November’s most read: Evergrande has defaulted, some say; Which assets will perform under stagflation?

Members of German market information provider, DMSA Deutsche Markt Screening Agentur say Evergrande has defaulted; Analysts are split over whether the market is approaching stagflation or pointing to a healthy recovery; Low hedge fund returns and high management fees have seen pension fund allocations fall but CPPIB is keeping the faith; and more.
November’s most read: Evergrande has defaulted, some say; Which assets will perform under stagflation?

Evergrande has defaulted, some say

Has China Evergrande Group, the world’s most indebted property developer, defaulted? Members of German market information provider, DMSA Deutsche Markt Screening Agentur, say the Chinese firm has.

Meanwhile, reports by several other media outlets, including Bloomberg and the Wall Street Journal, suggest that the company has so far managed to avert bankruptcy. They detail that some bond holders received payment on November 10, while others including Reuters, claim they remain waiting.

Evergrande owes US$300 billion of debt, including a US$148 coupon payment for offshore bonds which matured in October. However, the company was offered a 30-day extended grace period, until November 10.

Market Views: Which assets will perform under stagflation?

Some topics we thought were so last century are back in the news. Market observers are discussing the prospect of stagflation - defined as persistently high inflation, high unemployment and stagnant demand, all at the same time - which dogged markets in the 1970s. 

It does share something similar – sky-high commodity prices, a disappointing unemployment rate, and cooling economic growth, which is a mix of current energy crunch and the carbon-neutral transition.

Though there is no consensus about whether the market is approaching stagflation, or it is pointing to a healthy recovery, real assets are generally preferred amid price surges, while opinions vary on equities and bonds.

CPPIB holds steady as other pension funds divest from hedge funds

The low returns of hedge fund programs combined with their excessively high management and incentive fees has seen the average pension fund allocation fall from 1.7% to 1.2% since 2015 — with several prominent sovereign investors including CalPERS and ISBI making their exit completely.

Keeping the faith, however, is the Canada Pension Plan Investment Board (CPPIB), the largest Canadian pension fund, which manages $419 billion in assets of which 5% ($22.7 billion) is currently allocated to hedge funds.

The pension fund has a long-term capital allocation and deployment plan which generates desired allocations based on capital and “risk/return assumptions” of various asset classes and strategies, said Priti Singh the managing director, global leadership team, head of external portfolio management at CPPIB.

Allianz, IFC and HKMA step forward in sustainable investment

Under a new partnership called MCPP One Planet, Germany-based insurer Allianz Group and International Finance Corporation (IFC), a member of the World Bank Group, have joined up to create a new global platform for climate smart-investment that will provide up to $3 billion to private enterprises in developing economies.

The two organisations signed a partnership under the Managed Co-Lending Portfolio Program (MCPP) on November 3. 

The Development Finance team of Allianz Global Investors (Allianz GI), Allianz’s asset management arm of the insurer, will manage the vehicle on behalf of investors.

“The latest platform is an expansion of the existing partnership with IFC. Originally, the partnership focused on infrastructure and now it makes sense to extend the partnership beyond infrastructure to all Paris Aligned sectors of the IFC.” Nadia Nikolova, lead portfolio manager at Allianz GI Development Finance, told AsianInvestor.

Japan’s largest life insurers on alert for stronger yen in foreign bond strategies

Mega Japanese life insurance companies are employing different strategies in foreign fixed income as they seek to balance currency risks with lagging domestic yields.

Meiji Yasuda Life and Nippon Life Insurance plan to cut some foreign bond holdings to prepare for a stronger yen, while Sumitomo Life is expanding investments in overseas credit, the life insurer said in an announcement on Oct 18.

In addition, Sumimoto Life has decided to outsource all its two trillion yen ($17.6 billion) of foreign bonds to its US investment arm Symetra Investment Management for more efficient investment into higher yields. It manages $320 billion of assets as of March 31.

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