Wikimedia CommonsFoto:Coyau. KKR Lists Its First Closed-End Fund Raising Up To $352 Million
KKR has announced that its first listed closed-end fund, KKR Income Opportunities Fund, has successfully completed its initial public offering and began trading on the New York Stock Exchange on July 26 under the symbol “KIO.”
The Fund raised $305 million in its common share offering, excluding any exercise of the underwriters’ option to purchase additional shares. If the underwriters exercise that option in full, which may or may not occur, the Fund will have raised $352 million.
KKR Asset Management serves as the Fund’s investment adviser. Launched in 2004, KAM is a subsidiary of KKR and a manager of non-investment grade debt and public equities. The investment process for the Fund is substantially based on the investment process of KAM’s High Yield, Bank Loans and Special Situations strategies. The Fund will be managed by Chris Sheldon and Erik Falk, co-heads of Leveraged Credit, and Nat Zilkha and Jamie Weinstein, co-heads of Special Situations.
KKR Income Opportunities Fund will invest primarily in first- and second-lien secured loans, unsecured loans and high yield corporate debt instruments. It will employ a dynamic strategy of investing in a targeted portfolio of loans and fixed-income instruments of U.S. and non-U.S. issuers and implementing hedging strategies in order to seek to achieve attractive risk-adjusted returns.
Swiss Patrol. UBP Published an Increase in AUMs and Net Profit in the First Half
In the first half of 2013, UBP posted net earnings of CHF 77.2 million, which is a 10% rise compared to the previous half-year results (CHF 70 million). The end-of-June figure for assets under management is CHF 81.1 billion; this does not take into account assets from the acquisition, announced at the end of May 2013, of Lloyds Banking Group’s international private banking activities, which will be integrated when the deal is closed (on 31 October 2013).
Income came to CHF 349.4 million (USD 369.3 million) over the half-year, up from CHF 344.5 million a year before. The 11% rise in fees and commissions, to CHF 233.4 million (USD 246.7 million), offset the fall in interest margins. Operating expenses have been tightly controlled, and have dropped by 11% compared to the end of June 2012, to CHF 232.2 million (USD 245.5 million), bringing the Group’s consolidated cost/income ratio to 66% (down from 76% a year ago), despite the strong pressure currently weighing on margins in the banking industry.
Strong financial foundations
The balance sheet totalled CHF 18.8 billion (USD 19.9 billion). Overall, the balance sheet has remained stable and highly liquid. By pursuing a conservative approach to risk management, UBP has been able to maintain a solid financial base and a sound and strong balance sheet. With its Tier 1 ratio exceeding 30%, UBP is one of the best-capitalised Swiss banks.
Strategic developments
In the first half of 2013, boosted by a rebound on the markets and its renewed product sales drive, UBP was able to strengthen its positioning with both private and institutional clients, not only in Switzerland, but also in emerging markets. UBP firmly believes that the Swiss financial market has the strengths and qualities as a centre for wealth management to keep providing its clients with top-quality services through these times of regulatory changes.
Wikimedia CommonsFoto: Prayitno. EE.UU. se percibe como un “mercado impenetrable” por las plataformas de fondos europeas
The Fund Platform Group (FPG) commissioned “A Snapshot of European Platforms” to Cerulli and The Platforum. The survey was conducted over a four week period throughout October 2012 among some of the most influential platform groups, fund buyers and fund sellers across Europe. It sought the opinions of key players in the platform industry regarding future development opportunities, challenges and growth outlook.
The common theme was a story of a continued need for open architecture solutions. Having said that, concentration of funds is getting more pronounced with the majority of platforms predicting that 70% of assets would flow to just 10 fund managers by 2015.
There are a varying number of platform models in Europe, which have all evolved in response to the different distribution dynamics of each market. Italy is very bank-dominated and the platforms are correspondingly highly institutional. The UK’s IFAs have been historically very fragmented and so platforms have been much more retail focused. Looking to the future, each different European country has a slightly different focus. Switzerland, for example, is felt to offer great opportunity for those supporting the private banks. In continental Europe, insurance is felt to offer appealing growth potential.
As funds are sold in more countries, and as global agreements become more commonplace, the challenge for platforms is to deliver similar (or the same) underlying product in different jurisdictions with varying distribution channels at play.
Against the difficult backdrop of falling margins, fee pressure and the green shoots of increasing transparency, some believe that consolidation in the number of European platforms is inevitable. Scale continues to be a primary concern and platforms are looking to other European markets as well Asia for growth potential. Latin America would be the third option whereas the US market is felt as impenetrable, mainly due to regulatory issues.
Figure 1. If you are a European platform, which other markets are you considering expanding to?
42% of European platforms think that growth opportunities are presented by other European markets, with Asia the next most appealing option
The source of growth for European platforms is largely felt to come from other European markets, Allfunds Bank is an example of an international platform which has expanded its operations from original parent Santander’s Spanish roots to operate in other juristrictions, including the UK, Italy, Luxembourg, Chile and Dubai.
Outside of Europe, 38% of participants in the survey pointed to Asia as providing opportunities. Asia is a great seductress, promising tales of opportunity and expansion, but she is seen by some as a fickle mistress. Nevertheless, everyone believes that Asia is a great opportunity but participants pointed out that Asia is like Europe: it is a very fragmented market and so arguably doesn’t exist as a single concept.
Singapore is generally reported to be the most interesting opportunity because of the private bank market there – this is the core target market of many European platforms. Additionally, SICAVs are sold in Singapore so the product environment is arguably more familiar.
Latin America is regarded as a growth opportunity for 17% of respondents whereas US, the largest mutual fund market in the world, is attractive for only 4% of participants. The main cause is a complex regulatory environment, though the strong market share of no European platforms in this market might also be a concern.
Wikimedia CommonsFoto: Bob Jagendorf. Eric Lindenbaum y Jack Deino nuevos cogestores del Invesco Emerging Markets Debt Fund
Invesco Canada has promoted Eric Lindenbaum and Jack Deino to Co-Heads of Invesco’s emerging-markets debt business. The team will take over the lead portfolio manager role on Invesco Emerging Markets Debt Fund in Canada effective August 1, 2013.
Mr. Lindenbaum and Mr. Deino have been working together in close partnership at Invesco since 2006 and have strong complementary skills sets, specializing in sovereign debt and corporate debt, respectively.
Mr. Lindenbaum joined Invesco’s Emerging Market Debt team in 2004, with his most recent role being Senior Portfolio Manager. Inclusive of his tenure at Invesco, he has 18 years industry experience.
Mr. Deino, CFA joined Invesco’s Emerging Market Debt team in 2006, with his most recent role being Senior Portfolio Manager and Head of Emerging Market Corporate Credit Research with Invesco Fixed Income. He has 19 years of industry experience, entirely focused on emerging markets.
The Fund’s investment objectives, philosophy and process remain unchanged. Claudia Calich, who previously served as portfolio manager for the Fund, will be leaving Invesco.
Invesco Canada, operating under three distinct product brands (Trimark, Invesco and PowerShares), is one of Canada’s largest investment management companies.
Wikimedia CommonsBy Kables . Grosvenor Capital Management Acquires CFIG from Credit Suisse
Grosvenor Capital Management, allocators to hedge funds, announced on Thursday an agreement to acquire the Customized Fund Investment Group (“CFIG”), a leading global private equity, infrastructure and real estate investment management company, from Credit Suisse Group AG .
CFIG is one of the largest providers of customized private equity solutions globally with approximately $18 billion of assets under management and 11 offices around the world. Following the completion of the transaction, CFIG will be renamed the GCM Customized Fund Investment Group. Terms of the transaction were not disclosed.
“This transaction makes each firm a more valuable partner for existing clients,” said Michael Sacks, chief executive officer of Grosvenor. “It creates a strong and diversified multi-asset alternatives platform that can support institutional investors across a range of alternative investments. The CFIG team is made up of highly talented and experienced investors who share our core values including an intense focus on investment performance, their clients and on customized solutions. We are looking forward to joining forces with them.”
The combined firm will have over $40 billion in assets under management and 400 professionals across the globe. CFIG’s management team is committed to making this transaction a success – all senior members of management will join the combined firm and have signed long-term commitments to remain with the combined firm. CFIG will operate as a subsidiary of Grosvenor and maintain its New York headquarters.
The sale is part of Credit Suisse’s strategic divestment plans announced on July 18, 2012.
Wikimedia Commons. Zero Duration to Protect Against Rising Yields
Yields on US and European government bonds rose after reports that the Fed could begin tapering back its bond purchases later this year if the US economy keeps improving. Figure 1 shows the 5-year German Government Bonds and US Treasury yields (in %).
Currently, the Fed is buying USD 85 billion each month in treasury paper and mortgage-backed securities to stimulate economic and jobs growth. Bond investors expect this to be the starting point of a Fed policy that is less accommodating to the bond market. They fear that the Fed might raise short-term interest rates after 2015 in order to fight inflation.
In the euro zone, the situation is different: the ECB has pledged that interest rates will remain at record lows far into the future. The euro-zone economy is still weak.
Figure 1: 5-year German Government Bonds and US Treasury yields (in %)
Robeco offers a Zero-duration variant that protects regular bond strategies against a rise in the long-term interest rates, while investors can still try to take advantage of higher credit spreads.
The Zero-duration strategy invests in the existing portfolio and includes an interest-rate hedge. This hedge lowers interest-rate sensitivity by swapping the 5-year interest rate for the money-market rate (Libor 3 months). This means that Robeco pays the fixed interest rate while receiving the floating interest rate. The result is a lower sensitivity to interest rates. The investor can still benefit from potential credit-spread tightening. The expected returns on high-yield bonds are twofold: the credit spread and the interest rate. The swap makes the interest-rate component variable. When government bond yields rise, the Zero-duration strategy is expected to outperform the regular bond strategy.
Implementing this hedge lowers the yield of the portfolio. This difference currently amounts to about 1.5%. As the current duration of the Robeco High Yield fund is around 4.4 years, the interest rates only have to rise by about 35bps in order to break-even between both share classes (duration x rate increase) and to compensate for this yield give-up. In a scenario of stronger rate increases, the Zero-duration strategy is expected to deliver higher total returns than the regular share class.
Robeco offers Zero-duration variants for High Yield Bonds, Investment Grade Corporate Bonds and Financial Institutions Bonds
Alan Van der Kamp, client portfolio manager at Robeco, goes into further detail about the zero duration strategy in this 3 minute video.
You may also access the complete whitepaper by Robeco about Zero Duration strategies through this link.
By Munerabig. Andrés Bernal, CFO of Grupo Sura, Named Latin Trade CFO of the Year
The Latin Trade Group has selected Andres Bernal of Sura Asset Management as CFO of the Year Colombia. With this award, Andres Bernal joins the ranks of some of the most distinguished financial executives in Latin America.
In 2011 Andres Bernal, 41, led the largest M&A deal in Colombian history with the $3.7 billion acquisition of ING pension fund assets. This turned Sura into the largest pension savings manager in Latin America with 25 million clients, and assets under management of over $100 billion. To finance the operation, he led a $2 billion stock issuance, the largest to-date in Colombia. He also managed the issuance of international bonds, and found five co-investors to enter the deal.
In 2012, the pension fund operation was moved from Grupo Sura to Sura Asset Management (SAM), with Bernal at the head. Andres Bernal convinced SAM’s shareholders to keep the company’s debt on their own books, which left it with very low debt. This allowed SAM to launch a second wave of acquisitions.
Last year Bernal led the acquisition of the remaining 20 percent in the pension fund Integra, which rendered SAM the sole owner of the Peruvian fund. He also designed the sale of a 7.51 percent share of AFP Proteccion to Canadian Alberta Investment Management Corporation. He also headed the acquisition of a brokerage house in Chile, of an insurance company in Mexico, the creation of a private pension fund in Uruguay, and an insurance broker in El Salvador. But his most important move was the acquisition of a 50 percent stake in Horizonte, BBVA’s pension fund in Peru. The deal involved a highly innovative agreement with Scotiabank, a traditional competitor, which bought the remaining 50 percent of the company.
SAM’s assets under management grew 15.4 percent in 2012 to $107 billion, and obtained a 21.9 percent average market share in Mexico, Peru, Chile, Uruguay, and Colombia. SAM posted $1.1 billion revenues and a $409.9 million EBITDA in 2012.
Andres Bernal was appointed CFO of Sura Asset Management in January 2012. Prior to that, he served as CFO of Grupo de Inversiones Sura, the holding company of the largest business conglomerate in Colombia. Andres Bernal graduated from Eafit and Babson College and is director at public utility company EPM.
Foto cedidaSimon Brazier, Equity Manager United Kingdom at Threadneedle
. UK Equity, Increasingly in Portfolio Managers’ Radars
A process based on valuation, and long-term perspective, are the two principles that have earned Simon Brazier success at the helm of the UK equities strategy at Threadneedle. After nearly a decade as a specialist in British shares in the team at Schroders, he joined Threadneedle in 2010.
“All decisions are made based on the valuation of the companies, and whether the business model makes sense within the next three to five years. Our vision is long term. We use market volatility in the short term to take advantage of the opportunity of the valuation in the long term,” said the expert in an exclusive interview with Funds Society.
All decisions are made based on the valuation of the companies
A team of 14 people, including managers and analysts, closely follow the British market; visiting and understanding the business of each of the companies they invest in. “Last year we performed more than 1,000 company visits. Many times we have between 3 and 4 meetings a day.”
The analysis of each company is based on three fundamental levels going through the business model, the economic model and the management team. “We are focused on business models with sustainable cash flows and strong dividend yield,” he says. “On the other hand, we analyze that the management team is making the right decisions to allocate capital properly. In general, we focus on companies with a strategy that works for a period of the next 3-5 years.”
Another one of the strengths of strategy is the diversification of the portfolio, which they use as a tool to limit the downside risk. “We have about 70 securities in the portfolio. We diversify by security and by themes, i.e., sometimes we have several names for a particular idea. This allows us to limit the downside risk, both at company and at a sectoral level.”
The UK equity strategy already has almost 1.4 billion pounds (approx. 2.2 billion dollars) in assets under management, and it seems that this asset class is increasingly present in the radar of portfolio managers globally. “We have customers in Israel, Portugal, Kuwait or Chile. The world is increasingly looking at the UK.”
The world is increasingly looking at the UK
According to the expert, the interest in the UK market makes sense despite economic uncertainties; he himself acknowledges that in the longer term, he is more confident in the UK market than in the country’s underlying economy. “British companies are unique in that 75% of profits are not generated within the country. Examples are Diageo or Astra Zeneca. Besides, the equity market in the UK is not only very liquid, it is the third largest in the world after the U.S. and Japan, as big as Germany and France together,” he says.
Wikimedia CommonsSome of the members of the Special Committee of the Senate, last Monday. Chile Approves a Proposal to Create an Alternative Pension System
Amongst the agreements reached by the Special Committee formed by the Chilean Senate to study reforms to the Pension Funds system are: to generate a system in parallel to the existing system administered by the AFPs, to ensure tripartite contribution and to consider how to allocate the regional factor in the calculation.
In the last meeting, which was held on Monday, Senators Eugenio Tuma, Alejandro Navarro, Pedro Muñoz Aburto, Jose GarciaRuminot and Carlos Kuschel analyzed the first five points of the document prepared by this body, which was released in early July. This text will be presented to the Executive in order for them to consign the Commission’s proposals, when reforming the current system, the Chilean Senate reported.
Within the issues approved at the meeting, Senator Tuma, president of this parliamentary group, highlighted the fact that the changes make it compulsory for the employer, whether public or private, to contribute for the total remuneration. “No more non-taxable allowances. This irregular situation has been partly responsible for the current damage to social security contributions,” he explained.
According to the parliamentarian, another issue which will be highly important in a future reform is related to the regulation of fees charged. He commented on the urgency of establishing transparency for these costs, ensuring that while the AFP claim to be applying 2% for this concept, in practice the figure rises to approximately 20%.
In turn, Senator Navarro elaborated on the voting of the points that were addressed. He said there is a marked difference between the government and opposition senators, since the former are committed to improve the existing system, while the second are committed to its elimination altogether.
The congressman said that the next government should consider these proposals, calling on all current presidential candidates from different sectors to pronounce themselves on this issue. In his opinion, the candidate Michelle Bachelet will be responsible for eliminating profiteering in the area of pensions.
Text Adopted:
To provide Chile with a public and supportive universal pension system, which enshrines the right of workers to withdraw from the current fund managers, choose the management system they wish to use for their pension funds, end the compulsory contribution to AFP and establish a system of nonprofit pension fund managers with the creation of a supporting fund differnet than individual contribution pension savings.
Restore the principle of Social Security as a right according to international standards of the ILO in Chile.
Incorporate the employers’ share to the social security contribution and gradually increase the contribution dues, achieving a tripartite contribution to the pension system with the participation of workers, employers and the State.
Encourage collective pension savings plans established during the legislation. For these plans, create incentives, such as the possibility of withdrawal of these funds in times of illness, education and purchase of the first home.
Fees should be in line with the results. To adjust the fee amount, the taxable income should be taken into account.
Other items approved by the Commission, the drafting of which remained pending were:
Design a pension system which takes regional factors into consideration.
Ensure that all types of payments made by all types of employers are taxable.
Consider working conditions, positively discriminating when taking heavy work into consideration.
The committee will continue reviewing twenty points in a forthcoming meeting. The debate will begin by resolving the role of workers in managing their pension funds and damaged pension records.
On July 8th, the 22 points that the Senators of this parliamentary body agreed on after nine months of work, were announced. During that time, the body received the various players related with this matter, and even held a seminar on the same issues.
By Laitche. Most Institutions are Abreast of Changes and Ready to Comply with FATCA
The wealth management industry has experienced many changes in recent years, especially in new rules and regulations, something which Steven L. Cantor, Managing Partner of Cantor & Webb, knows quite well, as he has been legally representing and advising high net worth families for 35 years; he has guided and directed those families in the process of complying with multiple tax and regulatory obligations, as well as providing advice on wealth planning.
For Cantor, changes in regulatory matters that are occurring now are causing the business to become increasingly transparent, in clear reference to the FATCA law, a rule orchestrated by the U.S. government which seeks to combat international tax evasion, which is estimated at USD 40,000 million annually.
Therefore, Cantor stresses that private bankers, in their advisory roles, are more aware than ever that clients must be current and meet their respective jurisdictions.
Most institutions are ready
Regarding FATCA, Cantor believes that most of the institutions are ready, as long they know what lies ahead and how to act in order to stay abreast of changes. He says that in the current context what will change is the transparency. “The world changes, just as the rules and regulations that apply change, and in the case of this particular sector is a major breakthrough because it will provide great transparency.”
Steven’s advice to wealth advisors is to keep abreast of regulatory changes and new regulations, but above all, to provide the client with the possibility of putting themselves in the hands of a professional who specializes in the area of tax planning and who may legally advise the client, which eventually avoids many problems.
Regarding the type of client company, Cantor says the typical customer is Latin, “the matriarch or patriarch of a family, with one foot in America and another in Latin America and who is looking to plan their wealth from both a legal and a taxation point of view; structuring their assets to comply in all respects with the tax offices of both the USA as well as that of their respective country.”
Another very common situation is the client who comes from Latin America to reside in the United States, and who was born in the United States but has never before lived in the United States and either did not feel the need, or did not know, that as an American citizen they had the obligation to comply with the U.S. treasury. “When they come here and settle is when the problem begins. They are dual nationality citizens, and they require complex advice”.
FIBA Private Banking Conference in Miami in September
Steven L. Cantor, Managing Partner at Cantor & Webb, who is also a partner of FIBA, talks about the upcoming private banking appointment that FIBA will hold in Miami on the 16 th and 17 th of September, a meeting which will have a large audience, and which will be represented by over 75 financial institutions and professionals from Latin America, Europe …
“As a member of FIBA, I am very pleased to see how FIBA assumes a very active role in understanding, educating, and providing ideas and opportunities for the industry in a very interesting format of working panels which allow to make the most of these conferences.”
In September, Cantor will act as moderator in the panel: “How has asset management and wealth planning evolved in an era of greater fiscal transparency?” The speakers will be Arturo Giacosa, head of Fiduciary and Hispanic Market Wealth Planning, Itau International Private Banking, Stephen Liss, director of Wealth and Investment Management at Barclays Americas and Klemens Zeller, wealth advisor at JP. Morgan.
