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Pension Systems from Mexico to Chile will Channel Greater Percentages of Assets Outside of Their Borders

The Latin American pension system has grown to more than US$900 billion in assets under management, according to new research from global analytics firm Cerulli Associates.

“The pension industry in Latin America has been a key source of allocations for global managers and exchange-traded fund sponsors over the years, and promises to grow in importance as the size of these privatized social security systems quickly expand,” comments Nina Czarnowski, senior analyst at Cerulli. “Local capital markets will eventually be unable to absorb these additional flows.”

In their Latin American Distribution Dynamics 2013: Closed Markets Begin to Mature and Open report, Cerulli analyzes distribution and product development trends in the six key local mutual fund and pension fund markets–Brazil, Mexico, Chile, Colombia, Peru, and Argentina.

“Cross-border distribution to the regional pension industry remains the biggest opportunity. The good news is that, while highly competitive, it remains a fairly low-cost endeavor,” Czarnowski explains. “In fact, some of the top global managers in the region have succeeded in gaining more than US$5 billion each without a local office, or a local product.”

To the credit of the pension managers themselves, performance, global expertise, and on-going support have been the most-sought-after characteristics when choosing among cross-border managers.

“There has been a flurry of merger and acquisition activity in the pension space in Latin America, beginning in the last quarter of 2012,” Czarnowski continues.

Cerulli’s research finds that the compulsory fund systems from Mexico to Chile are doubling in size every five to six years. As they amass large sums of assets, it will be imperative for them to channel greater percentages of their assets outside of their borders.

The Self-Sustained Recovery in the US Shows no Signs of Being Derailed

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Los tres riesgos que podrían hacer descarrilar la imperturbable recuperación de EE.UU. — Giordano Lombardo is Global CIO at Pioneer Investments. The Self-Sustained Recovery in the US Shows no Signs of Being Derailed

The transition towards a self-sustained recovery in the US is supported by strengthening internal demand, driven by recovering capital expenditure and household consumption. Giordano Lombardo, Global CIO at Pioneer Investments, in an update posted in the asset managers blog follow Pioneer, expects to see mixed signals coming from economic activity indicators and labor market as the economy normalizes, but does not expect the trend in the main drivers of growth to be derailed.

Pioneer Investment’s growth estimates for 2014 in the US are:

U.S. GDP growth of 2.8%.
Personal consumption estimated to grow at a moderate pace and then accelerate in the second half of the year.
Inflation expected to remain below 2% but step up gradually during the year.
Non-Residential Investments to accelerate in the second half of the year, giving momentum to acceleration in capital expenditures.

If the economy develops as the Fed currently forecasts GDP growth around 3% in 2014 and 3-3.5% in 2015, unemployment around 6% by the end of 2015 – Pioneer Investments expects QE to be wound down by the end of 2014. Interest rates could then start to slowly increase during 2015 (Fed Fund futures currently project rates to slowly start to rise above the current 0.25% level in the autumn of 2015).

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Potential Catalysts to U.S. Economic Growth

Stronger-than-expected global demand, supported by a stronger economic performance of the Euro Area could support both confidence and exports, and somewhat offset the impact from weaker growth in emerging economies.
A productivity pick-up, accelerating the pace of recent weak growth.
Stable improvements in the consumer sector balance sheet, coupled with stable income growth and progressive improvements in the labor market could support higher patterns of consumption.

Potential Risks to U.S. Economic Growth

A significantly stronger dollar might adversely impact the export sector by making U.S.-produced goods and services more expensive in foreign markets.
After years of shedding debt, the U.S. consumer might be more reluctant to spend, detracting from growth momentum.
Geopolitical tensions, involving directly or indirectly the U.S. could be highly disruptive for the flow of oil and for financial markets in general.

Data Source: Pioneer Investments

GGM Capital Opens London Office with Appointment of Gabriel Padilla as Managing Director

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GGM Capital, Luxembourg-based boutique investment bank, announced it has appointed Gabriel Padilla as Managing Director of GGM Capital Markets to head up its newly opened London office.

Gabriel has over 20 years of international experience (USA, Latin America & Europe) in business development, relationship management, sales, trading and project management in the areas of securities financing, collateral management, securities clearing, settlements and custody in international markets and across different asset classes.

During his banking career he has worked in leading international organizations including JP Morgan Chase, Banco Santander and UBS, among others.

Prior to joining GGM Capital, Gabriel showed his entrepreneurial spirit by creating and leading SecFin Consulting Limited, a London based consulting company. He is a senior advisor with Eleven Canterbury mentoring, and coaching technology and services companies, enabling them to better understand financial institutions.

Guillermo G. Morales, the Executive Chairman of GGM Capital, commented: “We are delighted to have boosted our capital markets credentials with the appointment of Gabriel and expanded into the London market. It’s an exciting time in our development and we welcome such an A class operator to the company.”

Regulation Creates Opportunities for Financials Too

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¿Cuáles son las aspiraciones de Google en el sector bancario? — Wikimedia CommonsPatrick Lemmens, portfolio manager of Robeco's strategy New World Financial Equities . Regulation Creates Opportunities for Financials Too

The effects of the last major financial crisis have been far-reaching for banks and insurance companies worldwide. Investors tend to look at the negative aspects, like higher capital requirements that put pressure on returns. “But regulation creates opportunities too”, says portfolio manager Patrick Lemmens of Robeco New World Financials Equities, who received the Lipper Fund Award on 31 March for his fund’s strong track record.

Higher capital requirements lead to more expensive banking and insurance services

The banks are responding to the higher capital requirements by charging more for their banking services, says Lemmens. The new global regulatory system for banks, Basel III, is responsible for raising these capital requirements. This system is pushing up the requirements for capital and liquidity, while financial leverage needs to be reduced. Basel III is being introduced to tackle the inadequate regulation that contributed to the major financial crisis of 2008. Lemmers explains the consequences.

“This helps banks boost returns on their capital in order to retain access to the international capital market. There are not many other options for improving profitability. Reducing costs is harder, as cuts have already been made here.” In his opinion, this also applies to insurance companies. The introduction of Solvency II is impacting the European insurance sector. The objective of this European directive is to make sure insurers have sufficient capital reserves. “Covering longevity risk costs more in the Netherlands than in other countries as a result of the regulators’ high capital requirements.”

There is also another reason why higher capital requirements can lead to raised costs. The regulators are scaring off newcomers with more stringent capital requirements and reporting obligations, says Lemmens. “They are putting up daunting barriers that make it increasingly hard for newcomers to enter. This prevents new companies that are willing to slash prices from gaining access and thus benefits the established order.”

But European payment transactions offer opportunities for newcomers

There is one section of the banking world where competition is increasing, however, and where this monopoly is being broken: European payment transactions. The reason for this is that banks in the European Union are required to provide client data to competitors to make it easier to switch from one company to another. “This should make payment transactions cheaper and easier. In the case of client data, for instance, this includes account holders’ direct-debit and standing-order authorizations,” says Lemmens.

“The banks’ monopoly on payment transactions is disappearing. Competition will increase as new players start processing payment transactions for stores and webshops, for instance. A power shift is taking place amongst those parties handling payment transactions, making way for new innovative players. This is why I invest in companies such as Optimal Payments and Wirecard. These companies are expected to show rapid growth in the coming years.”

Lemmens sees opportunities in payment transactions mainly for innovative companies that challenge the established order, and therefore does not invest in large technology companies. “I often wonder what Google is up to in the banking sector. I don’t think they intend to become a bank. Clearly, they have a lot of search data that can make them money. And they can simply buy up a bank to obtain a banking license. But the downside of such a takeover is that it puts you in full view of the regulator, who could then easily decide that Google is a systemically important bank and must maintain additional capital buffers.”

IT companies benefit from increased outsourcing

The pressure of regulation on banks and insurance companies has increased in the aftermath of the financial crisis and has led to the outsourcing of IT activities, says Lemmens. Banks and insurance companies can no longer handle these activities on their own and are finally prepared to outsource them. In his opinion, dealing with IT has become too great a challenge to handle alone.

“Just providing the regulators with all the different loan data is a massive task for the banks. This does not happen simply by pushing a button – it is a complex process. Much of this data is sourced from diverse IT systems and is subject to different methods of administration. Nevertheless, you are expected to provide it in a uniform way, and so banks have to process, match and check their loan data.” “This requires extra investments in IT. Banks now no longer want to do the work themselves and are engaging third parties to handle it for them. An added advantage of outsourcing IT is that it enables you to make the related costs more variable, causing you to become less sensitive to the economic cycle.”

“Companies such as Cognizant, Simcorp and Temenos that supply IT services for banks will benefit from this outsourcing trend. They also happen to be the companies I have in my Robeco New World Financials portfolio.”

Lemmens sums up the consequences of regulation as follows: “Regulation is generating opportunities for investors. While strengthening the established order by setting up entry barriers, it can also generate opportunities for new players such as IT companies that provide services for the financial sector and for specialized companies active in handling payment transactions.”

US Asset manager EARNEST Partners Launches a UCITS Structure in Ireland

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Responding to strong demand from overseas investors, EARNEST Partners has announced the launch of an offshore vehicle to meet such demand. The UCITS platform will offer European, Asian, and other non-U.S. investors the ability to easily access a suite of EARNEST Partners’ equity strategies, including Global Emerging Markets Equities, Pan-Asian Equities, Frontier Markets Equities, Global ex U.S. Equities, and Global Equities. The firm has been managing equities since 1999.

The UCITS vehicle is domiciled in Ireland, where the Central Bank of Ireland is the regulatory authority with responsibility for authorizing and supervising the UCITS.

When asked about the opportunity that this presents, Paul Viera, the founder and CEO of the firm stated,“We seek to offer vehicles to clients that provide regulatory oversight as well as economies of scale. The UCITS structure is seen by investors as possessing important investor protection, regulatory, and disclosure characteristics. As a global firm with investments around the world, I am pleased to expand access to those opportunities.”

The UCITS vehicle, EARNEST Partners Global Funds plc. is structured as a Self-Managed Investment Company. State Street Fund Services (Ireland) Limited is the Administrator and State Street Custodial Services (Ireland) Limited is the Custodian.

EARNEST Partners has its headquarters in Atlanta, Georgia, and offices in Beijing and Rio de Janeiro.

What do the Super-Rich Look for in a Luxury Property?

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Location, size, number of bedrooms and bathrooms are some of the most important things to the super-rich when looking to purchase a luxury home, however some are willing to sacrifice on space if the location is right, LuxuryEstate.com has revealed.

Type of property is very important to luxury buyers, about 45% of LuxuryEstate.com clients wish to have both a country house and city pad. For those only looking to purchase one property, there is an equal spilt between the city and the countryside; 27% opt for city living whilst 26% seek a rural retreat.

Location is everything for wealthy buyers. Currently, London leads the pack in desirable cities for the super-rich, with New York close behind. However an interesting new edition to the top-ten list is Miami, which sits at number seven.

Silvio Pagliani, President of LuxuryEstate.com, said: “Miami has seen a real estate boom in recent years, fuelled by low tax rates and instability in many South American countries. Miami is the nearest ‘safe’ playground for these international rich and luxury property is seen as a good investment.”

Many buyers are sacrificing on space if it means a house in the perfect location. In the most prized locations, such as central London, a quarter of LuxuryEstate.com clients dropped their standard on space to 100sqm as their absolute minimum size for a pied-à-terre. However a fifth believes they could not live in less than 1,000sqm.

Silvio Pagliani, President of LuxuryEstate.com, said: “Size is the ultimate status symbol to those wanting to buy a home in the countryside, but in London for example proximity to Harrods will often trump concerns over square footage for a residence.”

Bedrooms and bathrooms are also important factors to luxury home buyers. Around 25%, the largest percentile group, of LuxuryEstate.com clients six or more bedrooms in their homes. When it comes to bathrooms, even in smaller homes a minimum of 2 bathrooms is a must (27%), though with larger houses an ensuite for every room is required, reflected in the 22% of clients requiring six or more bathrooms in their home.

Brilla Appoints Carlos Deupi as General Counsel

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Brilla Financial Group has announced that it has hired Carlos Deupi as General Counsel, Executive Vice President and Corporate Secretary. Brilla is an international financial group catering to institutional and private clients worldwide, with broad expertise in private equity, asset management, banking, brokerage, financial advisory, insurance and trust services. Mr. Deupi will oversee and advise on general corporate, financing, and transactional and compliance matters for Brilla and its private equity funds and financial service providers.

Deupi is a corporate and securities lawyer with 25 years of experience at major law firms in New York City, Washington, D.C. and Miami. He joins Brilla from the Miami office of Squire Sanders, where he represented multinational corporations, financial institutions, banks, private equity funds and real estate firms in a variety of M&A, fund formation, investment, financing, workout and disposition deals with several billion dollars in value, as well as in regulatory matters. He also has significant experience in structuring real estate, hospitality and infrastructure transactions, including investments, financing, property acquisitions and sales, commercial leasing, construction and development.

Deupi is Chairman of the Miami Finance Forum, a leading nonprofit networking and educational association of investment and finance professionals in South Florida. He is a frequent speaker on financial and legal topics. He has been AV-rated by Martindale Hubbell since 2000, the highest possible ranking from this renowned firm.

Deupi received a B.S. in Finance from the Wharton School of the University of Pennsylvania in 1985. He graduated from Boston College Law School in 1988, where he was Articles and Citations Editor of the Boston College Third World International Law Journal. He has been admitted to practice law in New York, California, the District of Columbia and Florida.

“We’re delighted to have Carlos join Brilla and bring his legal background to the firm. He will be a key resource for the expansion of the group,” said David Brillembourg, Chairman & CEO of Brilla.

67% of US Executives Plan Higher-Risk Organic Growth

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Low growth and competitive disruption have prompted companies to pursue higher-risk approaches to growth than in the past, according to the tenth edition of the EY Global Capital Confidence Barometer. Although only 29% of companies are planning to pursue an acquisition in the next twelve months, down from 41% six months ago, executives’ broader confidence in the US economy and their strong deal pipelines suggest they are setting the stage for inorganic growth.

Findings from the study indicate an improving level of economic confidence. Two-thirds (66%) of executives believe the US economy is improving, up from 48% six months ago. Moreover, 29% of companies expect their deal pipelines to increase in the next 12 months, and 53% expect US deal volumes to improve. Most notably, 70% of executives cite increased confidence in corporate earnings, up from 38% six months ago and the highest level in five years.

“Companies have weathered a prolonged period of uncertainty and their primary focus was on deleveraging, and cutting costs,” said Richard Jeanneret, EY Americas Vice Chair, Transaction Advisory Services. “However, we are now finding that more companies are shifting their focus to raising capital and optimizing performance to prepare for future growth.”

Forty-nine percent of companies are now focused on optimizing capital, suggesting that executives are cleaning house and getting ready to grow in a low-growth environment. “Companies are ‘kicking the tires’ on potential acquisitions, and they have concluded that the inorganic growth they require will demand more preparatory work,” said Jeanneret. “While debt-to-capital ratios have remained stable over the last year, 31% of companies’ debt-to-capital ratios are expected to increase as companies take advantage of favorable debt markets to optimize their balance sheets for the future. With stabilized capital structures, companies are preparing for the next wave of investment.”

US companies have long indicated in the Barometer that credit is broadly available to them, and global credit is currently at an all-time high, but executives now report a growing willingness to add leverage to their balance sheets, which could imply growth in deal activity over the medium to long term.

Shareholder Activism Shaping Boardroom Agenda

In the US, shareholder activism has become nearly ubiquitous. This trend and pressure to reduce costs and put companies’ stockpiles of cash to work could trigger the next wave of M&A. “Companies are facing pressure to grow and create value – and true valuation models are returning. To be strategic, there needs to be more capital deployment and activists are watching this,” said Jeanneret. “Even companies that have not yet been subject to shareholder activism are preparing now for any future activity.”

In the survey, 96% of executives say issues have been elevated due to shareholder activism. Fifty- one percent of US boardrooms elevated cost reduction, 31% share buybacks, and 26% dividend payments. In addition, some executives have elevated more transformational tactics for consideration including 21% who selected divestments, 11% selected acquisitions and 10% selected spinoffs or IPOs.

Growing in a Slow Growth Environment

Companies and boards are pursuing parallel priorities, working to find the right balance between growth strategies and cost reduction. In striking this balance, US executives also report closer scrutiny on cost structures and operational efficiency is now the norm. The result of this is a model that could help drive M&A activity and cost synergies as companies seek out new growth opportunities.

“Divestments may be on the upswing as there is a particular interest from companies in shaking up product and service offerings, focusing less on core offerings and more on updating the product mix or finding the gaps in offerings,” said Jeanneret. “This focus on higher-risk organic growth strategies may indicate increased interest in inorganic growth as internal opportunities are fully exploited.”

Twenty-eight percent of executives also cite that looking ahead over the next 6 to 12 months; emerging markets continue to present some of the greatest risks to their business as they contract due to both political instability and slowing growth. However, plans to grow in emerging markets are not thwarted, as the survey shows 75% of US investment capital over the next year is expected to go to BRIC and non-BRIC emerging markets with the greater proportion of that total earmarked for India, China and Brazil.

The Future of Work

In the US specifically, there are several trends that are converging to shape business and acquisition strategies. When asked which trend could have the greatest impact over the next year, executives cited a trend they are calling “the future of work.” Sixty-four percent said that lack of skill, competition for talent, and changing employer–employee obligations will greatly affect business strategies. This trend is largely brought on by digital transformation – for example big data and cloud technologies — as well as global rebalancing due to the growing middle class.

In C-suites across the US, memories are long and dealmakers have been wary to pursue deals until they see evidence of a full-blown economic recovery. Executives are setting the stage for growth, driven by the uptick in economic confidence, the tapering of equity markets preparing interest rates to rise and bring valuations in, a moderating stock market, and relative stability in Washington DC.

“If we examine each of the three elements necessary for an active M&A environment – credit, cash and confidence – credit and cash have been prevalent for a while now, but it’s the confidence we’ve been lacking. There is no one single factor underpinning deal flow. Rather, dealmaking will be determined by the convergence of valuation gaps contracting, improved fundamentals, and economic confidence that will intensify the drive towards M&A. In our new post-crisis environment, a comeback in the deal markets may be protracted. But whenever it arrives, US corporates will be ready for it,” concluded Jeanneret.

UBS Private Banking Dismantles its Operations in Bahamas

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UBS desmantela sus operaciones de banca privada en Bahamas — Photo: Jerrye and Roy Klotz MD . UBS Private Banking Dismantles its Operations in Bahamas

As confirmed to Funds Society by UBS Private Banking sources, the bank plans to gradually close its private banking operations in the Bahamas, where it employs about 70 people, between now and the end of 2014. Part of this workforce has already been relocated to other positions within the bank.

According to the Bahamian press, which was the first to break the news last March, UBS will reduce its private banking activity in the Bahamas but will continue to focus on its Trust Department, which it plans to strengthen.

The decision to reduce its presence in Nassau, where it provided trust and wealth management services, comes after undertaking a thorough evaluation of the bank’s international destinations. “Based on economic feasibility considerations, the UBS group has decided to dismantle its subsidiary in the Bahamas, UBS (Bahamas) Limited,” the bank declared in a statement to The Bahama Journal.

The bank wished to clarify that “the decision will not affect UBS Trustees (Bahamas). The shutdown process shall be completed in late 2014 and will proceed in close collaboration with the Ministry of Financial Services of The Bahamas.”

It also confirms that UBS shall offer its clients the ability to transfer their assets to other UBS booking centers or to a service provider of the client’s choice.

“A scheme to assist affected employees has been set in motion, and a considerable number of them will be offered other positions and jobs within the UBS group,” UBS confirmed.

Evercore Wealth Management Expands to Florida and Names Three New Partners

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Evercore Wealth Management LLC has announced the opening of an office in Florida, to serve high net worth individuals, families and related institutions with integrated financial planning and investment management. In a related move, the firm named three new partners.

The new office, based in Tampa, will serve clients in Florida and the southeast United States. The three partners, Julio Castro, Michael Cozene and Arthur Noderer, join Evercore Wealth Management from GenSpring Family Offices and its affiliate, SunTrust Bank.

“The establishment of our first office in Florida is an important step in our continued growth as a national firm,” said Evercore Wealth Management Chief Executive Officer Jeff Maurer. “Our new colleagues have deep relationships in the region, and they share our commitment to integrated financial planning and investment management that is in each client’s best interests,” Mr. Maurer said. “We welcome them to our team.”

Julio Castro, a Partner and Wealth Advisor at the firm, said, “We are delighted to join Evercore Wealth Management. The firm puts its clients first, delivering independent advice and customized investment solutions, and is free from many of the conflicts inherent in other financial services companies. That’s important to private investors in Florida and the Southeast.”

Julio Castro is a Wealth Advisor, providing comprehensive, goals-based wealth planning advice. Mr. Castro joins Evercore Wealth Management from GenSpring, where he led new business development and the integration of new clients in Florida, and was a member of the national leadership committee. Additionally, he has practiced as both an attorney and an accountant, specializing in estate and tax planning. He has 25 years of experience in wealth management.

Michael Cozene is a Wealth Advisor, serving clients throughout the Southeast with comprehensive, goals-based wealth planning. He is a member of the Evercore Wealth Management Strategic Planning Committee. Mr. Cozene also joins Evercore Wealth Management from GenSpring, where he led business development and spearheaded wealth planning and family office services for the firm’s ultra-high net worth clients in Florida. He has 25 years of experience in wealth management.

Arthur Noderer is a Portfolio Manager, with 34 years of experience in managing investment strategies for high net worth individuals, families and related institutions. Mr. Noderer joins Evercore Wealth Management from SunTrust Bank, where he worked for 18 years as an investment strategist. He is a Chartered Financial Analyst.