Foto: Scott S
. SEC Gets RIAs to Return 125 Million Dollars to Investors
The Securities and Exchange Commission announced on Monday that it settled charges against 79 investment advisers who will return more than $125 million to clients, with a substantial majority of the funds going to retail investors. The actions stem from the SEC’s Share Class Selection Disclosure Initiative, which the SEC’s Division of Enforcement announced in February 2018 in an effort to identify and promptly correct ongoing harm in the sale of mutual fund shares by investment advisers.
The initiative incentivized investment advisers to self-report violations of the Advisers Act resulting from undisclosed conflicts of interest, promptly compensate investors, and review and correct fee disclosures.
In a statement, SEC Chairman, Jay Clayton said: “I am pleased that so many investment advisers chose to participate in this initiative and, more importantly, that their clients will be reimbursed. This initiative will have immediate and lasting benefits for Main Street investors, including through improved disclosure. Also, I am once again proud of our Division of Enforcement for their vigorous and effective pursuit of matters that substantially benefit our long-term, retail investors.”
The SEC’s orders found that the investment advisers failed to adequately disclose conflicts of interest related to the sale of higher-cost mutual fund share classes when a lower-cost share class was available. Specifically, the SEC’s orders found that the settling investment advisers placed their clients in mutual fund share classes that charged 12b-1 fees – which are recurring fees deducted from the fund’s assets – when lower-cost share classes of the same fund were available to their clients without adequately disclosing that the higher cost share class would be selected.
According to the SEC’s orders, the 12b-1 fees were routinely paid to the investment advisers in their capacity as brokers, to their broker-dealer affiliates, or to their personnel who were also registered representatives, creating a conflict of interest with their clients, as the investment advisers stood to benefit from the clients’ paying higher fees.
The RIAs involved are:
Ameritas Investment Corp.
AXA Advisors LLC
BB&T Securities LLC
Beacon Investment Management LLC
Benchmark Capital Advisors LLC
Benjamin F. Edwards & Co. Inc.
Blyth & Associates Inc.
BOK Financial Securities Inc.
Calton & Associates Inc.
Cambridge Investment Research Advisors Inc.
Cantella & Co. Inc.
Client One Securities LLC
Coastal Investment Advisors Inc.
Comerica Securities Inc.
Commonwealth Equity Services LLC
CUSO Financial Services LP
D.A. Davidson & Co.
Deutsche Bank Securities Inc.
EFG Asset Management (Americas) Corp.
Financial Management Strategies Inc.
First Citizens Asset Management Inc.
First Citizens Investor Services Inc.
First Kentucky Securities Corporation
First National Capital Markets Inc.
First Republic Investment Management Inc.
Hazlett, Burt & Watson Inc.
Hefren-Tillotson Inc.
Huntington Investment Company, The
Infinex Investments Inc.
Investacorp Advisory Services Inc.
Investmark Advisory Group LLC
Investment Research Corp.
J.J.B. Hilliard, W.L. Lyons LLC
Janney Montgomery Scott LLC
Kestra Advisory Services LLC
Kestra Private Wealth Services LLC
Kovack Advisors Inc.
L.M. Kohn & Company
LaSalle St. Investment Advisors LLC
Lockwood Advisors Inc.
LPL Financial LLC
M Holdings Securities Inc.
MIAI Inc.
National Asset Management Inc.
NBC Securities Inc.
Next Financial Group Inc.
Northeast Asset Management LLC
Oppenheimer & Co. Inc.
Oppenheimer Asset Management Inc.
Park Avenue Securities LLC
PlanMember Securities Corporation
Popular Securities LLC
Principal Securities Inc.
Private Portfolio Inc.
ProEquities Inc.
Provise Management Group LLC
Questar Asset Management Inc.
Raymond James Financial Services Advisors Inc.
Raymond Lawrence Lent (d/b/a The Putney Financial Group, Registered Investment Advisors)
Wikimedia CommonsCourtesy photo. Justin Teman Joins Loomis, Sayles & Company
Loomis, Sayles & Company, an affiliate of Natixis Investment Managers, announced that Justin Teman has joined the firm as Director, LDI solutions. Justin is based in the company’s Boston headquarters and reports to Maurice Leger, head of product management and strategic planning.
“We are pleased to welcome Justin to Loomis Sayles,” said Leger. “Justin’s extensive expertise addressing client objectives with LDI solutions will continue to enhance our LDI presence and capabilities. He will be instrumental in delivering superior insights to our clients and designing solutions that meet their goals.”
In this new role, Justin will work closely with prospects and clients to understand and meet their needs by collaborating closely with the investment teams that contribute to Loomis Sayles’ LDI solutions. He will also help to position the solution set, deliver innovative thinking and contribute to LDI solution implementation.
Teman joined Loomis Sayles in 2019 from Cambridge Associates, where he was a Managing Director in the pension practice. As the firmwide expert on LDI, Justin helped clients in areas such as asset allocation, liability hedging, glide paths, risk transfers and completion management. Previously, he was an actuarial consultant at Mercer. Justin earned a BS in Business Administration, with a concentration in applied actuarial mathematics, from Bryant University. He is a CFA charterholder and a member of the American Academy of Actuaries.
Marisa L. Hernández, courtesy photo. Marisa L. Hernández to Join BigSur Partners
Marisa L. Hernandez will assume the role of Chief Operating Officer at BigSur Partners effective March 18.
In a statement, the company told Funds Society: “Marisa is a highly accomplished investment professional with 19 years of experience across asset classes, industries and regions. We are delighted to have an executive of her talent and seniority join our leadership team, as we are position BigSur for the next leg of growth given an exciting set of opportunities in the wealth management business.”
Hernandez joins BigSur after a successful career as an equity analyst and Co-Portfolio Manager at prestigious finance organizations in New York. She worked at asset manager Neuberger Berman for the last 12 years, where she most recently served as Senior Vice President. She was previously an equity analyst at UBS Securities. Before coming to the U.S., Marisa was an entrepreneur in her native Uruguay where she founded and managed a construction company.
Hernandez holds a Civil Engineering degree from the University of Uruguay, a post-graduate certificate from the University of Padua (Italy), an MBA from the MIT Sloan School of Management and is a CFA Charterholder.
According to FlexFunds, trade wars, a slowdown in global economic growth, longevity or disruptive technological advances are some of the factors of greatest uncertainty in the market, which might eventually give rise to volatility episodes, such as those occurred in 2018. Fear of a new recession will set the 2019 market pace.
In this context, attention is increasingly addressed to alternative investments or assets – products that provide the appropriate flexibility to leverage market opportunities and, at the same time, seek risk protection in times of volatility.
The alternative investment industry has become a significant part of the financial system and global economy. According to an Intralinks study, 66% of investors plan to increase alternative investment allocation in 2019. In a scenario where flexibility and dynamism will be key tools to attain positive results, asset securitization programs have the necessary resources to take a defensive position against market volatility and, at the same time, provide an opportunity to access investment projects that are uncorrelated to secondary markets.
According to an S&P study, in the US, the total volume of securitized assets issued in the first half of 2018 was USD 284 billion, an increase of 16% compared to the same period in 2017.
FlexFunds’ asset securitization program for financial institutions, hedge funds, real estate and a range of asset managers, facilitates distribution and access to investment opportunities. Securitization allows creating a listed security from any underlying asset, which is distributed to banking platforms through Euroclear. Therefore, these investment vehicles may be accessed by investors from all over the world through already existing brokerage and private banking accounts. Furthermore, asset securitization provides a flexible tool to raise capital in any sector, including alternative asset investments.
There is a wide range of alternative investment options, which may be a powerful tool to help investors achieve a greater diversification, minimize volatility impact on their portfolios and enhance performance.
Wikimedia CommonsPhoto: B137 . Climate Change: Risk for Florida Real Estate
Florida has been identified as a US states that will be under threat from global warming. Future challenges come in the form of more intense hurricanes and tropical storms, sea-level rises and extreme heat. “Of the total of 4.2 million US citizens that live at an elevation of less than 1m 20, 2.4 million of them live in South Florida. By 2045, nearly 64,000 homes in Florida face flooding every other week, with roughly half in South Florida and 12,000 in Miami Beach alone.” Points out Victoria Scalongne, Senior Real Estate Analyst at Indosuez.
Although these predictions depend on how high sea- levels are modelled to rise by the end of the century, in her opinion, it is clear that the housing market and infrastructure of the low-lying peninsula stands a very big chance to be negatively impacted during the course of the life-time of a mortgage taken out today (30 years).
In Miami, a property on or near the water currently fetches a premium and the cheaper real estate in the metro can in general be found on higher ground further inland. “With sea levels rising, this pricing scenario is likely to be inversed in the medium term, with higher ground fetching a premium. Whether it’s climate change, fashion, or real estate returns, developers have been reported to be buying up properties in lower value, higher elevation locations like Little Haiti, redeveloping them and letting them out at increased rents.” She mentions adding th (Scientific American). The median list price for all homes in this neighbourhood increased by 35% from January 2018 to January 2019, while the same indicator stayed flat for Miami Beach over the same period and only increased by 8% for Miami as a whole (Zillow). In Key Biscayne, on the other hand, the median list price in December 2015 was USD2.3 million, by January 2019, this stood at USD 1.54 million, a 33% drop.Florida ha sido identificada como un estado de los Estados Unidos bajo la amenaza del calentamiento global. Los desafíos futuros se presentan en forma de huracanes y tormentas tropicales más intensas, el aumento del nivel del mar y el calor extremo.
En Miami, una propiedad en o cerca del agua actualmente cuesta una prima y las propiedades inmobiliarias más baratas en la zona en general se pueden encontrar en terrenos más altos en el interior. “Con el aumento del nivel del mar, es probable que este escenario de precios se invierta en el mediano plazo”, comenta Scalongne añadiendo que ahora, los desarrolladores están comprando propiedades de menor valor, en lugares de mayor elevación como Little Haiti, reurbanizándolas y dejándolas a precios más elevados.
Según su investigación, el precio de lista promedio para todas las casas en este vecindario aumentó en un 35% desde enero de 2018 hasta enero de 2019, mientras que el mismo indicador se mantuvo estable para Miami Beach durante el mismo período y solo aumentó en un 8% para Miami en su conjunto. En Key Biscayne, por otro lado, el precio de lista promedio en diciembre de 2015 era de 2,3 millones de dólares, mientras que para enero de 2019, era de 1,54 millones, una caída del 33%.
The Florida housing market has traditionally not only been driven by local demand, but by retirees, people escaping cold regions, job seekers and the ebb and flow foreign investors (mainly South American concentrating on the condo market). It has also historically been quite a volatile housing market, relative to other locations. Scalongne notes that although this cycle has not been characterised by overbuilding as in period preceding 2006 (see chart above), and fundamentals are sound, any downturn in the real estate sector will have a profound impact on the economy, as the real estate sector is estimated to represent around 15% of US GDP. “Anyone thinking of investing in the short term has to think that we are in late cycle conditions, and anyone investing in the long term cannot ignore the potential negative impact that climate change could have on this part of the world. Instead of “location, location, location”, the new real estate motto could in the future be “elevation, elevation, elevation.” She concludes.
Didier Saint Georges, Managing Director and Member of Carmignac’s Investment Committee. / Courtesy Photo . Didier Saint Georges (Carmignac): “My Greatest Fear is What will Happen to Debt Once Economic Growth Slows Down”
In mid-2018, the IMF warned that, for the first time in history, global debt had reached 225% of world GDP. Due to central banks’ QE, global debt is today more than three times higher than the level of 20 years ago. The staggering level of debt is not a minor issue, as was pointed out by Didier Saint Georges, Carmignac’s Managing Director and member of its Investment Committee, during an informative meeting in Paris. “My greatest fear is what both public and private debt will do when economic growth slows down.”
In his opinion, the main difference today between strong countries and weak countries is precisely that: their debt. In the US, for example, private debt is low, but public debt is very high. In total, 72 trillion dollars, which is not only a record amount, but which surprises considering the country’s continued economic growth and its very low unemployment rate. But Saint Georges warns: “The problem is global, and the cycle is changing.”
From this perspective, sovereign bonds have become safe-haven assets for Carmignac, with priority over the Asian and European debt against the US bond. Meanwhile, corporate debt markets continue to be penalized, especially in the high-yield segment. “In developed country bonds, we have a history of convergence and the spread is reflected by the risk undertaken by the investor,” explains Saint Georges.
In fixed income investment, however, there is an asset that has become especially relevant in recent times: Liquidity. “Cash” trades bullish while waiting for better opportunities in the market, but the expert acknowledges that this also comes at a price. “We are concerned about the cost of liquidity and growth,” he says.
Is there opportunity in Italian Bonds?
In Italy, investors are faced with the dilemma of undertaking political and economic risk in exchange for a high return potential. For some it’s worth it, for others, not so much. According to Saint Georges, “there is nothing to worry about in the short term, in bonds of short durations, but we should be more cautious with those with long durations. The issue with Italy is not political, it’s purely economic.”
The big issue, however, is if the market starts to fear a recession. “The economy’s current performance doesn’t warrant that fear, except for the high debt. The markets, however, may be sensitive to a recession,” he adds.
Brexit and globalization
According to Saint Georges, “Brexit will be bad for everyone even if a negotiated agreement is reached” and, in the case of a “hard” option, he believes that the potential victims are Germany and France. “The referendum voters forgot to think about their pocket and made an emotional decision,” he says. Investors, he adds, are quite worried and have started 2019 thinking just the opposite than they did in early 2018, in panic mode.
The backdrop is rebellion towards globalization, which according to Saint Georges, is what has made China grow strong and has benefited Italy, France and Germany. However, “even though globalization is facing more and more difficulties at the political level, as an economic catalyst it is too strong to retreat from. There is a certain rejection against globalization. My fear of that is that it was globalization which drove China’s strong growth, in turn benefitting Italy, France and Germany. However, it is too strong to retreat from now.” He concludes.
Wikimedia Commons Roque Calleja. Roque Calleja Moves Back to NY as Head of BlackRock Alternative Specialists (BAS) for Latin America
Roque Calleja will move to New York next April, as Head of BlackRock Alternative Specialists (BAS) for Latin America. In this role he will work closely with Sara Litt, who has been a member of the BAS Latin America team since 2016 and will report to Armando Senra, Head of Latin America at BlackRock.
In his new position, Calleja will be responsible for strategy and fundraising for BlackRock’s alternatives platform working closely with Latin American institutional and wealth clients across hedge funds, private equity, real assets and private credit.
Calleja has worked for BlackRock in Mexico since 2014, first as vice president and since 2017 he has been co-director of the Institutional Business together with Giovanni Onate, who will lead the business individually when Calleja leaves. According to an internal memo to which Funds Society had access, “During this time, BlackRock has become the leading asset manager for active mandates in Mexico and one of the leading asset managers for local and international alternative investments… This appointment reflects BlackRock’s continued focus on alternatives as a strategic growth area and the growing demand from clients across the region for alternative assets.”
Serna added: “Latin American clients are increasingly relying on alternative investments as a critical component of their asset allocation in order to build resilient, diversified portfolios that can enhance long-term returns. BlackRock’s alternatives platform offers clients unparalleled breadth across alternatives asset classes, a global footprint, and robust sourcing capabilities, which combined with our risk management platform positions us well to deliver to clients best in class alternatives solutions.”
Calleja joined BlackRock in 2009 as a member of BlackRock’s iShares business in Iberia. He later moved to New York where he supported BlackRock’s Latin America and Iberia business and was responsible for managing the retail offshore wealth business. He has a BA degree in business administration and a Master’s degree in Business Strategy from the Francisco de Vitoria university in Madrid, Spain. He also holds a master’s degree in alternative investments and Hedge Funds by the Instituto de Estudios Bursatiles (IEB) university in Madrid.
BlackRock’s alternatives platform currently manages over $172 billion in client assets and comprises a global team of over 800 investment professionals sourcing and structuring both direct and fund investments.
Foto cedidaJosé Castellano, CEO adjunto y director de desarrollo de Negocio Internacional de iM Global Partner.. iM Global Partner: "Los sistemas de pensiones alrededor del mundo rotan hacia gestoras especializadas"
2019 brings a world of opportunities to iM Global Partners, a multi-boutique platform with offices in Paris, London and Philadelphia. That is what José Castellano, Deputy CEO, and Head of International Business Development is tasked with.
In an interview with Funds Society, Castellano, who joined the firm earlier this year, mentions that considering there is a worldwide strong appetite for alpha products from the best asset management companies, they are currently developing a global distribution platform.
In his opinion, “pension systems around the world are looking at specialized active managers while keeping the passive side invested with large asset managers.” And he believes their partners “have the quality to get strong appetite for alpha from investors”, so he is trying to take them to global portfolios while also looking to add on more partners. “We have clients almost everywhere not because we are active on the business perspective but because our partners are so good they have been already identified.”
iM Global Partners currently has strategic minority investments in four management companies – Polen Capital, Dolan McEniry Capital Management, Sirios Capital Management and Dynamic Beta investments but they have a big pipeline and ambitions.
“One of the reasons I got involved with the company, besides of how I see the industry, with big opportunities for alpha managers in the world, and that I also like that it is very entrepreneurial, flexible, effective, but also, because we have a huge level of ambition to grow the platform tremendously. I can tell you our intention is to invest in the next years up to 500 million, we have already deployed around 125 million so [we are looking to partner with] somewhere between 10-20 different asset managers with between 1-20 billion in AUM.”
Castellano mentions they have a very long pipeline and a number of ongoing conversations. Currently they are looking to close 1-3 transactions a year, and that they “are looking at liquid alternatives, US equities, European equities, Emerging Market Debt and US credit, as the asset classes where we are putting a lot of effort.”
Why partner with iM Global Partners?
According to the industry veteran, iM Global Partners is especially attractive to asset managers given that they have entrepreneurial DNA: “We are very flexible, we can talk to them every day, and we only buy minority stakes, between 20-49%. We do not want to manage the company, but we want to be very active on the business side. In that case we are very flexible and tackle it on a case by case base. We also offer permanent capital.” Castellano believes asset management is a long term game and so is its relationship with their partners. They provide a distribution platform but there is a full alignment of interests, since they are not only distributions but partners.
What are they looking for?
“When we buy stake in the AM we make sure we can accelerate their growth exponentially. For example if we buy someone with 3 Billion AUM is because we know they have the potential to go to 6, 10, 20 billion in AUM. Our idea is to help them grow exponentially by exposing them to other areas of the world.” Castellano mentions adding that their main consideration when building the pipeline is finding the right people, right talent and outstanding performance over time. “They have to be excellent in the long run but more with a difficult market because we believe that the best managers shine when they have a difficult market.”
Their mayor focus in the first half of 2019 is to launch Europe and expose their partners to the European market. They are having events in February in Paris, Zurich, Milan, Madrid, Lisbon and the UK.
For the second part of the year they are looking at Asia-Pacific since they are engaged with some Australian partners, and Latin America.
Photo: Shenandoah National Park. 201 Global Asset Managers Can Now Try to Woo Mexican Pension Funds
It is official, Afores can now invest in international mutual funds. The meeting and authorization of the Risk Analysis Committee (CAR) that international managers, afores and the regulator have been waiting for since 2017, has already taken place and, as a result, the guidelines by which afores can invest in mutual funds with active strategies can be consulted in only 12 pages.
In summary, in order to be elegible the manager should have at least 10 years of experience managing investment vehicles or investment mandates, as well as at least 50 billion dollars in assets under management. The same amount that applies to managers looking for an investment mandate. According to the CAR document, this requirement, which is fulfilled by the 201 largest asset managers in the world, can be modified by the Investment Committees of the Pension Funds by “considering criteria such as the experience of the administrator in the management of assets in the international markets of the strategy object of investment, the performance of the Fund, as well as additional criteria determined by their own Investment Committees.”
The fund in particular must have at least 2 years of operation since its inception and more than 100 million dollars in assets. In addition to being open funds of an Eligible Country for Investments and having a benchmark.
Although the guidelines do not indicate that the daily composition of the funds should be known, a condition with which several players were not comfortable, they do mention that the net value of the assets of the fund should be known daily.
The fund itself may use derivatives to reduce costs, manage liquidity, marginally facilitate the replication of the index or sub-index or for risk management but not to increase returns, leverage or synthetically replicate the benchmark.
In addition, to preserve the active nature of the strategy, investment in other funds or ETFs will not be allowed.
This resolution marks a milestone in the way Afores can invest and has been in the process for several years, as well as the increase of the 20% limit on investment in foreign securities, which the CONSAR confirms that they are still working to achieve. For this to change, there needs to be change to the law, which is now underway, but without a doubt, the approval of the investment in international funds will change the market in Mexico and the way of investing the afores, for the benefit of the workers.
Patrick Dwyer, Miami Area Winner 2019. The Best Advisor in Florida is...
The Forbes ranking of Best-In-State Wealth Advisors, developed by SHOOK Research, spotlights over 3,000 top advisors across the country who were nominated by their firms—and then researched, interviewed and assigned a ranking within their respective states.
Those advisors that are considered have a minimum of seven years experience, and are ranked using an algorithm that weights factors like revenue trends, assets under management, compliance records, industry experience and those that encompass best practices in their practices and approach to working with clients. Portfolio performance is not a criteria due to varying client objectives and lack of audited data.
In Florida, for the Coral Gables and Miami Area 51 advisors made the cut. The top 2 come from Merril, Patrick Dwyer and Louis Chiavacci, while on the third place we find Adam Carlin from Morgan Stanley Private Wealth Management.
For Northern Florida, 100 advisors made the list, with Merril’s Michael Valdes at the top. He was followed by Clarke Lemons from WaterOak Advisors and Bob Doyle from Doyle Wealth Management.
94 advisors from South Florida were included on Forbes list. At the top are Thomas Moran from Wells Fargo Advisors, Sal Tiano from JP Morgan Securities and Don d’Adesky from The Americas Group of Raymond James.
