Pavilion in the News
S&P 500 Profit Generators Under Threat From Peak Inflation
Bloomberg, April 21, 2017
“The rolling over of inflation expectations and commodity prices presents unique risks for sectors that were large contributors to better earnings expectations,” said Alex Bellefleur, head of global macro research and strategy at Pavilion Global Markets Ltd. in Montreal. “The risk is that markets begin to reassess the forward earnings picture and turn a little less optimistic.”
Could Gulf States Be Forced To Devalue Their Currencies Against The Dollar?
Forbes, March 24, 2017
Fears of a devaluation first emerged in early 2016. Although the authorities in Riyadh and elsewhere have done their best to quash such speculation, the idea is again being discussed among some analysts, with Pavilion Global Markets suggesting that the Saudi authorities “will be forced to either increase interest rates or devalue the currency”.
Will Saudis Devalue Currency With Oil At $50?
Barron’s, March 23, 2017
OPEC countries depend on oil revenue, but they have been forced to cut production to keep prices near $50 per barrel, and the chief among them — Saudi Arabia — could be the oil markets’ biggest loser, Pavilion Global Markets writes today.
The positives and negatives to larger private equity fund sizes
The Alternative Assets Network, February 27, 2017
GPs raising increasingly large funds can be a double-edged sword for potential LP backers.
Gold Hedge vs Dollar: Chart Of The Day
Barron’s, February 24, 2017
The Montreal-based analysts at independent research house Pavilion Global Markets think that gold isn’t getting enough attention in the post-election rally even as members of the new administration talk down the strength of the dollar.
What Happens When Two Bankers and an Engineer Get a Billion Dollars? How Global Infrastructure Partners turned a sleepy sector into one that has investors clamoring for more.
Bloomberg Markets, February 16, 2017
“These assets are big and complicated and require expertise that some managers don’t have. The complexity is often underestimated,” says Jay Yoder, a managing director who oversees real asset investments at Pavilion Alternatives Group, an adviser to institutional investors. “That’s what has helped firms like GIP raise money and generate good returns.”
Indonesia & Commodities: The ‘Resilient’ Emerging Market
Barron’s, February 10, 2017
With Indonesian real rates (about 2%) not as high as those of other EMs, we think that Indonesian bonds remain relatively unattractive. We would rather look into equities rather than bonds to benefit from the country’s still-strong domestic fundamentals and rebounding PMIs…”
Junk May Slam Into $1 Trillion Wall as Maturities Hit Record
The Washington Post, February 8, 2017
Tighter monetary policy, higher volatility, elevated valuations and unfavorable changes to U.S. tax law could all contribute to pressure on spreads and underperformance in the sector, according to a separate report from Pavilion Global Markets, the Montreal-based trading and research firm.
The hedge funds where computers call the shots
Financial News, January 31, 2017
The situation seems to be improving, slowly. Alex Da Costa, director of hedge fund research and consulting at Pavilion Advisory Group, said: “Years ago, AI or ‘neural networks’ as they were sometimes called carried quite a bit of stigma among managers and investors.
How to invest if you think Donald Trump will be good for the U.S. economy
Canadian Business, January 18, 2017
While Aidan Garrib, global macro strategist for Pavilion Global Markets in Montreal, likewise doubts the Trump administration’s ability to effect his plans in the time frame that investors’ widely expect, one area he thinks will get some traction is financial industry deregulation.
Was Emerging Markets’ Trump Selloff Overdone?
Barron’s, January 17, 2017
Trump’s election briefly curtailed markets’ interest in EM assets late last year. As markets get a clearer picture of the outlook for the U.S. economy, we see them rotating back into EM assets … we think there is an interesting entry point into EM U.S.-dollar bonds and into more cyclical EM equity sectors …
One of Trump’s biggest plans to stimulate the economy won’t be great for most Americans
Markets Insider, December 21, 2016
Companies that benefitted the most immediately hired more workers. But the pace was inconsistent, Pavilion said, adding that some of these new workers may have been accountants and lawyers needed to implement the repatriation. To be fair, the number of employees they had right before the recession was higher compared to the trough when the AJCA was passed.
Uncertainty Can Push Term Premiums Higher
Barron’s, December 19, 2016
Investors may be asking themselves about the term premium. Pavilion argues that it can grow from here. While the term premium is up since the election, it’s still actually low in recent historical terms.
Why Lithium Prices May Fall As Auto Battery Demand Rises
Barron’s, December 2, 2016
Lithium prices could start to fall soon, and investors should differentiate between battery technology and the raw commodity.
So say the analysts at Strategy-Pavilion Global Markets, who point to the supply of lithium-ion batteries to be produced at Tesla’s Gigafactory in Nevada.
Even before Trump, US exporters complained that the dollar was too strong
CNBC, November 22, 2016
Research from Pavilion Global Markets from early in the third-quarter earnings season showed that the strong dollar was the top reason cited by companies for bad earnings — more than wages, oil prices, the election, Brexit, the Federal Reserve or China. That data came out four weeks before the election.
Key steps to mentorship success
Investment Executive, October 31, 2016
Dedicating blocks of time specifically for the purpose of mentoring and away from the day-to-day hustle of meeting with clients is important to reassess objectives and determine if goals are being met, says Steve Sebag, a private wealth counsellor in Montreal with Pavilion Investment House, a division of Pavilion Advisory Group Ltd.
Why Gold Can Recover From Its Recent Fall
Barron’s, October 19, 2016
So what’s causing this anomaly? It may be a readjustment in market positioning, given that long gold positions were recently at their most “extreme” in years, Pavilion writes. After the turmoil, positions are now much closer to average.
Everyone Is Blaming the Dollar for a Rough Earnings Season
Bloomberg, October 12, 2016
“If they go ahead and hike at this point, the dollar issue becomes a greater problem,” Alex Bellefleur, head of global macro research and strategy at Pavilion, said by phone. “It’s the issue that’s back at the forefront of this earnings season. I’m not sure the problem will go away soon. It seems companies were so used to having a weaker dollar in the previous cycle and at this point it just isn’t.”
Facing losses, energy firms ask investors for more time, money
The Wall Street Journal, September 26, 2016
“There are no good options when an energy fund reaches the end of its life at the bottom of the cycle,” said Jay Yoder, head of real assets at Pavilion Alternatives Group, a Sacramento, Calif., firm that advises private-equity investors. “The number of energy funds that need more time is at a level we’ve not seen before.”
For ETF providers, penetrating target-date fund market a challenge
Investment News, September 23, 2016
“Jennifer Flodin, Chicago-based DC practice leader and senior consultant for Plan Sponsor Advisors, a division of Pavilion Advisory Group Inc., hasn’t heard requests for ETFs as core investments or white-label investments. “I don’t see the benefit of doing this in defined contribution plans at this point,” said Ms. Flodin, whose DC clients hold assets ranging from $20 million to $8 billion.”
When this happens, you’ll know the oil industry is in trouble again
Business Insider, September 17, 2016
“If you start seeing a slowdown in Indian demand — although it’s only 4.5% of global oil demand — it still just doesn’t bode well for overall demand, given the negative outlooks and the negative pictures that we’re seeing everywhere else,” said Aidan Garrib, global market strategist at Pavilion Financial Corp.
Safety trade leaves S&P 500 on knife’s edge as valuations soar
The Globe and mail, September 12, 2016
“High valuations in these sectors have been directly proportional to the compression of the term premium demanded in holding long-term bonds, so you could pay a high valuation for dividend yields, staples and utilities,” Alex Bellefleur, head of global macro research and strategy at Pavilion Global Markets in Montreal, said by phone. “What happened late last week was a scenario in which people rethink that.”
Looking for Dividends? Try Japan
Ein News Desk, August 15, 2016
Japan isn’t normally the place where one goes when on the hunt for yield. Yet recent trends in Japanese dividends have us thinking again. For the first time in a long time, the Japanese equity market has a “normal” dividend yield.
With China Quiet, Emerging Markets Diverge On Fundamentals
Barron’s, August 5, 2016
When China doesn’t sneeze, emerging markets don’t get a cold. In fact, what happens is that investors may focus more on country and currency fundamentals, say the folks at Strategy-Pavilion Global Markets. That is especially as China stays out of the headlines as its equity market struggles.
Are Frontier Investments Better Than Emerging Markets?
Barron’s, July 27, 2016
The riskiest developing markets are categorized as “frontier,” which has proved a better investment category than emerging markets in recent years.
Entering the Swamp: S&P 500 Hits New High as Dow Flirts With Its Own
Barron’s, July 12, 2016
Stocks are surging despite the fact that earnings will likely be weak–again. The folks at Pavilion Global Markets explain: Q2 corporate earnings will likely remain weak. Sales growth is tepid and operating margins are under pressure. This will permeate profits. However, don’t expect a surge in earnings misses…
DC Plan Risk, and How to Manage it
Institutional Investor, July 7, 2016
Institutional Investor, July 7, 2016 – Determining the plan design structure inclusive of auto features and whether or not to offer a Roth 401(k) option are examples of decisions that need to be made thoughtfully, taking participant demographics into account, says Flodin. Dimilarly, education all too is not tailored to participants’ level of financial literacy. “Consider an approach that talks about overall financial wellness instead of stale large-vs.-small-cap discussions,” she suggests.
Pavilion Financial Corporation to acquire Altius Holdings Ltd.
June 28, 2016
Read more on: Private Equity Wire – Global Investor – Pensions&Investments – Acquisition International – International Securities Services – Money Management – SWFI – HFMweek – Financial Standard – Asset Servicing Time – Financial News – Realdeals – ACQ5 – International Investment – Institutional Asset Manager – The PE Hub Network – Unquote
Brexit Steamrolls Fed Model for Stock Bulls as Bond Yields Drop
Bloomberg, June 28, 2016
With Treasury yields approaching 1.40 percent Monday, rising rates seem like the least of anyone’s problems. Still, should yields start to rise with economic growth still sluggish, the Fed’s warning would be relevant to equity owners, according to Alex Bellefleur, head of global macro research and strategy at Pavilion Global Markets.
Buy Emerging Market Local Debt, Or Focus On Bad Loans?
Barron’s, June 23, 2016
“…there are reasons investors should be positive on emerging market debt: emerging markets have issued roughly $65 million in euro-denominated bonds so far this year, and Pavilion Global Markets writes that emerging market debt is “set for a record year.”
So Peaceful Until…: Dow Gains 2 Points, S&P 500 Ticks Up in Yawner of a Day
Barrons, June 1, 2016
Then again, something could make the sky cave in and the devil cut loose. The folks at Pavilion Global Markets worry about the debt levels of companies in the S&P 500:
In recent weeks, we have written at length about the deteriorating earnings results and prospects of U.S. corporations. However, another trend has taken place at the same time: a general increase in leverage among U.S. companies. Indeed, the percentage of S&P 500 companies with a lower debt-to-assets ratio than a year ago is now at its lowest point since the 1990s. This signals that the corporate deleveraging impulse that took place initially after the 2007-09 recession is over…
Understanding risk in hedge funds
Pension&Investment, May 24, 2016
Risk-management practices assist managers in both monitoring and reducing their funds’ exposures to unwarranted risks, and reducing exposures to downside risk. Historically, hedge funds invested little in the way of risk systems beyond unsophisticated spreadsheets, and offered low transparency around strategies, risk and market outlook. Following the financial crisis of 2008, increased regulatory and public scrutiny, combined with additional compliance and monitoring, have put significant pressure on hedge funds to better measure and control risk and to be more transparent in the process.
Want to stay in your home forever? Be aware of the costs of home care
24News, May 22, 2016
There are two levels of costs to consider if you want to stay in your home through retirement – one for maintenance and upkeep on your home and the other for home care services to help when you’re unable to look after yourself. Maintenance issues may be more of an issue than you think.
Cary Williams of Pavilion Investment House in Edmonton says it’s simple to arrange for someone to cut the grass and shovel the driveway. “But there are a lot of small things that go into better living, like making sure the furnace filters are getting changed.”
Reports saying hedge funds are dead could be a bit premature
Pension&Investment, May 18, 2016
Hedge fund returns as represented by the HFRI Fund Weighted Composite index were down 1.1% in 2015, and the downdraft continued into 2016 as the index declined 0.7% in the quarter ended March 31.
The biggest driver behind the catcalling about hedge funds is the poor investment environment that’s plagued all active managers for the past couple of years, said Alex Da Costa, director-hedge fund research and consulting at Pavilion Advisory Group Ltd., Montreal.
“In the first quarter, the V-shaped sell-off was followed by a sharp rebound. Hedge fund managers tend to get whipsawed in these kinds of environments,” Mr. Da Costa said, adding “it’s been tough for managers with the S&P 500 trading in the 300-point range over the last two to three years.”
This Canadian energy company is one of Berkshire Hathaway’s biggest holdings
Yahoo Finance, May 2, 2016
Will Buffett’s rising interest in Suncor be seen as a validation by shareholders and potential investors, many of who are disillusioned by the struggling oil industry?
“I don’t want it to sound like I’m making a recommendation but we can take his behaviour as a lesson,” says Marshall McAlister, a chartered financial analyst with Pavilion Investment House in Edmonton. “If he’s one of the greatest investors in the world maybe we should take a lesson that owning businesses over a long time is the wise thing to do.”
ETFs to Hedge Against a Poor Earnings Season
ETF Trends, April 7, 2016
While slightly less pessimistic, FactSet projects first quarter earnings to decline 8.5%, which is significantly lower compared to its previous estimated earnings growth rate of 0.8% for Q1 2016 at the start of the year.
Alex Bellefleur, head of global macro strategy and research at Pavilion Global Markets, argues that the earnings results will be insufficient to justify current valuations, which suggests that the equities market could have a hard time ahead.
Consequently, investors seeking to hedge against a potential pullback in an expected weak earnings season may turn to inverse or short ETFs.
U.S. Braces for Worst Earnings Season Since 2009 Crisis: Chart
Bloomberg, April 7, 2016
U.S. corporate profits are expected to drop the most in 6 1/2 years in the first quarter, led by a wipeout in the embattled energy sector. Earnings for companies in the Standard & Poor’s 500 Index will fall 9.8 percent year-over-year, which would be the sharpest decline since the third quarter of 2009 and a fourth consecutive quarter of contraction, according to Bloomberg data. Results will be insufficient to justify current stock valuations, says Alex Bellefleur, head of global macro strategy and research at Pavilion Global Markets.
This private equity fund’s goal is to help grow the family farm
Financial Post, April 6, 2016
Armand Kessous, private wealth counsellor and principal at Pavilion Investment House in Montreal, said Area One also provides good value for the high-net-worth Canadian families he advises. After 2008, many of them became more conservative with their savings, making farmland a particularly attractive store of value.
“You can buy land and lease it, but it’s not worth it,” he said. “By getting higher yield, you drive the value of the land higher. It’s a professional that will do that properly.”
Investors should pay attention to this overlooked emerging market
The Globe and Mail, March 30, 2016
For investors beginning to reconsider their aversion to emerging markets, one overlooked developing economy deserves some attention, according to Pavilion Financial Corp.
Emerging-market stocks have not fared well ever since the U.S. Federal Reserve started talking about curtailing the bond-buying program known as quantitative easing in 2013.
But the Philippines is an “emerging market exception,” Pavilion said in a strategy note.
“In contrast to many other emerging markets, there is a compelling case to look at opportunities in Philippine equities,” the authors said, citing rising incomes, a growing service-export sector, and expanding infrastructure spending. “As equity prices come off their highs, investors should take a look.”
Investors pile into Brazilian equities over bets on imminent regime change
Financial Post, March 18, 2016
“Investors are betting on regime change,” said Alex Bellefleur, head of global macro strategy at Montreal-based Pavilion Global Markets. “Dilma’s policies have been a complete disaster for Brazil, so investors are really looking for her to go away, and have a new government with better policies to curb inflation, make the structural reforms to get the budget deficit in line, get productivity back up, and to thrive in a world with lower commodity prices.”
Rousseff has faced criticism as her policies to stem inflation and boost growth haven’t panned out. This contributed to a massive credit bubble in parts of the Brazilian economy, and everything unraveled when commodity prices started falling.
Automating 401(k) Investing
Treasury & Risk, March 9, 2016
Donald Stone, director of DC strategy and product development at Pavilion Advisory Group, said plan sponsors struggle to provide unconflicted advice to participants at a reasonable cost.
“It’s not easy to do either one of those,” he said. “I think the robo-advisers can play a role in that regard. I think they’ll play more of a role at the small end of the market than the mid or large end.
Canada misses out on new auto assembly plants
Globe and Mail, February 16, 2016
Automotive credit is tightening and is expected to hit sales in the United States analysts at Montreal-based Pavilion Global Markets Ltd. said on Monday, echoing comments made by U.S. analysts in recent weeks.
“Mexico and Canada likely will also feel some consequences from a peak in the U.S. auto cycle,” Pavilion’s analysts said. “Both countries’ auto sectors depend on U.S. demand and are integrated closely with the U.S. industry. A peak would hurt both countries, but especially Canada, where there has been evidence of a loss of competitiveness in recent years.”
NAPA Announces 2016 401(k) Advisor Leadership Award Semifinalists
NAPA-Net, February 9, 2016
Previous winners of the award include the advisory team at Retirement Resources, represented by Jim Phillips and Patrick McGinn; Kathleen Kelly, representing Compass Financial Partners, LLC; Fiduciary Consulting Group @ PSA, represented by Jania Stout; Plan Sponsor Advisors, represented by Jennifer Flodin, Angelo Auriemma and Donald Stone; Michael J. Malone of MJM401K; Sean Waters, Cook Street Consulting, Inc.; Fred Reish of Drinker Biddle & Reath; and Bill Chetney, then of National Retirement Partners.
Inside the mind of the consultants
CTA Intelligence, February 7, 2016
Recent studies looking at a century of data have backed up the case for trend-following. Alex Da Costa, Director of Hedge Fund Research and Consulting for Pavilion Advisory Group in Montreal, says: “One of the great things about the space is a lot of managers have long track records, are more established, have had managed risk over time…they know how to manage the downside.”
Will Cheap Oil Bust US Banks?
Barron’s, January 28, 2016
With the high-yield market signaling trouble ahead for many oil companies, the market has started to become worried that rising defaults in the oil patch will hit U.S. banks. The folks at Pavilion Global Markets think that’s unlikely:
Aside from HY debt holders, many see U.S. banks as another potential casualty of crashing oil prices. Some sources point to total exposure of U.S. banks to the oil and gas industry to 3-5% of their assets. Last November, a joint review by the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) assessed the risks coming from U.S. banks’ aggregate oil portfolio2, which totaled USD 276.5 billion (or 7.1 percent of the total USD 3.9 trillion syndicated loan portfolio of large U.S. banks in all industries).
India’s Consumer: An Emerging Market Bright Spot?
Barron’s, January 14, 2016
If you have to be invested emerging markets, a bet on the Indian consumer is a way to find value in an otherwise unattractive asset class, according to Pavilion Global Markets.
Though “things could get worse before they start getting better,” India’s economic growth of about 7.5% year over year is likely to be one of the brighter spots in the emerging market space this year, Pavilion says. That will be fueled by the country’s slow-moving reform agenda, which could triple spending on road improvements, which “should rapidly translate in GDP growth.”
Bets against Saudi Arabia’s currency peg may be premature
Morningstar, January 13, 2016
Many market strategists believe that, though the country has hemorrhaged money over the past year-and-a-half as falling oil prices left it with a massive budgetary shortfall, bets against the currency peg are premature.
“We are not claiming the exchange rate peg is indestructible, just that authorities have a number of other, less drastic policy alternatives available to them before considering such a drastic change.” said strategists from Pavilion Global Markets.