update iii/2019 update magazine - lu.allianzgi.com · spotlight on how this is altering investment...
TRANSCRIPT
06 Global Asset Management Colloquium 201912 Creative Disruption22 Integrating ESG
Update Magazine
Active is:Allianz Global Investors
Update III/2019
Contents
12 Creative DisruptionBeing a rational optimist
06 Global Asset Management Colloquium 2019Focus on artificial intelligence and new media
04 SpotlightsNews from the world of Allianz Global Investors
20 Capital Market OutlookCapital market implications 2019
22 Integrating ESG An ESG framework for EM sovereign bonds
32 PEPP EU adopts a regulation on a new pan-European personal pension product
36 Allianz GIobal Investors Today The world in 2040 – Investments in Infrastructure
38 Interview Thomas Zimmerer, Global Co-Head of Multi Asset at Allianz Global Investors
Arne Tölsner, Head of InstitutionalGermany, Austria & Switzerland, AllianzGlobal Investors
Dear Reader,
“America, China and Europe are global centres of power. But in terms of digitalisation, we Europeans are have-nots.” This was the view of Kai Diekmann, journalist and former editor of Bild newspaper, at our Global Asset Management Colloquium at Hotel Petersberg near Bonn, which we highlight in this issue. Digitalisation is a blessing for some and a curse for others. But everyone is clear that it will change the world.
The article by Kerstin Keller, Head of Event Marketing, gives an insight into the topics we discussed with our clients at the annual Global Asset Management Colloquium: what are the benefits of digitalisation, what risks – buzzword data security – does it involve, and how will investors benefit from this trend?
Behind change lies the creative power of disruption – the destruction of the old by the new that creates the opportunity for improvement. So, reason enough to invest in the future like a rational optimist: in tangible assets and in the drivers of change. Hans-Jörg Naumer, Global Head of Capital Markets & Thematic Research, explains how this works.
Another driver of change is the trend toward greater sustainability. This year, we shone a spotlight on how this is altering investment strategies. The last issue, for example, explained how impact investing works. In this issue, Richard House, Head of Emerging Markets, and his colleague Nicolas Jaquier, show why ESG criteria can be a good indicator of a debtor’s future solvency – with the help of a case study on Turkey.
Greater life expectancy is an indicator that our world is improving. What is needed are functioning systems for old-age provision. The EU has come up with something new here. Dr. Kai Wallbaum, Head of Global Asset-Life Solutions, and Sebastian Peitzsch, Pension Advisor at risklab, present the fundamentals of a pan-European private pension plan – PEPP for short.
Change becomes particularly visible when it comes to investing in infrastructure. A world without smartphones? Two decades ago, this would have still been the norm, but now it’s unimaginable. We look 20 years ahead: at the trends in infrastructure investing through to 2040, and how they will benefit investors.
The question remains as to whether, with so much change happening, old risk factors remain valid. Take momentum as an example. Yes, says our author, Thomas Zimmerer, Global Co-Head of Multi Asset. He shows what momentum strategies will look like in the future, and why they remain of interest to investors.
I hope you find it a stimulating read. Arne Tölsner
A changing world
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Update III/2019
Delivering for our clients in a highly skilled teamAllianzGI has been named Greenwich Quality Leader in Institutional Investment Management for the ninth year in a row in Germany, and for the third year in Europe. Furthermore, we have been named Greenwich Quality Leader in Overall European Intermediary Distribution Quality for the second time – accolades that will spur us on to achieve even more in the future.1
AllianzGI announces leadership succession from January 2020AllianzGI has announced succession plans for its leadership, effective 1 January 2020. Tobias Pross, currently Global Head of Distribution, and Deborah Zurkow, currently Global Head of Alternatives, will succeed Andreas Utermann as CEO and Global Head of Investments, respectively. Andreas Utermann will be available on an advisory basis for the first six months of 2020.
First private market debt and equity impact fund from AllianzGIAllianz Global Investors announces the launch of the Allianz Impact Investment Fund (AIIF), its first multi asset private market impact fund. The fund aims to leverage the potential of the rapidly expanding impact investing sector by putting institutional investor capital to work in projects which generate measureable, positive impact. The positive effects of every impact investment are measured using a rigorous methodology developed in line with industry best practice. The AIIF is a closed fund that will have a term of approximately ten years after the investment period. The fund expands AllianzGI’s impact investing offering, which already includes investments in renewable energy (Allianz Renewable Energy Funds) and green bonds.
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Award
Spotlights
LaunchLeadership change
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Spotlights
What has Europe undertaken in terms of sustainability, and what role do investors play in this? The Sustainable Finance agenda in the European Union (EU) is being executed rapidly and ambitiously across all asset classes and main financial products. ESG Regulation is approaching corporate and investor disclosures, sustainability preferences in the distribution of investment products, sustainability methodologies, investment benchmarking, and green bonds. This is no longer a topic of “If”; this is a topic of “How high?”.
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The SeaCleaners introduce themselves at AllianzGIIn the last issue of Update Magazine we announced the partnership with The SeaCleaners. Over the next five years, we will be supporting the development of a solar-powered catamaran, to be employed to collect more than 10,000 tons of micro-plastic waste a year from the world’s oceans. Allianz Global Investors, together with The SeaCleaners founder Yvan Bourgnon, has now opened interactive exhibition spaces at various company locations around the world to give AllianzGI’s clients and employees a clear picture of the project.
Exhibition Quo Vadis ESG?
Allianz European Infrastructure Fund reaches first closeOn 2 October 2019 Allianz Global Investors (AllianzGI) announced the first close of the Allianz European Infrastructure Fund S.A. – RAIF (AEIF)2. The fund, which was launched in March 2019 and is managed by Allianz Capital Partners, attracted commitments from institutional investors across various European countries exceeding EUR 600mn.
The fund was established to meet the growing demand from professional clients for equity investments in infrastructure. Through the AEIF, clients will be able to make equity investments alongside Allianz in attractive infrastructure projects across Europe for the first time. The fund will make equity investments predominantly in energy, transport and communication infrastructure that provide essential services for the public.
In response to the strong demand from clients, the target size of the fund was increased from an initial EUR 500mn, to EUR 750mn. The second and final close is expected for 4Q2019.
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Closing
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Global Asset Management Colloquium 2019: focus on artificial intelligence and new media
Blessing or curse? Virtually no other trend is growing as fast as global digitisation – with an enormous impact on society and the capital markets of the future. The Global Asset Management Colloquium 2019, held in Königswinter, examined the growing potential, but also the dangers, stemming from this trend, such as in traditional sectors of the economy.
AUTHOR: KERSTIN KELLER
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Global Asset Management Colloquium 2019
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In an interview with journalist and presenter Inka Schneider, Kai Diekmann, former editor of “Bild-Zeitung” and “Bild am Sonntag”, talked about his experiences of digital change in the media industry. “The business model of traditional media has collapsed,” said Diekmann, noting that in the past ten years, the total circulation of all German daily newspapers had fallen from over 28 million to below 15 million. At the same time, more than 40 million Germans are active on social media. “Social media have replaced the monopoly held by broadcasters and newspapers over access to mass audiences,” he noted, adding that it was essential that players wanting to place topics in the public eye understood this paradigm shift. His winning formula for a successful media company is, therefore, to expose seemingly functioning business models, in their entirety, to jeopardy, in order to occupy the digital space. He cited the example of “Bild”, which had accepted the accelerated
1/ Successful media jeopardise functioning business models in order to occupy the digital space
decline in print circulation in order to build up a digital audience. “But it’s not enough for a firm operating on social media to simply send messages – it must hold conversations among equals,” Diekmann stressed, especially if it wanted to reach the younger generations: the proportion of under 20s who watch ZDF, the German television channel with the highest viewing figures, is 0.8%, and the proportion of under 30s is 3%, taking football into account. “Young people consume content exclusively through social media. They no longer learn how to filter messages,” said Diekmann. This is done by an algorithm - so people think that only the information offered to them is relevant. But the algorithm is only concerned with the time the user spends in the app, so that it can collect as much data as possible. “Dealing with this development is a challenge to which society has not yet found an answer,” concluded Diekmann.
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Global Asset Management Colloquium 2019
Inka Schneider and host Arne Tölsner, Head of Institutional D/A/CH, Allianz Global Investors, spoke about opportunities, risks and courage in investing with Frank Thelen. An investor and start-up founder known for the German version of TV show “Dragons’ Den”, Thelen is funding several start-ups to enable Europe to keep pace with China and the USA on technology issues. “The prerequisite for investing is that the start-up has the potential to increase its value to 100 billion euros and more – and so become a major international player,” explained Thelen. He believes there are several promising start-ups, such as the development of the “Kraftblock” energy storage system, which has infinite charging cycles, consumes no rare earth materials, consists of 80% recycled material and is often cheaper than lithium-ion batteries. Another example cited by Thelen is the development of an electric aircraft that can take off and land vertically and fly about 300 km at a speed of 300 km an hour. “To be able to drive forward projects like this in
Europe, we need to provide massive financial support to high-potential research institutes. It’s also important to have a venture capital fund that provides abundant capital so that projects are not funded in the USA,” Thelen urged. He also believes we need to think differently – like the Americans, who see opportunities rather than risks in a project and, following the Chinese model, approach things more analytically and with a long timeframe in mind. According to Thelen, the most important forward-looking technologies are quantum computers, robotics, block chains, brain interfaces – i.e. humans and machines becoming one – and artificial intelligence. Thelen summed up his motivation thus: “In 10 to 50 years’ time, artificial intelligence will be so intelligent that it will develop autonomously. In order to control the resulting dangers, we need a global agreement in which Europe must be involved.”
2/ A venture capital fund is important for funding high-potential projects in Europe
Social media have replaced the monopoly held by broadcasters and newspapers over access to mass audiences.
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Source: Allianz Capital Partners, 2019. For illustrative purposes only.
Energy Transport Communication Environment Social
Sub
-seg
men
ts
Generation Roads Cable networks Water supply Education
Transport Rail Radio networks Waste / sewage Health
Utilities Airports / ports Data centers Processing Housing
A/ ALLIANZ CAPITAL PARTNERS’ INVESTMENT STRATEGY COVERS THE FIVE KEY INFRASTRUCTURE SECTORS AND THEIR
SUB-SEGMENTS
3/ Internal personnel are involved in 80% of all hacker attacks investigated
Under the title “New media, new algorithms, new risks or: How we protect our data,” Peter Kestner, a cyber security expert at KPMG, explained the challenges of data protection, pointing out that 80% of all investigated hacker attacks involve internal company personnel. “Databases are often so badly set up – with standard passwords and no encryption – that access is very easy,” Kestner stressed. Accordingly, 68% of all databases cannot determine whether their users are abusing the permissions.
Prof. Michael Heise, Chief Economist at Allianz SE, gave an informed assessment of trends in the economic and financial markets: “Economic growth is slowing worldwide due to the trade dispute between China and the USA, the
ongoing Brexit debate, the unresolved debt problem in many countries and the increasing risks in the crisis-hit region of the Middle East. Nevertheless, all roads lead to the capital markets.” Carsten Quitter, CIO of Allianz Group, drew attention to the opportunities offered by the megatrend of digitisation on the capital markets, including for insurers. He cited obligations to clients, the capital markets and the regulatory environment as key parameters for a life insurer’s investment strategy. The challenge, according to Quitter, is that bonds – the traditional instrument of insurers – provide zero or even negative yields. “In the current investment environment, there is little scope for higher returns, which makes it even more important to seize every opportunity,” explained Quitter.
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Global Asset Management Colloquium 2019
Kerstin Keller, Head of Event Marketing, Allianz Global Investors
In summary, in a zero-interest world, investors must maintain a high appetite for risk. The more uncertain the environment, the higher the potential offered by equity strategies with long investment terms. Illiquid investments are also particularly promising, and still offer a lot of potential for returns – but exploiting this requires very extensive expertise. Digitisation is a long-term trend. With it, the emerging importance of data and new technologies holds many opportunities for investors. People wishing to invest worldwide in the infrastructure required for this trend can do so via Allianz Capital Partners.3
5/ Conclusion: in a zero-interest world, courage to take risks is vital
Selected investment experts from Allianz Global Investors showed where this investment potential lies, giving presentations on artificial intelligence, the stock market and co-investments with Allianz in global infrastructure. Johannes Jacobi, Product Specialist Equity Europe, explained why artificial intelligence is seen as an enormous growth driver for the economy and presented Allianz Global Artificial Intelligence, a fund that investors can use to benefit from this. Christian Schneider, Senior Portfolio Manager, spoke about equity strategies in times of uncertainty. Yves Meyer-Bülow,
4/ There is an enormous need for investment in digitisation infrastructure, providing investors with attractive opportunities
Head of Infrastructure Funds & Co-Investments, Allianz Capital Partners, explained the enormous need for investment in infrastructure in the wake of digitisation, transformation of energy policy, urbanisation and modernisation: “The European Commission estimates that 75% of the infrastructure we will need by 2050 has not yet been built. This example alone gives us an idea of the considerable burden of investment in the coming years and where opportunities exist for investors.” (see Chart A/).
In the current investment environment, there is little scope for higher returns, which makes it even more important to seize every opportunity.
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Being a rational optimist The world is becoming a better place. All the indicators concur: increasing life expectancy on every continent of the planet, falling child mortality and child labour, rising prosperity and, from a global perspective, declining inequality. Wherever the forces of creative disruption are allowed to unfold, we have every reason to be rational optimists. But what does this mean for investors and others?
AUTHOR: HANS-JÖRG NAUMER
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Creative Disruption
Being a rational optimist
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A/ GPD OF THE WORLD (INFLATION ADJUSTED IN 2011 INTERNATIONAL DOLLARS)
EXPONENTIAL GROWTH LEADS TO MORE WEALTH
* inflation adjusted in 2011 international DollarsSource: OurWorldInData.org/economic-growth, AllianzGI Global Capital Markets & Thematic Research; Data as of: 2015
0 500 1000 1500 2000
20
40
60
80
100
120
0
Trillion Dollars
“Disruption”: no word better describes the age we live in. Disruption – the destruction of the old by the new (and better), driven by technologies based on digitalisation and artificial intelligence.
From the steam engine, the railway and the automobile to information technology, robots and artificial intelligence – groundbreaking innovations have always been the driving force behind changes in working processes and social structures, thereby helping to create the growth of affluence.
We can visualise this by looking at the growth in global gross domestic product (GDP). For centuries, GDP barely changed at all in a measurable way. Then, with the dawn
1/ The creative power of disruption
of industrialisation, it began to rise sharply, even exponentially. Population growth followed suit. At the beginning of the 19th century, the global population exceeded one billion for the first time. Yet the famines feared by Robert Malthus did not come to pass. Innovations in agricultural technology not only ensured that more and more people could be fed, but also increased prosperity (income per head). Prior to industrialisation, bitter poverty had been the norm for all but a powerful elite. By the early 1980s, the proportion of the world population living in absolute poverty (living on less than US$ 1.90 a day) stood at 45%. Today, it is just 10%, despite the fact that the global population has grown to approximately 7.5 billion. Without innovation, without technology, many would simply have starved (see Chart A/ and Chart B/).
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Creative Disruption
B/ PERCENTAGE OF THE WORLD POPULATION WHO HAS LESS THAN $ 1.90 A DAY TO LIVE.
Source: Thomson Reuters DatastreamAs of: December 2017
1000
2000
3000
4000
5000
6000
7000
8000
1960 1965 1970 1975 1980 1985 1990
Share of World population Living in Absolute Poverty (lhs) World population (rhs)
1995 2000 2005 2010 2015
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35
45
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Figures in percentage Figures in Millions
0
… groundbreaking innovations have always been the driving force behind changes in working processes and social structures, thereby helping to create the growth of affluence.
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C/ GLOBAL AND REGIONAL LIFE EXPECTANCY SINCE 1770
Source: OurWorldInData.org, AllianzGI Global Capital Markets & Thematic ResearchData as of: 2015
Former Soviet Union OceaniaAfrica Americas Asia Europe World
10
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50
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90
0
1770 195019201890186018301800 1980 2010
The decline in absolute poverty has been paralleled by the emergence of a “global middle class.” The World Bank defines the “middle class” internationally as comprising those earning between US$ 11 and US$ 110 a day, based on 2011 purchasing power parity. As the Brookings Institution think tank has concluded, the world recently reached a “tipping point” in September 2018: for the first time, half of the global population are now “rich” or “middle class,” and the other half “vulnerable” or “poor.” Brookings predicts that this trend of declining poverty and a growing middle class will continue. While the number of people considered poor will fall further, the ranks of the middle class are set to swell to 5.3 billion people by 2030.
It is not only the population size that is growing, but also life expectancy. At the end of the 18th century, average life expectancy around the globe was less than 30. Today, it is more than 70. The average American lives to almost 80, and the average European even longer. In Africa, average life expectancy is around 60, while in Asia it is over 70 (see Chart C/).
Growing prosperity is the driver behind these developments, and is leading not only to higher living standards thanks to medical care, access to clean water and electricity, but also to the spread of technology. Over 85% of people have access to electricity.
At the same time, the spread of information is accelerating, and an ever-larger share of the world population has access to knowledge and markets e.g. via smartphones and the Internet (see Chart D/).
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Creative Disruption
D/ SHARE OF THE POPULATION USING THE INTERNET
Source: OurWorldInData.org/internet, AllianzGI Global Capital Markets & Thematic ResearchData as of 2016/17
United Kingdom Germany United States Brazil China India Nigeria
1990 1995 2000 2005 2010 2015
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0
Of course, there is a flip side to everything. This is clearest when it comes to the environment, and especially the level of CO2 in the atmosphere, which has increased exponentially since the Industrial Revolution. The concentration of CO2, which stood at approximately 280 ppm in the centuries prior to industrialisation, is now 400 ppm and rising.
But there is another interesting trend: CO2 emissions per dollar of GDP have declined in recent decades (see Chart E/), as has energy intensity (units of energy per unit of GDP). Though it remains low, the share of renewables in the global energy mix is climbing.
2/ What now?
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E/ CARBON EMISSIONS PER US -DOLLAR GDP
Source: OurWorldInData.org, Allianz Global Investors Global Capital Markets & Thematic Research, Data as of: 2014
United KingdomChina United States World India France
0.5
1.0
1.5
2.0
2.5
3.0
0.0
1820 1840 198019601940192019001860 1880 2000 2020
Kilograms CO₂ per $ 1 GDP
The most important question investors should ask themselves is: “If I follow the paradigm of rational optimism, am I also investing in this “optimism”, this “transformation”?”
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Creative Disruption
Hans-Jörg Naumer, Director Global Capital Markets & Thematic Research, Allianz Global Investors
The world is changing – but is our investment approach changing with it? Rational optimists should consider the following:
1/ Investing in shares – investing in tangible assetsThe most important question investors should ask themselves is: “If I follow the paradigm of rational optimism, am I also investing in this “optimism,” this “transformation?” “Do I participate in innovation and value creation?” This means investing in companies (e.g. through equity strategies) and therefore in real assets. Savings books and government bonds will not cut it.
2/ Investing in the drivers of changeTechnological change pervades every industry and every region. Why not also invest in those companies that are bringing about this change and leading the way in implementing new technologies?
3/ Investing in a better worldThe world may be improving, but there is still a long way to go. Child labour still exists, working conditions remain poor in parts of the world, and some businesses and countries are badly governed. There is still inequality, environmental pollution and an excessive human carbon footprint.... The list could go on.
3/ Investing as a rational optimist
For investors, it is therefore important to invest in a better world. This need not mean missing out on profits. It is striking how “ESG” (Environmental – Social – Governance) criteria have become more important to investment decisions in recent years. The ESG criteria are a growing and evolving catalog of investment criteria that help to direct funds into investments that value environmental protection, good working conditions and good corporate governance. This approach, long used by institutional investors, is steadily gaining importance among individual investors, too – especially with the trend toward integrated ESG among investment professionals/strategists. The ESG criteria are no longer regarded as a category used to exclude investments, but as an integral part of analysis and security selection. Academic studies have shown that this need not be to the detriment of investors.
There are plenty of reasons for “rational optimism.” Things are often better than we think.
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Capital market implications 2019/2020
Iran: Nuclear program & US sanctions
GermanyHow stable is the grand coalition?
Will the US intervene in the Venezuela crisis?
Argentina: Policy change after elections?
Saudi Arabia How stable is the OPEC cartel? Where are reforms heading?
Proxy conflicts in the Middle East
Italy’sbudget
World map of political risks
Hard Brexit?
Our capital market implications give you a brief summary of the baseline macroeconomic scenario. In our world map of political risks, we also take a look at existing and potential hot spots.
“America First“Trade conflict with China & RoW/ Impeachment against POTUS?
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Capital Market Outlook
1/ ECONOMIC TRENDThere is still a loss of economic momentum. Regional and sectoral differentiation continues with Europe and the manufacturing sector – representing the cyclical part of the global economy – on the weak side. Ongoing labour market tightening will entail a further narrowing of the global output gap. Large swings in the terms of trade due to the rise and fall of commodity prices. Biggest risks: global trade war, a hard Brexit and rising tensions in the Near East.
2/ PRICE DEVELOPMENTBase effects of the ups and downs of raw material prices are determining CPI time profile in 2019 – and in 2020. Subdued price pressure in the EZ and Japan while US core rate is ticking up.
3/ MONETARY POLICYThe Fed has shifted to an easing course due to recession fears – further cuts of the Fed funds rate in 2019. This helps EM central banks to focus on domestic issues. ECB with easier monetary policy: lower deposit rate + extended forward guidance + net asset purchase programme. The BoJ remains expansionary due to calm price climate, while BoE actions depend on the Brexit path. China’s PBoC continues to support national economic policy.
4/ FISCAL POLICYExpansionary effects of US fiscal policy are coming to an end. French budget deficit above 3% in 2019. Truce between Rome and Brussels about budget deficit, but no final solution. What is the intention of the new government? Will Germany increase fiscal deficit?
MACROECONOMIC BASE SCENARIO
Russia: Ukraine conflict
China How stable is the economy?The new Silk Road as a geopolitical instrument.
Source: AllianzGI Economics and Strategy. Data as of November 2019 The statements contained herein may include statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions, and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. We assume no obligation to update any forward-looking statement.
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Integrating ESG in emerging markets
An ESG framework for EM sovereign bondsAUTHORS: RICHARD HOUSE AND NICOLAS JAQUIER
The creditworthiness of an emerging market country is dependent on many factors. Typically, investors focus on a range of macroeconomic variables, such as fiscal deficits, debt levels, or the stock of foreign exchange reserves. Healthy macroeconomic indicators are a necessary condition for sound economic development. However, they are not sufficient without further consideration of a country’s performance on longer term issues related to environmental standards, social outcomes and the governance of state institutions. ESG factors are drivers of economic development which will play a key role in determining a country’s ability to repay its debt.
The materiality of ESG factors for sovereign bonds has been documented in our previous research.4 We think that ESG considerations are potentially even more relevant when focusing on emerging markets (EM). Differences in levels of
1/ Why ESG for emerging markets?
socio-economic achievement, the degree of political stability or the respect for the rule of law vary significantly between countries. The emerging market debt (EMD) asset class has grown and become significantly more diversified in recent years, as countries from all regions issue bonds for the first time. Most of the growth over the past decade has come from frontier economies where ESG practices can often be lax.
This is why we developed an in-house propriety ESG framework, which aims to capture these differences. It helps identify long-term factors and dynamics that might not be fully reflected into sovereign bond spreads. We believe that integrating ESG factors in the investment decision making process will help investors mitigate certain risks and improve the quality of their portfolios.
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Our proprietary ESG framework covers over 90 investable EM countries. The first step in building this framework is to select the indicators that are most relevant. The selection is driven by three main considerations: how well an indicator captures a certain dimension; the breadth of country coverage and credibility of the source; and how much control the government has over implementing policies that can directly affect the outcome. In total, 18 indicators are selected from various third-party sources (see Chart A/). We deliberately aim to keep the number of indicators relatively low, in order to make the framework usable. It also makes it easier to identify areas of weakness on which to engage with sovereigns.
1/ Environmental sustainability is a key long-term determinant of an economy’s development. In addition to a broad indicator of countries’ environmental policy goals, we also include direct measures of air quality, natural resources depletion and stress on water sources.
2/ Social indicators are often an outcome of state development policies. Among the wealth of social indicators available, we have focused on five topics that have a large potential for achieving long-term development and where government policies can have a direct impact: gender and income inequalities, educational attainment, the quality of healthcare, access to basic finance and personal security.
2/ ESG framework
3/ Governance indicators assess a number of dimensions, all particularly relevant for investors in sovereign bonds. For instance, we examine the strength of the rule of law, transparency of public accounts, level of corruption of public bodies and stability of the political framework. In addition, we look at the existence of checks and balances on state institutions, such as a free press, established political rights and civil liberties. Transparent policy-making and sustainable growth are frequently associated with a greater likelihood of debt repayment.
For each one of our 18 indicators, Z-scores are calculated, which indicate where each country stands compared to the average on that dimension. The Z-scores are then averaged for each of the three pillars, providing a score for each pillar. Finally, the overall ESG score is computed as a weighted average of each pillar’s score. The environmental pillar is given a weight of 20%, the social pillar 30% and governance 50%. We believe that governance factors have the greatest potential impact on a country’s ability to implement robust environmental standards and achieve favourable social outcomes. Lastly, our ESG scores are normalised on a scale from 0 to 10.
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Integrating ESG in emerging markets
Source: Allianz Global Investors
A/ INDICATOR SELECTION
Pillar Indicator Source
Environmental
20%Environmental Performance Index Yale University und Columbia University
Air Quality (PM2.5 Exposure) World Development Indicators (WDI), Weltbank
Natural Resources Depletion (% des BSP) WDI
Water Stress Index World Resources Institute
Social
30%GINI coefficient WDI
Gender Inequality Index International Monetary Fund
Infant Mortality Rate United Nations (UN)
Life Expectancy WDI
Homicide Rate (per 100'000) UN Office on Drugs and Crime
Mobile cellular subscriptions (per 100 people) WDI
Youth Literacy Rate UNESCO
Governance
50%WGI (Gvt effectiveness, Reg quality, Rule of law) World Bank
Legal System & Property Rights Fraser Institute
Corruption Perception Index Transparency International
Open Budget Index International Budget Partnership
State Fragility Index The Fund for Peace
Press Freedom Reporters without borders
Freedom House Index Freedom House
Transparent policy-making and sustainable growth are frequently associated with a greater likelihood of debt repayment.
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B/ ESG SCORES CORRELATE WITH SOVEREIGN BOND SPREADS
0 2 4 6 8 10
Source: AllianzGI, Bloomberg
Spread (bp)
ESG Score
Saudi Arabia
correlation = – 0.6
EcuadorUkraine
Costa Rica
China
Philippines
Slovakia
The ESG framework is an integral part of the investment process for EM debt as it can help account for differences in sovereign creditworthiness.
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Integrating ESG in emerging markets
The ESG framework is an integral part of the investment process for EM debt as it can help account for differences in sovereign creditworthiness. Deterioration in a country’s ESG score can be expected to be accompanied by wider credit spreads on its bonds. The close link between ESG factors and credit spreads is visible in the significant correlation between the two metrics5 (see Chart B/). Of course the relation is far from perfect, so that deviations of credit spreads from those implied by a simple regression model can be used as an indication of possible richness or cheapness of sovereign credits on an ESG basis.
Due to the limitations of ESG data which are often lagged and slow moving, we find it necessary to complement the analysis with an assessment of whether a country is on an improving or deteriorating ESG trend. This is done as part of our regular internal research process. Complementing the hard data with a forward-looking assessment allows us to reflect more recent changes in policies that might potentially influence ESG quality. For example, the recent weakening of the rule of law in Poland has not yet been fully reflected in the country’s still high ESG score.
Combining the quantitative and the qualitative outputs of the framework generates interesting signals. In particular, countries that flag as cheap on the regression model and are on a positive direction of travel should be of interest as it suggests that ESG factors might not be fully priced in.
3/ Integration of ESG in EMD investment process
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4/ Sustainable and responsible investing (SRI) strategiesThe ESG framework can be used to build exclusion lists, in order to answer investors’ potential concerns on various ESG- related issues, and improve the profile of an EMD portfolio. Filters can be set up for country selection based on the overall ESG score, or based on different weighting for E, S or G. This will enable portfolios to be managed against SRI or ESG benchmarks (such as the JPM ESG Suite of indexes), or tailored solutions to meet client requirements and preferences.
One such approach could be to exclude countries falling below the 10th percentile on each of the three pillars. The idea is to insulate portfolios from the worst offenders on each ESG dimension, making sure that a country performing
particularly badly on any single pillar is still picked up by the filter even if it performs better on the other two pillars. For instance, it ensures that Venezuela is excluded due to significant deficiencies on the governance front, even if it scores above average on the environment pillar.
Besides potentially avoiding outright sovereign defaults, utilising the framework for exclusion strategies, can also help limit exposure to countries where ESG factors are gradually deteriorating, which might eventually lead to underperformance. The trend in Turkey over the past few years has been a good example of how value can be added by an early consideration of ESG factors (see Chart C/).
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Integrating ESG in emerging markets
Indicator Environmental Social Governance ESG Spread Rich / Cheap Direction of travel
Angola 2.9 1.5 1.9 2.0 574 (140) positive
Brazil 8.5 4.8 5.7 6.0 196 13 negative
Chile 5.7 7.3 9.0 7.8 76 (22) positive
China 4.4 7.8 2.6 4.5 60 (237) neutral
Colombia 8.9 5.4 4.4 5.6 126 (83) positive
Costa Rica 8.8 7.7 8.3 8.2 330 246 neutral
Dominican Republic 7.4 4.7 5.1 5.4 265 47 neutral
Ecuador 7.3 6.0 4.3 5.4 786 565 positive
Egypt 4.2 5.9 2.5 3.9 443 96 neutral
El Salvador 7.0 4.4 4.5 5.0 378 122 positive
Ghana 5.1 3.9 6.3 5.4 543 229 neutral
Guatemala 7.0 4.3 4.1 4.7 219 (57) negative
Hungary 9.3 8.1 6.9 7.7 21 (79) negative
India 0.0 4.4 5.1 3.9 121 (252) positive
Indonesia 5.5 6.7 5.3 5.8 124 (72) neutral
Iraq 1.2 3.4 0.3 1.4 523 (337) neutral
Jamaica 6.1 4.5 6.9 6.0 211 32 positive
Kazakhstan 4.9 8.5 4.2 5.6 84 (122) positive
Malaysia 7.3 7.4 6.0 6.7 92 (52) positive
Mexico 6.4 5.8 4.7 5.4 155 (69) neutral
Nigeria 4.8 0.1 2.3 2.2 443 (223) neutral
Pakistan 2.0 2.5 2.7 2.5 496 (94) negative
Peru 6.1 6.5 5.8 6.1 80 (97) positive
Philippines 6.7 5.3 4.5 5.2 80 (159) neutral
Poland 8.5 9.0 7.8 8.3 46 (36) negative
Romania 9.1 7.4 7.7 7.9 118 23 negative
Russian Federation 7.8 7.6 3.8 5.7 142 (56) neutral
Saudi Arabia 1.0 7.9 2.9 4.0 123 (234) neutral
Senegal 6.5 3.3 5.4 5.0 397 143 neutral
South Africa 4.8 3.2 7.0 5.4 296 78 positive
Turkey 5.2 6.6 4.0 5.0 426 175 negative
Ukraine 6.8 8.0 4.7 6.1 470 296 neutral
Uruguay 9.2 7.8 9.2 8.8 114 44 positive
Venezuela 8.0 3.1 0.0 2.5 negative
C/ OUTPUT FROM ESG FRAMEWORK (SELECTED COUNTRIES)
Source: Allianz Global Investors, Data as of November 2019
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Update III/2019
2013 2015 20172014 2016 2018
130
120
110
100
90
TurkeyJPM EMBIG Div
D/ SOVEREIGN HARD-CURRENCY BOND PERFORMANCE (JAN 2013 = 100)
80
Source: JP Morgan. Past performance is not a reliable indicator of future results.
5/ Case study – Turkey
In 2018, Turkey was buffeted by a severe shock as tighter global liquidity conditions and rising geopolitical tensions with the US combined with a build-up of economic vulnerabilities (high inflation, large external imbalances, FX mismatches and rapid increase in corporate debt leverage) to trigger a currency crisis. However, the deterioration in Turkey’s social and governance factors was already evident for a number of years, which eventually made the country significantly less well equipped to deal with the economic crisis.
Social tensions came to the forefront in 2013, when the government cracked down violently on protesters against an urban development plan. Protests were also fuelled by concerns over freedom of the press and limits on social media activity. Social divisions intensified after the ceasefire with Kurdish rebel groups fell apart in 2015 and the insurgency erupted again. Kurdish members of Parliament have been arrested and the Turkish military became involved in the border region in Syria to contain the advance of Kurdish fighters there.
Over the last few years, President Recep Tayyip Erdogan (RTE) worked to concentrate power at the expense of independent institutions. His constant attacks against the central bank kept it from implementing an adequate monetary policy. Independent media have all been taken over by the state and many journalists have been jailed. Following accusations of corruption against his government,
and his family entourage, RTE cracked down on members of the Gulen organisation in the judiciary, military and education systems. The rise in fragmentation erupted with an attempted military coup in July 2016. While the failed coup was testament to Turkey’s social divisions, the backlash proved to have a more lasting effect. RTE purged thousands of suspected Gulen followers from official institutions, and moved to consolidate power the following year, by transitioning to an executive presidency system which greatly weakened the powers of Parliament.
Issues related to social cohesion and governance are now leading to a large brain drain out of Turkey, accentuated by the purge of government bodies following the failed coup. For a long time, many investors judged that mounting concerns on social and governance issues did not have a significant bearing on the broader macroeconomic framework. However, this perception proved wrong as the gradual trend of weakened institutions and concentration of power in RTE’s hands culminated in the replacement of respected economic policy-makers with the president’s son-in-law at the finance ministry. As a result, Turkey has become much less resilient than in the past. The capacity to implement a package of needed economic adjustment measures is now weakened. Since the failed coup attempt, the performance of Turkish government bonds has been significantly weaker than that of the other emerging markets (see Chart D/).
30
Integrating ESG in emerging markets
Richard House, Head of Emerging Markets, Allianz Global Investors
Nicolas Jaquier, Strategist, Allianz Global Investors
6/ Conclusion
Emerging market debt is an increasingly diverse asset class. In this respect, active asset management is key and it should be coupled with a robust, integrated ESG investment process. With this in mind, we have developed a proprietary framework to integrate our assessment of ESG factors into the more traditional analysis of macroeconomic drivers in emerging economies. ESG integration will help investors improve the quality of their portfolios and mitigate certain risks. In addition, investors will need to start engaging with sovereign issuers on the more qualitative aspects of risk, including ESG factors.
31
Update III/2019
1/ What is a PEPP?
The Pan-European Personal Pension Product (PEPP) is designed to offer a new voluntary personal pension scheme to complement existing national pension schemes. Its principal purpose, in addition to promoting cross-border competition, is to enable citizens who work in several Member States over the course of their career to have a uniform savings product.
Currently, only 27% of Europeans aged 25 to 59 say they make personal provision for old age. Moreover, the current interest rate environment means that the pension gap will continue to rise, even for those currently making personal provision for old age. This is because, with life expectancy increasing while the duration of working life decreases,
people are dependent for longer on their savings for retirement (see Chart A/). Statutory social security systems have ever greater challenges to surmount, such as a further tightening of the old age dependency ratio (see Chart B/), i.e. the ratio of pensioners older than 65 to people of working age. The PEPP initiative is a first step at European level to counteract this trend while encouraging investment in the European Union.
For companies that operate in many different European countries and employ their staff across national borders, the PEPP can develop into a key component of compensation, and as such make a strong contribution in an increasingly mobility-driven society (see Chart C/).
PEPP: EU adopts a regulation on a new pan-European personal pension product
A pan-European single market is one of the EU’s greatest achievements. An EU-27 without the free movement of goods, capital and payments is as unthinkable as it is without the free movement of people to live and work within its borders. It is therefore only logical that the EU would also want to launch a Europe-wide pension system. The Regulation on a pan-European Personal Pension Product (PEPP) was the first major step in this direction.
AUTHORS: DR KAI WALLBAUM AND SEBASTIAN PEITZSCH
The political motivation behind the initiative is clear. Occupational and personal pension provision in Europe is an often fragmented market characterised by numerous local tax and regulatory rules, and the PEPP is designed to transform this into a uniform framework. This new direction for private provision is to be accompanied by strong investor protection standards for the whole of Europe. Savers in the European Union are set to benefit from stronger competition,
with a broader range of providers now entering the market, leading to an expectation of lower prices. This will enable providers of PEPP solutions to achieve economies of scale and thus make their schemes cheaper. The European authorities expect PEPP solutions to be offered by insurers, banks, institutions for occupational retirement provision and investment firms.
2/ What is the motivation for introducing PEPPs?
PEPP
32
2014
2015
2016
Source: OECD estimates. Labour market exit age data are based on the results of national labour force surveys, the European Union Labour Force Survey and, for earlier years in some countries, national censuses. Life expectancy data stem from OECD Health Statistics and are based on Eurostat data and national sources.
Life expectancy at age 65 women
Labour market exit age men Labour market exit age women
Life expectancy at age 65 men
A/ CHANGES IN LABOR MARKET (LM) EXIT AGES AND LIFE EXPECTANCY (LE) AT THE AGE OF 65 SINCE 19756
–4
–2
0
2
4
Figures in percentage
6
–6
1975
1983
1981
1979
1977
1976
1978
1980
1982
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
33
Update III/2019
Mex
ico
Source: United Nations World Population Prospects: The 2017 Revision
2015 20501975
B/ NUMBER OF PEOPLE OLDER THAN 65 PER 100 PEOPLE OF WORKING AGE (20–64)
1975–2015 – 20508
10
20
30
40
50
Figures in percentage
60
70
80
90
0
Japa
n
Gre
ece
Fran
ce
Port
ugal
Finl
and
Italy
Ger
man
y
Swed
en
Den
mar
k
Latv
ia
Esto
nia
Uni
ted
Kin
gdom
Bel
gium
Spai
n
Aus
tia
Net
herla
nds
Switz
erla
nd
Slov
enia
Cze
ch R
epub
lic
OEC
D
Hun
gary
Nor
way
Can
ada
New
Zea
land
Aus
tral
ia
Uni
ted
Stat
es
Pola
nd
Icel
and
Irela
nd
Luxe
mbo
urg
Slov
ak R
epub
lic
Isra
el
Kore
a
Chi
le
Turk
ey
The old age dependency ratio will almost double in the next 30 years on average.
In light of broken employment histories and ever-increasing mobility, the ability to transfer pension provision throughout Europe via an attractive product could be an essential component in closing the anticipated pension gap.
Other complementary measures designed to promote broad acceptance include the obligation to provide a basic version with regulated cost parameters, the inclusion of a certain level of investor protection and uniform supervision by the European Insurance and Occupational Pensions Authority (EIOPA).
Although many details are still being clarified, the PEPP is expected to become an important component in pension provision for European citizens in the medium term.
Who can offer a PEPP?7
• Insurers• Institutions for
occupational retirement provision
• Investment firms• Asset managers• Banks
Who can save in a PEPP?7
• Employed/self-employed• Unemployed/ trainees
PEPP
34
Source: KPMG Luxembourg
transparent
simple
cost-effective
PEPP
strong consumer protection
cross-border
C / A NEW UCITS FOR PENSION SAVINGS:
PEPP, THE EU PILLAR 3 PAN-EUROPEAN PERSONAL PENSION PRODUCT
Industry representatives like to compare the initiative to the introduction of UCITS in the European mutual funds market. Over time, UCITS have virtually revolutionised the fund industry, turning local asset management units into pan-European, or even global providers, with the ability to offer more attractive schemes in the various markets through economies of scale. Although introduction of the PEPP is not expected to create this effect in the near future, the potential is immense, with assets under management estimated at approximately EUR 3.5 trillion by 2030. It is important for Allianz and AllianzGI that we contribute our expertise in long-term pension solutions to this framework, too.
3/ What does the PEPP mean for financial services providers like Allianz Global Investors?
Many PEPP characteristics are to be regulated at national level in line with existing guidelines for national products. This seems an essential step if the PEPP is to be treated on a par with existing solutions, but it is also an enormously complex task for providers.
As asset managers in the Allianz Group, pension issues are a part of our DNA. The PEPP brings with it a new opportunity in Europe for employers and individuals, but also for Allianz, to participate actively in solving one of the major challenges of our time – demographic change and the increasing life expectancy of citizens. Against this background and in close cooperation with Allianz Leben, we also intend to provide our institutional clients with support regarding the PEPP.
Sebastian Peitzsch, Global Asset-Life and Pension Business, risklab
Dr. Kai Wallbaum, MBA, FRM, Head of Global Asset-Life Solutions, risklab
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Update III/2019
Source: McKinsey, Bridging infrastructure gaps, 2017. Numbers may not sum due to rounding.
12 136135
Telecommunications ElectricityWaterAirportsPorts Railways
in USD billion (at constant prices)
A/ AVERAGE ANNUAL INVESTMENT NEED IN EUROPEAN INFRASTRUCTURE (2017–2035)
79696016
total
506
Roads
The world in 2040 – Investments in Infrastructure
36
Allianz GIobal Investors Today
Remember the year 2000? There was no Euro, no female Bundeskanzler, no Brexit and no smartphone. Since then the world has changed, and continues to change at an ever increasing pace. One thing is certain – infrastructure and more so digital infrastructure will play a crucial role for further development of society.
Allianz Capital Partners is one of Allianz Group´s asset managers for alternative equity investments and is part of Allianz Global Investors. In March 2019 it launched the Allianz European Infrastructure Fund10 which had its first close end of September at over 600mn. The AEIF allows for the first time professional clients to invest alongside with Allianz in infrastructure projects in Europe. ACP benefits from a strong global network and is a renowned player in the market. This year ACP announced an investment in a Czech gas distribution network and the broadband expansion of Lower Austria.
But no one has the crystal ball. As a long term investor, it is important to understand new technologies and trends that evolve in the coming decades. These trends have to be taken into consideration when making an investment decision. Infrastructure is essential for the economic and social development of society and will remain key in the future (see Chart A/).
The World in 2040 In 2040 we will still need clean drinking water, electricity and transportation. But the way we will live and work will change. With an increasing level of urbanisation, cities will need to cope with providing housing, urban transport, water and energy supply and increasing digital infrastructure. Moreover, population will increase significantly and so will the existing infrastructure. Hence, it is important to continue to further develop the existing infrastructure, improve services, adopt them for future needs and ensure that this is done in a sustainable manner.
Allianz Capital Partners has been investing in infrastructure sectors for more than a decade, and has adopted Allianz´s strict ESG (Environmental, Social, Governance) for all its investments.
Preparing for 2040 Constrained public funding, evolving infrastructure needs and continued corporate activity drive the deal flow in infrastructure. As infrastructure needs are evolving, most sectors are undergoing fundamental changes that require vast amounts of capital. According to a recent McKinsey Study9 there is an annual investment gap of ~ Euro 42bn in Europe. Energy policy changes, electro-mobility, urban growth, digitalisation and the trend towards greater sustainability: these structural changes result in greater demand for infrastructure which comes hand-in-hand with a significant need for capital and create opportunities for institutional investors pursuing a long-term investment strategy only, who are pursuing a long-term strategy.
37
Update III/2019
Is momentum-driven investing dead?Interview with Thomas Zimmerer, Global Co-Head of Multi Asset at Allianz Global Investors
The underperformance of momentum-driven investment strategies in the recent past has caused some investors to wonder: Is momentum dead as a risk factor? Kai Trinkies, Team Lead Conusltant Relations, likes to discuss this issue with Thomas Zimmerer, Global Co-Head of Multi Asset at Allianz Global Investors.
38
Interview
Mr Zimmerer, what challenges are momentum-driven strategies facing at the moment?
Mr Zimmerer, do you believe that momentum-driven strategies can still work despite the flaws you have described? What would a more promising strategy look like?
Thomas Zimmerer: As a risk factor associated with a proven, positive risk premium, momentum remains very much alive. However, that does not mean all momentum investing strategies are in robust health. To the contrary, some of the more simplistic approaches to momentum investing might never recover – and appropriately so. Capturing the risk premium associated with momentum is no easy task, and it cannot be
Thomas Zimmerer: We believe that investors can improve their chances of success by adopting a more sophisticated approach to momentum. This Momentum 2.0 strategy includes the following four elements: following multiple trends with
accomplished reliably with some of the basic trend-following strategies in use today. Many contemporary momentum strategies share some critical flaws: they rely on a single trend, usually from a constant “lookback period;” they are uni-dimensional, meaning that they take into account only direction, ignoring other potentially relevant factors; they operate in a single asset class; or the investment horizon they employ is too short.
multiple lookback periods; employing a multi-dimensional approach; constructing a risk-balanced multi asset portfolio, and adhering to an appropriate, long-term investment horizon.
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Update III/2019
Why does it makes sense from your point of view to analyse multiple lookback periods in order to derive the right investment decisions?
How is a multi-dimensional approach characterised?
You also mentioned the possibility of combining different asset classes in a multi asset approach.
Thomas Zimmerer: Research demonstrates that the optimal lookback period for a momentum strategy – the period with the most predictive power – is eight to nine months. However, research also shows that: 1) The predictive power of lookback periods fluctuates, and 2) Momentum returns for various lookback periods are less than fully correlated over time. To put it another way, there is not just one trend, but rather a number of overlapping trends whose
Thomas Zimmerer: The most popular trend concepts are one-dimensional, meaning they incorporate only a single metric direction. By contrast, trends in the actual market cycle are two-dimensional, meaning that they are
Thomas Zimmerer: Momentum returns across asset classes normally are so asynchronous over time that their returns show virtually no correlation to one another. Using a multi asset approach therefore can deliver diversification returns with suitable portfolio construction. An optimal portfolio construction is one in which the
relative attractiveness to one another changes over time. Given these findings, the most effective approach would be to use a mixture of lookback periods to determine trend signals, rather than any single “best” lookback period. A mixture of lookback periods (e.g., 1, 3, 6, 9, 12 months) yields a more stable alpha result over time than any one of these lookback periods individually.
characterised by the two metrics of direction and strength. Adding the concept of trend strength to a momentum strategy gives investors an important advantage because strength has an impact on trend duration.
risk budget is distributed similarly among the uncorrelated signal sources. Using that framework, with four uncorrelated signal sources and efficient portfolio construction, the excess return potential per unit of risk (risk-return ratio) could be increased significantly.
40
Interview
Kai Trinkies, Team Lead Consultant Relations, Allianz Global Investors
In light of our research, momentum is not dead. To the contrary, it is as strong and healthy as ever.
What role does the investment horizon play in your strategy?
Are you confident that your Momentum 2.0 Strategy will work in real life?
Thomas Zimmerer: Although trend-following strategies rely on short-term, tactical portfolio adjustments to generate alpha, the goal of these strategies is to capture the long-term risk premium associated with momentum. In this context, it is important to understand the term “risk premium” correctly. The strategy will not necessarily reap the expected premium in each year; in fact, the investment return is volatile and can (and will) be
Thomas Zimmerer: In light of our research, momentum is not dead. To the contrary, it is as strong and healthy as ever. The success factors for momentum investing are multi- faceted, and go beyond the trivial task of selecting one lookback window to determine the trend of an asset class. Investors asking if momentum is dead are likely using momentum investment strategies that lack
negative in individual years. While the long-term target return is similar to that achieved by traditional equity and bond investments, the return pattern may be quite different. For this reason, long-term investors with an investment horizon of 10 years or more may make smaller investments in momentum strategies to create long-term diversification effects, provided that they can live with the short term “premium-related risk”.
the important elements that are needed to consistently capture the momentum risk premium. Investors who adopt this more complex, comprehensive and effective model, which we call Momentum 2.0, will find that the momentum factor is very much alive, and that momentum investing can still be exploited to the benefit of investors’ portfolios.
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Update III/2019
All sources and background information
Spotlights1 Page 4: Source: Greenwich Associates. Allianz Global Investors has been named “Greenwich Quality Leader in
Overall German Institutional Investment Management” for the ninth consecutive time in Germany. Moreover, AllianzGI has been named “Greenwich Quality Leader in Overall Continental European Institutional Investment Management” for the third time and “Greenwich Quality Leader in Overall European Intermediary Distribution Quality” for the second time. As at 16/09/2019. A ranking, a rating or an award provides no indicator of future performance and is not constant over time.
2 Page 5: Allianz European Infrastructure Fund S.A. is a reserved alternative investment fund (RAIF).
Integrating ESG in emerging markets4 Page 23: Allianz Global Investors [2017]: Financial materiality of ESG risk factors for sovereign bond portfolios by
Dr. Steffen Hörter, Global Head of ESG Strategy, Allianz Global Investors5 Page 27: The correlation between the ESG score and the logarithm of credit spreads is -0.6. We take the logarithm
of credit spreads since the relation between spreads and credit quality indicators (credit ratings, macroeconomic variables or ESG score) is closer to an exponential fit rather than a linear one. The relation between the two variables remains even when other factors, such as credit rating and macroeconomic indicators, are controlled for.
Global Asset Management Colloquium 20193 Page 11: Equity investments in infrastructure are highly illiquid and only suitable for professional investors pursuing
a long-term investment strategy.
Allianz GIobal Investors Today9 Page 37: McKinsey – Bridging the Infrastructure Gap, 2017. Converted into US dollars at the spot exchange rate of
0.856 on October 10, 2018.10 Page 37: https://de.allianzgi.com/de-de/pro/ueber-uns/presse/pressemitteilungen/20190314-pm-infrastrukturexpertise
PEPP6 Page 33: The trend reversal that led to increases in the effective labour market exit age between the early 2000s
and today can be found in most countries, but not all. The effective age of labour market exit was actually higher in 2000 than in 2016 for men in Denmark, Greece, Iceland, Japan and Mexico and women in Greece, Ireland and Mexico.
7 Page 34: European Commission8 Page 34: The projected old-age dependency ratios differ based on the sources used. This report is based on
UN data for comparison reasons. The largest differences are the following: according to Eurostat the old-age dependency ratio (65+/20–64) would increase by 39 and 19 percentage points between 2015 and 2050 in Spain and Austria, respectively, against 47 and 29 points with UN data. On the other hand, it would increase in Latvia by 33 points based on Eurostat against only 21 points with UN data.
42
Footnotes
All sources and background information
Masthead
Update III/2019 Client Magazine for Institutional Investors
Publisher: Allianz Global Investors GmbH Bockenheimer Landstr. 42–44 60323 Frankfurt/M. www.allianzglobalinvestors.com
Editor in Chief: Kerstin Keller
Project Manager: Maria Rita Raffaele
Editorial Team: Peter Berg, Kerstin Keller, Hans-Joachim Kollmannsperger, Hans-Jörg Naumer, Klaus Papenbrock, Maria Rita Raffaele, Oliver Schütz, Caroline Tschesche
Contact the Editorial Team: [email protected]
Design: Rotwild GmbH, Köln
Layout: Werbemanufaktur Albert, Frankfurt/M
Printing: Schleunungdruck GmbH, Marktheidenfeld
Photographs: Allianz Global Investors, Getty Images, iStock
As of November 2019
Investing involves risk. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on management‘s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. We assume no obligation to update any forward-looking statement. The value of an investment and the income from it may fall as well as rise and investors may not get back the full amount invested. There is no guarantee that the strategy will succeed and losses cannot be ruled out. Investors may not get back the full amount invested.
The volatility of fund unit prices may be increased or even strongly increased. Past performance is not a reliable indicator of future results. If the currency in which the past performance is displayed differs from the currency of the country in which the investor resides, then the investor should be aware that due to the exchange rate fluctuations the performance shown may be higher or lower if converted into the investor’s local currency.
This is for information only and not to be construed as a solicitation or an invitation to make an offer, to conclude a contract, or to buy or sell any securities. The products or securities described herein may not be available for sale in all jurisdictions or to certain categories of investors. This is for distribution only as permitted by applicable law and in particular not available to residents and/or nationals of the USA. The investment opportunities described herein do not take into account the specific investment objectives, financial situation, knowledge, experience or particular needs of any particular person and are not guaranteed. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer and/or its affiliated companies at the time of publication. The data used is derived from various sources, and assumed to be correct and reliable, but it has not been independently verified; its accuracy or completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or willful misconduct. The conditions of any underlying offer or contract that may have been, or will be, made or concluded, shall prevail.
Contact the issuer electronically or via mail at the address indicated below for a free copy of the sales prospectus, the incorporation documents, the latest annual and semi-annual financial reports and the key investor information document in English. Please read these documents – which are solely binding – carefully before investing.
For investors in Europe (excluding Switzerland): This is a marketing communication issued by Allianz Global Investors GmbH, www.allianzgi.com, an investment company with limited liability, incorporated in Germany, with its registered office at Bockenheimer Landstrasse 42–44, 60323 Frankfurt/M, registered with the local court Frankfurt/M under HRB 9340, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (www.bafin.de). Allianz Global Investors GmbH has established branches in the United Kingdom, France, Italy, Spain, Luxembourg and the Netherlands. Contact details and information on the local regulation are available here (www.allianzgi.com/Info).
For investors in Switzerland: This is a marketing communication issued by Allianz Global Investors (Schweiz) AG, a 100% subsidiary of Allianz Global Investors GmbH, licensed by FINMA (www.finma.ch) for distribution and by OAKBV (Oberaufsichtskommission berufliche Vorsorge) for asset management related to occupational pensions.. Details about the extent of the local regulation are available from us on request.
This report does not satisfy all legal requirements on the guarantee of impartiality in investment recommendations and investment strategy recommendations and is not subject to any trade restrictions prior to the publication of such recommendations. The duplication, publication, or transmission of the contents, irrespective of the form, is not permitted.
43
A shocking nine million tons of plastic are dumped in the ocean every year. The need to act is obvious. For the next five years we are partnering with The SeaCleaners in support of their project to combat plastic pollution; this partnership will culminate in ‘The Manta’ taking to the seas in 2023. For us, sustainability is more than just a trend, and that’s why ESG factors have played a key role in our investment decisions for many years.
Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors might not get back the full amount invested. For investors in Europe (excluding Switzerland): This is a marketing communication issued by Allianz Global Investors GmbH, www.allianzgi.com, an investment company with limited liability, incorporated in Germany, with its registered office at Bocken-heimer Landstrasse 42–44, 60323 Frankfurt/M, registered with the local court Frankfurt/M under HRB 9340, authorised by Bundes-anstalt für Finanzdienstleistungsaufsicht (www.bafin.de). Allianz Global Investors GmbH has established branches in the United Kingdom, France, Italy, Spain, Luxembourg and the Netherlands. Contact details and information on the local regulation are available here (www.allianzgi.com/Info). For investors in Switzerland: This is a marketing communication issued by Allianz Global Investors (Schweiz) AG, a 100% subsidiary of Allianz Global Investors GmbH, licensed by FINMA (www.finma.ch) for distribution and by OAKBV (Oberaufsichtskommission berufliche Vorsorge) for asset management related to occupational pensions. AD_927028. August 2019.
“The analysis of ESG factors is an integral part of our investment processes and our holistic, ESG-integrated risk management. Our approach to sustainability goes beyond risk management. Like many of our clients, we acknowledge the wider responsibility of capital. Our long-term view on capital allocation is a key driver and enabler of change, helping to shape the future towards a sustainable economy and to create value for our clients.“
Beatrix Anton-Grönemeyer, Chief Sustainability Officer, Allianz Global Investors
“We consistently implement Allianz’s approach to ESG factors in our investment strategy. We invest in strategic infrastructure companies, ensuring that compliance with ESG principles is a key prerequisite for creating sustainable added value – to the benefit of both our investors and society.”
Christian Fingerle, Chief Investment Officer, Allianz Capital Partners
For more information, visit allianzgi.com/sustainability
ACTIVE IS:BEING COMMITTED WHERE OTHERS CHOOSE TO HANG BACK