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Hong Kong will Overtake Switzerland to Have World’s Richest Citizens by 2020

El ahorro medio de los ciudadanos de Hong Kong superará al de los suizos en 2020 — CC-BY-SA-2.0, FlickrPhoto: Colin Tsoi . Hong Kong will Overtake Switzerland to Have World’s Richest Citizens by 2020

Switzerland tops the current ranking of the world’s wealthiest territories measured by savings per capita, with the average Swiss citizen holding more than $186,000 in liquid assets, according to financial services research and insight firm Verdict Financial. The US and Hong Kong follow in second and third place respectively.

The company’s latest report, which analyses 69 wealth markets across the globe, indicates that by 2020 the rankings will change, with Hong Kong taking the lead, and Switzerland falling to third place.

Bartosz Golba, Verdict Financial’s Senior Analyst for Wealth Management, explains: “With a forecast compound annual growth rate of 7%, Hong Kong will be the third quickest growing developed wealth market over 2016–20. Hong Kong’s growing importance is not a big surprise. The market is exemplary in regard to explaining why the majority of global wealth managers put Asia-Pacific at the center of their growth strategies. In real terms – taking inflation into account – no other region will see its value of liquid assets grow at a greater pace.”

“What makes Hong Kong unusual is the local investors’ preference for near-cash products. Almost 85% of liquid onshore assets of retail investors in Hong Kong are allocated to bank deposits, while the developed markets’ average stands below 62%. This protects portfolios from capital markets volatility, and at the same time provides a significant cross-selling opportunity for wealth managers operating in Hong Kong.”

On the other hand, Verdict Financial’s savings per capita ranking highlights the unequal distribution of global wealth. Golba continues: “Look at India, for instance, which is already the world’s tenth biggest market in terms of total assets held by high net worth individuals. It will be ranked sixth by 2020, by which point Indian millionaires will hold more wealth than their Australian counterparts. At the same time, however, the average individual’s savings stand below $2,000, making India one of the worst performers in our assets per capita classification.”

According to Golba, the low penetration of affluent individuals as part of overall population is typical for developing nations. He explains: “The higher the country’s development level, the larger the penetration of the world’s wealthiest people. In the US, almost two thirds of the population can be considered affluent. As a country in which almost 2% of citizens are millionaires, it remains an attractive market for private banks and wealth managers.

“While we are in a period characterized by volatile financial markets and wealth managers looking for optimal business strategy, there is one thing that remains constant. In aggregate terms, the US has been, and will remain, by far the world’s largest wealth market.”

Imran Ahmad Joins Standard Life Investments as Investment Director EMD

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Standard Life Investments has added to its team of five emerging market debt specialists with the appointment of Imran Ahmad as Investment Director – Emerging Market Debt (EMD). Imran, who has 12 years’ experience in the industry, joins the company from JP Morgan Asset Management where, since January 2013, he held the role of Currency Portfolio Manager.

Reporting to Richard House, Head of Emerging Markets Fixed Income, Imran will be based in London and will have primary responsibility for emerging market currency overlay strategies across the entire EMD suite of funds.

Richard House said of the appointment: “Imran’s appointment reflects our commitment to, and belief in, the long term opportunities the EMD asset class has to offer. Imran’s skill set compliments the team’s approach to managing EM fixed income portfolios, namely high conviction macro based investing. The team which has over 77 years’ experience in the industry, works ‘hand-in-hand’ with the 40 strong fixed income and global emerging market equities teams, allowing us to seek out the best investment ideas and opportunities for our investors.”

Standard Life Investments this week announced the launch of an Emerging Market Debt (EMD) Unconstrained SICAV – the fourth Emerging Market Debt strategy in the suite of EMD products they offer to both retail and institutional investors. The SICAV was launched in response to demand from European investors for access to the increasingly popular asset class and will be co-managed by Richard House and Kieran Curtis.

Glyn Jones, New Independent Non-Executive Chairman at Old Mutual Wealth

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Old Mutual Wealth appointed Glyn Jones as the independent non-executive Chairman of the Old Mutual Wealth Board, subject to regulatory approval.

He will replace Bruce Hemphill, CEO of Old Mutual plc, who is stepping down as Old Mutual Wealth’s Chairman. Bruce will continue to be a director of the Old Mutual Wealth Board. Glyn will be working closely with Bruce as Old Mutual plc seeks to execute the managed separation of the wealth business.

Glyn is presently the Chairman of Aspen Insurance Holdings, a New York Stock Exchange listed business, and the Chairman of Aldermore Group, the challenger bank that went public in 2015 on the London Stock Exchange. Previous non-executive roles included being the Senior Independent Director on the Direct Line Insurance Group, a board he joined ahead of its listing on the London Stock Exchange as a FTSE 100 company. Other past chairmanships include: Hermes Fund Managers, BT Pension Scheme Management and Towry, a financial planning and wealth advice business.

Glyn started his career with Deloitte, Haskins & Sells, a predecessor firm to PWC, where he was a senior partner in the consulting practice specialising in financial services. In 1991, he joined Standard Chartered Bank where he ran their international private banking business which was headquartered in Hong Kong. On his return to the UK in 1997, he joined NatWest Bank and was appointed CEO of the Coutts Group, the domestic and international private banking business, as well as having responsibility for NatWest Investments and NatWest Stockbrokers. In 2001, Glyn joined Gartmore Investment Management as CEO until 2004.

Paul Feeney, CEO of Old Mutual Wealth, said: “I am very pleased that Glyn has agreed to join the Old Mutual Wealth Board as Chairman. His depth and breadth of understanding of the financial services industry, which has been gained from leading top industry companies over the last 20 years, will be of great benefit to our business. He also brings extensive experience of chairing both public and private boards. I look forward to working with Glyn as we build on the momentum that exists to transform Old Mutual Wealth into a truly outstanding business. I believe we have an exciting future ahead of us.”

Jones added: “I am delighted to be invited to be the new Chairman of Old Mutual Wealth. This is a unique and leading wealth management business which is well placed to succeed in the fast developing and exciting industry in which it operates. I look forward to helping Old Mutual Wealth in its development and playing my part, alongside my fellow board directors, in supporting and guiding Paul and his executive management team, as well as working closely with Old Mutual plc to help them achieve their strategic objective of managed separation.”

Old Mutual Wealth is a subsidiary of Old Mutual plc. Old Mutual plc is in the process of executing a managed separation strategy that will separate the Group into its four constituent businesses: Old Mutual Wealth, Old Mutual Emerging Markets, Old Mutual Asset Management and Nedbank.

PwC Luxembourg Announces Joint Business Relationship with Accelerando Associates

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CC-BY-SA-2.0, FlickrFoto: Oscar F Hevia. Cambio de conversación

PwC Luxembourg’s Market Research Centre and Accelerando Associates announced a joint business effort to deliver a series of asset and wealth management country reports on the following European markets: France, Germany, Italy, the Netherlands, the Nordics, Spain and the UK.

By combining PwC’s expertise of the asset management industry with Accelerando’s understanding of Europe’s fund selector and investor landscape, these reports will give asset managers in-depth insight into the asset management institutional and wholesale fund selector market in various European countries. The reports are also useful tools to guide asset managers in their business development.

“We are excited about the collaboration with PwC Luxembourg. The combined resources, different insights and perspectives will set new standards in terms of asset management and fund distribution country reports in the industry. The joint forces ensure thorough, complete and highly practice relevant intelligence for asset managers worldwide,” said Philip Kalus, founder & managing partner of Accelerando.

“Combining our forces with accelerando will allow us to serve even better the asset management community, providing valuable European country reports to help them define the right fund distribution strategy”, added Steven Libby, partner and Asset & Wealth Management Leader at PwC Luxembourg.

AXA IM Creates Global Platform for Alternative Credit

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AXA Investment Managers (AXA IM) recently announced the merger of its Alternative Solutions and Structured Finance teams to create a single global alternative credit platform under the leadership of Deborah Shire, Head of Structured Finance.

Commenting on the announcement, John Porter, Global Head of Fixed Income & Structured Finance at AXA IM, said: “AXA IM’s Structured Finance team has been a pioneer in the disintermediation of credit markets since its inception in the late 1990s and today provides a length of track record across credit cycles, volume of assets under management, and a breadth and depth of expertise that few asset managers can rival. We believe that by combining the talent, resources and skillset of our Alternative Solutions team we can create a simpler and more agile structure to the benefit of our clients.”

The merger will create a single alternative credit platform with a presence in Paris, London and Greenwich (Connecticut). The combined team will encompass 100 professionals providing management and advisory services to over €31 billion of assets covering loans, private debt, collateralised loan obligations, insurance linked securities, asset backed securities, fund of hedge funds and impact investing.

Porter added: “Deborah has more than 20 years of experience across alternative asset classes and under her leadership our structured finance offering has experienced strong growth with assets under management rising by 29% since she took over in September 2014 and capital raised to date this year of €3.5 billion. We are confident that under her direction our alternative credit platform will continue to grow and excel in delivering innovative solutions to meet clients’ needs.”

Deborah Shire said: “AXA IM’s integrated alternative credit platform will offer better visibility and a wider range of investment opportunities to our existing and future clients. In the context of a low rate environment investors are increasingly looking for high yielding and diversifying assets to provide returns but they also want peace of mind i.e. transparency and a trusted partner who aims to deliver consistently throughout credit cycles. I believe our disciplined management style combined with our strong fundamental credit skills and market knowledge will enable us to continue to earn our clients’ trust. I look forward to working with my colleagues to expand AXA IM’s footprint as a market leader in the alternative credit space.”

Eric Lhomond, previously Global Head of the Alternative Solutions team, has decided to leave AXA IM in order to pursue a new opportunity.

Julien Fourtou, Global Head of MACS & TSF, said: “Eric has worked across the AXA Group for over 17 years. He spent the last two years at AXA IM leading our Alternative Solutions team which encompasses fund of hedge funds, impact investing and alternative credit solutions. We would like to take this opportunity to thank him for his significant contribution and to wish him all the very best for the future. Eric will be working closely with the team to ensure as smooth a transition as possible.”

China FMCs Improve Revenues, Profits in 2015

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Despite the downturn in China markets in the second half of 2015, Chinese fund management companies (FMCs) saw revenues and profits rising in 2015. Many FMCs saw double-digit and even triple-digit net profit growth during the year.

This is one of the key findings of a research initiative by Cerulli Associates entitled Asset Management in China 2016. This research initiative is divided into three parts: two quarterly strategic overview reports followed by our annual report scheduled for release in the third quarter of 2016. This key finding was presented in the second strategic overview, released this month.

Cerulli’s research shows that six FMCs reported net profits of more than RMB1 billion in 2015. China Asset Management was the most profitable with RMB1.41 billion in net profit, followed by ICBC Credit Suisse Asset Management with a net profit of RMB1.29 billion for 2015.

For the largest 20 managers in China, the average net profit margin was 30.4% in 2015 while the net profit yield–which measures how much managers earn in basis points for each renminbi they manage–was approximately 28.5 basis points. Fullgoal Fund Management showed the best net profit yield last year at 56.9 basis points.

Institutions continue to play a big part in growing FMCs revenues and profits. “Institutional investors are estimated to have contributed one-third of assets under management as at end-2015. We understand that they prefer one to-one segregated accounts because such accounts are more flexible in active management and in using leverage,” says Miao Hui, senior analyst with Cerulli who leads the China research initiative.

Institutional investors also welcome “customized mutual funds,” or funds launched for specific investors that meet the minimum number of subscribers, with lower leverage allowed. Still, it will be hard for FMCs to sustain 2015’s profit levels in 2016. “While institutional investors’ participation in capital markets is expected to grow in 2016, FMCs’ profits will be hard to maintain under current volatile market conditions,” Hui adds.

London Remains the Top Leading Global Financial Centre

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Londres mantiene su liderazgo como centro financiero a pesar del Brexit — CC-BY-SA-2.0, FlickrPhoto: Nimalan Tharmalingam. London Remains the Top Leading Global Financial Centre

London, New York, Hong Kong, Singapore and Tokyo remain the five leading global financial centres according to the twentieth Global Financial Centres Index (GFCI 20). Published by Z/Yen in collaboration with the China Development Institute (CDI), the GFCI rates 87 financial centres. London is one point ahead of New York (on a scale of 1,000 points this is insignificant). Singapore is 42 points behind New York in third place. Tokyo, in fifth place, is 60 points behind New York.

The UK ‘Brexit’ referendum result is not reflected in the GFCI 20 results so far. GFCI 20 was calculated based on data collected up to the end of June 2016 – a few days after the referendum result on 24 June. Looking ahead to GFCI 21, assessments given to London in July and August are significantly down from previous levels. GFCI 21 may show some significant changes. London, New York, Singapore and Hong Kong remain the four leading global financial centres.

All North American centres except Calgary are up in the ratings. Calgary focuses on energy finance and the recent volatility in oil prices is likely to have caused a decline in Calgary’s rating. San Francisco and Boston are second and third in North America – reflecting the growing importance of FinTech. Chicago re-enters the GFCI top ten and Toronto, the leading Canadian centre, is now 13th having been eighth a year ago.

Western Europe remains a region in flux. Luxembourg and Dublin show strong rises in the ratings whilst Geneva and Amsterdam fall. Early indications following the Brexit referendum result are that decision-makers are looking around and considering Luxembourg and Dublin as potential locations if they need to leave the UK. Wealth management in Geneva may be suffering from increased transparency requirements of international regulators. Seven of the top ten Asia/Pacific centres see a fall in their ratings.

Some Eastern European and Central Asian centres prosper whilst others struggle. Warsaw, Tallinn and Riga are now the leaders in this region. Istanbul, Moscow, St Petersburg and Athens continue to languish. Turkey and Russia are both involved in armed conflict. Although geographically removed from the fighting, the financial centres in these countries are clearly affected by the uncertainty this creates.

Australasian centres are doing well. Three of the top five global centres are Asian. Hong Kong and Singapore had some small declines. Sydney and Melbourne both saw solid increases in their ratings.

Offshore financial centres are recovering lost ground. Jersey, Guernsey, the Isle of Man, the Cayman Islands, Bermuda, the British Virgin Islands, and are all up in the GFCI 20 ratings.

Middle Eastern centres decline. With the exception of Bahrain which saw a modest rise, all Middle Eastern centres were somewhat down although Dubai only fell by a single point remaining well ahead of other centres in the region.

Latin America down, Caribbean Up. Sao Paulo, Rio de Janeiro and Mexico continue to struggle. Trinidad & Tobago have entered the index for the first time in 71st place.

Mark Yeandle, Associate Director at the Z/Yen Group and the author of the GFCI, said “Changes in perceptions following the Brexit referendum are not yet reflected in the GFCI. However, early signs are that London could see a decline next time round. Which centres may gain from this is hard to predict.”

Fan Gang, CEO of the CDI, said “We are delighted to be working with Z/Yen Group in producing this index. It is a very exciting time for financial centres in China as Shanghai, Shenzhen and Beijing all rose in the GFCI ratings in GFCI 20. Dalian and Qingdao were also seen as performing well in recent editions. We anticipate that Chinese financial centres will rise rapidly in importance around the world.”

“You Cannot Invest in Asia Without Properly Knowing the Market.” Matthews Asia’s Message During its Annual Conference

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Last 13^th to 15^th of September, Matthews Asia held its annual conference at the Palace Hotel in San Francisco. The sessions were attended by up to 120 delegates from Canada, the United States, and Latin America.

Delegates heard firsthand about the management company’s experience in long term investing in one of the world’s most dynamic economic regions, which contributes to more than a third of global GDP. This year, the company celebrates its 25th anniversary as one of the most specialized companies in the Asian market.

“Speaking directly with the CEOs, visiting the company, walking through their facilities…” for Paul Matthews, the firm’s founder, and Mark Headley, Chairman of the Board of Directors, that isthe key to the company’s 25 years in the region. “It is still essential to visit the companies in which we invest to get to know them properly,” Headley said during his speech, reminiscing about his first visit at an Asian factory.

“In 1993, Paul and I saw, in a Barings brochure, photos of a textile company, which pictured all its workers busy at their jobs. When we went to visit it, we discovered that their warehouses were completely empty” After a few twists and turns, they finally got someone to explain to them what was happening. The factory was waiting for machinery from Germany, and meanwhile its 3,000 employees could not work. “The fundamental conclusion of that trip was that you could not invest in Asia without personally visiting the companies,” said the Chairman of the Board.

During the two conference days, the company’s portfolio managers emphasized the idea that investing in Asia is a long distance race, and that the best way to ensure returns is by investing strategically, rather than tactically. Matthews Asia does not invest in countries or in certain sectors, but in companies. Their process is entirely bottom-up and the portfolios are constructed company by company.

Investing in China

With regards to China, Matthews’ experts stressed that despite the ‘bad press’ haunting the Asian giant, the reality is that there has just been a slowdown, rather than a collapse of the economy. In fact, the fund managers believe there is an opportunity to invest in companies, especially those related to the strength of domestic consumption in China.

Matthews is convinced that the debt problem in China is not higher than in other world economies, and is mainly composed of public debt. The fact that household debt is not substantial is, in their opinion, an advantage.

The highlight of the first day came from Andy Rothman, a veteran investment strategist and author of the Matthews Asia blog, Sinology. His mission: to destroy the myth of an unrestrained China.

“The average citizen in developed economies imagines China as an economy which is still totally controlled by the state, with a very communist background, ghost towns, “zombie “companies, and with exports and investment accounting for the most part of GDP. The reality of China’s economy is more like this: 80% of employment in China is in private hands, all employment growth is generated by SMEs, it is a market of entrepreneurs and, finally, we are in the fifth consecutive year in which services and consumptionaccount for a larger part of the economy that investment.”

Strategic vs. Tactical

The Matthews Asia Investment Forum also featured a presentation by portfolio managers, Robert Horrocks and Teresa Kong, who reminded the audience that there are not many purely tactical or purely strategic decisions, but that decisions within their company are much more strategic than tactical. This is why, for them, macro data is important but just up to a certain extent.

Matthews Asia defines itself as ‘macro-agnostic’, a description which caught the audience’s attention, and which refers to the fact that it places much more importance on choosing the right companies, than on choosing the right countries.

“Choosing the right company is even more important than choosing the right sector. In fact, issues like interest rates, currencies, and GDP growth, are all more tactical than strategic. When you invest with a 10-year horizon, macro parameters lose relevance,” Kong said during her presentation.

The event closed, until next year, with a visit to the company’s San Francisco office, providing delegates with the opportunity to have one-to-one meetings with fund portfolio managers.

Baby Boomers Are the Largest Users of ETFs

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Los 'baby boomers' son los mayores usuarios de ETFs — CC-BY-SA-2.0, FlickrPhoto: greeblie . Baby Boomers Are the Largest Users of ETFs

Despite the commonly held view that exchange traded funds (ETFs) are most popular with younger investors, a new whitepaper from Pershing, a BNY Mellon company, in conjunction with Beacon Strategies, finds that investors between the ages of 51-70 who work with advisors are, in fact, the largest users of ETFs, followed by those over the age of 71.

The report, The Evolving ETF: Using Exchange Traded Funds in Client Portfolios, surveyed more than 1,500 advisors in the U.S and around the globe. More than two-thirds of advisors who use ETFs intend to increase their usage over the next 12 months, while 55 percent said that more than half of their clients already have ETFs in their portfolios.

“The widespread assumption across the investment management industry is that the continued growth and popularity of ETFs is being driven by younger investors. However, advisors are telling us that this is not necessarily the case,” said Justin Fay, director of financial solutions for alternative investments and ETFs at Pershing.

“We found that ETF usage in portfolios is most prominent among the Baby Boomer and Greatest Generation populations, mainly because these investors have become increasingly aware of the cost efficiency and access to a variety of styles that ETFs may provide, which can help them achieve their financial goals,” he added.

Pershing and Beacon Strategies’ whitepaper revealed a number of other key findings, such as:

Advisors view ETFs as critical investments in client portfolios
Performance is the key criteria for choosing a specific ETF
Further education needed around ETFs

“ETFs can be a particularly attractive investment option for advisors, offering customizable solutions and potentially lower-cost access to markets, countries and sectors than many other comparable investment vehicles. While the RIA channel continues to dominate in terms of ETF use, we are seeing increased adoption across other channels, particularly independent broker-dealers who are implementing ETFs more frequently within portfolios, and this trend is expected to continue,” concluded Fay.

To obtain a copy of Pershing’s whitepaper, follow this link.

Cazenove Capital Management Acquires C. Hoare & Co’s Wealth Management Business

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Cazenove Capital Management crece con la adquisición del negocio de wealth management de C. Hoare & Co — CC-BY-SA-2.0, FlickrPhoto: Moyan Brenn. Cazenove Capital Management Acquires C. Hoare & Co's Wealth Management Business

Cazenove Capital Management, the UK wealth manager of Schroders, has reached an agreement with C. Hoare & Co. to acquire its wealth management business.

C. Hoare & Co. is a London-based private bank with a 300-year history of providing banking services to high net worth and ultra-high net worth clients. Over the last decade, it widened its service offering into wealth management and has developed a high-quality business with approximately 1,800 clients and £2.2 billion of discretionary assets under management at the end of June 2016.

Peter Harrison, Group Chief Executive at Schroders, said: “C. Hoare & Co.’s culture of client focus and exemplary client service are a strong fit with Schroders. This acquisition of its UK wealth management business grows our business in this area. I am confident that the relationship will create long-term value and benefits for clients, shareholders and employees.”

Andrew Ross, Chief Executive at Cazenove Capital Management, said: “We believe the combination of our two businesses will bring significant benefits and enhanced opportunities for our clients. The complementary fit between our two firms, the strong shared service culture, long-term thinking and established heritage of both businesses make this an ideal match.”

Alexander Hoare, Partner and Director at C. Hoare & Co., said: “We have chosen Cazenove Capital, the UK wealth manager of Schroders, because our firms share established heritages and similar cultures with the same dedication to customer service. We are very proud of the wealth management business that we have built over the last decade and we are keen for it to continue to flourish. We look forward to an ongoing relationship with Cazenove Capital.”

Financial terms of the transaction were not disclosed and it is expected to complete in the first quarter of 2017.