European UHNW Investors Plan to Commit Additional Cash to Investing in 2014

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J.P. Morgan Private Bank has revealed the expectations of Ultra High Net Worth and High Net Worth European investors on market conditions, risk appetite and investment sentiment for 2014, as part of the Bank’s latest Private Client Survey. Conducted as part of the Private Bank’s latest Investment Insights series between January and February 2014, held in 15 cities across Europe amongst more than 900 UHNW and HNW investors, the survey polled participants on their market outlook, including investment views on the key risks for the next 12 months, as well as investment sentiment and their anticipated portfolio positioning.

When asked about European economic growth, almost all investors (95%) are convinced that Europe will grow in 2014. The majority (49%) believe Europe will grow at a rate of 1% in the next twelve months, and a quarter (23%) say a 1.5% growth rate is achievable, while 3.5% of investors think the region will grow by 2% in 2014. Some investors were slightly more cautious, with 20% predicting a lower 0.5% growth rate. Only 5% of investors believe Europe will not grow at all.

More than half (54%) of investors believe equities will be the best-performing asset class in 2014 – with Spanish (70%), German (59%) and Greek (54%) investors being the most bullish. A further third (31%) of investors consider alternative investments and hedge funds to be the other asset class winner for 2014, with respondents in the Netherlands (67%) and Switzerland (32%) particularly supportive. Investors generally agree that fixed income will not deliver the performance of the past 20 years, and less than 5% expect the asset class to be a good performer in 2014.

Europe is expected to be the best performing equity market in 2014, leading the way with 39% of investors’ votes. However, other markets are also listed: 35% believe the US will be the strongest performing equity market; 15% say Emerging Markets will outperform other regions; and 12% believe Japan could perform the best.

For fixed income investments, well over half (59%) of investors consider extended credit (high yield, loans, peripheral debt) to be the best performer for 2014. This was followed by Emerging Markets debt (18%), core/traditional fixed income (12%) and finally, cash (11%).

The survey also asked investors whether they plan to commit additional cash to investing in 2014. More than half (52%) revealed they plan to do so through additions to equities, while 18% are willing to commit more cash to alternatives. Roughly one in five (18%) investors would rather hold cash at current levels, while 8% are willing to increase cash positions and even reduce market exposure. “Given the outlook for 2014, it is reasonable that investors are willing to commit additional cash to investing this year, and as 2014 progresses, we expect consensus to be proven right: Stocks will beat bonds. Many investors have carried large cash positions over the past few years and have missed out on strong returns for risk assets, especially equities. We believe 2014 will be another year in which it pays to be invested”, César Pérez, Chief Investment Strategist for J.P. Morgan Private Bank in EMEA, comments.

Slower growth in China was the key concern for investors last autumn. This perception, however, has now shifted. According to the study, the geopolitical/political environment is now the key risk for markets for 33% of European investors in 2014.. Other concerns include the Fed’s exit from quantitative easing (30%), Europe turning to deflation (21%), and equity valuations being too high (17%).

Ossiam Announces Cooperation with CSI, the Largest Chinese Index Provider

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Ossiam, an affiliate of Natixis Global Asset Management (NGAM), has today announced the signing of a cooperation agreement with China Securities Index Company, Ltd. (“CSI”), the largest Chinese index provider, based in Shanghai. Ossiam will provide expertise in minimum variance index construction to CSI, which is developing a minimum variance index based on CSI’s own CSI 300 benchmark.

CSI 300 aims to reflect the price fluctuation and performance of the China A shares market. It is widely used as a performance benchmark and a basis for indexing and derivative products. The first index future contract in mainland China is based on CSI 300.

CSI has selected Ossiam as the proven alternative-weighted index asset management expert to provide guidance and research in the design of the new CSI minimum variance index.

The Ossiam research team has extensive experience in the design and management of rule-based, transparent minimum variance portfolios based on various equity investment universes, including those in Europe, the US, global and emerging markets. It has also proven its capability of providing superior research content and analysis of its alternative-weighted smart beta processes to investors. Ossiam’s strategies are consistent in volatility reduction and their ability to outperform peers, thanks to predictable and transparent processes.

Ossiam manages more than USD 1.29 billion in minimum variance strategies in exchange-traded funds (ETFs) and segregated mandates.

Ma Zhigang, chief executive officer of CSI, said: “CSI calculates nearly 2000 end of day and real time indices covering equity, fixed income, commodities and other alternative assets in mainland China, Great China and other global markets. The cooperation with Ossiam helps to provide more valuable solutions to market participants.”

Bruno Poulin, chief executive of Ossiam, welcomed the announcement, saying: “We are delighted to work with CSI on this exciting project. As the first asset manager in the world to launch minimum variance ETFs in 2011, we have a track record that strongly backs our approach. We believe rigour, consistency and transparency of our own minimum variance process were the reasons why CSI selected Ossiam as a partner to assist in the construction of their minimum variance index. This cooperation also shows our ability to innovate and partner on the global stage, sharing our strengths and capabilities through cooperation with a leading index provider in Asia.”

E-Cigarettes, Momentum to Legalize Marijuana Could Revive Tobacco Industry

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E-cigarettes and growing momentum to legalize marijuana in the United States could dramatically revive growth for major tobacco companies, which have not introduced a major new product since light cigarettes in 1970, according to The Boston Company Asset Management (TBC), BNY Mellon‘s Boston-based equity investment boutique.

The growing popularity of electronic nicotine-delivery systems (ENDS) has been increasing significantly over the last two years, according to David M. Sealy, senior equity research analyst at TBC and the author of the report, Up in Smoke: Changes Sweep the Tobacco Industry.

While the ENDS industry initially was dominated by small entrepreneurial companies, TBC estimates that the largest three tobacco companies in the U.S. now hold approximately 25 percent of the global market.

“The global market for ENDS is substantial, and we estimate that it now amounts to $3 billion in annual revenue, with roughly half in the U.S. and the other half in Europe, primarily in the UK,” said Sealy.  “But this means that the ENDS market share is a mere 0.5 percent of the $670 billion global cigarette industry.” Sealy added that he does not expect regulatory scrutiny to meaningfully slow the growth of e-cigarettes.

Regarding marijuana, Sealy said, “Legalization in the U.S. could be closer than most people think.” The TBC paper notes that the current marijuana policies as measured by consumption are a failure, with consumption growing consistently over the last 40 years. In addition, the costs of current policies including incarceration, enforcement, and loss of taxation are large and growing amid budget woes, the report said.

The report cites growing popular support for legalization and notes the trend for decriminalization in more states. “Until now the markets have focused primarily on the impact of legalization on speculative small cap stocks, but if legalization becomes official federal policy, the big tobacco companies will end up dominating the market,” Sealy said. 

Declining sales of traditional cigarettes has been driving the big tobacco companies to diversify into related products, and marijuana would be a natural evolution of this strategy, the report said. The report also notes that the tobacco industry also is well adapted to an environment of high taxation, regulation and litigation, which are expected to accompany any commercialization of marijuana. “From a regulator’s point of view, tobacco companies may be the most desirable entrants in the industry as they may be the most controllable players in the commercialization of marijuana,” said Sealy. 

Scotiabank Announces Retirement of Vice Chairman and Chief Operating Officer, Sabi Marwah

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Scotiabank has announced the retirement of Sabi Marwah, effective May 30, 2014. Sabi is currently Vice Chairman and Chief Operating Officer with a 35-year history at Scotiabank. 

“Sabi has had an extraordinary impact in shaping the success and character of Scotiabank,” said Brian Porter, Scotiabank President and Chief Executive Officer. “He is a well-regarded business leader with keen insight and an unwavering commitment to excellence. He has also been a role model in the community, giving generously of his time.”

There will be a realignment of key executive reporting relationships with this retirement.

Sean McGuckin, Executive Vice President & Chief Financial Officer, will report directly to Mr. Porter and assume expanded responsibility.

Also now reporting to Mr. Porter are Deborah Alexander, Executive Vice President, General Counsel & Secretary, Jeffrey Heath, Executive Vice President & Group Treasurer, Kimberlee McKenzie, Executive Vice President, Information Technology & Solutions, and Grant Mick, Senior Vice President & Chief Auditor.

Anatol von Hahn, Group Head, Canadian Banking will assume responsibility for Shared Services in Canada.

Scotiabank is a leading financial services provider in over 55 countries and Canada’s most international bank. Through its team of more than 83,000 employees, Scotiabank and its affiliates offer a broad range of products and services, including personal and commercial banking, wealth management, corporate and investment banking to over 21 million customers. With assets of $783 billion (as at January 31, 2014), Scotiabank trades on the Toronto and New York Exchanges.

Brian Kutsmeda Joins Oppenheimer as Managing Director-Investments and Area Manager In Boca Raton

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Brian Kutsmeda Joins Oppenheimer as Managing Director-Investments and Area Manager In Boca Raton
Boca Raton. Photo: StevenM61. Oppenheimer cuenta con nuevo managing director de Inversiones en Boca Raton, Florida

Oppenheimer & Co. Inc., has announced that Brian C. Kutsmeda has joined the Firm as Managing Director – Investments and Area Manager. He will work out of Oppenheimer’s Boca Raton office and will report to Executive Vice President, Private Client Division, Robert Okin.

Throughout his more than 20 years in the financial services industry, Mr. Kutsmeda has created a distinguished track record as a financial advisor, training director and branch and area manager. He joins Oppenheimer from JP Morgan. 

“Brian’s range of skills reflect a determined professional who has put his time to good use in helping clients and helping his associates grow their abilities and their assets under management,” said Mr. Okin.

Mr. Kutsmeda focuses on collaborating with the people in his company, clients and industry partners. His goal is to assist his firm and the financial advisors with whom he works to bring in new clients and assets. His experience as a trainer and mentor helps improve the competencies of advisors and managers to structure their businesses as effectively as possible.

“I am excited to be a part of Oppenheimer,” Mr. Kutsmeda said, “because it offers a strong platform for financial advisors to perform well for their clients while encouraging the entrepreneurial spirit so critical to our business. During the past decade, I have observed the firm’s growth, and my goal is to continue the momentum, making it the best place for successful advisors in South Florida.”

“Oppenheimer has already built a substantial and dynamic presence in Boca Raton. We expect Brian to help expand the firm’s business and reputation throughout the area,” Mr. Okin said.

Oppenheimer & Co. Inc., a principal subsidiary of Oppenheimer Holdings Inc. and its affiliates provide a full range of wealth management, securities brokerage and investment banking services to high-net-worth individuals, families, corporate executives, local governments, businesses and institutions. OAM is a registered investment adviser and a subsidiary of Oppenheimer Holdings Inc.

Henderson Appoints Steve Drew as Head of Emerging Market Credit

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Sacar partido de conceptos erróneos
. Sacar partido de conceptos erróneos

Henderson Global Investors’ £17.28 billion (€20.77 billion or US$28.62 billion) fixed income business has hired Steve Drew as Head of Emerging Market Credit. He will work alongside Stephen Thariyan, Global Head of Credit, and Phil Apel, Head of Fixed Income, in building out the emerging market credit team.

Most recently Steve was Partner and Head of Global and Emerging Credit at Thames River Capital and managed in excess of £1.5bn (€1.8bn or US$2.4bn), c.£750m (€900m or US$1.2bn) of which was in emerging market credit.  Steve has over 20 years of global credit experience across buy and sell-side businesses such as JP Morgan Chase and Tudor Capital.

Commenting on the appointment, Stephen Thariyan said, “Steve brings valuable investment knowledge, client relations and management skills to the team. His understanding of the emerging market credit sector, together with his impressive track record with client money and proven ability to help raise assets, will be hugely beneficial as we focus on expanding the scale of our fixed income franchise globally.” 

“We will actively seek to apply Steve’s expertise to our existing portfolios for the benefit of our clients as his approach to investing, combining top down macroeconomic perspectives with security selection, fits well with our established method. During 2014 we plan to hire an investment team specialising in emerging market credit to support Steve. This will give us the background to launch products in the area.”

Steve Drew added: “Henderson has an excellent reputation in the credit market and the wider fixed income team is one of the most respected in the industry. My choice to join was also based on the strong collective belief that emerging market credit forms an imperative part of Henderson’s future business strategy. This is an exciting time for Henderson and I look forward to working with Stephen and the team.”

 

New CEO for UBS Wealth Management in Hong Kong

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Amy Lo has taken over from Allen Lo as UBS Wealth Management’s chief executive officer (CEO) in Hong Kong, according to information published in several media.

The outgoing Lo, who has been in the role since October 2009, is retiring. Edmund Koh, CEO of UBS Wealth Management in South-east Asia and Asia Pacific Hub, will assume Lo’s responsibilities as deputy CEO of wealth management in Asia Pacific.

For the incoming Lo, she moves into her new role from her position of head of UBS’ ultra high net worth group in Asia Pacific. She first joined UBS in 1995.

How Millionaires Invest

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Los inversores mundiales solo asignan el 16,5% de su cartera a activos internacionales
Photo: HipolitoLuiz, Flickr, Creative Commons.. How Millionaires Invest

According to the new Legg Mason Global Investor Survey of 4,320 affluent investors from 20 countries, the vast majority (80.2%) said they were optimistic about investments over the next twelve months. The majority of respondents said they intend to maintain their current asset allocations; however, greater than one-third (37.1%) said they intend to increase their allocation to equities – more than those increasing their allocation to cash (36.8%) or any other asset class. 

The top five investments that investors believe offer the best opportunity over the next twelve months are:

  1. Domestic stocks
  2. Real estate
  3. Cash
  4. Precious metals including gold
  5. Domestic bonds

The average asset allocation among all respondents globally consists of:

  • 26.5% cash or cash equivalents
  • 24.7% equities
  • 19.9% fixed income
  • 16.8% investment real estate
  • 6.8% non-traditional investments
  • 5.2% other

“Our survey found a level of optimism shared by investors around the world that is very encouraging,” said Matthew Schiffman, managing director and head of global marketing at Legg Mason Global Asset Management. “The fact that more said they are adding equities, and they believe domestic stocks present the best opportunity, says their optimism could translate into a change in investment behavior that may play out in the equities market.”

Income important but income gap remains a challenge

Seven out of ten (71%) investors said that having income generating investments in their portfolio is an important priority. Yet global investors said the income they are generating continues to fall short of their goals.

More specifically, according to the survey the average rate of return global investors seek to achieve on income-producing investments is 9.5%; but the actual rate of return they receive is 6.2%, creating an income gap of 3.3%.

Investing internationally: increasing interest in US and China

More than three-quarters (78.7%) of survey respondents said they invest outside of their home country with an average allocation of 16.5% to international investments.  Those who invest internationally or are likely to do so see the following countries as presenting the best investing opportunities over the next 12 months:

  1. US (51.7%)
  2. China (50.1%)
  3. Emerging markets (45.3%)
  4. Europe excluding UK (35.2%)

Growth, retirement top goals but achieving a challenge

Asked to identify their primary goals of investing, almost three-quarters (73.7%) said “grow my wealth” was their top investment goal, followed by “provide for my own retirement” (61.7%) and “protect my wealth” (58.5%).  However, many investors are not doing very well in making progress toward their goals; many are only doing “somewhat” well.

More specifically:

  • 46.9% admit they are doing not well or only “somewhat” well in achieving their goal to “grow my wealth”
  • 41.9% said they are doing not well or only “somewhat” well at achieving the goal to “provide for my own retirement”
  • 39.5% said they are doing not well or only “somewhat” well at “protecting their wealth”

Only 19.6% said they are doing “extremely well” in their progress toward achieving their goal to “provide for my own retirement.” Further, more than half (56.6%) said they are only “somewhat confident” that they will have enough money to “live the lifestyle they want in retirement,” while 28.3% said they were “very confident.”

“When it comes to achieving your retirement goals, only doing ‘somewhat well’ or being ‘somewhat confident’ is concerning,” Mr. Schiffman said. “Investors around the world all have one thing in common – the need for enough assets to provide for their years in retirement. Granted, different countries have different social programs to help their retiree populations, but in the end, our survey found that investors everywhere can, and should, do more to prepare for their retirement. And that includes millionaires.”

How millionaires invest

Included in this year’s Legg Mason Global Investor survey were the responses of 2,164 millionaires– that is, survey participants with over $1 million in total assets measured in US dollars. According to the survey, the average asset allocation of global millionaires is:

  • 25% cash
  • 21.5% equities
  • 19.6% fixed income
  • 18.7% investment real estate
  • 9.1% non-traditional
  • 6.1% other

More than eight in ten (83.2%) millionaires surveyed said they are optimistic about investments over the next year, and 45% said they plan to increase their allocation to equities in the next 12 months – well above the 33.7% of investors below $1 million who said the same.

Millionaires go global for investments

Millionaires are far more likely to be investing outside of their home country than those with fewer assets. More specifically, 88.7% of global millionaires surveyed said they invest outside of their country, compared to 74.6% of investors with less than $1 million. Furthermore, millionaires also have a larger portion of their assets invested outside of their home countries: 20.4% of their assets versus 14.8% for those with under $1 million. Among those millionaires who do invest internationally or are likely to do so, the countries they believe represent the best investment opportunities over the next 12 months are:

  1. US (53.7%)
  2. Emerging markets (45.3%)
  3. China (44.6%)
  4. Europe ex UK (37.8%)

Income gap smaller as millionaires achieve greater return

As a result of receiving greater income from their portfolios, the income gap millionaires are experiencing is smaller than that of investors around the world with fewer than $1 million in assets.

The average rate of return millionaires seek to achieve from income-producing investments is 9.6%, close to the 9.5% for those with less than $1 million in assets. Millionaires reported the actual rate of return they receive is 7% compared to 5.8% for those with fewer assets. As a result, the income gap for millionaires is 2.6%, while the income gap for investors with fewer assets is 3.7% – a 110 basis point difference.

According to the survey, millionaires are more focused on growing their assets than protecting their assets. Specifically, asked to identify their primary goals of investing, the millionaires said:

  1. Grow my wealth (70.9%)
  2. Protect my wealth (60.5%)
  3. Maintain my current lifestyle later in life (55.4%)
  4. Provide for my own retirement (53.3%)

When it comes to retirement, 45% of millionaires around the world said they are only “somewhat” confident in their “ability to retire at the age they want to” and 18.6% are not confident. Just over one-third (36.5%) said they were very confident. Asked to define the decisions they made that have had “the most positive impact on investing success,” millionaires point to the following top five decisions:

  1. Developed a financial plan (43.9%)
  2. Invested in products other than stocks and bonds (35.4%)
  3. Took cash off the sidelines and invested it (34.8%)
  4. Changed my spending habits so I could save/invest more (32.2%)
  5. Took a more global approach to investing (29.3%)

BNY Mellon Appoints Kimberly Mustin Head of North American Distribution

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BNY Mellon Investment Management has announced that Kimberly Mustin has joined the firm as Head of North American Distribution, responsible for leading new business strategy and driving sales, client management and consultant relations efforts across institutional, retirement and retail markets throughout North America.

“Kim has significant leadership experience in all three North American markets and has succeeded within a multi-boutique investment management structure,” said PeterPaul Pardi, BNY Mellon’s Global Head of Distribution. “We are delighted to have Kim lead our North American efforts, and are confident she will further enhance our ability to build a market-leading organization focused on delivering outstanding investment solutions to our clients from across our specialist boutiques.”

In North America, Mustin will oversee centralized distribution and consultant relations across Dreyfus, BNY Mellon Retirement, and Institutional markets. Working closely with BNY Mellon’s investment boutiques, as well as Investment Management’s product and marketing leadership, she will lead the strategic plan for the North American distribution business.  She will be based in New York and report to Pardi.

Mustin joins BNY Mellon most recently from Oppenheimer Funds where she was Head of Global Strategic Accounts since 2010, leading all institutional buyer groups including institutional, retail home offices, third party and global private banking platforms. Prior to Oppenheimer, Mustin was with Legg Mason, serving as both Head of Institutional and Co-Head of Americas Distribution for Legg Mason affiliates. Throughout her career of consistently progressive sales leadership positions, Mustin headed the Financial Institutions Group at Deutsche Bank, led Consulting and Relationship Management for Retirement at Scudder Investments, was a Principal at State Street Global Advisors and a Senior Consultant at Putnam Investments.  She began her career as an Agent with the US Treasury Department. 

“We are working continuously to explore, develop and implement enhancements to our distribution efforts globally,” Pardi continued.  “These initiatives have enabled us to achieve top 10 sales performance in both the U.K. and Europe in 2013, as well as a top 10 position in the U.S. Retirement market. It’s a thoughtful approach to strategic planning and investment in our platform that will serve Kim well as she leads us forward in North America.”

SEC Charges Brokerage Firm Executives in Kickback Scheme to Secure Business of Venezuelan Bank

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Dos traders de Nueva York, los nuevos acusados en un caso de soborno a funcionarios venezolanos
Wikimedia CommonsPhoto: Popejon2 . SEC Charges Brokerage Firm Executives in Kickback Scheme to Secure Business of Venezuelan Bank

The Securities and Exchange Commission has announced another round of charges in its ongoing case against several individuals involved in a massive kickback scheme to secure the bond trading business of a state-owned Venezuelan bank.

The SEC alleges that two executives at New York City-based brokerage firm Direct Access Partners (DAP) were integral participants in the wide-ranging fraud. Benito Chinea, who was a co-founder and CEO of the firm, and Joseph DeMeneses, who was DAP’s managing partner of global strategy, devised and facilitated sham arrangements to conceal multi-million dollar kickback payments to a high-ranking Venezuelan finance official of the bank. In one instance, DeMeneses made kickback payments from funds he controlled to a shell entity controlled by the Venezuelan official, and Chinea arranged for the firm to reimburse DeMeneses. The allegations were made in a second amended complaint that the SEC submitted in federal court in Manhattan as part of its pending action against four individuals with ties to DAP as well as the head of DAP’s Miami office, who were charged last year for their roles in the scheme. 

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York and the U.S. Department of Justice’s Criminal Division today announced criminal charges against Chinea and DeMeneses.

“The corruption at Direct Access Partners reached the very top,” said Andrew M. Calamari, director of the SEC’s New York Regional Office. “The schemers depended on Chinea as CEO to authorize outsized payments from the firm to be funneled as kickbacks to Venezuela.”

The filing of the SEC’s second amended complaint is subject to court approval.  The SEC seeks disgorgement of ill-gotten gains plus interest and financial penalties against Chinea, who lives in Manalapan, N.J., and DeMeneses, who lives in Fairfield, Conn., as well as the five previously named defendants with ties to DAP, which has filed for bankruptcy.

The SEC’s investigation, which is continuing, has been conducted by Wendy Tepperman, Amanda Straub, and Michael Osnato of the New York Regional Office, and supervised by Amelia Cottrell. Howard Fischer is leading the SEC’s litigation. An SEC examination of DAP that that led to the investigation was conducted by members of the New York office’s broker-dealer examination staff.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Department of Justice’s Criminal Division, and the Federal Bureau of Investigation.