The number of advisors practicing in the registered investment advisor (RIA) model grew at an annualized rate of 8% between 2004 and 2012, while every other advisory channel declined by more than 1% during the same timeframe, according to the latest research from Cerulli Associates.
The December 2013 issue of The Cerulli Edge-U.S. Asset Management Edition examines the RIA channel’s evolution, how third-party vendor platforms reach advisors who value flexibility, and the emergent phenomenon of ETF strategists.
According to Cerulli, multiple factors have fueled the growth of this channel, most prominently the so-called “breakaway broker” – an advisor or team with an established practice choosing to leave an employee broker/dealer (B/D) and creating their own advisory firm. Transitioning advisors have not only come from employee B/Ds, but also from independent B/Ds.
“While the ‘Breakaway Broker’ has been an important driver of change, it is not the sole source of growth for the RIA channel,” Waldert explains. “Nontraditional competitors, such as law and accounting firms, have entered the advisory industry.”
“The unique challenges of business ownership are no longer an obstacle for a breakaway advisor,” Waldert continues.
“The RIA channel expanded from a cottage industry to an essential element within the financial advisory and asset management space”, concludes the report.
Cormac Weldon, director de Renta Variable EE.UU. en Threadneedle. EE.UU. está más caro que otras regiones debido a los puntos fuertes de los que otras regiones carecen
Cormac Weldon, Head of US Equities at Threadneedle, addresses some of the questions currently on the minds of US equity investors. Overall, he believes that US stocks remain attractively valued and that some sectors offer particular value. Cormac also points out the positive aspect of the political division in Congress over the budget deficit and the debt ceiling.
US stock markets are higher now than before the 2008 financial crisis. How is that possible?
Earnings have recovered and surpassed their previous peak so therefore it is entirely understandable that the market should have performed so well.
European stocks have yet to regain their previous highs. Why has the US performed so much better?
The reason that US earnings have recovered is that America quickly implemented dramatic steps to stabilize the economy in 2008 and 2009. Measures included forcing the banks to accept fresh capital and to raise equity and capital levels. As a result, US banks are well capitalized and loan growth is positive. By contrast, European banks remain poorly capitalized and lending growth is negative on the Continent.
Moreover, the US is much stronger in terms of innovation and companies that are dramatically changing industries have driven some of the stock market gains. Examples include Google and Facebook and other internet companies that are changing how companies advertise and gaining market share through innovation.
What do you think of the current level of valuations in the US? Are stocks still attractive?
We believe that the market remains fairly valued and is certainly not overvalued in historical terms although neither is it cheap. However, when compared with other asset classes such as bonds, stocks do look attractive.
How do US valuations compare to other regions?
The US is clearly more expensive than other regions but we believe this simply reflects strengths that other regions lack including: well-contained inflation; positive economic growth; innovation; and a robust banking system.
Many experts have increased their allocation in US equities. Is that a good move?
It certainly has been in terms of performance over the year to date and we believe it will probably remain prudent to have a good allocation to US equities, particularly given that the Federal Reserve is targeting employment levels, which means that is also focusing upon economic growth. Given that inflation remains low, this is almost certainly a very good environment for equities to continue to perform well.
Does the debt ceiling issue pose a serious threat to the economy?
Although the political shenanigans in Washington generate many headlines, we believe they are very much a secondary issue in terms of their impact upon markets and the economy. While there may be some negative effects, we believe that these will be more than offset by the Federal Reserve’s willingness to prolong quantitative easing.
Moreover, we would rather see political bickering than a situation where the Democrats controlled Congress and were able to do as they pleased. This is because the major long-term challenge facing the US is the budget deficit, particularly given that healthcare expenditure will explode in 10 years or so. It is very clear to us that the Democrats are reluctant to address an issue that the Republicans are at least discussing. Thus, we would prefer to see some political turbulence over the budget deficit than a government able to ignore it entirely.
What do you think about the appointment of Janet Yellen to head the Federal Reserve?
We can only comment upon what we have read about her. She is clearly experienced and we are impressed by the fact that her economic forecasts have been more accurate than other policymakers within the Federal Reserve. This record appears a very positive factor.
What are your expectations for the coming months and for 2014?
We believe the market will make further gains. It tends to at this time of the year while all should be quiet on the political stage for a while. Whilst the economy is growing moderately, the Federal Reserve continues to stimulate the economy by buying treasuries and maintaining interest rates at very low levels.
Can you give examples of two companies in your top 10 holdings and explain why these stocks are interesting?
We like Google, where revenues and earnings are growing at healthy double-digit rates – with earnings probably expanding at 20% plus per annum. This has been the case for a number of years and we anticipate this pace will continue given that it is changing the face of the global advertising industry. Although it trades at 19 times next year’s earnings, it is important to remember that earnings will double over the next four years if it maintains a 20% earnings growth rate.
Charter Communications is another favored stock. The cable business had been poorly managed but under a new chief executive, who took over two years ago, has benefited from hefty investment. Consumers are buying more services, such as digital movies and broadband internet, from the company and are paying higher prices for them. Consequently, we believe the company will enjoy good growth in the coming years. Moreover, it is possible that Charter will be involved in any further consolidation within the US cable industry.
Foto: Awesome Sasquatch. FATCA crece con dos nuevos acuerdos firmados por Costa Rica y las Islas Caimán
The U.S. Department of the Treasury announced that the United States has signed intergovernmental agreements (IGAs) with the Cayman Islands and Costa Rica this week to implement the Foreign Account Tax Compliance Act (FATCA).
“Today’s announcement marks a milestone in the effort to promote global tax transparency,” said Deputy Assistant Secretary for International Tax Affairs Robert B. Stack. “These agreements underscore growing international cooperation in the effort to end tax evasion everywhere.”
FATCA, enacted in 2010, seeks to obtain information on accounts held by U.S. taxpayers in other countries. It requires U.S. financial institutions to withhold a portion of payments made to foreign financial institutions (FFIs) that do not agree to identify and report information on U.S. account holders. FFIs have the option of entering into agreements directly with the IRS, or through one of two alternative Model IGAs signed by their home country.
Signed on November 29th, the Cayman Islands IGA is a Model 1B agreement, meaning that FFIs in the Cayman Islands will be required to report tax information about U.S. account holders directly to the Cayman Islands Tax Information Authority, which is the sole channel in the Cayman Islands for the provision of tax-related information to other governments. The Cayman Islands Tax Information Authority will in turn relay that information to the IRS. Additionally, the United States and the Cayman Islands also signed a new Tax Information Exchange Agreement (TIEA), to take the place of the original TIEA signed in 2001.
“By working together to detect, deter, and discourage offshore tax abuses through increased transparency and enhanced reporting, we can help build a stronger, more stable, and accountable global financial system. We look forward to collaborating with the Government of the Cayman Islands to further these objectives,” said Julie Nutter, Minister-Counselor for Economic Affairs at the U.S. Embassy in London, who signed on behalf of the United States.
The Costa Rica IGA was signed on Tuesday, November 26, and is a Model 1A agreement, meaning that the United States will also provide tax information to the Costa Rican government regarding Costa Rican individuals with accounts in the United States.
“Today’s signing marks a significant step forward in our efforts to work collaboratively to combat offshore tax evasion – an objective that mutually benefits both our countries,” said Gonzalo R. Gallegos, Chargé d’Affaires of the U.S. Embassy in Costa Rica, who signed on behalf of the United States.
In addition to the 12 FATCA IGAs that have been signed to date, Treasury has also reached 16 agreements in substance and is engaged in related conversations with many more jurisdictions.
For the signed Costa Rica IGA, click here. For the signed Cayman Islands IGA, click here.
Marcos Martinez, presidente ejecutivo y CEO de Banco Santander Mexico. Santander México completa la compra de ING Hipotecaria por 41,4 millones de dólares
Grupo Financiero Santander Mexico announced on Novembr 29th that its subsidiary, Banco Santander Mexico, has completed the acquisition of the equity stock of ING Hipotecaria, a subsidiary of ING Group, as announced on June 14, 2013.
Upon receipt of all required regulatory approvals and authorizations for the acquisition, Banco Santander Mexico purchased ING Hipotecaria for Ps.541.4 million (approximately US$41.4 million) in cash. As of September 30, 2013, ING Hipotecaria’s loan portfolio totaled Ps.11.9 billion, its customer base exceeded 28,000 clients, and its distribution network consisted of 20 branches throughout Mexico.
Marcos Martinez, Executive Chairman and CEO, commented, “We are very pleased to have completed the acquisition of ING Hipotecaria, which strengthens our core portfolio and solidifies Santander Mexico’s position as the second largest banking mortgage provider in Mexico with an estimated market share that increases from 15.8% to 17.8% with this acquisition. We have successfully grown our mortgage business over the years through a prudent combination of organic and external growth initiatives, and we believe the acquisition of ING Hipotecaria fits perfectly into our ongoing strategy. Going forward we intend to continue to expand our mortgage business, providing our clients with innovative products and services while leveraging opportunities for cross-selling our other banking products and maximizing the cost synergies we have identified for this acquisition.”
Foto: Xenan. Interior of ING House, headquarters of the ING Group in Amsterda. ING IM Appoints Two Senior Portfolio Managers to EMD Team
ING IM has announced two senior appointments to its Emerging Market Debt team. The company is also in the process of hiring a credit analyst to join the team in The Hague with the view to them assuming fund management resonsibilities at a later date.
Marcin Adamczyk joined ING IM as Senior Portfolio Manager EMD Local Currency, based in The Hague.
Marcin has more than 15 years of experience in EMD Fixed Income markets and joins from MN, a Dutch pension fund fiduciary manager, where he was Senior Fund Manager Emerging Market Debt. Previously, Marcin worked at Lombard Odier Investment Managers in Amsterdam and Geneva, and was a senior portfolio manager for EMD. Before that, he worked as EM local markets trader at various banks, based in London and Warsaw.
Marcin holds a Master’s degree in Economics from the Krakow University of Economics.
Alia Yousuf joins ING IM as Senior Portfolio Manager EMD Local Currency, based in Singapore.
Alia has 13 years of experience managing EMD portfolios and joins the company from ACPI Investment in London where she was Head of Emerging Market Debt. Alia also had various fund management roles at Standard Asset Management and First State Investments. She started her career at the World Bank as a research analyst.
Alia holds a Master’s degree in Economics from the London School of Economics (LSE). She is also a CFA charter holder.
Both report to Marcelo Assalin, Lead Portfolio Manager EMD Local Currencies based in Atlanta, USA.
The team currently manages $7.9 billion in assets. It has more than 25 investment professionals that are based in The Hague, Atlanta and Singapore.
AXA Investment Managers has appointed John Porter as Global Head of its Fixed Income division. John Porter will replace Theodora Zemek who has decided to leave the company. Based in London, Porter will become a member of AXA IM’s Management Board and report to CEO Andrea Rossi.
John Porter joins AXA IM from Barclays where he was Managing Director and Global Head of Portfolio and Liquidity Management. He was also on their Management Committee. John joined Barclays in 1998 from Summit Capital Advisers where he was Chief Economist and Principal performing macro-economic analysis and developing investment strategies in North America, Europe and Japan for this fixed income and currency- based hedge fund.
John has an MA in International Economics and Certificate in European Studies from Columbia University, a Doctorate in Psychology from the Sorbonne, attended the Ecole Normale Superieure and has a BA in Psychology and Social Relations from Harvard.
“We are thrilled that John will be joining us to oversee the next stage in the growth of our Fixed Income division. He has had a very diverse and hugely successful career and brings with him extensive experience from across the fixed income spectrum, as well as a strong understanding of the challenges facing our clients”, said Andrea Rossi, CEO of AXA IM.
Commenting on his appointment John Porter said: “I am pleased and excited to be joining AXA IM. I am inheriting a very strong and diversified Fixed Income business and my goal will be to work with this hugely talented and experienced team to continue to grow our third party assets under management through the same investment approach and philosophy, compounding current income and avoiding principal loss through fundamental credit analysis and macroeconomic research.”
Photo: silvernet2. Calypso Technology Expands Offices in Santiago, Chile
Calypso Technology has expanded their offices in Santiago, Chile. This expansion is in response to a rapidly growing client base and increasing opportunities in the Latin American markets.
The office serves as a professional services hub as well as a sales and marketing base for the region. The territory had previously been managed from Calypso’s New York office, but with recent sales momentum and growth of Calypso’s local and regional client portfolio, including COMDER, Banco Penta, Banco de Crédito del Perú, Banco Crédito e Inversiones en Chile, a local presence was required.
Working with exchanges and banks in the Latin American markets, Calypso provides a cross-asset front-to-back office platform that meets the trading and operational needs of a region that is modernizing and consolidating its capital markets infrastructure. Calypso provides OTC derivatives clearing and processing infrastructure to the world’s top clearing houses, including COMDER, CME, Eurex, BM&FBovespa, TSE, SGX, HKEX and ASX.
Calypsocustomers in Latin America are among the leading users and dealers of a broad range of asset classes including interest rate derivatives, settlement and non-settlement currencies, money market indexed loans, fixed income instruments, FX products and derivatives hedging.
Carlos Patino, Director of Business Development, Latin America & the Caribbean, comments, “Key to our strategy as a global leader has been to identify, understand and implement solutions to meet the challenges faced by local financial institutions particular to their markets. We see great demand for our cross-asset capabilities from banks in the region who are looking to increase market share – both locally and globally, as foreign investors continue to focus on the region. These currents are also being driven by a need to comply with multiple regulatory regimes, while moving quickly to capitalize on current opportunities. We look forward to playing a critical role in evolution of the regional markets and supporting institutions as they grow.”
Better than expected US macroeconomic data and a somewhat more hawkish perception of the Fed have increased the probability of Fed tapering on December 18. Although ING Investment Managament still believes that tapering will not start before March 2014, it is wise to assess the broader market consequences of such a move.
Markets seem to have adapted to the concept of Fed tapering. Evidence is emerging that they have ‘learned’ to understand the Fed better as they have started to appreciate the difference between tapering and tightening.
EM currencies remain vulnerable to tapering (expectations)
Probability of tapering in December has increased
A number of better than expected US macroeconomic data, combined with a somewhat more hawkish than expected Fed statement after its last meeting on 30 October has brought back speculations in the market that Fed tapering could start rather sooner than later. Although we must not be fixated too much on one month’s data, the assumption of many market pundits that corporate confidence and hiring intentions would take a hit from the government shutdown and the budget discussion does not seem to materialize.
The asset manager still believe that the tapering of the Fed’s asset purchases is more likely to commence somewhere in the first quarter of next year, also because the December meeting will coincide with the conclusion of US budget discussions, which given past precedence have a high probability of failure. Still, the odds of December tapering have increased. It is therefore crucially important to take the balance of risk surrounding our view into account. Moreover, we need to assess what the broader market consequences of such a policy move will be.
Emerging market assets remain vulnerable
Most vulnerable to tapering still are emerging market (EM) assets. As we can see in the graph on the front page, EM currencies (represented by the JP Morgan ELMI+ index) have moved largely in line with the US Treasury yield since the start of the taper talk in May. After the last Fed meeting on October 30, the Treasury yield resumed its rise while EM currencies started to weaken again after an impressive rally since early September. As EM assets have attracted so much foreign capital since the Fed and other central banks introduced their unprecedented monetary policies, they remain vulnerable to capital outflows. As with the US Treasury yield, we do not expect a sharp move comparable to the May/June period, but the risk of further weakening is likely.
You can view the complete story on the attached document.
Value-add real estate, which are properties exhibiting marginal operational or physical challenges, offer better total return prospects than core real estate, according to a white paper from CenterSquare Investment Management
The paper, Era of Execution, written by P.J. Yeatman, head of private real estate for CenterSquare, and Jeffrey Reder, senior vice president, private real estate, for CenterSquare, focuses on the potential of value-add strategies to generate attractive risk-adjusted returns in private real estate. Value-add strategies involve acquiring real estate at an attractive cost basis and then resolving the property’s deficiency, stabilizing the income stream, and increasing the overall value of the property for disposition.
Core real estate, generally defined as high-quality assets in prime locations with stable cash flows, is traditionally viewed to have the least risk. These properties were the first to attract significant institutional capital from risk-averse investors following the Global Financial Crisis. As a result, this segment of the private real estate market was the first to recover, according to the report.
But now these core properties appear to be over-valued, and better investment opportunities can be found within value-add real estate, CenterSquare said.
“Our view is that we have entered an era in which value creation through strategic execution offers the most compelling risk-adjusted returns,” said Yeatman.”The raw materials for a value-add real estate strategy can still be acquired at an attractive cost, particularly when compared to core properties, which appear to be overbought.”
Reder added, “We see assets that are not functioning optimally, but can be improved so that their value and ability to deliver returns to investors are both significantly increased.”
CenterSquare also noted that in past market cycles, recovery of private market values have lagged that of public real estate market values. “Based on the public market value recovery we’ve seen since 2009, we can infer that we are in the midst of an optimal private market investment period,” said Yeatman.
Another advantage of value-add real estate strategies singled out by the report is that because of the low cost basis at which they can be acquired, they are better positioned to withstand potential shocks to the market. In the white paper, CenterSquare said the most attractive value-add properties are primary assets in secondary growth markets and secondary assets in primary growth markets.
Photo: Dori. Nexxus Capital Raises $550 Million for its Sixth Private Equity Fund
Nexxus Capital announced the final closing of its sixth institutional private equity fund, Nexxus Capital VI, with capital commitments of $550 million. The Fund was oversubscribed, significantly exceeding its original target of $400 million.
In addition to strong support from existing and new local institutional investors, Nexxus Capital VI has attracted commitments from new investors from North America, Europe and the Middle East. Pension plans, sovereign wealth funds, and endowments account for the majority of the investor base.
Nexxus VI is comprised of two vehicles: a Mexican public vehicle listed on the Mexican Stock Exchange and an Ontario limited partnership. Both vehicles will co‐invest on a pro‐rata basis according to total available resources of each vehicle.
MVision Private Equity Advisers acted as lead global fundraising adviser. Santander and Citigroup acted as joint‐bookrunners for the Mexican vehicle.
Nexxus Capital VI expects to make equity and equity‐related investments in midsize companies primarily in Mexico, where there is an opportunity to institutionalize family or entrepreneurially owned businesses. Nexxus Capital’s approach focuses on the implementation of operational efficiencies and maximizing liquidity value after taking portfolio companies public or selling to strategic or industry buyers, which is a continuation of the successful investment strategy applied to its prior funds.
White & Case LLP served as US legal counsel to the Fund, General Partner and Manager, and Stikemann Elliott served as Canadian legal counsel to the General Partner.
