Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

<ul>
<li>EM Fund managers continue to add to MENA allocations, yet underweights have increased to near record levels.</li>
<li>Saudi Arabia has been the driver of the recent allocation spike, with the average GEM fund allocation now at 1%</li>
<li>Fund activity over the last 6-months has favoured Qatar National Bank and Saudi Tadawul Group, with both seeing the percentage of funds invested increase.</li>
</ul>


EM Fund managers continue to add to MENA allocations, yet underweights have increased to near record levels.
Saudi Arabia has been the driver of the recent allocation spike, with the average GEM fund allocation now at 1%
Fund activity over the last 6-months has favoured Qatar National Bank and Saudi Tadawul Group, with both seeing the percentage of funds invested increase.


The last decade has seen EMEA allocations in active GEM portfolios drift ever lower, with Asia becoming the dominant weight.  However, the recent rhetoric from China has seen Asian allocations fall from their peak and EMEA allocations rally from their lows.  Average weights in EMEA stocks stand at 13.72%, marginally overweight the iShares MSCI Emerging Markets ETF by 0.24%, with just under half of the active managers in our analysis overweight. <ul>
<li>Over the course of the last decade, exposure to each EMEA sector has either fallen dramatically or at best stayed largely unchanged.  Those that have seen a big decline in investment are led by EMEA Industrials and Health Care, with over 40% of investors closing exposure.  </li>
<li>The largest sector exposure, EMEA Financials allocations sit towards the lower-end of their historical range.  Top holdings are <a href="https://www.smartkarma.com/entities/sberbank-of-russia-pjsc" target="_blank" data-smartkarma-citation="entities:24142:1" rel="noopener">Sberbank Of Russia Pjsc (SBER LI)</a> and <a href="https://www.smartkarma.com/entities/otp-bank-nyrt" target="_blank" data-smartkarma-citation="entities:28806:1" rel="noopener">OTP Bank Nyrt (OTP HB)</a> with 59% and 31% of funds invested respectively.  <a href="https://www.smartkarma.com/entities/tcs-group-holding-plc" target="_blank" data-smartkarma-citation="entities:28148:1" rel="noopener">TCS Group Holding PLC (TCS LI)</a> and <a href="https://www.smartkarma.com/entities/capitec-bank-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27628:1" rel="noopener">Capitec Bank Holdings Ltd (CPI SJ)</a> saw ownership levels increase the most over the last 6-months.</li>
<li>Consumer Discretionary weights hit another all-time high this month of 1.46%, representing a 1.04% overweight versus the iShares MSCI EM ETF.  Underpinning the overweight are out-of-benchmark holdings in <a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a> and Fix Price Group, though in general stocks in the sector are not widely held.  Funds with big overweights are led by Comgest's GEM Promising Companies Fund (8.98%) and Van Eck's Emerging Markets Fund (7.21%).  </li>
<li>With active ownership declining throughout 2020, <a href="https://www.smartkarma.com/entities/gazprom-pjsc" target="_blank" data-smartkarma-citation="entities:23749:1" rel="noopener">Gazprom PJSC (GAZP RX)</a> has finally been the recipient of some inflows.  Over the last 6-months, 2% of funds added Gazprom to their portfolios with a combined $217m in inflows.  Leading those were Fidelity (2.7%), Virtus Allianz (2.67%) and JP Morgan ($64m).</li>
</ul>The analysis looks in detail at all sectors in the EMEA region, together with some of the key stocks that underpin investment in the region.Analysis taken from our GEM fund research, covering 250 active GEM strategies with combined AUM of $500bn

The last decade has seen EMEA allocations in active GEM portfolios drift ever lower, with Asia becoming the dominant weight.  However, the recent rhetoric from China has seen Asian allocations fall from their peak and EMEA allocations rally from their lows.  Average weights in EMEA stocks stand at 13.72%, marginally overweight the iShares MSCI Emerging Markets ETF by 0.24%, with just under half of the active managers in our analysis overweight. 
Over the course of the last decade, exposure to each EMEA sector has either fallen dramatically or at best stayed largely unchanged.  Those that have seen a big decline in investment are led by EMEA Industrials and Health Care, with over 40% of investors closing exposure.  
The largest sector exposure, EMEA Financials allocations sit towards the lower-end of their historical range.  Top holdings are Sberbank Of Russia Pjsc (SBER LI) and OTP Bank Nyrt (OTP HB) with 59% and 31% of funds invested respectively.  TCS Group Holding PLC (TCS LI) and Capitec Bank Holdings Ltd (CPI SJ) saw ownership levels increase the most over the last 6-months.
Consumer Discretionary weights hit another all-time high this month of 1.46%, representing a 1.04% overweight versus the iShares MSCI EM ETF.  Underpinning the overweight are out-of-benchmark holdings in Prosus (PRX NA) and Fix Price Group, though in general stocks in the sector are not widely held.  Funds with big overweights are led by Comgest's GEM Promising Companies Fund (8.98%) and Van Eck's Emerging Markets Fund (7.21%).  
With active ownership declining throughout 2020, Gazprom PJSC (GAZP RX) has finally been the recipient of some inflows.  Over the last 6-months, 2% of funds added Gazprom to their portfolios with a combined $217m in inflows.  Leading those were Fidelity (2.7%), Virtus Allianz (2.67%) and JP Morgan ($64m).
The analysis looks in detail at all sectors in the EMEA region, together with some of the key stocks that underpin investment in the region.Analysis taken from our GEM fund research, covering 250 active GEM strategies with combined AUM of $500bn

EMEA Sectors Deep-Dive.  Active Positioning in the EMEA Region

Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Credit

Additional Tier 1 (AT1) bonds simultaneously issued by <a href="https://www.smartkarma.com/entities/commercial-bank-of-dubai" target="_blank" data-smartkarma-citation="entities:29706:1" rel="noopener">Commercial Bank of Dubai (CBD)</a> and the <a href="https://www.smartkarma.com/entities/bank-of-east-asia-ltd" target="_blank" data-smartkarma-citation="entities:341:1" rel="noopener">Bank of East Asia (BNKEA)</a> present a unique opportunity to trade on the macro and micro-economic impacts of the COVID-19 economic environment in the United Arab Emirates and Hong Kong SAR, respectively.  Issued on Monday, 12 October, CBD achieved a 6% coupon while BNKEA managed 5.825%. Both banks are tier 2 entities in their home markets. From our perspective, one, if not both, of these bonds was mispriced in the primary market.Having examined Bank of East Asia’s financial fundamentals in <a href="https://www.smartkarma.com/insights/bank-of-east-asia-strategic-review-to-set-at1-value-forewarned-is-forearmed" target="_blank" data-smartkarma-citation="insights:42705" rel="noopener">Strategic Review to Set AT1 Value</a>, we contrast what we like and dislike regarding CBD with BNKEA. As BNKEA’s AT1 is now trading around the fair value which we projected in <a href="https://www.smartkarma.com/insights/bank-of-east-asia-s-new-at1-likely-coupon-and-curve-impact" target="_blank" data-smartkarma-citation="insights:44112" rel="noopener">Bank of East Asia’s New AT1 – Likely Coupon and Curve Impact</a>, we conclude with suggestions on how to trade this pair as a possible proxy on Dubai versus Hong Kong as well as how to trade CBD relative to other banks headquartered in the United Arab Emirates.Commercial Bank of Dubai – what we dislike:<ul>
<li>Commercial real estate exposure is high.</li>
<li>Legacy asset quality issues still haunt.</li>
</ul><ul><li>Capital buffer is adequate, but inflated by forbearance.</li></ul>Commercial Bank of Dubai – what we like:<ul>
<li>Distributable reserves should enable AT1 payments if capital buffers are depleted.</li>
<li>Ownership and connections suggest strong support.</li>
</ul>

Additional Tier 1 (AT1) bonds simultaneously issued by Commercial Bank of Dubai (CBD) and the Bank of East Asia (BNKEA) present a unique opportunity to trade on the macro and micro-economic impacts of the COVID-19 economic environment in the United Arab Emirates and Hong Kong SAR, respectively.  Issued on Monday, 12 October, CBD achieved a 6% coupon while BNKEA managed 5.825%. Both banks are tier 2 entities in their home markets. From our perspective, one, if not both, of these bonds was mispriced in the primary market.Having examined Bank of East Asia’s financial fundamentals in Strategic Review to Set AT1 Value, we contrast what we like and dislike regarding CBD with BNKEA. As BNKEA’s AT1 is now trading around the fair value which we projected in Bank of East Asia’s New AT1 – Likely Coupon and Curve Impact, we conclude with suggestions on how to trade this pair as a possible proxy on Dubai versus Hong Kong as well as how to trade CBD relative to other banks headquartered in the United Arab Emirates.Commercial Bank of Dubai – what we dislike:
Commercial real estate exposure is high.
Legacy asset quality issues still haunt.
Capital buffer is adequate, but inflated by forbearance.Commercial Bank of Dubai – what we like:
Distributable reserves should enable AT1 payments if capital buffers are depleted.
Ownership and connections suggest strong support.


Commercial Bank of Dubai Vs Bank of East Asia: A Tale of Two AT1s in COVID-19 Uncertainty

United Arab Emirates

Emaar Properties PJSC operates as a real estate development company. The Company is involved in property investment, development, shopping malls, retail centers, hospitality, and property management services.  Emaar Properties has business throughout the Middle East, and is headquartered out of Dubai, United Arab Emirates.

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Emaar Properties Pjsc (EMAAR UH)

M.E.N.A Momentum

The MENA region has strong momentum in two distinct areas. As investment levels rise to record levels, so too does the net underweight versus the...

Steven Holden

EMEA Sectors Deep-Dive. Active Positioning in the EMEA Region

The last decade has seen EMEA weights drift ever lower. We look in detail at all sectors in the EMEA region, together with some of the key stocks...

Steven Holden

Commercial Bank of Dubai Vs Bank of East Asia: A Tale of Two AT1s in COVID-19 Uncertainty

AT1 bonds simultaneously issued by Commercial Bank of Dubai and the Bank of East Asia present an opportunity to trade the COVID-19 economic impacts...

Hank Calenti, CFA

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Market Cap (USDm)

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