News https://www.la-francaise.com/ RSS La Francaise Group en La Française Sun, 03 Jul 2022 23:25:07 +0200 Sun, 03 Jul 2022 23:25:07 +0200 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. 

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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.” 
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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.

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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.

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    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.

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    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

    ]]>
    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).

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    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.

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    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.

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    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.

    ]]>
    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 
    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.

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    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.

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    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.

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    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.

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    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)

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    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: