strategies and investing with those clients across the board Broadly speaking, China has three bond markets 2: an onshore CNY-denominated market, an offshore CNH-denominated market, and an offshore “international” market denominated in other currencies, predominantly US dollars (Figure 1). The investor base in China is unlike most other markets. Cambridge Associates Private Equity Index search trends: Gallery Cool picture of listed performance p listed Cool picture of performance p listed u. s. Perfect picture with p listed u. s. sp listed Need more pictures of u. s. sp listed thomson reuters like this for 2016 Why we will continue to love sp listed thomson reuters u.s. in 2016 FIGURE 3 INBOUND BOND PROGRAMS FACILITATE FOREIGN INVESTMENT IN CHINA In general, policy bank bonds and CGBs are the most liquid, and local government bonds and certain credit segments are deemed illiquid. In June 2018, repatriation and holding period restrictions for QFII/RQFII funds were removed, and in June 2020, quota restrictions were abolished and procedures for the repatriation of funds were simplified. FTSE Dim Sum (Offshore CNY) Bond Index diversity of managers within their portfolio we are looking for 2015—2020 • US Dollar (billions). Notes: Daily volume data are represented by the average daily traded values in USD terms for the past six months. Thomson Reuters and Cambridge Associates Create Innovative Online Platform for Private Fund Performance Benchmarks. Notes: Estimates are subject to change. This paper provides an update to our 2017 introduction 1 to the onshore Chinese bond market and discusses the outlook for the market and other considerations for investors. Data as at 1Q86 or earliest available to 4Q17, and de-emphasizing 2008 and 2009 returns at one-third the weight, due to the extreme volatility and wide range of performance which skewed results. Source: Cambridge Associates, Bloomberg. class talent and ideas. Since 2016, Chinese authorities have implemented various programs and measures to improve the accessibility of the onshore bond market for foreign investors. who is managing money and also how they have to think about traditionally you'll see that the assets with diverse managers This is the Cambridge Associates, LLC company profile. ALIGN WITH DEVELOPED MARKETS SOVEREIGN BONDS outside of how the industry has traditionally recruited so I'm curious as It is devoted to helping family ownership groups with growth aspirations to build shareholder value and achieve multigenerational success for their financial wealth, businesses, family offices, ownership groups, and family members. Senior Investment Associate at Cambridge Associates Greater Boston Area 291 connections. Sources: China Central Depository & Clearing Co., Ltd., FTSE Fixed Income LLC, J.P. Morgan Securities Inc., and Wind. (Source: Bloomberg). Pleasure to be with you their portfolios. emerging manager programs . However, international credit rating agencies have been able to operate in China since 2019, with S&P and Fitch approved and Moody’s application still pending. not have a specific emerging manager port program as you'll see The Bond Connect further eases investor concerns over repatriation and capital account risk since the assets are held and settled offshore. So while we definitely are have at some firms or a diverse manager program. Source: China Central Depository & Clearing Co., Ltd. Note: Credit default data for 2020 are as of October 31, 2020. RMB-hedged China bond exposure is thus not a yield play, but a bet that bond yields will fall (i.e., a hope for capital appreciation) or hopes that Chinese yields will rise less than global yields should interest rates normalize. Sources: Bloomberg Index Services Limited, FTSE Fixed Income LLC, and Thomson Reuters Datastream. industry. J.P. Morgan will complete the inclusion of CGBs in its Government Bond Index-Emerging Markets Global Diversified Index by the end of 2020, and FTSE recently announced that CGBs will be added to the World Government Bond Index over a 12-month period starting in October 2021. Negative carry for CNH has generally been higher than CNY and has become more volatile since 2015, as the PBOC has routinely intervened in the offshore market to squeeze short sellers and support the RMB. Read more: Fund Allocator Plots Extra $20 Billion for Minority Managers A few hedge funds have changed the make-up of their senior ranks. Inclusion of an ETF on this list does not indicate that Cambridge Associates endorses the ETF or has conducted any form of investment review. fifth iteration of a wave of sort of diversity hiring that we've Join us to hear from Cambridge Associates’ thought leaders as they discuss diversification options across a variety of asset classes including cash and emerging market sovereign debt, hedge funds, credit, and real assets. Returns are available from January 2003 for diversified indexes. Cambridge Associates. MSCI data provided “as is” without any express or implied warranties. Jasmine I'm curious which clients of yours are coming to ... heavily utilizing Bloomberg Terminal While there are a few large and liquid ETFs, the size of assets under management for the majority is small (less than US$100 million) and comes with relatively poor liquidity, especially for US investors. Start to think All content is posted anonymously by employees working at Cambridge Associates, LLC. As Chinese government bonds are added to global fixed income benchmarks, overall index returns may be boosted by China’s yields and volatility will likely be lowered because of the risk/return profile and correlations of onshore Chinese bonds. So what we're doing is having conversations where Source: Bloomberg L.P. As of October 31, 2020. Since the launch of the CIBM Direct, further reforms have been made to address investor concerns surrounding settlement cycles and the ability to trade onshore CNY currency forwards for hedging. Concerns over credit quality and credit risk in China are warranted. Total returns for MSCI Emerging Markets Indices are gross of dividend taxes. In practice, both renminbi and yuan are used interchangeably for the Chinese currency. The Cambridge Associates’ benchmarks are reported on a one -quarter lag from the end of the performance quarter due to the report ing time frame of private investments fund managers. So Indeed, most bond markets have average volatility in the 3%–4% range (Figure 10). underwrote telecom private equity funds and we invested over 200 The Cambridge Associates’ benchmarks are reported on a one -quarter lag from the end of the performance quarter due to the report ing time frame of private investments fund managers. The ease and scalability of the access channel has contributed to its popularity, and as of October 2020, there are more than 2,200 approved investors from across 33 jurisdictions on the Bond Connect. Sources: J.P. Morgan Securities Inc. and Thomson Reuters Datastream. What we're doing is widening their their aperture of of going The onshore bond market can further be subdivided into the Chinese Interbank Bond Market (CIBM) and the exchange-traded bond market. both gender as well as underrepresented ethnicities and race All Rights Reserved. SINCE INCEPTION RISK/RETURN CHARACTERISTICS: J.P. MORGAN CHINA BOND INDEXES The index covers fixed-rate securities issued by governments, agencies, supranationals, and corporations. Look like it. The emerging markets country indexes included are: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, the Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey, and the United Arab Emirates. particularly when you're looking for the black community to come Thus, China has one currency (the RMB), but two different prices (onshore CNY and offshore CNH). Sources: Bloomberg Index Services Limited and China Central Depository & Clearing Co., Ltd. Cambridge Associates defines diverse managers as those from underrepresented ethnicities, races and genders. Source: Bloomberg, Cambridge Associates. Buyout Index. Currently, foreign investors account for around 4% of bond holdings. Chinese government bonds also exhibit low correlations to other bond markets, and in fact are more correlated to developed markets sovereign bonds than to emerging markets sovereign bonds. J.P. Morgan JACI China Index The CNY code refers to the RMB traded onshore (with values set by the People’s Bank of China [PBOC]), and the CNH code refers to the RMB traded in Hong Kong by offshore investors. ... • Completed Bloomberg Certification and used Bloomberg Terminal for equity analysis. Notes: All figures shown are annualized. seen on Wall Street. Total Returns for MSCI Developed As of October 31, 2020. Onshore currency hedging provisions are also available to help investors manage foreign exchange risk, and block trading has been allowed for sizeable trades. Institutional investors should consider dipping their toes into cryptocurrencies, according to Cambridge Associates, a consultant for pensions and endowments. invested on behalf of. I interviewed at Cambridge Associates, LLC (Boston, MA (US)) in September 2020. BLOOMBERG BARCLAYS CHINA AGGREGATE INDEX WEIGHT List is based on author’s knowledge of ETFs’ existence at time of publication and is not necessarily a complete representation of available ETFs. Source: China Central Depository & Clearing Co., Ltd. if they are investing in areas that disproportionately impact increasing focus such as it could be a pension at a corporation diverse managers. Richards, who is 39 and based in Boston, spoke to Bloomberg News about what needs to change in the industry and the role allocators -- institutional investors in hedge funds and private equity funds -- can play. It is also common for the more credit-focused funds to invest in both the onshore and offshore bond markets, seeking to capitalize on relative pricing differences. Infrastructure private equity: Cambridge Associates index of 86 infrastructure private equity funds covering vintage years 2002-2016, based on net internal rate of return (IRR) to limited partners; infrastructure private debt: two public indexes with equivalent Most bonds in China are rated by domestic rating agencies, whose ratings are not comparable with those of international rating agencies. MSCI All Country World Index The process took 2 weeks. them up to be you know the heads of banks or other finance and our approach here at Cambridge Associates is really taking a So thank you for asking that question. While we have advised a gradual approach to investing in China, today we believe that investors should take a systematic and comprehensive approach, overweighting Chinese assets relative to their index weights. FIGURE 2 CHINA’S ONSHORE BOND MARKET IS THIRD LARGEST IN THE WORLD For some investors, this may be politically unappealing or contentious with key stakeholders. Dedicated Chinese bond allocations may be appealing to investors that have RMB liabilities or spending needs. Thus, investors must decide whether they are comfortable with the currency risk or willing to sacrifice yield to hedge it out. Notes: CNY-denominated market is represented by the ChinaBond New Composite Index; CNH-denominated market is represented by FTSE Dim Sum Bond Index; and USD-denominated market is represented by the J.P. Morgan Asia Credit Index (JACI) China. seeing really an awakening across the different asset owners of the case is that you will get to the diversity of thought The developed markets country indexes included are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. However, the RMB remains a major concern for investors, as currency weakness could wipe out any extra return from higher yields. Total may not sum to 100% due to rounding. FIGURE 4 CENTRAL GOVT BONDS ACCOUNT FOR 1/5 OF THE MARKET if they need to know the names of different recruiting networks more creative about what sort of experience you really need Sources: Bloomberg Index Services Limited and Bloomberg L.P. As of October 31, 2020 • Percent (%). Based on the current assets under management of these benchmarks, the resultant estimated index-related flows into onshore bonds are in the range of US$290 billion. there is merit there you can also look at on the private side in The J.P. Morgan JACI China Index is a subset of the J.P. Morgan Asia Credit Index and measures total returns of liquid USD-denominated debt in mainland China. What we're doing is As of October 31, 2020 • Percent (%) • US Dollar (billions). Furthermore, depending on the regulator, some corporate bonds trade on both the CIBM and the exchange-traded market, while others are mutually exclusive. Salaries posted anonymously by Cambridge Associates, LLC employees. Glassdoor gives you an inside look at what it's like to work at Cambridge Associates, LLC, including salaries, reviews, office photos, and more. Percent (%). Please see Aaron Costello and Han Xu, “China’s Onshore Bond Market: An Introduction, Cambridge Associates LLC, 2017. ChinaBond New Composite Index Published Data: When the vast majority of a benchmark group’s (organized by asset class, e.g. Data reflect performance for the following indexes for the 15-year period, 2002-2016. which I think will have sustainable impact . you can have a venture capital fund that focuses on investing in While the CIBM Direct and Bond Connect schemes have helped to facilitate foreign investors’ access to onshore China bonds, reforms have also been made to the original inbound schemes—the Qualified Foreign Institutional Investors (QFII) and Renminbi Qualified Foreign Institutional Investors (RQFII) schemes (Figure 3). Foreign holdings of onshore bonds now exceed US$400 billion and are set to rise further as Chinese bonds are added to major global fixed income indexes. FIGURE 5 CREDIT DEFAULTS CONTINUE TO RISE As of October 31, 2020. Sources: Cambridge Associates LLC, MSCI Inc., Oxford Economics, and Thomson Reuters Datastream. Bloomberg Live uses the power of data and media to create newsmaking events and provide thought leadership to the leaders of the business world. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS, and CMBS (agency and non-agency). Cambridge Associates, the investment consultant that has ramped up its focus on asset management, added a small private college endowment in Oregon to its list of clients. MSCI data provided “as is” without any express or implied warranties. companies. January 31, 2004 – October 31, 2020 • Local Currency. In addition, investors with high conviction in RMB strength and willingness to tolerate the extra volatility may find unhedged RMB bonds more attractive than global bonds or a complement to such exposure. Given that China has historically kept a tight leash on the RMB and that for much of the 2004–20 period the RMB has appreciated, the volatility of Chinese government bonds in USD terms over this timeframe has been only marginally higher than it is in local currency terms and has comparable volatility to US Treasuries. Estimated flow impact calculated as estimated AUM benchmarked to index multiplied by Sources: Barclays, Bloomberg Index Services Limited, FTSE Fixed Income LLC, and J.P. Morgan Securities, Inc. Once CNH hedging is factored in, the yield on Chinese bonds falls from 3.25% to 0.81%. In today’s yield-starved environment, China’s bond market stands out. CEO or CFO because that limits you too much. For context, this amount is less than the total CGB bond issuance in the first six months of 2020. where they recognize that their staff is intensely diverse in At the same time, hedging the RMB is costly. Cambridge Associates (CA) has decided to (1) adopt distribution and commercial policies that are more in line with other performance/index data providers, and (2) partner with IHS Markit, a world leader in critical information, analytics, and solutions, to leverage their global financial markets data and index distribution platform. She specializes in manager research for U.S. and Canadian equities, 130/30 hedge funds, index funds and alternative beta. This multi-currency benchmark includes Treasury, government-related, corporate, and securitized fixed-rate bonds from both developed and emerging markets issuers. estimated final index exposure. understand that there still is ample time out there. Investors will need to determine whether the return potential and diversification benefits of Chinese government bonds outweigh the above factors. ... Investors should not plan to make any big trades based on their views on Brexit, according to consulting firm Cambridge Associates… Defaults in 2020 have increased as a result of the pandemic, but monetary policy easing by the PBOC and a relaxation of corporate fundraising restrictions have helped to lower companies’ financing costs and improve liquidity. Others includes government-sponsored bonds, asset-backed securities, and mortgage-backed securities. strategies across the board. Copyright © 2021 Cambridge Associates LLC. intentions around diversity as an example. Foreign investors hold very few corporate bonds or local government bonds, largely for the liquidity and credit risks discussed above. In February 2016, the introduction of the CIBM Direct Access program allowed foreign institutional investors to access the CIBM with no investment quotas or repatriation restrictions applied. so they can expand their recruiting practices. Cliffwater Research – U.S. Mezzanine Debt Page 3 of 6 Data as of March 31, 2018 . The CIBM is regulated by the PBOC and is supported by the China Central Depository & Clearing Co., Ltd. More than half of the market is considered “AAA.” Generally speaking, the informal threshold for “investment grade” is AA; issuers that would fall below AA simply opt to remain “unrated.”. Concerns over liquidity, the quality of financial disclosures, and the reliability of corporate data only add to the skepticism. As of October 31, 2020. So that's one of the pieces of our current The Bloomberg Barclays US Aggregate Bond Index measures the investment-grade, USD-denominated, fixed-rate taxable bond market. Cambridge Associates (C|A) is a leading global investment firm. we're partnering with managers to provide those resources. Buyout Index. While the number of ratings issued by global agencies remains low for the moment, the gradual availability of international credit ratings will help to provide greater clarity on the credit quality of China’s bond market and increase investor confidence over time. At the moment, the number of active managers with dedicated China fixed income strategies is limited. Given that Chinese central government bonds are the focus of global and emerging markets bond indexes inclusion, we will focus primarily on the risk/return characteristics of this segment. The name and abbreviation for China’s currency is often a source of confusion for investors. We recently Although CNY and CNH closely track each other, they can at times diverge. Ultimately, most foreign investors only consider the CGBs and policy bank bonds as “investable,” and these are the two segments included in global bond benchmarks. Cambridge Associates is a privately held investment firm based in the United States. 3-Year : 5-Year . This contrasts with global bonds and emerging markets bonds, which have USD volatility double and triple, respectively, their local currency volatility. today. By contrast, emerging markets bonds and currencies tend to sell off as foreign investors pull out of the market and domestic institutions can’t absorb the selling, resulting in negative emerging markets bond returns in hard currency terms. In contrast, most of the countries that make up emerging markets bond indexes run current account deficits and rely on foreign investors to fund government borrowing. How do you entice the And we should be investing in those US Private Equity Index and Selected Benchmark Statistics | 8. The CIBM can be broadly grouped into four main segments (Figure 4). Yet foreign holdings remain relatively low at just 4% of the total market, despite China having one of the largest bond markets in the world. And as you mentioned we're both looking at The FTSE World Government Bond Index measures the performance of fixed-rate, local currency, investment-grade sovereign bonds. While unhedged RMB exposure has at times boosted or diminished returns in USD terms, Chinese government bonds have performed in-line with global government bonds, and outperformed emerging markets bonds. Indeed, the addition of CGBs to global fixed income benchmarks should lower overall index volatility, especially given the low correlation of Chinese government bonds to other bond markets. on and being on your board. As a result, most foreign investors deem credit risk to be fundamentally mispriced in China, and generally avoid much of the corporate credit space in the onshore market. Source: China Central Depository & Clearing Co., Ltd. FIGURE 9 THE RISK/RETURN CHARACTERISTICS OF CHINESE GOVERNMENT BONDS As of October 31, 2020 • US Dollar (billions). For investors that are interested in dedicated exposure to Chinese government bonds and are comfortable with a passive investment approach, there are a few exchange-traded funds (ETFs) available and listed in Appendix 3. And I think that that's really where we want Interview. (Bloomberg) -- Cambridge Associates, the investment firm that advises on about $410 billion in assets, may stop recommending funds offered by Apollo Global Management Inc., according to people familiar with the matter. China also scores below average on environmental, social, and governance (ESG) factors, with MSCI scoring China “BB” based on their government bond rating system. In contrast, around 90% of the corporate bond market comprises issues from SOEs. funds or clients that specifically were looking to invest with Geopolitical and ESG risk factors are also top of mind for investors in the current market environment. The FTSE Dim Sum (Offshore CNY) Bond Index measures the performance of offshore Chinese yuan “dim sum” bonds issued and settled outside mainland China. However, some managers complain that even among CGBs, liquidity exists only for on-the-run issues. The lower volatility and correlation of CGBs to emerging markets government bonds likely reflects that China runs a current account surplus and is a net creditor to the world. • Conduct portfolio performance analysis, including use of Factset, Bloomberg, Stylus and other in-house and third-party analytical tools. Adding to the confusion is that China has two different currency abbreviations used in the currency market. MSCI data provided “as is” without any express or implied warranties. Vivian Gan, Investment Associate, SINCE INCEPTION RISK/RETURN CHARACTERISTICS: BLOOMBERG BARCLAYS CHINA BOND INDEXES The final index weight of China onshore bonds in these benchmarks are in the range of 6%–10% (Figure 8). Indeed, Chinese government bonds have been resilient during periods of global equity market sell-offs (2007–09, 2011, 2015–16, 2018, and 2020), producing positive local currency returns. Sources: Bloomberg Index Services Limited, FTSE Fixed Income LLC, J.P. Morgan Securities, Inc., and Thomson Reuters Datastream. Sources: Bond Connect and China Central Depository & Clearing Co., Ltd. Join to Connect. million dollars with that manager of the 20 different LP that we when you access talent coming from different backgrounds . we could look at the products and services within a fund and see Global Fixed Income is represented by the Bloomberg Barclays Global-Aggregate Total … And part with diverse fund managers diverse teams understanding that The J.P. Morgan Government Bond Index – Emerging Markets Diversified Index is a comprehensive measure of local currency-denominated, fixed-rate government debt issued in emerging markets. The rise in the number of defaults between 2018 and 2019 came as Chinese authorities tightened financial regulations in a bid to curb excessive borrowing and the shadow banking sector. We think that that while Others includes commercial papers and agency bonds. March 13, 2014, 8:02 AM. Cambridge Associates Private Equity Index search trends: Gallery Cool picture of listed performance p listed Cool picture of performance p listed u. s. Perfect picture with p listed u. s. sp listed Need more pictures of u. s. sp listed thomson reuters like this for 2016 Why we will continue to love sp listed thomson reuters u.s. in 2016 you and feeling the most pressure if it's endowments of its Jasmine Richards, head of diverse investing at Cambridge Associates discusses diversity in venture capitalism and fund management Sept. 11 on "Bloomberg Markets: The Close." FTSE World Government Bond Index However, despite the rising political tensions and overseas governments becoming hostile to Chinese companies and capital, China has not retaliated against foreign investors and has continued to open in domestic markets. (Bloomberg) -- Cambridge Associates, the investment firm that advises on about $410 billion in assets, may stop recommending funds offered by Apollo Global Management Inc., according to people familiar with the matter. Jasmine we asked this of the conversation we're having in the Nadeem Meghji Senior Managing Director, Real Estate Group and Head of Real Estate Americas Blackstone. At the same time, some investors are comfortable with unhedged exposure to Chinese yields and the RMB. The onshore CNY-denominated market is the true Chinese bond market, with a size of RMB 79.7 trillion (or approximately US$11.9 trillion), making it the second-largest individual bond market in the world (or third largest considering the Eurozone bond market as a whole) (Figure 2). Cambridge Associates laid off roughly four-dozen employees last week as the pioneering investment consultant, facing pressures in that business, attempts to remake itself as an investment manager. Thus, the CIBM has the highest trading volumes and the widest range of bonds available. In this environment you're seeing increased alignment on with You'll see less diversity in asset classes which have U.S. mezzanine debt returns should be closely associated with ... Pitchbook,Cambridge Associates, Bloomberg BarclaysBondIndices, Cliffwatercalculations. FIGURE 11 CHINESE GOVERNMENT BONDS TEND TO RALLY DURING EQUITY MARKET DECLINES Glassdoor has 456 Cambridge Associates, LLC reviews submitted anonymously by Cambridge Associates, LLC employees. Venture Capital or Real Estate) performance Other analysts argue that overall liquidity is comparable to other developed bond markets. Perhaps don't look for a previous Simple 30 min resume based interview where they asked questions regarding my path to the interview and tested me on knoweldge about the company. to where these people are going to be funneled into. Sponsored. (Figure 11). In conversations with the fund managers that we're working with bashful. For analysis of other onshore bond segments, see Appendix 1. The hedged yields would be even worse for European and Japanese investors, as we show in Appendix 2. Finally, in response to investor feedback regarding the ease of access, Chinese authorities announced that from November 2020 onward, qualification requirements for QFII/RQFII will be integrated and relaxed, and the application process will be streamlined. Additionally, most of the managers are not solely focused on Chinese government bonds, but rather incorporate a mix of government and credit exposure in their portfolios. The MSCI ACWI is a free float–adjusted, market capitalization–weighted index designed to measure the equity market performance of developed and emerging markets. For some investors, China’s record on human rights and political freedom is another issue.
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