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Unravelling Market Dynamics

The first quarter was rather confusing for investors, as the management of risks and positions by investors was a key driver of markets rather than fundamentals. This quarter, it seems that market dynamics can be assessed a bit more easily. According to ING IM, there are good opportunities in equities while a short-term rebound in emerging market assets is also in the cards.

“We hold on to our longer standing overall risk-on tilt as the increasing visibility in the underlying momentum of the cyclical recovery in developed markets continues to provide solid support. We think that the perception of a broadening of the recovery will increase as the negative impact on economic data from bad weather will fade in the current quarter”.

Will equities catch up with commodities and real estate?

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Confusing first quarter for investors

Investing is never easy as the first quarter once again underscored. The first three months of the year were characterized by an increasingly synchronized recovery in developed markets, a firm earnings season and multiple eye-catching headlines of turmoil in emerging markets (EM) – Thailand, Venezuela, Turkey, Ukraine, Russia and China, just to name a few.

Remarkably, this environment translated into clear outperformance for commodities, more volatility than direction in developed equity markets and only modest underperformance in EM assets. Stressing that we live in uncertain times has long lost its shine as an excuse for temporarily misunderstanding markets. Yet it is prudent to explore less “fundamental” reasons for the behaviour of investors over the last three months.

Markets influenced by investor sentiment and positioning

In the complex system of global financial markets there is no stability in either the set of driving factors of markets or even the direction of causality between the real economy and markets. Sometimes market dynamics are the consequence of investor behaviour that follows from their shifts in sentiment, management of certain accumulated portfolio concentrations (squaring strongly overweight or underweight positions) or the dominance of certain types of investors.

To view the complete story, click the on the attached document.

“Having Worked with a Giant Gave Us the Impetus to Establish AM Global”

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“El haber trabajado con un gigante nos dio el acicate para fundar AM Global” — Andrew Mehalko. “Having Worked with a Giant Gave Us the Impetus to Establish AM Global”

In late 2012, Steve Barimo and Andrew Mehalko established AM Global Family Investment Office, a firm which was born out of a common vision and many years’ experience in wealth management. Tired of managing a giant, they both opted for a type of company more in line with the client, hence the launch with their own capital to establish a family office.

Before taking this step, Barimo and Mehalko worked together for many years in GenSpring Family Offices where they both became part of its operating committee. They both participated in the growth of Genspring since the time when the company’s assets under management were of $ 400 million to the more than $23,000 million which Genspring had when they left the firm, which was founded in 1989 in Palm Beach (Florida).

These two former GenSpring executives have much more than just their professional careers in common. Although they didn’t see each other for the few years coinciding with their college years and the first few years of their working life, Barimo and Mehalko grew up together in a small neighborhood of Hialeah, a city south of Miami where 89% of the population speaks Spanish. They were neighbors and consider themselves as close as brothers. Mehalko, who was motherless, spent many hours in Barimo’s house after school, “especially at lunchtime” they both laughingly explained during an interview with Funds Society.

After an interval of a few years, Barimo and Mehalko met again in Genspring, where they worked together from 2001 to 2012. It was during their last years in Genspring when they began to toy with the idea of going ahead with establishing their own company with a clear premise “to do things genuinely: an independent firm with superior and independent talent, which neither sells nor distributes”. And from there, AM Global Family Investment Office was born.

“At AM Global Family Investment Office, the client pays us for our help in figuring out the best way to realize their investments, and we guide them by the hand every step of the way,” says Steve, who stressed that in order to establish AM Global, they invested their own capital, so their investments are always aligned with their clients.

AM Global seeks to preserve client wealth and works to maintain a long term relationship. “We are building our own venture around enterprising people, customers who sold their businesses and find themselves with liquidity, so we want to be sure to maintain their wealth in the long term.”

Accordingly, both partners agree that the industry in which they operate is “very opaque”, something that is very difficult for many of the families with which they deal to understand. Therefore, AM Global charges an advisory fee to its customers instead of using the co-investment fees method.

“They know we’re closely aligned with them. We are a client for all of them, which makes much more sense,” says Mehalko. The fact of having worked with large firms and having had the opportunity to experience firsthand the motivations that lead to sell a client a particular product and not another, served to gain experience in his career. “At AM Global we do the opposite without any conflict of interests,” he added.

“ The fee we charge our clients is not for the funds or compensations, it is strictly an advisory fee, this is simply a consultancy firm where there is no self interest and is directed only towards what is best for them,” said Barimo.

AM Global Family Investment Office, is aimed at ultra- high- net –worth- individuals (UHNWI), and currently has 12 client families and $ 230 million in assets under management. They are growing at an average of two new customers per quarter, most of them from the United States, even though there are two Latin American families in their portfolio. Along with the two founders, a team of eight people, which is also aided by external service providers, works in the company’s office, located in West Palm Beach (north of Miami).

AM Global is managed jointly by Steve Barimo, as co-founder and chief operating officer, and Mehalko, as founder and chief investment officer; likewise, they are both in charge of all strategic decisions and operational investments.

Mehalko is very clear on how to build a first-class investment management family office. He believes that many of the complex needs which high net worth and multi generational ultrahighnet worth families have are underserved by traditional investment management firms. To Mehalko, AM Global embodies a sophisticated investment culture and advisory services, as well as a better investment experience for clients.

MoraBanc Turns to Club Deals in Real Estate to Offer Added Value to Customers

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MoraBanc tira de club deals en bienes raíces para ofrecer valor añadido al cliente — Casa Vicens, Gaudí. Photo: Pere López. MoraBanc Turns to Club Deals in Real Estate to Offer Added Value to Customers

Gilles Serra, MoraBanc CEO, believes that in a market in which there is little added value in traditional management and even less with interest rates at rock bottom, the club deals in real estate are a great way to offer clients added value. Therefore, for the last few years, the Andorran institution has been looking for prime assets in Spain and other European countries, Serra explained in an interview with Funds Society.

MoraBanc has, for some time now, been investing in real estate, a type of investment which is achieving returns of around 6% and in which the family’s joint venture, referring to the Mora family, owners of MoraBanc, also offers an additional attraction for the investor client who, through this type of real estate private equity instruments, buys, manages and subsequently sells the property.

Serra, who is enthusiastically committed to this type of asset, recalled that they have been involved in several operations in the real estate sector in Spain and Europe in recent times. Casa Vicens, the Barcelona residence of the iconic Gaudí, which, until recently had been inhabited for a period of 105 years by generations of the Herrero Jover family, has been their last and most emblematic operation. Now its doors have closed, the bank plans to undertake major renovation work to convert Casa Vicens into a museum.

The executive also acknowledges that they have some other buildings in sight in Barcelona that might be of interest, as they have reached an agreement with the Hermitage for a franchise of the museum within the Catalan capital, where its own exhibitions could be combined with temporary exhibitions on concession from the Hermitage in St. Petersburg.

Accordingly, Gilles pointed out that museums are no longer confined solely to housing artworks. The museum itself has an ever increasing weight as a business through the tourism which it attracts and the profitability generated by the different events, a growing trend in big cities like Barcelona, where brands use these facilities to promote different events and celebrations.

Outside Spanish borders, MoraBanc recently purchased a building next to the European Parliament in Brussels, whose tenant is the French Alliance. In February 2013, the Andorran entity bought another building in Paris; these operations are performed through Amura Capital, the SICAV acting as head of real estate investments for the Andorran group.

Last January, Amura Capital announced the investment of 100 million Euros in Colonial, a real estate company, in which the Spanish group of companies, Grupo Villar Mir, and the Latin American, Grupo Santo Doming, are also shareholders.

As for the opportunity to invest in Spanish property, an interest which is shared by major international firms as indicated by various real estate transactions recently closed, Serra agreed that it is a good time to invest in Spain, but added “I think it will be a fairly short cycle. There is a lot of bad and not much good property. The time is still right to invest at reasonable prices.”

Since late last year and during the first quarter of 2014 the rate of international investors looking for opportunities in Spanish territory has increased, either through direct investment or through listed vehicles as the socimi, the Spanish real estate investment trusts (REIT), the market is currently very dynamic.

Apollo and Santander, Kennedy Wilson-Värde Partner and Popular, TPG Capital and La Caixa, HIG Capital and SAREB, Intu and CPPIB, Cerberus and Bankia, are just some of the agreements recently announced by Spanish companies and international funds. Blackstone, Centerbridge, Fortress, Goldman Sachs, KKR, Lone Star, Northwood, Pimco, Soros, Starwood, and WL Ross, are other international investors who have already signed agreements or are looking to position themselves in Spanish territory.

Grupo Sura Increases Assets by 7.6% in Q1

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Grupo Sura cae un 48,5% en el I trimestre al no registrarse los beneficios extraordinarios de 2013 — . Grupo Sura Increases Assets by 7.6% in Q1

Grupo SURA has presented its financial results for the first quarter of this year, showing operating revenues of USD 93.0 million and net profits of USD 75.2 million. Assets came to USD 11.5 billion, showing increases of 2.6% compared to the same period last year and 7.6% versus year-end 2013. Shareholders’s equity at the end of this first quarter came to USD 10.6 billion, which was 3.0% higher than for year-end 2013.

These results mirrored a good level of performance on the part of Grupo SURA’s subsidiaries which contributed with a total of USD 51.8 million this past quarter, posted via the equity method. Suramericana, the Group’s insurance and social security subsidiary contributed with USD 31.2 million and SURA Asset Management, the pension, savings and investment fund management subsidiary provided another USD 32.8 million. Assets at March 31, 2013 came to USD 11.5 billion, showing an increase of 7.6% compared to year-end 2013.

Overall results for this past quarter showed an increase in liabilities due to the financing obtained for the acquisition of preferred shares in Bancolombia back in March of this year. This produced a debt ratio of 4.7%. On the other hand, the Colombian Superintendency of Finance has given its authorization for an issue of Ordinary Bonds and/or Commercial Paper for up to COP 1.3 billion. This new issue of bonds to be placed in stages, the first for almost 50% of the total amount authorized, shall be used to restructure the Company’s debt, providing it with more flexibility in taking full advantage of market opportunities or advancing its expansion plans.

As they recently announced, Fitch ratings has given this forthcoming issue an “AAA” rating. In its corresponding report, Fitch Ratings highlighted the sound credit profile of all those companies from which the Group obtains a steady stream of dividends as well as an adequate debt debt-service coverage ratio, historically low leverage ratios together with adequate liquidity and the capacity to access alternate sources of financing.

On the other hand, Grupo SURA’s subsidiary, SURA Asset Management S.A. announced the terms and conditions of its first ever issue of corporate bonds on the international markets worth a total of USD 500 million. The value of the bids received came to a total of USD 4,281 million, almost 9 times the amount offered.

URA Asset Management es una empresa latinoamericana, filial de Grupo SURA, que participa por medio de sus compañías operativas en los negocios de pensiones, ahorro e inversión, en Chile, México, Perú, Colombia, Uruguay y El Salvador. A diciembre 31 de 2013 cuenta con 9,822 colaboradores y administra activos por USD 113.2 billones, pertenecientes a sus 16.7 millones de clientes, posición que la sitúa como líder del negocio de pensiones en América Latina con una cuota de mercado de 23.4% en activos administrados a esa fecha *.

Para la colocación se realizó una gira encabezada por el Presidente Ejecutivo de la Compañía, Andrés Castro, quien junto a un equipo de profesionales sostuvieron reuniones con inversionistas en 9 ciudades de Europa, Estados Unidos y América Latina.

– See more at: http://www.gruposuramericana.com/noticias/Lists/Entradas%20de%20blog/Post.aspx?List=8521d82e%2D670f%2D4c7d%2Db96e%2D199bc8abd10e&ID=447#sthash.qfVjqzst.dpuf

Misaligned Incentives and Information Asymmetry, Potential Conflicts in the Principal-Agent Relationship

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Incentivos no alineados e información asimétrica: algunos de los conflictos de interés entre el cliente y su asesor — Photo: Dave Dougdale. Misaligned Incentives and Information Asymmetry, Potential Conflicts in the Principal-Agent Relationship

The CFA Institute Research Foundation has published a white paper authored by Sunit N. Shah, Strategist at Pine River Capital Management addressing the principal–agent relationships, and the associated potential problems, in finance.

“The relationship between a principal and the agent who acts on the principal’s behalf contains the potential for conflicts of interest. The principal–agent problem arises when this relationship involves both misaligned incentives and information asymmetry. In asset management, factors contributing to the principal–agent problem include managers’ compensation structures and investors’ tendency to focus on short-term performance. In the banking industry, myriad principal–agent relationships and complex instruments provide a fertile breeding ground for incentive conflicts, many of which were highlighted by the recent financial crisis.”

You may access the white paper through this link.

The Emerging Market Sell-off Analyzed

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The emerging market sell-off last year has understandably attracted a lot of attention. It was different to the sell-offs seen in 2011 and 2008, as bond returns had more of an impact.

Investec AM believes that the core positives for emerging markets i.e. higher growth potential, better demographics, lower debt-to-GDP and higher productivity potential are still in place. However, some things have worsened. The market has been concerned about the current account deterioration in some emerging markets and the varying speed at which policy makers are taking action. According to Investec the right action has been taken to address the imbalances and hopefully stop the hemorrhaging of capital.

Investec believes that the world has globalized and emerging market data will most likely follow developed market data albeit with a lag, and hence emerging market capital flows should more than fund any current account deficits. Additionally, they expect strong reform momentum in coming years and for emerging markets to outperform developed markets over the longer term.

To read Werner Gey van Pittius’s (Co-Head of, Fixed Income Emerging Markets at Investec AM) viewpoint in full click here.

In summary, the main conclusions of the report regarding emerging markets are:

Broadly we have seen a re-pricing from expensive to cheap levels in currencies and local bond markets. In most countries the levels we have reached are not causing major concern to policy-makers and have been getting buy-in from the markets.
Inflation is not a worry for most countries due to below trend growth, moderating commodities and decent margins.
External debt is modest, especially for governments and banks. Some corporates have risk, although many have dollar revenue streams which hedge those out. Turkey stands out on this but officials are aware and taking action.
In some countries tightening of monetary conditions is healthy to reduce reliance on credit growth and improve savings rates; particularly in Indonesia, Brazil, Turkey, and India.
Combined with fiscal consolidation, growth drivers will be more sparse, with reliance on net exports increasing, as well as structural reforms.
Finally, we are already seeing trade balance improvements as exports benefit from currency weakness and imports moderate.
Hence, Investec AM thinks current levels of yield at 7% for local currency EMD are attractive from a nominal perspective given the global low yield environment they envisage for a foreseeable time. Also with inflation at 4% emerging markets are generating attractive real yields of 3%, compared to negative real rates in the developed world.
Chinese policy makers expected to take appropriate action to ensure a soft landing whilst a restructuring takes place across the Chinese economy. Investec expects growth to remain about 7%

The Crèdit Andorrà Financial Group Opens an Asset Management Company in Luxembourg

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The Crèdit Andorrà Financial Group has made further progress in its internationalization process with the creation of Crèdit Andorrà Asset Management Luxembourg, SA. The launch of the investment fund management company increases the Group’s competences in Luxembourg, one of the main international financial centres, where the Group has two SICAVs, created in 2004 and 2008 and where it has also been operating through Banque de Patrimoines Privés since 2011.

The new company will provide portfolio management and central administration services and will act as a distribution, domiciliary, paying and register agent of investment vehicles. Crèdit Andorrà Asset Management Luxembourg, SA will also manage the Crediinvest SICAV business, which has 12 sub mutual funds.

Luxembourg is a key location for the Group’s European wealth management project. The wide range of international investments and the multibooking platform constitutes a value added proposal for the customer. Crèdit Andorrà Asset Management Luxembourg, SA is part of the internationalisation strategy of the Group, which is present in 10 countries: Andorra, Spain, Luxembourg, Switzerland, the United States, Mexico, Panama, Paraguay, Peru and Uruguay.

The Managing Director of Crèdit Andorrà, Xavier Cornella, stated that the new management company will further consolidate the Group’s European private banking project taking into account the importance of Luxembourg as a financial centre, and added that “Luxembourg is a top level platform for structuring and distributing investment products and offers more than 45% of all the investment funds of the European Union. Being aware of this, Crèdit Andorrà has been present there since 2004 with two SICAVs and in 2011 we acquired Banque de Patrimoines Privés. The Group is now complementing its presence by launching a new management company that offers a broader range of investment services to the Group’s customers.”

ING IM Strengthens High Dividend Strategies with Two Senior Appointments

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ING Investment Management International (ING IM) has announced two senior appointments to its High Dividend strategies. Moudy El Khodr has been appointed Senior Portfolio Manager for the US High Dividend strategy and Kris Hermie, Senior Portfolio Manager for the Global High Dividend strategy.

Moudy and Kris, both of whom previously worked as part of ING IM’s Equity Value boutique, join a Brussels-based team of eight investors with an average of 19 years of experience. They will report to Nicolas Simar, Head of the Equity Value boutique.

Nicolas Simar, Head of the Equity Value boutique: “We’re very pleased to welcome these talented investors back to ING IM. Both Moudy and Kris have excellent track records and these appointments give us the opportunity to further strengthen this quality team.”

Moudy, who started in mid-April, has 16 years of experience in the industry, including 10 years at ING IM where he assisted in the development of the company’s High Dividend strategies. He re-joins ING IM after two and a half years with Petercam, where he managed the North America Equity Dividend strategy and co-managed the Global Equity Dividend strategy.

Previously at ING IM, Moudy was lead Portfolio Manager on ING (L) Invest Global High Dividend from 2006 till 2011 and on ING (L) Invest US High Dividend from 2006 to 2009.

Kris has 16 years of investment experience, four of these with ING IM as manager of the Global High Dividend strategy. He re-joins from Petercam, where for the past three years he was responsible for the Europe Equity Dividend strategy and co-managed the Global Equity Dividend strategy. Kris joins on 1 May.

Silk Invest Partners with Bramer AM to Launch the Emerging Africa Bond Fund

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Silk Invest has just reached a new major milestone: The launch of Emerging Africa Bond Fund in collaboration with Bramer Asset Management in Mauritius. This is an exiting new chapter in its story because the firm has increasingly been working with Africa-based institutional investors as they continue to expand their investment activities across the African continent.

As a result of this effort comes a strategic partnership with Bramer Asset Management which provides Silk Invest with a deeper reach into the Mauritius and East African investor markets while Bramer taps into Silk Invest’s specialist capabilities of managing local currency fixed income.

Both firms believe that 2014 will be the year of Africa’s bond markets and expect to see significant flows into this maturing asset class. “Investors are now also considering African fixed income investments to diversify their equity portfolios. The Emerging Africa Bond Fund has also been domiciled in Mauritius, which is globally known for its financial hub. This product has been designed to meet the requirements of both retail and institutional clients and we remain confident of the African potential which this new initiative brings”, says Jaya Allock, President & CEO of Bramer Asset Management.

The Fund will be domiciled in Mauritius and will be targeting mainly African and international institutional investors. “African institutional investors have seen a remarkable growth in assets but, until now, due to lack of compelling bond offerings, have invested most of their assets within their regions”, comments Malick Badjie, Head of Investment Solutions, Silk Invest. “Africa markets have seen tremendous interest recently from investors worldwide because of their increased share of the global economy and capital markets, along with their growth potential”, adds Muhammad Rawat, CIO of Bramer Asset Management. “African capital markets have significantly matured over the last few years with high positive real yields, solvent balance sheets and improving governance and institutional frameworks all providing an attractive investor entry point”, says Chandi Jethu, Managing Partner Silk Invest.

The fund will employ an active, benchmark-agnostic investment style, based on fundamental, country-by-country macroeconomic research that incorporates quantitative analysis, macro-analytic models, local market insight and rigorous risk management to achieve the target.

Bramer Asset Management Ltd is a leading financial Services provider in East Africa. The firm is headquartered in Mauritius and has presence in Kenya, Mozambique, Madagascar, Botswana and Malta. It is part of the British American Investment group, one of the fastest growing conglomerates in the Indian Ocean region. Bramer is also a major shareholder of Equity Bank, one of Africa’s most innovative financial institutions.

Cantor Fitzgerald Wealth Partners Names Chief Investment Officer

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Cantor Fitzgerald Wealth Partners, LLC, an affiliate of Cantor Fitzgerald & Co. serving the private wealth management market, has named industry veteran Bob Serhus as its Chief Investment Officer.

Mr. Serhus will focus on delivering Cantor Fitzgerald’s world-class investment offering to Cantor Fitzgerald Wealth Partners’ private clients, and be responsible for monitoring investment portfolios, directing investment policies and leading a team responsible for market research, manager selection and portfolio management strategies.

“Cantor Fitzgerald Wealth Partners is committed to quickly expanding its presence in the wealth management marketplace, and to achieve that, we are bringing in the most experienced, talented and respected individuals and teams. Bob exemplifies all of these qualities, and we expect that he will help accelerate our growth, expand our investment management capabilities and strengthen our existing client relationships,” said Stan Gregor, CEO of Cantor Fitzgerald Wealth Partners. “Our goal is to deliver a top-tier experience to clients by providing a highly tailored offering of services, to help advisors and their clients reach their unique financial objectives.”

Most recently, Mr. Serhus served as founder and Chief Investment Officer of Serhus Capital Management, where he provided customized client solutions through comprehensive and in-depth analysis, risk management and thorough due diligence. Before that, he served as Director of Research and Head Portfolio Manager at Attalus Capital, and Chief Investment Officer of Alternatives at Julius Baer. In addition, he also held senior positions at Alpha Investment Management and at J.P. Morgan, where he began his investment career in risk management. Mr. Serhus holds a Master of Business Administration in Finance from the University of Florida’s Warrington College of Business.

“Cantor Fitzgerald is well-known for its client-centric culture and track record of service, which provides advisors with a launching pad for further growth. We’re committed to delivering institutional-level investment management to clients and I am excited to be a part of a team that shares a common investment approach and goal of providing exceptional service,” said Mr. Serhus.

Cantor Fitzgerald Wealth Partners, an affiliate of Cantor Fitzgerald & Co., serves the private wealth market. In addition to its partnership structure, Cantor Fitzgerald Wealth Partners provides its advisors with an expansive suite of products and services, as well as access to Cantor Fitzgerald’s services reserved for Cantor’s large institutional clients.