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Introducing the Persistence Scorecard for Latin America

Multiple Operators Suffer Damage to Fiber Networks from Hurricane Michael

Factbox Energy demand impacts to linger in wake of Hurricane Michael

Factbox: Hurricane Michael Impact Turns from Production Loss to Demand Destruction

Fast-moving Michael destroys gas demand across US Southeast

Introducing the Persistence Scorecard for Latin America

Following similar studies performed by S&P Dow Jones Indices on active funds in the U.S. and Australia, we introduce the Persistence Scorecard to the Latin America region. The two aforementioned studies have demonstrated that top-performing active funds have little chance of repeating that success in subsequent years. To determine if similar conclusions can be made in Latin America, we examined active funds in Brazil, Chile, and Mexico.

The Persistence Scorecard: Latin America Year-End 2017 presented two key statistics. First, the performance persistence of top-performing active funds that remained in the top-quartile or top-half rankings over consecutive three- and five-year periods was measured. Second, transition matrices showed the movements of funds between quartiles and halves over two non-overlapping, three-year periods. The transition matrices also tracked the percentage of funds that later were merged or liquidated during the study period.

Exhibit 1 measures the performance persistence of the top quartile of funds based on performance in 2013 (Year 0). The performance of these funds was compared with the respective universe for each of the next four years to determine if they were able to sustain top performance.

Across all categories, few funds were able to maintain top-quartile status over the five-year horizon. After just one year, the most successful category was Brazil Equity, in which 56% of funds stayed in the top quartile. While this was the most successful category, it also meant that nearly half of the funds that were top performers in 2013 were unable to maintain their performance after just one year. By year three, several categories had zero remaining funds in the top quartile, and by year four, five of the seven categories had zero remaining funds. These results showed that regardless of fund category, active managers were unable to persistently produce top results.

In Exhibit 2, we separated each country’s equity category into quartiles based on an initial three-year performance period (2012-2014). The performance of the subsequent three-year period (2015-2017) was then measured for each fund to obtain two non-overlapping periods of performance. Looking at these two periods, we used a transition matrix to show the movements between quartiles from the first period to the second period.

In Brazil, 60% of the funds that were in the first quartile for the first period ended up in the first or second quartile in the second period. For the second through fourth quartiles in the first period, more funds ended up merging with another fund or liquidating than sitting in one of the four quartiles (darker shades of blue signify higher frequency). In Chile, more funds shut down than resided in any of the four quartiles by the end of the second period. For the first quartile in the first period, funds that survived remained top performers in the second period, but the overall majority of funds (60%) ended up no longer being in existence. No clear trend was observed in Mexico. More funds in the top quartile in the first period transitioned to the bottom quartiles in the second period than remained in the first quartile or moved to the middle quartiles. Funds in the second and third quartiles generally moved up to the first quartile in the second period, while most funds in the fourth quartile continued to show poor performance. In essence, the results in Mexico were a coin flip.

The initial scorecard for Latin America echoed results found in the other regions—the vast majority of top performing funds were not able to deliver top performance in future years.

To see the full results, the scorecard can be found at the link below.

Multiple Operators Suffer Damage to Fiber Networks from Hurricane Michael

Communications providers are working to restore services in areas impacted by Hurricane Michael, but storm debris, power outages and significant fiber damage are hindering progress in those counties most devastated by the storm.

As of Oct. 14, a number of counties along the Florida Panhandle had more than half of their cell sites down, including Bay County — home of Panama City and Mexico Beach, described as "ground zero" of the storm by U.S. Federal Emergency Management Agency administrator Brock Long — where 66.1% of cell sites were down. Similarly, neighboring Gulf County had 69.6% of cell sites down, according to data from the U.S. Federal Communications Commission.

Based on the amount of damage in the area and ongoing power outages, it could be weeks before services are restored. Long said Oct. 12 that after search and rescue, restoring communications in impacted counties is among FEMA's top priorities.

"You have to be able to communicate to appropriately respond and we are trying to do everything we can to get the private sector vendors, the Verizon [Communications Inc.]'s of the world, to get in to try to get their systems back up and running," he said.

Long added, however, that the process is not easy. "There was a tremendous amount of debris. When you look at the damage in Mexico Beach, that is where the ocean rose potentially 14 feet … and shoved buildings out of the way. When you have that type of damage, it takes time to get in and go through," he said.

Hurricane Michael made landfall Oct. 10 near Mexico Beach as a Category 4 hurricane with 155-mile-per-hour winds.

For its part, Verizon said the "vast majority" of Florida and Georgia service has been restored, with 99% of the company's network in Georgia in service and 97% of its network in Florida. But the company noted there are pockets, particularly near Panama City, where the damage is severe.

"The storm caused unprecedented damage to our fiber, which is essential for our network — including many of our temporary portable assets — to work. Our fiber crews are working around the clock to make repairs, and while they are making good progress, we still have work to do to get the fiber completely repaired," the company said Oct. 14.

Fiber is the connecting component of a network that carries data from point to point. It is necessary for Verizon's permanent and temporary cell sites to be operational. The company noted that while it has multiple fiber paths to carry data, "The severity and intensity of the storm caused damage to all duplicate routes in the Panama City and Panama City Beach area."

In terms of wireline services, the FCC said 291,300 subscribers remain out of service as of Oct. 14, including 205,643 subscribers in Florida. The figures were down from a day earlier, when a total of 337,223 subscribers were without service, including 233,843 in Florida.

The top residential video and broadband provider in Bay County is Comcast Corp., according to MediaCensus data from Kagan, a research group within S&P Global Market Intelligence. Comcast, the largest cable operator in the U.S., said in an Oct. 12 statement that it is working to get Xfinity services back online.

"As power returns … and it becomes safe for our technicians and restoration crews, we will work to repair any damages affecting our network," the company said.

As of Oct. 15, more than 162,000 customers in Florida remained without power, including all 27,275 customers served by Gulf Coast Electric Cooperative. The cooperative said in an Oct. 12 Facebook Inc. post that its distribution system "suffered catastrophic damage"

In Gulf County, the top residential video provider is AT&T Inc.'s satellite video service DIRECTV, according to MediaCensus data, while the top residential broadband provider is Mediacom Communications Corp., the fifth-largest cable operator in the U.S.

Mediacom said Oct. 14 that its recovery efforts are underway but its network in Florida has 14 miles of severely damaged fiber near Walton County, as well as 25 miles of damaged fiber east of Panama City that is obstructing video transmission from Gulf County to Walton County.

"Our current priority remains focusing on repairing damage to our high-speed data transport network and main transmission facilities and repairing downed lines where we have access to the area. We have outages from widespread loss of commercial power along with downed lines, and structural damage throughout our systems," the cable operator said.

Factbox: Hurricane Michael Impact Turns from Production Loss to Demand Destruction

Houston, Oct. 11 2018 — Hurricane Michael made landfall at the Florida panhandle as a Category 4 hurricane Wednesday with 155 mph winds, quickly destroying demand for power, natural gas and refined oil products. Shut-in oil production rose modestly from Tuesday to over 700,000 b/d, but the storm has stayed east of much of the region's production, which means supply should be back online quickly.

Meanwhile, the severity of the storm has surprised to the upside, which could a mean longer lasting and more severe impact on demand for power, natural gas, refined products and ultimately crude oil.

"We expect the impact on refined products demand to be below that of previous hurricanes in the Gulf Coast such as Harvey in 2017, as the region impacted by Michael has lower population density than Houston ... Nevertheless, the impacts are favoring the high side of our estimates given the sheer severity of the storm," said Claudio Giamberti, Head of Demand and Refining at S&P Global Platts Analytics.

As of 7 pm EDT, the eye of Michael was moving over southwestern Georgia with maximum sustained winds still at 100 mph, according to the National Hurricane Center. The storm is expected to move northeast across the Carolinas before heading back out to sea Friday morning.