Investment Officer

The decision of the US Federal Reserve to cut interest rates once more and restart QE was expected by investors. But not on a Sunday afternoon. Asset managers characterise the sudden decision as ‘a defining moment’, for more than one reason.

A 44.5% increase in premium income in Luxembourg’s insurance sector last year was driven mainly by Brexit relocations in the non-life sector. However the traditional mainstay for the industry, life insurance, also enjoyed a strong year with income up 18.6%.

The Fed’s rate cut was not the most clear-cut answer to the corona crisis, says Hendrik Tuch, head of fixed income at Aegon Asset Management. 
But he understands the decision.

Investors did not respond to the Fed’s surprise 50 basis points rate cut with a relief rally. To the contrary, markets closed almost 3% lower as investors interpreted the rate cut as a warning the macroeconomic situation is likely to worsen.
 
Fed president Jerome Powell stated shortly after Wall Street opened that the negative effects of the coronavirus are slowly becoming visible.

The coronavirus is causing ‘a clear shock to the world economy’, according to Columbia Threadneedle. Janus Henderson calls the global spreading of the coronavirus ‘a real game changer that has dashed hopes of a V-shaped recovery in global growth.’ 
 
‘So far we are seeing two clear consequences: lower consumption and less supply,’ says Neil Robson of Columbia Threadneedle. He illustrates the first concern citing the Adidas market update last week, showing a 85% decline in activity in China. 

Three fund directors have sent a letter to Europe’s top regulatory body to complain about a lack of action by Luxembourg’s regulator CSSF to protect investors.

They run several Luxembourg-domiciled funds, known as LFP I, that were defrauded for millions of euros, contends LFP I director David Mapley. Mapley says the CSSF ‘is really obstructing our work’ to recoup the lost funds, he told Investment Officer.

T. Rowe Price has won the Morningstar Luxembourg Fund Award for best fund house, the data provider announced on Thursday during a ceremony at the Centre Culturel ‘Schéiss’ in Luxembourg. T. Rowe Price also won the award for best fixed income fund house. Neuberger Berman, another US asset manager, received the honours for best equity fund house.

Inflows into global open-ended mutual funds almost doubled last year to around 1,600 billion dollars. The vast majority of the inflow was invested in bond funds, according to Morningstar data. 

The strong inflows have taken the total stock invested in mutual funds to almost 42,000 billion dollars in total.  In 2019, a net 1008 billion dollars flowed into bond funds, beating the previous record of 869 billion dollars achieved in 2017, according to Morningstar.

ETFs can be a source of systemic risk because they can induce important feedback effects in markets, such as increased volatility in periods of market stress. However, these effects can be mitigated by regulators, according to a research paper by Maureen O’Hara (pictured) of Cornell University and assistent-professor Ayan Bhattacharya of the City University of New York.

Global dividends rose 3.5% in 2019 to a new record of  1.43 trillion dollars (1.32 trillion euros), according to the Janus Henderson Investors Global Dividend Index. Dividend growth in Europe lagged other markets.