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

Actively managed GEM funds had a fantastic first half of 2019.  Year to date absolute returns for the average GEM fund stand at 13.06% compared to 10.24% for the <a href="https://www.smartkarma.com/entities/ishares-msci-emerging-markets-indx-etf" target="_blank" data-smartkarma-citation="entities:438:1" rel="noopener">iShares MSCI Emerging Markets (EEM US).</a>  Moreover, 77% of funds outperformed.Outperformance was generated through strong stock selection in China &amp; HK, underweights in South Korea and stock selection in Brazil.  Overweights in <a href="https://www.smartkarma.com/entities/aia-group-ltd" target="_blank" data-smartkarma-citation="entities:14895:1" rel="noopener">AIA Group Ltd (1299 HK), </a><a href="https://www.smartkarma.com/entities/mercadolibre-inc" target="_blank" data-smartkarma-citation="entities:27954:1" rel="noopener">MercadoLibre Inc (MELI US)</a><a href="https://www.smartkarma.com/entities/aia-group-ltd" target="_blank" data-smartkarma-citation="entities:14895:1" rel="noopener"></a>and <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>generated the most outperformance for managers, on average.

Actively managed GEM funds had a fantastic first half of 2019.  Year to date absolute returns for the average GEM fund stand at 13.06% compared to 10.24% for the iShares MSCI Emerging Markets (EEM US).  Moreover, 77% of funds outperformed.Outperformance was generated through strong stock selection in China &amp; HK, underweights in South Korea and stock selection in Brazil.  Overweights in AIA Group Ltd (1299 HK), MercadoLibre Inc (MELI US)and Sberbank Of Russia Pjsc (SBER LI) generated the most outperformance for managers, on average.

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

Thematic (Sector/Industry)

<ul>
<li>We lift the lid on the consumer finance arms of ten leading LatAm retailers, providing corporate summaries in this primer on those entities with “skin in the game” of LatAm consumer credit</li>
<li>Our top pick is Mexican department store retailer <a href="https://www.smartkarma.com/entities/27611" target="_blank" data-smartkarma-citation="entities:27611:1">El Puerto de Liverpool SAB de (LIVEPOLC MM)</a> , given its attractive valuations; it is also the third largest issuer of credit cards in Mexico and the portfolio has a relatively low NPL ratio with healthy NPL coverage</li>
<li>Brazilian department store and apparel retailer <a href="https://www.smartkarma.com/entities/28023" target="_blank" data-smartkarma-citation="entities:28023:1">Guararapes Confeccoes SA (GUAR3 BZ)</a> is the second largest private label card issuer in Brazil and an attractive value, we believe, even if in the consumer credit arm its NPL coverage levels are a bit lower than its peers</li>
<li>In Chile, we like the business and geographic focus of <a href="https://www.smartkarma.com/entities/28022" target="_blank" data-smartkarma-citation="entities:28022:1">Ripley Corp SA (RIPLEY CI)</a>, despite Ripley's high debt to equity ratio, and its high return banking business in Chile in particular</li>
<li>
<a href="https://www.smartkarma.com/entities/27954" target="_blank" data-smartkarma-citation="entities:27954:1">MercadoLibre Inc (MELI US)</a> is the leader in LatAm e-commerce, with structural growth potential. It has a fast growing and, we believe, profitable payments operation in MercadoPago and small but high growth potential credit business in MercadoCredito, yet we believe that the current intensifying Brazilian competitive climate and Argentine political and economic outlook are real and near-term headwinds for the share price</li>
</ul>


We lift the lid on the consumer finance arms of ten leading LatAm retailers, providing corporate summaries in this primer on those entities with “skin in the game” of LatAm consumer credit
Our top pick is Mexican department store retailer El Puerto de Liverpool SAB de (LIVEPOLC MM) , given its attractive valuations; it is also the third largest issuer of credit cards in Mexico and the portfolio has a relatively low NPL ratio with healthy NPL coverage
Brazilian department store and apparel retailer Guararapes Confeccoes SA (GUAR3 BZ) is the second largest private label card issuer in Brazil and an attractive value, we believe, even if in the consumer credit arm its NPL coverage levels are a bit lower than its peers
In Chile, we like the business and geographic focus of Ripley Corp SA (RIPLEY CI), despite Ripley's high debt to equity ratio, and its high return banking business in Chile in particular

MercadoLibre Inc (MELI US) is the leader in LatAm e-commerce, with structural growth potential. It has a fast growing and, we believe, profitable payments operation in MercadoPago and small but high growth potential credit business in MercadoCredito, yet we believe that the current intensifying Brazilian competitive climate and Argentine political and economic outlook are real and near-term headwinds for the share price


Banking on Retail: A Primer on The Credit Operations of Leading LatAm Retailers

Global Emerging Market funds made a strong start to 2019, with just over two-thirds of funds outperforming the benchmark, generating an average alpha above the <a href="https://www.smartkarma.com/entities/438" target="_blank" data-smartkarma-citation="entities:438:1">IShares MSCI Emerging Markets Indx (ETF) (EEM US)</a> of 1.3%.In this report, we look at the performance of 180 global emerging market strategies over the first quarter of 2019 and analyse the countries, sectors and stocks that helped generate that outperformance.  We also take a look at the longer-dated outperformance of active GEM funds.

Global Emerging Market funds made a strong start to 2019, with just over two-thirds of funds outperforming the benchmark, generating an average alpha above the IShares MSCI Emerging Markets Indx (ETF) (EEM US) of 1.3%.In this report, we look at the performance of 180 global emerging market strategies over the first quarter of 2019 and analyse the countries, sectors and stocks that helped generate that outperformance.  We also take a look at the longer-dated outperformance of active GEM funds.

GEM Active Funds:  Big Q1 Outperformance

Accelerating Tomorrow’s Independent Research

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<ul class="">
<li>The non-cash payments market continues to grow at a double-digit rate in Brazil, driven primarily by growing usage of credit and debit cards</li>
<li>De-regulation and new entrants have brought challenges for the incumbents, especially for the largest player <a href="https://www.smartkarma.com/entities/24750" target="_blank">Cielo SA (CIEL3 BZ)</a>, with the challengers taking market share, squeezing margins and promoting better service for SME merchants in particular</li>
<li>Competitive pressures continue in the Brazil payments market, reflected in the declining merchant discount rate (MDR), lower rental rates and sale prices for POS terminals, as well as pressure on the commissions for early payment of merchant receivables; the near-term prospects for Cielo remain challenging in our view</li>
<li>Due to the ongoing headwinds, we expect Cielo to show negative earnings growth to 2021; management has announced that Cielo will defend its market share against the challengers; we see further downside risk to consensus earnings and the real risk of a greater than consensus 2019 DPS cut</li>
<li>
<a href="https://www.smartkarma.com/entities/27564" target="_blank">StoneCo Ltd (STNE US)</a>and <a href="https://www.smartkarma.com/entities/27939" target="_blank">Pagseguro Digital Ltd (PAGS US)</a> are two of the payment challengers in this de-regulated market, growing faster than the Brazilian non-cash transactions market and taking incumbents' market share; we see StoneCo to be the preferred entity to PagSeguro, based on StoneCo’s higher revenue yielding SME segment of focus and on its more attractive PEG ratio valuation</li>
</ul>


The non-cash payments market continues to grow at a double-digit rate in Brazil, driven primarily by growing usage of credit and debit cards
De-regulation and new entrants have brought challenges for the incumbents, especially for the largest player Cielo SA (CIEL3 BZ), with the challengers taking market share, squeezing margins and promoting better service for SME merchants in particular
Competitive pressures continue in the Brazil payments market, reflected in the declining merchant discount rate (MDR), lower rental rates and sale prices for POS terminals, as well as pressure on the commissions for early payment of merchant receivables; the near-term prospects for Cielo remain challenging in our view
Due to the ongoing headwinds, we expect Cielo to show negative earnings growth to 2021; management has announced that Cielo will defend its market share against the challengers; we see further downside risk to consensus earnings and the real risk of a greater than consensus 2019 DPS cut

StoneCo Ltd (STNE US)and Pagseguro Digital Ltd (PAGS US) are two of the payment challengers in this de-regulated market, growing faster than the Brazilian non-cash transactions market and taking incumbents' market share; we see StoneCo to be the preferred entity to PagSeguro, based on StoneCo’s higher revenue yielding SME segment of focus and on its more attractive PEG ratio valuation


Brazilian Payments Report: Cielo on the Defensive Against Disruptive Challengers

Derivatives and Quantitative Strategist

Gaudenz Schneider

Equity Derivatives

<ul>
<li>
Context: Over the past five trading days, <a href="https://www.smartkarma.com/entities/alibaba-group-holding-limited" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba (9988 HK)</a> multi-leg option strategies showcased a variety of approaches. Strategy highlights are provided.</li>
<li>
Highlights: A wide iron condor reflects expectations for continued consolidation near Alibaba’s 50-day moving average.</li>
<li>
Why read: This breakdown of complex option strategies sheds light on market sentiment and positioning. Detailed examples provide actionable insights that could inspire similar strategies,</li>
</ul>



Context: Over the past five trading days, Alibaba (9988 HK) multi-leg option strategies showcased a variety of approaches. Strategy highlights are provided.

Highlights: A wide iron condor reflects expectations for continued consolidation near Alibaba’s 50-day moving average.

Why read: This breakdown of complex option strategies sheds light on market sentiment and positioning. Detailed examples provide actionable insights that could inspire similar strategies,


Alibaba (9988 HK) Top Trades: Bullish Bias and Long Volatility Dominate

Brazil

MercadoLibre, Inc. operates an online trading site for the Latin American markets. The Company's website allows businesses and individuals to list items, conduct sales, and purchases online in either a fixed-price and auction format. MercadoLibre offers classified advertisements for motor vehicles, vessels, aircraft, and real estate, as well as online payment services.

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MercadoLibre (MELI US)

Active GEM Funds Trounce Passive in H1

Actively managed GEM funds had a fantastic first half of 2019. Year to date absolute returns for the average GEM fund stand at 13.06% compared to...

Steven Holden

Banking on Retail: A Primer on The Credit Operations of Leading LatAm Retailers

We lift the lid on the consumer finance arms of ten leading LatAm retailers, providing corporate summaries in this primer on those entities with...

Victor Galliano

GEM Active Funds: Big Q1 Outperformance

Global Emerging Market funds made a strong start to 2019, with just over two-thirds of funds outperforming the benchmark, generating an average...

Steven Holden

Brazilian Payments Report: Cielo on the Defensive Against Disruptive Challengers

The non-cash payments market continues to grow at a double-digit rate in Brazil, driven primarily by growing usage of credit and debit...

Boost Research

Alibaba (9988 HK) Top Trades: Bullish Bias and Long Volatility Dominate

This breakdown of Alibaba’s option strategies offers insights into market sentiment and potential trading strategies. The trades show a modest...

Gaudenz Schneider

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