Bail on Bonds: The Great Rotation into Equities /en/who-we-are/news/detail/bail-on-bonds-the-great-rotation-into-equities/ Until recently, the acute search for yield had driven more and more money into fixed income. However, expectations around fiscal stimulus owing to the U.S. election drove up growth and inflation expectations which seem to have resulted in a Great Rotation from bonds to equities. > To read more, please click here.

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    news-327 Mon, 28 Nov 2016 17:35:28 +0100 Spread Italy versus Germany has reached a 30-month high: market pricing is already under stress /en/who-we-are/news/detail/spread-italy-versus-germany-has-reached-a-30-month-high-market-pricing-is-already-under-stress/ When a portfolio manager loses money, he has two options:
    • Either he remains convinced by his views and keeps his positions. Even better, adds to them if conditions allow for it.
    • Or he thinks he is wrong and cuts his risk.

    We have been wrong for the last 10 days on our main themes, and so we spent the last 10 days reviewing our investment themes’ fundamentals.

    What are our themes?

    • US yields: we thought US core yields were too low a few months ago and inflation expectations were too low as well. This is no longer the case:
      - First, we do not share markets’ optimism about Mr Trump, who has become over the last 10 days the solution to every problem (reflation, government spending, etc.).
      - We think the impact will probably be limited on growth (+0.1 or +0.2% GDP) and it is too soon to price it. Global gross domestic product stays close to 3%, there is no significant pickup.
      - Excess saving stays elevated and US yields have come back to attractive levels in our opinion. US 5y5y forward yields is close to 3%, above Federal Reserve’s LT dots, which looks decent to us.
      - Same for inflation anticipations which has risen from 1.5% to 2% over the last 2 months, and is close today to US core inflation.
    • US Dollar: spreads between US and other areas are widening, and it is positive for the dollar. We do not think this move can last much longer for the following reasons:
      - The dollar is expensive, sometimes very expensive vs other currencies (Euro/Yen/Sterling Pound).
      - US current account balance and trade balance remains deeply in the red versus massive surpluses in Eurozone and Japan.
      - Potential rising deficits thanks to Mr. Trump are negative for the dollar.
      - Inflation could be on the rise, which is also negative for the dollar over the medium term.

    • Italy: this position is highly trying and rather controverted. Is there a risk on Italian assets going into Dec. 4th referendum? Yes of course. Are we compensated for taking this risk? We say yes. Not by a very large margin, but decently:
      - Spread versus Germany has reached a 30-month high: market pricing is already under stress.
      - The European Central Bank support is still operating and this prevents markets from collapsing like in 2011-2012; By the way, the ECB will be meeting on Dec. 8th, which is 4 days after the referendum.
      - Investors are already heavily underweighted on Italy
      - A “no” vote is already priced by the market, and there will be few surprises. Surprises – if any – will come afterwards and will be either positive or negative.

    These three positions explain the rough patch we’ve experienced over the past 10 days.

    It does not mean we will not change our opinion on our themes if facts change (Populist party elected in Italy? Very hawkish Fed?) but so far, our analyses drive us to keep our positions on. We are highly aware of our trying approach, which explains why they are not very large in terms of risk.

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    news-324 Tue, 29 Nov 2016 12:21:00 +0100 La Française Real Estate Managers (REM) acquires an office complex in Boulogne-Billancourt (92) /en/who-we-are/news/detail/la-francaise-real-estate-managers-rem-acquires-an-office-complex-in-boulogne-billancourt-92/ La Française REM has acquired an office property from Delta Immo, a dedicated fund for the MAIF, managed by Swiss Life REIM (France). The asset is located 50 route de la Reine in Boulogne-Billancourt, which is today the third largest business centre in the region after Paris and La Défense.

    The property’s two buildings provide a total lettable floor space of 6,414 sqm. The first building, which provides 4,655 sqm over seven storeys, is fully leased to Les Nouveaux Constructeurs and offers 78 parking spaces. The second one is leased to Esprit de Corp.

    The property is BREEAM “Very Good”, HQE (high environmental quality certification) and BBC certified..

    > Click here to read the full press release

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    news-321 Tue, 22 Nov 2016 09:28:39 +0100 La Française Real Estate Partners International acquires a high street retail asset in Lübeck /en/who-we-are/news/detail/la-francaise-real-estate-partners-international-acquires-a-high-street-retail-asset-in-luebeck/ La Française Real Estate Partners International (formerly La Françaie Forum Real Estate Partners) has acquired a high street retail asset in the Hanseatic city of Lübeck at Breite Straße 47-53, on behalf of two La Française collective real estate investment vehicles. The seller was TRIUVA Kapitalverwaltungsgesellschaft mbH (TRIUVA).

    Lübeck is located in the state of Schleswig-Holstein and has the largest tourist ferry port in all of Europe and a well-developed public transport network.

    Built in the 1950s and refurbished in 2002/2003, the four story property is comprised of three adjoining buildings and provides lettable floor space of 6,005 sqm for retail, residential and office use. The high street investment, that enjoys good accessibility by public transport, includes three retail units, occupied by well-known tenants including H&M, Hallhuber and Roland Schuhe, with more than 45 meters of shopfront. Residential and office spaces are available on the upper floors. 

    Jens Goettler, Managing Director-Germany, La Française Real Estate Partners International, said “We are thrilled to have purchased Breite Straße 47-53, our second acquisition in Lübeck. The high level of employment in Lübeck and the high purchasing power of the population are just two factors that make this an attractive investment location for our French retail funds.”

    La Française Real Estate Partners International was advised by Hogan Lovells and TA Europe. The broker was JLL. TRIUVA was advised by JONES DAY (legal).

    > To read the full press release, please click here

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    news-318 Mon, 21 Nov 2016 15:10:53 +0100 The US Dollar keeps moving up against the Euro and most developed currencies /en/who-we-are/news/detail/the-us-dollar-keeps-moving-up-against-the-euro-and-most-developed-currencies/ After a busy week – and that’s an understatement – this week investors kept focusing on the impacts of Trump’s election at the White House.

    As they sometimes do, assets classes have moved in their own way.

    •  Equities did not move that much and consolidated their rally. The risk/reward ratio looks unattractive to us, with rising rates eroding relative equity valuations.
    •  The selloff in US bonds that began last week (+37bps) carried on (+18bps). Markets deemed Janet Yellen’s speech hawkish, and that gave fuel to bonds vigilante
    •  Consequently, the dollar soared vs G10: +2.5% vs Euro and +3.6% vs Yen

    Macroeconomic data was colorless and anyway markets are not focused on them these days.

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    news-311 Thu, 17 Nov 2016 10:00:00 +0100 La Française Real Estate Partners strengthens its organisation to support its business development /en/who-we-are/news/detail/la-francaise-real-estate-partners-strengthens-its-organisation-to-support-its-business-development/ La Française Real Estate Partners strengthens its organisation with the arrival of Christophe Fleury as Senior Asset Manager. Christophe Fleury joined La Francaise Real Estate Partners as Senior Asset Manager, responsible for property asset management and valuation for French and foreign institutional clients.

    Christophe Fleury has more than twenty years' experience in asset management and investment, covering both office and retail spaces. In particular, he worked for eight years as Asset and Acquisition Manager for Bail Investissement, followed by ING Real Estate, before joining Redevco France in 2007 as Portfolio Director responsible for asset valuation.

    In the words of Patrice Genre, CEO at La Française Real Estate Partners: "His considerable experience will enable him to meet the expectations of institutional clients in terms of managing their property assets. Furthermore, his retail expertise will boost La Française Real Estate Partners’ business development in the retail sector."

    Christophe graduated from the business school, Institut Supérieur de Gestion, in Paris, France.

    > Click here to read the full press release

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    news-307 Mon, 14 Nov 2016 15:43:03 +0100 Among the worst week of recent history… /en/who-we-are/news/detail/among-the-worst-week-of-recent-history/ Trump is elected so markets obviously… rise! This market is really paradoxical : it fears an event for weeks only to cheer when it actually happens…

    Our understanding is that markets judge Trump this way: he will increase government spending through infrastructure projects and cut public spending (Obamacare) while cutting taxes. All of this is good for growth even though deficits rise somehow – it is not really bothering. This scenario is positive for growth and for inflation as well, which is why we observe a very sharp move over the last two days. The move can as well be explained by the very cautious stance held by investors before the event.

    This market analysis may not still be up-to-date next week and we have to remain cautious. Protectionism could come back rapidly and amend this analysis.

    In short, bouts of volatility are to be expected since overall, nobody knows what will happen.

    Let us take a step back and look at things with cold blood:

    • Markets are still positioned with a bearish stance, key technical feature
    • Questions about Trump’s policy questions won’t be answered for weeks. At best we will have some speeches, but nothing clear.
    • Markets do not like vacuum: when there is no news, it continues to move with other information: macro, micro data etc... This is what occurred few month back during the Brexit vote.
    • This election will probably moderate inflows into Trump specific assets : Mexico first, and overall a part of Emerging markets

    We are not worried about equities as long as rates do not rise too much: macro is positive, micro as well, investors are underweight equities. Neither do we think rates can continue to rise for a long time: US growth has trended down over the past few years, and with the exception of the Q3 GDP figure, 2016 is on the soft side. Markets can overshoot, but it is not our scenario, given that investors are already positioned short duration.

    Lastly, dollar moves look pretty surprising to us. At first sight, we think Trump’s policy should weaken the dollar, but it rallies, even against G3. 

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-306 Thu, 22 Oct 2015 14:47:00 +0200 Three awards for La Française at this year's "Forum de la Gestion d'Actifs", organized by l'Agefi /en/who-we-are/news/detail/three-awards-for-la-francaise-at-this-years-forum-de-la-gestion-dactifs-organized-by-lagefi/ Pascale Auclair walked away with two awards : "best female manager of the year" and first runner-up for "best investments director". La Française was voted first runner-up for "best assez management firm of the year".

    Over 400 professionnels and their clients attended the Asset Management Forum, held on October 9, 2015.

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    news-305 Fri, 16 Sep 2016 14:35:00 +0200 La Française a des ID n°5 /en/who-we-are/news/detail/la-francaise-a-des-id-n5/ We present to you quartely a focus on a "Sustainable Building" in accordance to Environmental, Social en Society requirement of our major tenants. This month look at our "ZAC Ravezies" efficient and sustainable offices :

    • Welcoming
    • Efficient
    • Dynamic

    With also the Ravezie's Technical Manager in the Corporate Property Asset Management Department of La Française REM Interviews.

    > To download La Française a des ID n°5, please click here

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    news-274 Mon, 07 Nov 2016 21:43:45 +0100 US Election : polls results remain highly volatile... /en/who-we-are/news/detail/us-election-polls-results-remain-highly-volatile/ ...leading to market stress. Overall macro data was good during this eventful week: manufacturing indexes in line in the US, on a solid trend in China, same in Europe. Unemployment was in line in the US with rising wage growth and US GDP was above expectations. On the micro front, earnings season keeps it trend : it is a positive one, earnings beat more than they usually do.

    But the key topic is clearly not there: markets are only moving in tandem with polls and newsflows related to US elections. Trump is getting stronger in polls, the probability to see him in the White House has gone (if we trust polls institutes) from 13% at the end of October to 33% today, and markets are under renewed pressure: equities are down, dollar is weaker vs G3, peripheral spreads are widening, etc. however moves are not violent yet, markets are falling slowly with – rare thing to note – 8 consecutive negative trading days in S&P 500.In this kind of environment, like Brexit or some other political event, we must analyze things with cold blood:

    • Markets are unable to price political risk properly
    • During binary events, adjustments are made very rapidly
    • Markets reaction over the next 2-3 days is not always coherent with what happens over the next weeks
    • Lastly, we must take into account market technical at the time of the event.

    So, what does this analysis suggests?1. First, investors are today positioned lightly in terms of risk taking. US elections are top of the mind for a long time and everyone remembers Brexit acutely. So everyone is prepared, with light equity exposures, etc. For illustrative purposes, please find below a US risk indicator that mirrors the other indicators we look at (RSI close to 30, very low equity ownership, negative flow in equities, etc.)2. Then, macro and micro backdrop is getting better, which is in first sight positive for risky assets3. Markets will probably slump if Trump is elected, because this is the way they operate, previsions are self-fulfilling and this would provide great entry pointsSo the idea is to go into the event with a portfolio light enough to take the opportunity to buy on the cheap in case Trump gets into the White House, but still with some risk on because we feel compensated for it today.

    We have begun to move our books to take this scenario into account in switching our futures to options in delta equivalent. This enables to reduce significantly losses if markets collapse while enduring modest loss if Clinton gets elected. Apart from this move, we have not changed the portfolio radically: we have just take some profits on short dollar trades vs Euro and Yen that had done well.One thing that seems very clear to us is that we will increase risk post elections.

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    news-273 Mon, 07 Nov 2016 17:32:01 +0100 La Française acquires 250 cottages and a commercial building in Allgäu Center Parcs in Germany /en/who-we-are/news/detail/la-francaise-acquires-250-cottages-and-a-commercial-building-in-allgaeu-center-parcs-in-germany/ La Française acquired, on behalf of a number of French institutional investors, an extension to the Allgäu Center Parcs holiday village in Baden Württemberg, Germany, from the Pierre & Vacances Center Parcs Group. The development is located on a green field site in the city of Leutkirch in Allgäu. It will comprise 250 high-quality holiday cottages offering a surface area of 25,000 m² and a commercial building with spa, restaurants, shops and play areas of around 2,500 m².

    This project forms part of a larger development in the Allgäu Center Parc, which involves building a total of 1,000 cottages. The full complex is scheduled for delivery by 31 December 2018.

    The buyer has signed a development agreement with the German real estate development subsidiary of Pierre & Vacances Center Parcs Group. The cottages and commercial building will be let by the same group's German operating subsidiary under two separate 15-year commercial leases. Asset management will be handled by La Française Real Estate Partners, La Française’s specialist entity for institutional investors.

    > Click here to read the full press release

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    news-270 Tue, 05 Jul 2016 16:53:00 +0200 Europe or the instinct to survive : a call to europeans /en/who-we-are/news/detail/europe-or-the-instinct-to-survive-a-call-to-europeans/ The failure of soft power: This had to happen, said Hubert Védrine: despite its spectacular successes, it was inevitable that reality would catch up to this idealistic, and peremptory and somewhat artificial, construct. Its internal and external fragilities run deep.

    Internally, the driving will of most elites, right or left, has kept the project on track for decades, in the “interest of the people” but without the people having any input aside from sporadic consultations. As a result, the construction of Europe has been stirring up increasing passive or active resistance for more than twenty years. Referendums scraped through or were lost, while abstention rates to the European parliament averaged 60%. The disconnect is obvious.

    However, the paternalist authoritarian line of the Europhiles remained unshakeable. Europe can only move forward - historical destiny, progress, keep moving or die. The answer was always “more Europe”, have the courage to “take a federal leap”, overcome “national egotism” (whatever became of national interests?). The big sin was to “turn in on yourself”, hence the constant and confident expansion of Schengen with no real control at its external borders.

    Laws and treaties rejected by referendums were pushed through parliaments, including the constitution/Lisbon treaty and people were sent back to vote again until they got the right answer, undermining faith in democracy.

    > To read more, please click here.

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    news-268 Thu, 31 Mar 2016 16:45:00 +0200 NewAlpha completes its first Fintech Investment with french start-up Heoh /en/who-we-are/news/detail/newalpha-completes-its-first-fintech-investment-with-french-start-up-heoh/ NewAlpha is pleased to announce the first investment by this fund in a €2.3 million capital increase in Heoh to accelerate the development of its innovative technology platform for donations at payment terminals. NewAlpha Asset Management (“NewAlpha”), the Paris-based global emerging manager acceleration specialist, launched its first dedicated FinTech Venture Capital fund at end-November 2015.

    A pioneer in the collaborative economy, Heoh plans to raise €60 million for NGOs in the next 5 years while offering merchants and payments companies an innovative charitable service that complements existing solutions.

    Ghislain d’Alançon, specialist in means of payment, and Antoine Vaccaro, specialist in philanthropy, set up Heoh in 2012 to offer consumers a simple direct way to finance charitable projects through a new fund-raising circuit on electronic payment terminals and bank cards. In 2013, Heoh was labeled a “Charity Finance Innovator” by International competitiveness labeller Finance Innovation.

    To underpin its future development Heoh has struck major partnerships with leading companies in the payment industry (Ingenico Group, AVEO Group, banks), the IT sector (IBM, Microsoft, Les Comptoirs, Astek, among others) and with top NGOs.

    Its aims are:

    • to increase the financing capacity of charities
    • to reduce the cost of collecting donations
    • to allow means of payment companies, merchants and consumer-givers a common innovative tool for promoting the charitable economy

    Heoh has raised €3.4 million in the 12 last months to finance their technological innovation and operations and is now marketing their GoodTransaction solution.

    This high-value and exportable offering takes place in a propitious context for innovating finance. NGO financing is in a critical situation (less government support, economic stagnation, etc.) while social, cultural, humanitarian, ecological and medical needs are rising. At the same time, new aspirations to social responsibility are having a considerable impact on consumption and driving new demands for brands. The projected rise in the number of card payments is another driver for the development of consumer-giving.

    “The scope of application and developmental possibilities of the technology are massive and impact all methods of payment, billing and management on behalf of third parties. The quality of Heoh's management, pilots run in 2015, and interest among our investors in the value added by Heoh to their own businesses looks highly promising”, said Lior Derhy, Managing Director responsible for Private Equity at NewAlpha.

    Ghislain d’Alançon, President and founder of Heoh, added “NewAlpha's name recognition and the quality of its ecosystem, including banks and insurance companies, and the partnerships already in place with the team, will reinforce our capacity and ambition to develop our solutions on a grand scale while improving the quality of the customer experience.”

    Subscribed by institutional investors, the fund managed by NewAlpha aims to build and grow a diversified portfolio of promising innovative projects in the different sectors of FinTech and InsurTech. It is also intended to keep an active watch on developments in financial services (innovative initiatives, new practices) and the technological changes that impact the banking, insurance and investment management industries.

    “The investment in Heoh, an innovative player in payment systems, is a perfect fit with the socially responsible profile that NewAlpha seeks to promote in the financial industry.” concluded Antoine Rolland, President of NewAlpha.

    > Click here to read the full press release

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    news-267 Thu, 25 Feb 2016 16:41:00 +0100 Newalpha announces acceleration deal with Germany-base Prime Capital /en/who-we-are/news/detail/newalpha-announces-acceleration-deal-with-germany-base-prime-capital/ NewAlpha Asset Management (“NewAlpha”), the Paris-based global emerging manager acceleration specialist, is pleased to announce a seeding agreement with Prime Capital AG (“Prime Capital”). Founded in 2006, Prime Capital is an independent financial services provider and asset management firm focusing on institutional clients. The company specializes in Alternative Investments, in particular Absolute Return, Infrastructure and Private Debt. Prime Capital currently employs over 50 professionals, based in Frankfurt, London and Luxembourg and has around € 5.4bn in Assets under Management.

    NewAlpha will invest a significant amount of capital in Prime Capital’s Gateway Target Beta UCITS Fund, via a dedicated fund, structured and managed on behalf of large European institutional investors that are committed to increasing their strategic allocation to innovative investment strategies. Post-investment, the fund will have close to €40 million in AuM, enabling it to reach an important threshold.

    The investment objective of the Gateway Target Beta UCITS Fund is to provide consistent positive returns by pursuing an investment strategy, which seeks to provide returns similar to those of certain diversified hedge fund indices, which invest in or have exposure to global equity and credit markets.

    > Click here to read the full press release

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    news-266 Mon, 06 Jun 2016 16:01:00 +0200 At its lowest level since 2010... Immediate reaction of stressed markets /en/who-we-are/news/detail/at-its-lowest-level-since-2010-immediate-reaction-of-stressed-markets/ This week’s figure is quite easy to find: 38 000 job creations in May in the US. This is significantly below market expectations and at the lowest level since 2010. Market reaction is very logical:
  • Very strong rally in fixed income markets (US, but Euro as well)
  • Slump in the Dollar (especially vs Euro and Yen)
  • And a negative impact on equities (mostly Euro and Japanese markets)
  • March and April job creations have been revised downwards as well. Unemployment rate goes down to 4.7% but it is merely the result of a reduction in the participation rate. The only positive figure is wage growth, stable at 2.5%. There are specific elements to be taken into account (including large strikes at Verizon that artificially lowers the figure by approximately 40 000 jobs) but the global outcome is definitely disappointing.

    We expected a slowdown in job creations because of the heavy drop in the unemployment rate which reflects that economy is close to full employment. However, this figure is way below equilibrium level (job creations needed to keep a steady unemployment rate) estimated at 100k.

    Other events this week:

    • Brexit fears are back thanks to poor polls
    • ECB with very little new information
    • ISM manufacturing was decent but ISM Services was a clear disappointment in the US
    • Chinese data was in line

    Notable events for next week:

    • Janet Yellen – Fed chairman - will be on the wires on Monday. Her speech on monetary policy will be key for understanding Fed future moves in the coming months
    • Many Chinese figures (trade balance, FX reserves, new loans)
    • And obviously and as always Brexit polls

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-265 Mon, 04 Jul 2016 15:47:00 +0200 Brexit: fixed-income markets push their anticipations back, we disagree /en/who-we-are/news/detail/brexit-fixed-income-markets-push-their-anticipations-back-we-disagree/ Brexit stress did not last for long, to say the least.

    After 2 days of rout, equity markets soared with US indices now back to their highs, UK indices are at their 2016 peak level (with a little help from GBP collapse) and Euro area equities recovered half of their losses.

    The impact is much stronger on fixed income assets with a collapse in core bond yields, but also for EM and even peripheral yields – even though many were expecting these bonds to suffer in case of Brexit. Obviously, central banks are pushing yields lower, but price action shows clearly investors’ appetence for carry is stronger every day.

    Our opinion on Brexit has not moved since last week: it is going to be a lengthy story, and we are not 100% sure to see UK exiting European Union in the end. Markets will carry on moving with central banks and macroeconomic statistics.

    On the one hand, US equities are back to their highs, implying the Brexit impact on global and US GDP will be small, and on the other hand, US fixed-income markets see the next Fed hike not before 2018.

    Current atmosphere is still favorable to EM assets, periphery bonds and carry assets in general. 

    However, with these days’ bounce, equity indices upside potential seems limited to us. Euro area equities and Euro banks are lagging and are cheap, but the underlying fundamental dynamic is not great with lower earnings and flatter yield curves in Eurozone. 

    Lastly, the European Central Bank will probably amend its Quantitative Easing rules in the coming months. Indeed, with the very strong rally over the last few days, and considering its current rules, it will be prevented to buy German bonds as early as August. There are several possibilities for the ECB: either it sets the limit from 33% to 50% percentage ownership of an issue. Or they can  expand to non CAC bonds, or amend the capital key.

    The two former options will push forward the deadline by a few more months, so there is a decent chance markets will speculate in the coming months about a change in the capital key. This would be very favorable for peripheral spreads.

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-264 Mon, 11 Jul 2016 15:45:00 +0200 A positive surprise and a reassuring figure for investors after a major disappointment in may /en/who-we-are/news/detail/a-positive-surprise-and-a-reassuring-figure-for-investors-after-a-major-disappointment-in-may/ Markets are clearly balanced!

    On the one hand, we see potential systemic risks:

    Europeans banks (Italian, but also German banks) are facing serious issues with non-performing loan that would need to be recapitalized. The problem is that European rules do not allow it anymore and that bond holders have to be impacted first. This could potentially lead to a revival of the 2011-2012 banking crisis and European authorities cannot really afford it. This is a political game between the Italian Prime Minister Matteo Renzi and the German Chancellor Angela Merkel. We should see the conclusion to this in the course of July. A worst case scenario is unlikely because the risk is too high, but volatility will remain strong and timing is unclear.

    We have seen the first consequence of the Brexit this week with property funds gating investors in the british following massive redemption ; and obviously, people are already thinking about what happened in 2007-2008… Could there be some contagion? It is possible even though it is not really surprising to observe real estate funds with low liquidity. Not our base case, but possible.

    On the other hand, macroeconomic data continue to surprise:

    ISM Manufacturing? Very good.

    ISM non-Manufacturing? Very good. 

    Eurozone PMI ? Solid.

    Chinese data ? Reassuring, no hard landing.

    Jobs report in the US today (highly anticipated after the disappointing figure last month)? A lot higher than market expectations (even if revisions were negative and wages inflation below consensus).

    To sum it up, everything is fine on the macroeconomic side, as least until the Brexit.

    Markets appears to be a bit lost, volatile and don’t know how to read central banks. One year ago, with job report figures as we had today, US rates would have been up 10bps at least. This year, they are almost unchanged.

    Looking ahead, a few events could have a significant impact:

    Start of the earnings season next week in the US 

    Central bank meetings at the end of the month

    European discussions about banking issues but also on a potential QE modification 

    Brexit, again, with elections coming (Theresa May seems to be leading) and maybe other consequences on the financial markets

    Finally, we note that the Chinese currency has been depreciating slowly over the last weeks. The magnitude of the move is similar to what we saw in August last year and January this year, but in a more linear way. Markets are not worried, we haven’t seen any capital outflows, but still…

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-263 Mon, 18 Jul 2016 15:44:00 +0200 A steady increase since 2015: will it be enough to convince the FED to raise rates? /en/who-we-are/news/detail/a-steady-increase-since-2015-will-it-be-enough-to-convince-the-fed-to-raise-rates/ Last week, markets were undecided : systemic risk on one side, great macroeconomic news on the other side. The bulls have won!

    Last week, markets were undecided : systemic risk on one side, great macroeconomic news on the other side. The bulls have won!

    Markets had indeed all good reasons to make that choice last week, as least on a short term basis:

    • Italian banks issues have been fading, especially regarding the Monte Dei Paschi case. The Atalante fund should be used in the coming days / weeks to buy non performing loans and it should remove some pressure from the banking sector. An “Atalante II” fund is also under discussion to keep on solving this problem on a broader basis. Well, “mutualizing the problem” might be more appropriate than “solving” as those NPL would be bought by other Italian Banks at a price that won’t allow them to hope for any return of investment before many years. But still, pressure should be lower in the coming days, and that’s enough for the time being.
    • Earnings season in the US has begun in a very classical way: 65% above consensus, 15% neutral and 20% below. If you aggregate the results, it is 0.17% above consensus. Most of the time, markets like earnings seasons and this quarter is no exception. 
    • Macro data continue to be good with retail sales above expectations in the US and Chinese data (new loans, industrial production, GDP..) is also above consensus.
    • Rumors of “Helicopter money” have been increasing in Japan after the bigger than expected victory of Shinzo Abe last week end, and after the visit from the American economist Ben Bernanke last week-end. He is not named “Helicopter ben” for nothing!
    • Inflation in Eurozone was in line with expectations but Inflation in the US was a bit higher than expected, putting a bit of pressure on US rates.

    The result was of course pretty good for equity markets and pretty bad for core fixed income markets. Yen was an outlier, losing more than 5% vs USD after Japanese rumors.

    We think that this “risk on” move can continue next week: we are still at the beginning of the earnings season in the US, the ECB in only at the end of next week and banking news could be good in the coming days. But that being said, being euphoric might be a bit risky right now as the situation of European banks won’t be solved easily.

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-262 Tue, 09 Aug 2016 15:42:00 +0200 The US employment report, above expectations, leaves the door open for a rate hike this year /en/who-we-are/news/detail/the-us-employment-report-above-expectations-leaves-the-door-open-for-a-rate-hike-this-year/ Key events this week were the meeting of the Bank of England and the release of the US July employment report.

    Key events this week were the meeting of the Bank of England and the release of the US July employment report.Yesterday, the Bank of England has announced a strong stimulus package including a 25bp rate cut, extended Quantitative Easing program and corporate bonds purchase. Moreover, the British institution is ready to act again if needed and a further rate cut before the end of the year is likely. With this stimulus, the Bank of England wants to support the UK economy after the Brexit shock. This package was bigger than expected and the market reaction was logical:

    • Sterling weakened against its major peers
    • 10Y British bonds (Gilts) extended decline
    • Stocks rose across the world

    In the US, the employment report surprised by its robustness. Payrolls climbed by 225K last month, exceeding all forecasts. The jobless rate held at 4.9 percent. Wage growth begins to show some signs of acceleration, with average hourly earnings rising a more-than-forecast 0.3 percent from a month earlier. After the weak GDP report of last week, it’s clearly a positive signal. The labor market is firming up as wages are starting to pick up. Short term yields increased today. We continue to think that the market is too pessimistic if the look at the pricing for the next rate hike before the end of 2016. We remain short on the US 2Y yield.

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-261 Tue, 16 Aug 2016 15:40:00 +0200 Disappointed by weak macro data, markets remain uncertain about a rate hike /en/who-we-are/news/detail/disappointed-by-weak-macro-data-markets-remain-uncertain-about-a-rate-hike/ Global market sentiment was positive this week. All major equity indices are going up: US equities rallied to new record highs and European markets are back to pre-Brexit level.

    China’s data took the center stage this week with the July activity data broadly disappointing, all below expectations: 

    • Industrial production growth slowed and came in at 6% year on year, down from 6.2% in June,
    • Domestic demand and investment were weak as well, 
    • Trade data (in USD) was weaker than expected.

    China’s activity remained subdued. Growth momentum weakened slightly as the economy entered Q3. However, there is no surprise that China growth is slowing, it's more a matter of how quickly. That being said, the monetary policy is likely to remain accommodative for the coming months.In the US, all eyes were on consumers: 

    • Retail sales were unchanged vs +0.4% expected. Disappointing investors clearly
    • Moreover, producer prices drop -0.4%, that is to say the biggest drop in a year.

    After these weak data, core yields drop sharply and dollar weakened against all of its G-10 peers as there is no sign of inflationary pressure at this stage. Markets have been clearly disappointed. Odds of a 2016 Fed rate hike drop to 40 percent.

    Our positioning remained the same this week. We just began to take some profits on European equities.

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-260 Mon, 22 Aug 2016 15:39:00 +0200 With +3.8% for the crude, increase in oil prices is speeding up /en/who-we-are/news/detail/with-38-for-the-crude-increase-in-oil-prices-is-speeding-up/ This week saw very light volumes on financial markets.

    Equity indices were in the red, Eurostoxx -2.9% and core bond yields are slightly higher.

    In terms of macroeconomic data, we had US and Euro Zone inflation figures which were both slightly below expectations (respectively +0.8 and +0.2% YoY).

    Australia published its employment report: modest drop in the unemployment rate but when we look underneath things are not so rosy: full time jobs are destroyed while part time jobs are created. On top of that, wage growth is nowhere to be found.  

    Markets are waiting for the Jackson Hole meeting next week. We will listen very carefully to Janet Yellen: markets price a 50% probability of a rate hike this year. We still think this is too low in a context of decent US macroeconomic data and diminishing external risks. 

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    news-259 Wed, 31 Aug 2016 15:38:00 +0200 It may appear low but the GDP reaches +2.4% when removing the inventory effect /en/who-we-are/news/detail/it-may-appear-low-but-the-gdp-reaches-24-when-removing-the-inventory-effect/ For many of us holidays are over, but not for financial markets.

    Summer has been quiet, very quiet, even sleepy after markets recovered from their post Brexit slump. Crude oil is back to its 2016 highest level, and income type assets are increasingly popular. All have tightened with investors desperately looking for yield.Some economic data came up this week: Euro PMI was decent, solid US real estate and durable goods orders and a slightly weaker US Q2 GDP revision (10bps below consensus). Janet Yellen, the Chairman of the Fed, is currently speaking and seems slightly more hawkish this time.

    • What is the macro backdrop today?
    • Decent macroeconomic data
    • Nobody mentions Brexit anymore (and so far UK data is far from being ugly)
    • Central banks are all accommodative
    • Bond yields are very low
    • Everyone is looking for yield with strong inflows into HY / EM and the like
    • US and EM equities rally
    • Volatility is low
    • Liquidity is tight

    This backdrop can last longer: as long as inflation signs do not show up, there is little chance central banks move their stance, and therefore yield grab is still strong.  What events should we keep in mind until the end of 2016?

    • Central banks: ECB starts on sept 8th, with potential information about QE after march 2017. Fed and BoJ are due for 09/21.
    • Politics: US elections in November, Italian referendum in October/November.
    • Inflation: We are expecting positive base effects for end of 2016, real rates are already very low, which should push yields higher.
    • Anything that could awaken markets from its lethargy. Many investors are positioned the same way, on same assets with no volatility and tight liquidity. All systematic models have high risk budget. In short, if there is a small pickup in volatility, all is set to have a self-sustained selloff.

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-258 Mon, 12 Sep 2016 15:36:00 +0200 At its lowest since 2010. Will this figure prevent a FED rate hike? /en/who-we-are/news/detail/at-its-lowest-since-2010-will-this-figure-prevent-a-fed-rate-hike/ This week has been much more interesting and volatile than previous ones on financial markets

    It begun with US ISM non-manufacturing report which came out way below expectations at 51.4 vs 54.9, lowest since 2010. Coherently, after a poor manufacturing ISM and a weak S1 GDP, Fed hikes were revised downward and global rates moved lower. The most awaited event of the week happened on Thursday with the European Central Bank (ECB) meeting. Markets were expecting: 

    • At best QE extension after march 2017 with technical tweaks and possibly a rate cut
    • At least a technical tweak coupled with some sort of QE extension preannouncement

    They had nothing, Mr Draghi (ECB’s president) repeated previous meeting’s messages and gave no hint about QE extension. He was as well less worried about inflation and growth, and mentioned the economic adjustment was under progress. The latter is being helped by his easy policy which is working well to his eyes.What was the outcome? Since then, markets begin to think that ECB could be less accommodative than expected. Consequently, bond yields are up 15 to 20bps, equities are on the soft side – S&P is down 1% today, worst day since Brexit. We have written for many weeks that we think markets are potentially unsafe: 

    • All systematic models are long risk, long commodities, long fixed income and long US equities
    • Volatility is very low, and markets is positioned heavy net short volatility
    • Cross assets correlations are on a gentle rise
    • Fixed income assets are very expensive (true, it’s been a while…)
    • US financial firms profits are dwindling, and risky assets are pushed higher by the drop in bond yields

    In short, conditions seem to be met for a correction, with bond yields on the rise, equities going down, volatility higher and possibly systematic models having to deliver, which could amplify market stress. Things might not happen this way, we could have dovish lines from ECB members next week that would calm things down. However, to us a negative scenario is the most probable option.  Oddly enough, Forex is behaving in the opposite direction from our expectations. Fed is on hold and ECB less accommodative than expected, so logically EUR/USD should be higher. Same for the Yen. 

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-257 Mon, 19 Sep 2016 15:31:00 +0200 No consumer confidence decrease (yet), UK economy is showing better resilience than expected /en/who-we-are/news/detail/no-consumer-confidence-decrease-yet-uk-economy-is-showing-better-resilience-than-expected/ The small market stress we witnessed at the end of last week remains live, even though risks drivers are not very clear to us. Less accommodative ECB and a potential Fed hike ignited the selloff initially.

    Markets seem to be sort of lost to which direction to head for: 

    • Is it business as usual : with dovish central banks, let’s buy everything, high yield assets first
    • Or should we delever a little, wait for Fed and Bank of Japan combo on 9/21, considering some assets are beginning to be very expansive
    • Should we stay in the EM party, which has already gone up a lot and had significant 2016 inflows, but could be at risk in case of rising US yields?
    • How about Eurozone banks? Upside potential seems elevated if rates move higher, but in the meantime ROE and profits looks suspicious

    In short, many questions, and conflicting signals, which explains why markets spent the week sideways This week we had: 

    • Disappointing retail sales in the US, second tier business indicators rather good and inflation above expectations
    • UK macro data still looking good (employment and retail sales). Bank of England met and kept its policy unchanged. They noted the economy is behaving slightly better than expected; they keep a dovish stance howeve 
    • Chinese data was good (industrial production, retail sales)

    This market looks still perilous generally speaking, with heavy positioning, richly valued assets and central banks coming to the end game.

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-256 Tue, 27 Sep 2016 15:29:00 +0200 The FED seems to be preparing markets for a december hike… if nothing happens in-between /en/who-we-are/news/detail/the-fed-seems-to-be-preparing-markets-for-a-december-hike-if-nothing-happens-in-between/ Don’t fight the Fed, don’t fight the Fed…

    Here is what we should repeat day after day, rather than trying to face central banks… things are not so complicated, you just need to buy more or less any asset that bares little idiosyncratic risk, preferably with an income bias and it is going high and higher. We had Bank of Japan (BoJ) and Federal Reserve (Fed) meetings this week, here is our take: 

    • In Japan, the BoJ didn’t announce anything new, apart from moving from QE to QQE, adding a qualitative factor to its purchasing program with the objective to steepen the yield curve. To our eyes, the central bank acknowledges it has few options and the result is flattening yield curves
    • The Fed didn’t hike, which is not surprising given market pricing was very low, which historically has prevented the American institution from moving. Language is trying to be hawkish on the margin and tries to prepare investors for a December hike - provided nothing bad happens until then. But in the meantime they revised down their GDP and neutral long term rate downwards, so markets took it dovishely. Consequently, equities are up are yields are down.

    Markets were hesitating after the ECB; the trend was this Thursday much clearer: with a dovish Fed, buy income, included high dividend equities

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-255 Mon, 03 Oct 2016 15:26:00 +0200 Strong rebound after a preliminary agreement on lowering production of the OPEP… to be continued ! /en/who-we-are/news/detail/strong-rebound-after-a-preliminary-agreement-on-lowering-production-of-the-opep-to-be-continued/ What a busy week ! This week was marked by growing pressure on the Deutsche Bank, leading to pressure on the German equity markets.

    “The DB story” has been going on for months and there was some new developments in the latest days:

    • The US Department of Justice announced a USD 14bn fine leading DB equity price down and all correlated assets moved accordingly (Euro banks slump, bonds get richer, etc.)
    • Then DB management announced the fine will be reduced significantly : DB equity price bounced back, along with other related assets
    •  And Thursday night, latest episode, some major hedge funds were said to stop trading with DB and moving out cash from their prime brokerage account driving equity down again, etc…

    Markets seem to recover this afternoon, but we will probably experience new rounds of stress in the coming weeks.

    DB complies however with regulatory ratios and has some significant cash buffer, so where is the problem coming from?

    The problem comes from the very low market capitalization (EUR 14bn as of today) and the climate of distrust that prevents them to refinance through fixed income markets.

    Hence, at the slightest problem, market anticipates a capital increase and shareholder dilution, which provokes equity price meltdown, which makes recapitalization even harder, and equity price keeps going south.

    In the end, the issue is obviously about trust: when market deems DB is robust enough to cope this episode, all will get better. However, if other financial institutions begin to doubt the bank’s survivorship, things can go very fast.

    Lastly, there is of course a political element to this. German leaders have been fighting for European countries – Italy amongst others – to stop bailing out troubled banks with public money. This has created tensions between the countries' leaders during the summer, and it is therefore very difficult for them to support DB publicly.

     

    Other major issue, OPEC meeting reportedly has reached a consensus on production cut in November. This could reduce production by 500k barrel per day. It remains to be seen whether this cut is actually implemented, but for the moment crude is up, back to its USD 48-49 high.

     

    Elsewhere, this week hosted the first debate between Trump and Clinton. As usual, markets have a rough time pricing  political events and there is always some volatility. Clinton is seen as the debate winner.

     

    Apart from this, macro-economic data is decent:

    • Eurozone: IFO was very good and inflation in line, without any sign of acceleration
    • US: disappointing real estate data, durable goods orders were in line, consumer confidence was great, as were Chicago and Michigan PMI

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-254 Mon, 10 Oct 2016 15:24:00 +0200 So far, no explanation on this huge move; one sure thing though: the hard Brexit scenario is growing on operators /en/who-we-are/news/detail/so-far-no-explanation-on-this-huge-move-one-sure-thing-though-the-hard-brexit-scenario-is-growing/ This week was somewhat more volatile, even very volatile for those invested in British assets…

    Tuesday, an unofficial ECB leak went on the wires: ECB tapering would be €10bn a month. “Tapering you said? What tapering?” Here is what investors probably wondered. This rumor has been denied since then, explained, and all of this is probably orchestrated by the ECB to prepare markets and gauge their reaction. Anyway, we had a volatile episode on fixed income markets especially.

    The day after, ISM non-manufacturing PMI went out very strong after a decent Manufacturing PMI on Monday. This erased previous month’s releases which were very disappointing and probably led the Fed not to hike.

    In the meantime, one of Carney’s lieutenants at the BoE suggests that the BoE might have overestimated Brexit fallout, and that the economy could be faring better than expected. This is the kind of news we were expecting for our short Gilt positions to deliver.What’s more, today, a huge move on the GBP which lost -6% before recovering +4%. So far, no explanation on this move (digital options that got exercised in a low volume?) but one sure thing is that markets are pushing hard on the United Kingdom:

    • Current account deficit is huge
    • Following Teresa May’s speech, a Hard Brexit is a serious threat, and the impact on the British economy would be large
    • Therefore investors are selling GBP, which pushes inflation forecasts up, with a negative impact on yields
    • In the end, this could force the central bank to revise its dovish stance in order to protect its currency and fight against unwanted inflation

    Well, this is this week’s scenario, that can be reversed in a minute if T. May and A. Merkel become best friends.Lastly, US Non-Fram Payrolls were released on Friday, roughly in line with expectations, which confirms December as a likely date for the next Fed hike.Many trades this week:

    • We increased our Euro banks exposure early on this week and took profits on Friday
    • We reduced our short duration stance, mostly on gilts but on bunds as well. The fund is still short core bonds, but not short duration as a whole. We will try not to give back all of our gains if yields collapse again…
    • We bought JPY vs USD after a 3% rebound
    • We increased the size of our long US 30Y vs German 30Y

    Worth mentioning: fixed income spreads create volatility within the fund because EUR and USD assets do not close at the same time. When volatility picks up, this can have some impact on daily returns.

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-253 Mon, 27 Jun 2016 15:21:00 +0200 Markets reacted strongly to Brexit, with no systemic crisis from our views for now /en/who-we-are/news/detail/markets-reacted-strongly-to-brexit-with-no-systemic-crisis-from-our-views-for-now/ Britons have finally decided to exit the European Union. Given that bookmakers were still largely pricing that the UK would remain in the UE the previous night, this Friday has logically been a very ugly day on financial markets. At the opening, here was what the situation looked like:

    • -12% Euro Area equities
    • -20% Euro Area banks
    • -5% S&P 500 (limit down on the day)
    • -9% Japanese equities and EM
    • -30bps core fixed income bond yields

    In a nutshell, this was a bloodbath and the worst single day in Euro equity markets.

    What do we think about Brexit implications and how are we going to manage the upcoming days and weeks?

    • Nobody has a clear view about macro implications over the medium and long term. It will depend on various political decisions that we do not control. That being said, UK exiting EU should have a marginal impact on global growth and limited on European growth. Some studies even consider it could have a positive impact on the Euro Area.
    • Policy makers and Central banks are on our side and everyone wants consequences to be as minimal as possible. Angela Merkel’s speech today heads in this direction and many central banks are ready to intervene.
    • Brexit is not a surprise for anybody. All asset managers had nine months to prepare, modify their allocation, perform stress tests, etc. So obviously, the outcome is a surprise, but the environment was ready to absorb this event.
    • The consequence is that investors have today a low exposure to equities and risky assets as a whole, with high cash buffers in their books.
    • In our view, the risk that Brexit morphs into a systemic crisis is low. We are not in a Lehman Brothers type of context.

    However, it is likely that markets will be volatile in the coming days and weeks. We will keep a very liquid portfolio and a constrained risk budget. Our risk will evolve rapidly depending on upcoming news/announcements.

    But the way, we think, is risk taking. Apart from Brexit, the bulk of our indicators is today very well positioned.

    • Equity flows have been negative for the last three months
    • Positioning is at its lowest since 2011
    • Stress is huge
    • Brexit risk has been at the core of all discussions for months
    • And the Euro area economy is getting better if we take apart negative impact from Brexit

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-252 Mon, 17 Oct 2016 15:20:00 +0200 66% probability of FED rate hike in december, a jump since last month (52% in september) /en/who-we-are/news/detail/66-probability-of-fed-rate-hike-in-december-a-jump-since-last-month-52-in-september/ We had a heavy news flow over the two previous weeks, and it was much less the case this week.

    We had a heavy news flow over the two previous weeks, and it was much less the case this week. Yields are on an uptrend but moves are not that large this week, apart from the Gilt market. Equities do not move much as well and stay in a tight range. FX markets are somewhat more volatile, however without outstanding moves.

    What was key this week?

    • Oil continues to trend up gently
    • Pressure on Deutsche Bank dwindles
    • Earnings season has started in the US with an Alcoa disappointment, but US banks first announcements were above expectations on Friday. We will probably get a traditional season: above expectations (EPS previsions have been revised downwards over the past few weeks). This should support equity markets over the next fortnight.
    • FOMC Minutes were a nonevent. They confirm they will hike in December provided no accident happens, but it is already priced in by fixed income markets (66% probability of a hike)
    • The dollar is stronger than most currencies, which is not very positive for EM this week
    • Trump continues to suffer in polls

    This week we have ECB on Thursday. Market do not expect anything major but hope to get some indications about what ECB could announce in December. We do not see a potential for a large deception, but we could have some clarity about the potential tapering that shook up markets two weeks ago. This could be dovish at the margin.

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-251 Mon, 20 Jun 2016 15:18:00 +0200 Market expectations of a 2016 US rate /en/who-we-are/news/detail/market-expectations-of-a-2016-us-rate/ This week’s news flow has been busy with Central banks’ meetings: Fed, Bank of Japan, Bank of England. All three institutions kept their monetary policy unchanged.
  • Janet Yellen, Fed’s Chairman, had once again a very dovish stance, repeating “we don’t know” on numerous topics including US macroeconomic outlooks. Not much to make rate hike expectations go up! Markets now think there is a 38% probability of a hike by the end of 2016, compared to 75% at the beginning of the month. On top of that, Fed’s neutral long term rate was revised down -50 bps to 3%. Keep in mind previous revisions in September 2015 and in June 2014 were only -25 bps. Therefore, the 10Y US yield reached a new low since 2012.
  • The Bank of Japan stayed put as well and did not boost its QE purchases. While economists’ expectations of a new easing were low, market reaction was once again brutal (Nikkei -6%, JPY +2.6% new low since 2014). 
  • The Bank of England kept its rate unchanged as widely expected and issued a warning about the consequences of a Brexit. 
  • Overall, fixed income core markets look very expensive to us in terms of Inflation Breakevens or real rates.

    This week, some Chinese data came out in line with consensus but more importantly, MSCI put off local Chinese equities inclusion into its index. Oddly enough, Chinese indices did not slump. We must admit however that they are already deep under water YTD.

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-250 Tue, 25 Oct 2016 15:18:00 +0200 Markets are currently anticipating a clear defeat for D. Trump /en/who-we-are/news/detail/markets-are-currently-anticipating-a-clear-defeat-for-d-trump/ The question is : what is the European central bank Governing Council talking about during their meeting?
    • Journalist: “Did you talk about QE extension?” 
    • Draghi: “No”
    •  As a result : Rates soar, Euro climbs, equities down 5 min later, other question 
    • Journalist: “ Did you discuss a potential tapering?”
    • Draghi: “No”

    As a result : Rates go back down, Euro slumps, equities rally So we did not learn anything from ECB this week, and all issues are pushed back to December… In the meantime, earnings season in the US is getting pace. So far earnings are decent : 2% in aggregate above expectations. They usually are, but the magnitude is larger than usual, mainly thanks to banks. This has helped equity indices to rise this week, without any excitement. Few macroeconomic data this week. US CPI came out in line with consensus, with base effects beginning to kick in. This should carry on and exceed 2% at year end. CPI was in line as well in the Eurozone, but on a softer tone. Oil inventories decreased but oil is flat on the week. US retail sales were in line with expectations. In short, nothing fundamentally changes the global picture. 

    Not much is due for next week as well, apart from EZ PMIs. Market is still focused on US election on November 8th, US earnings and of course Fed meeting in December.

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-249 Mon, 31 Oct 2016 15:16:00 +0100 Robust Q3 GDP growth for the US, boosted by strong exports /en/who-we-are/news/detail/robust-q3-gdp-growth-for-the-us-boosted-by-strong-exports/ We had a busy week ending with long expected US Q3 GDP. But before commenting this figure, let us come back on core fixed income markets which have sold off this week.

    The collapse has been ignited by a better UK GDP report. This move was then maintained by the European central bank’s president saying that negative rates for a long period of time are is not advisable. Core rates have moved up 15 to 20bps this week and almost 30bps MTD.

    Economic data has been decent this week: good Euro Area PMI, US PMI accelerating and to finish with, US Q3 GDP at 2.9% vs 2.6% expected. The breakdown was rather comforting even if consumption contribution slowed down. These reports have of course helped as well fixed income markets to drop.

    US earnings season is now half way through, until now the

    • 275/500 firms have reported in S&P 500
    • 75% are above, 6% in line and 19% below expectations. That’s better than usual
    • YoY growth is +3% vs -1% expected before the season

    The question everyone is asking is where does this fixed income correction stops? To our eyes it is probably close to the end, at least for the next few weeks:

    • The move was violent, sustained by systematic models deleveraging: markets are now clearly oversold, and our contrarian bias pushes us to like this kind of positions
    • Investors are not heavily invested in core fixed income. They are very long credit, but for many weeks they have increased their cash holdings vs govies.
    • We do not believe in an ECB tapering and think QE will be extended. Sure thing, inflation will rise through base effects in the coming months but remaining below ECB target.

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-248 Mon, 13 Jun 2016 15:14:00 +0200 Chinese imports are not decrasing anymore, a 18-month first /en/who-we-are/news/detail/chinese-imports-are-not-decrasing-anymore-a-18-month-first/ Brexit remained the main focus after the weak job report in the US last week. Global safe haven yield drifted strongly lower this week as risk aversion kept markets under pressure. Two weeks ahead the referendum, markets have moved, repricing higher Brexit risk. Volatility is spiking and mistake opportunities are currently everywhere. On the data front this week:

    • Fed Chair Yellen’s speech was dovish as she omitted the words "in the coming months"
    • In China, macro data released are more positive. Trade figures look better as China’s imports increased and exports stabilized

    Next week a flurry of economic data will be released (housing sector, inflation…) and central banks meeting will be a focus with the Fed and Bank of Japan meetings. This FOMC will be key. A June hike is clearly off the table but the statement and the press conference could be less dovish than expected. 

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-242 Mon, 30 May 2016 12:40:00 +0200 Oil topped a $50 a barrel... Ending of the disinflationary effect ? /en/who-we-are/news/detail/oil-topped-a-50-a-barrel-ending-of-the-disinflationary-effect/ We have seen a positive sentiment this week with equity indexes rebounded sharply following 3 key developments:
  • Brexit risk declined as polls signaled that the “remain“ camp is pulling ahead. GBP increased by 4%
  • New debt deal for Greece with creditors
  • Oil prices continued to rally and topped US$ 50 a barrel. The correlation between oil and equities has decreased, but the fact that oil prices remained quite strong is encouraging
  • On the macroeconomic side, we have been surprised by strong report on the US housing market. New home sales surged  16.6% to 619K, strongly above the consensus at +2.4% and pending home sales climbed 5.1% in April. Other US data released this week were mixed (durable goods orders, Michigan consumer sentiment, revised Q1 GDP)

    Fed rumors continued this week with an hawkish tone. Yellen will speak this Friday at Harvard university, but no mention of monetary policy is expected. So, the next speech on June 6 will be very important and may bring more clarity on rate hike timing. It will be key to see if Yellen shares hawkish views of most Fed members.

    Key events next week will be:

    • China PMI released
    • ECB meetings
    • US Non-Manufacturing ISM and NFP report

    Regarding next week’s ECB meeting, we expect no new significant development.

    We do not understand why yields remained quite stable over the week and are struggling to rise amid a rally in oil prices and risky assets, better than expected data both in US and Europe and hawkish Fed comments.

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management.

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    news-239 Fri, 20 May 2016 12:31:00 +0200 Markets are adjusting forecasts following FED's minutes, still too low from our point of view /en/who-we-are/news/detail/markets-are-adjusting-forecasts-following-feds-minutes-still-too-low-from-our-point-of-view/ FOMC Minutes publication was a major topic of discussion for investors on Wednesday. A few days ago, markets were pricing in a 3% probability of a June Fed hike. It has shot up to 30% following much more hawkish minutes than expected. Fed indeed suggests that a June hike is far from impossible and the bulk of Fed members’ speeches warn that the market still underestimates its implied probability.

    The consequences are quite logical: US bond yields rose (and to a lesser extent European yields as well), the dollar is higher, and EM assets are under renewed pressure. That being said, moves are not so large and while markets have begun to adjust, they still do not believe in a June hike and think that the future path of rate hikes will be shallow (One hike per year is priced in for the next five years). We continue to think market’s anticipations are too low.

    Other economic data that came out this week are satisfactory in the US (industrial production, real estate indicators) apart from the manufacturing sector. Elsewhere there was little meaningful data.

    Brexit continues to be a hot topic, and this will probably be the case until June 23rd. A very positive poll helped GBP to post a nice return this week.

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management

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    news-238 Mon, 16 May 2016 12:24:00 +0200 Uncertainty remains around the Brexit referendum, parlyzing markets /en/who-we-are/news/detail/uncertainty-remains-around-the-brexit-referendum-parlyzing-markets/ This week has been extremely quiet on markets with low ranges on asset prices generally speaking. One thing to keep in mind is the strong pickup in US retail sales, which should bring other positive economic surprises and also boost expectations for the US Q2 GDP (expected at 2.2% as at this Friday). Euro area data was more disappointing, especially industrial production which came out way below expectations. China published its new loans volume which are significantly lower than anticipated. This can be seen either as a good or a bad piece of news.

    What is coming up next? Unfortunately, it will probably depend on a very random issue with the Brexit vote on June 23rd. There are other potential risks (Spanish elections, OPEC meeting possibly, etc) but Brexit vote dominates newsflow by far.

    The issue is not only that nobody knows for sure what is going to happen (bookmakers quote 75% probability of “Bremain” while polls are very stretched), but that the market reaction in case of Brexit is far from clear. Will the Bank of England cut its rate to restart the economy or will they hike to defend a plunging currency?

    In a nutshell, this issue will continue to “block” markets for a few more weeks. We think this is probably why US rates remain so low. This Friday was a case in point, with very good Retail sales and a positive Michigan indicator. However, US 10Y yield continues to fall while the dollar rises sharply.

    Lastly, we can note that EM assets have been behaving in an asymmetric way over the last weeks: if economic data is bad, they fall, and if it is good, they fall too, mainly because of the dollar surge.

    La Française’s Essentiel Markets brings you an insightful analysis of the latest financial news by François Rimeu, Head of Total Return at La Française Asset Management

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    news-221 Wed, 25 Nov 2015 17:17:00 +0100 La Française is moving! /en/who-we-are/news/detail/la-francaise-is-moving/ As of December 14th La Française relocates to the Left Bank.

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    news-220 Fri, 04 Nov 2016 16:18:39 +0100 A Wide Disparity Offers Opportunity /en/who-we-are/news/detail/a-wide-disparity-offers-opportunity/ Consider U.S. Growth Equities Now Price-to-earnings ratios for the traditional U.S. growth sectors—Technology, Health Care, and Consumer Discretionary— are currently discounted materially relative to defensive sectors such as Utilities, Consumer Staples, and Real Estate.

    > To read more, please click here.

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    news-219 Fri, 04 Nov 2016 16:17:22 +0100 The Single Greatest Predictor of Future U.S. Stock Market Returns /en/who-we-are/news/detail/the-single-greatest-predictor-of-future-us-stock-market-returns/ Starting P/E has Historically Driven Returns About 90% of U.S. stock market returns over a 10-year period can be attributable to starting price-toearnings(P/E) ratios. Buying low and selling high in terms of P/E has historically driven returns.

    > To read more, please click here.

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