Snowden Lane Partners Adds Latest Advisor, Creates $360 Million Advisor Team

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Snowden Lane Partners announced Al Jacobi has joined the firm as Senior Partner and Managing Director, from Fieldpoint Private.

Together with Tom Hakala, who joined Snowden Lane as Partner and Managing Director in July, Jacobi and Hakala will form The Jacobi-Hakala Group. They are the fifth wealth management team to join the fast-growing hybrid RIA since mid-April.

Based in Snowden Lane’s New York City headquarters and having worked together for over two decades, The Jacobi-Hakala Group will oversee $360 million in client assets and specialize in offering sophisticated advice and highly customized financial strategies to high-net-worth families and individuals.

“Al and Tom have proven they are experts in the high-net-worth space, and they will fit perfectly into Snowden Lane’s culture,” said Greg Franks, Snowden Lane’s Managing Partner, President & COO. “I’m looking forward to watching them collaborate again, and if their history working together is any indication, they will have an outstanding impact at our firm. I’m excited to officially welcome them to the team.”

“I’m thrilled to be joining Snowden Lane alongside Tom, as the firm has built a great reputation across the wealth management industry,” said Al Jacobi. “I know their established platform will allow me to continue offering clients the customizable financial solutions they deserve, while Snowden Lane’s culture and values align with my ultimate goal of providing objective, conflict-free wealth management advice.”

Prior to Snowden Lane, Jacobi and Hakala each held senior positions at Fieldpoint Private and Wilmington Trust.

Jacobi served as a Managing Director and Senior Advisor at Fieldpoint Private, having previously spent over a decade as a Managing Director and Senior Investment Advisor at Wilmington Trust. In that role, Jacobi led a team of investment specialists to develop highly customized client portfolios. He also worked as a senior investment executive for a large national banking organization, directing a team of investment professionals focused on high-net-worth families. Jacobi holds the Chartered Financial Analyst® designation, an MBA, and is a member of the New York Society of Securities Analysts and the Association of Investment Management and Research.

Hakala most recently served as a Managing Director at both Fieldpoint Private and Wilmington Trust and has held positions with KPMG, UBS and PricewaterhouseCoopers throughout his career.

“We are extremely grateful that Al and Tom chose Snowden Lane after evaluating a competitive recruiting environment,” said Rob Mooney, Managing Partner & CEO of Snowden Lane Partners. “We have always believed our independence, in addition to the personal attention we offer clients, would resonate across the RIA community. It’s very rewarding to see those beliefs hold true and we are humbled by the interest we have received this year.”

Lyle LaMothe, Chairman of Snowden Lane Partners, added, “We deeply admire Fieldpoint Private, hence our enthusiasm when it became clear The Jacobi-Hakala Group would be joining our firm. Al and Tom are highly experienced and have a track record of maximizing results for their clients through customized solutions. I am certain they will thrive in Snowden Lane’s boutique environment.”

The firm has 126 total employees, 72 of whom are financial advisors, across 12 offices around the country: Pasadena and San Diego, CA; New Haven, CT; Coral Gables, FL; Chicago, IL; Pittsburgh, PA; Baltimore, Salisbury and Bethesda, MD; San Antonio, TX; Buffalo, NY, as well as its New York City headquarters, according Snowden Lane information.

Important Things to Consider Before Hiring New Remote Employee

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While a lot goes into a successful business, nothing is quite as important as your employees. They are the lifeblood of any company, and are crucial to everything from creating products, to marketing, to dealing with customers, and much more.

You will only get as far as your employees will take you as a business, and without a good team, a company will often struggle to succeed. Because of this, the importance of hiring the right person the first time is massive.

But before you can hire the right people for the job, there are some things you need to consider.

One of the most important things to consider when hiring anybody is their background. First of all, you need to look at their work experience. You need to look at where they worked, how long they worked there, and the type of things they did there.

If someone has no relevant experience, they may struggle in the position vs. those who have years of experience in a similar role. For some positions, you will also want to think about their educational history and background, as well. Make sure that they have the necessary degrees, certificates, or other requirements that you need to do the job.

However, you should also look at their personal background. You want to ensure they are reliable and have proven in the past that they can handle doing what you need them to do. Also, you may need a background check to learn a little more about their past, too.

Their Cultural Fit

While the education and experience of candidates are important, you also need to think about their personality and how they will fit within your organization. Teams work best together, so everyone you hire should be able to work well with your existing team.

If values are different, goals are different, and personalities clash, it can spell disaster. Everyone doesn’t need to be exactly the same, and a diverse team is very strong, but everyone should have common goals and values, and get along with the rest of their team.

The importance of cultural fit when hiring cannot be overstated and is something that every hiring manager needs to think about when checking out resumes, reading cover letters, and interviewing people. A positive culture at work often leads to better employee engagement, happier workers, better productivity, and other benefits.

Their Potential

Who the candidate is now is important, but so is who they could become in the future. Just because someone is lacking the experience you want due to being a new graduate or because of a career change doesn’t mean they are worth considering. They might have all the right skills and education but are simply too young to have enough relevant experience

Sometimes it is worth it to hire someone who might be a little green if they show promise and are ready and willing to learn. This can be evaluated on a case-by-case basis, but finding someone with the potential to be one of your best employees is often a more intelligent call than bringing in someone who is experienced, but will just be okay at their job.

Another thing about young employees with potential is that they often had the time to develop any bad habits, which is always a good thing. You can build them from the ground up to be great employees, and won’t need to undo any bad training that they have gotten in the past.

Their Skillset

The skills that a person has are also very important to think about when hiring staff. Of course, hard skills are something you need to take a close look at and consider. These are specific abilities, often that can be measured, that can show how good a person is at a particular job.

The exact skills that a person should have can depend entirely on your industry, as well as the type of job that the individual will be doing. For example, the skills that airlines look for when hiring pilots will be different than what a bank looks for when hiring financial advisors.

However, you also cannot forget about their soft skills. These are things like communication skills, time management, conflict resolution, and listening skills, that are very important at every job.

In conclusion, these are some incredibly important considerations to make before hiring a new employee to come work at your company. By thinking about these things, you will be able to ensure you hire the right person and don’t have to waste time and money after hiring mistakes.

Bolton Recruits Former Merrill Lynch Advisor with $130 Million AUM

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Bolton Global Capital has announced that Raul Rohr, a former Merrill Lynch advisor who manages $130 million in client assets, has joined the independent broker dealer.

Mr. Rohr has over 12 years of industry experience, most recently at Merrill Lynch where he was an International Wealth Advisor since 2014. His clientele consists primarily of high and ultra-high net worth individuals located throughout Latin America and the United States.

Mr. Rohr is a graduate of University of California at Irvine with a Bachelors of Science in Chemical Engineering and a Masters in Business Administration (MBA).

He holds designations as a Certified Private Wealth Advisor® and as a Trust and Estate Practitioner. “We are gratified that Raul has decided to join Bolton after receiving multiple competing offers from other firms” according to Ray Grenier, CEO of Bolton.

“We anticipate that this talented professional will be in a strong position to grow his international business on our platform” stated Grenier.

Established in 1985, Bolton Global Capital is an independent FINRA member firm with an affiliated SEC registered investment advisor. The firm manages approximately $12 billion in client assets for US based and international clients through 110 independent financial advisors operating from branch offices in the US, Latin America and Europe, according the firm information.

Inflation: What to Expect in the Short, Medium and Long Term

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There are so many factors that go into inflation, that the Fed itself has come out and said they often don’t totally understand what drives it. A lot of the factors are reflexive with self-correcting mechanisms and self-reinforcing mechanisms so it’s complicated to predict inflation prints. Rates and inflation are reflexive. What happens with one drives the other, and then it goes back in the other direction. There’s a lot of room for one of those things to move and change the other.

That being said, my expectation is that inflation for this cycle peaks in the next one to three months. We were surprised in May by the 8.6% CPI, and there are reasons to think inflation will be a little bit higher for the next month or two, but after that, there are a lot of forces that are going to bring both headline and core inflation down in the medium term.  However, longer term, inflation may not return to the historical trendline of 2 to 3% per annum, where it has been for several decades.

Core inflation bounced up to six and a half percent this year and that bounce was many standard deviations from the trendline and off the map in terms of most of our investing lifetimes. Let’s look at the components.

The blue bar represents core services inflation. Historically that’s the stable part and the bulk of inflation. What’s interesting is even if you took out the green bar, which is energy, the yellow bar, which is food, and the orange bar, which is goods, and left just services, inflation is still running at over 3%. Services alone, if everything else were zero, would still be running higher than the Fed’s target.

In other words, inflation is not due to a single component. It is comprised of upward ticks in energy, goods, food, and services. All are higher than their historical averages, even the ones that are relatively sticky. Indeed, all components have turned inflationary.

How did we get here? The huge economic stimulus following the Covid pandemic encouraged people to go online and shop. Yet many businesses shut down, causing supply chain constraints, which in turn drove shortages and higher prices for scarce goods, services, and labor.

The good news is that there are many reasons inflation can fall in the next six to 12 months.

  • Fiscal policy has turned restrictive. Government outlays have been curtailed and are perhaps 20% lower this year than at the peak of Covid spending.
  • Monetary tightening. The Fed is backing off its quantitative easing and reduced purchases of Treasuries while hiking the Fed funds rate.
  • Commodities prices are softening. Demand is slowing in China and elsewhere.
  • A strong US Dollar. This gives the US greater purchasing power to buy foreign goods without importing inflation.
  • Declining consumer confidence. The July Conference Board’s index (CONCCONF) decreased for a third month to 95.7 from a downwardly revised 98.4 reading in June.
  • Auto production is increasing and used vehicle prices are moderating. The Manheim Index, which tracks the used car market sales volume, was negative for the first time in a long time in June and again in the first half of July from the previous periods.
  • Supply chains normalizing. The huge queues of ships in the ports of Long Beach and Los Angeles waiting to be unloaded have now dissipated.

All these things argue for inflation coming down in the medium term and they certainly represent strong headwinds to inflation continuing to rise. However, it should be noted that while there are a lot of reasons to hope that inflation moderates, certainly the surprises over the past year have all been on the wrong side and new surprises could alter our outlook.

The market will continue to debate where inflation is headed, but there is reasonable confidence (70% likelihood in our view) that in the next month or two there will still be high inflation prints.

In the subsequent two to twelve months, we believe there is a 40 to 50% likelihood that inflation will moderate, and rates will climb slowly or hold.

There are, however, potential longer-term drivers of higher inflation that will be different post-Covid, although it remains to be seen how things shake out in 2023 and 2024.

Longer-Term Drivers of Potentially Higher Inflation

  • Covid has encouraged de-globalization, onshoring, and shortening of supply chains. Long supply chains have hurt a lot of companies’ businesses. Relying on China when it shut down or the constraints in the ports when there was a shortage of labor to unload containers led many to want to shorten supply chains and onshore, with more of their production closer to home.
  • Lower workforce participation is inflationary and causes businesses to boost wages to attract talent. A lot of people have dropped out of the labor force and there has also been a lot of early retirement. The lower labor force participation is below what the Fed expected, and what there has been historically This has also led to more labor bargaining power. Let’s wait and see how long that persists. If a recession brings unemployment back to 5 to 6%, bargaining power for labor probably decreases, but for now, workers are in the driver’s seat.
  • Technology is not adding as much to productivity The productivity leaps experienced through the development of electricity and the internet have not been replicated as of late. Technology advancements such as AI and big data helped to generate some improvement in productivity, but the history of the last decade shows per unit productivity in the US is not on a good trend. New social media technology such as Facebook, Instagram, and TikTok doesn’t add to overall productivity and in fact, probably decreases a worker’s efficiency and output.
  • The energy transition and the trend toward addressing ESG concerns are costly. Why does the world burn oil, coal, and natural gas? The answer is because, on a per-unit-of-energy produced basis, fossil fuels are the most cost-effective. The free market–absent activist investors–would generate electrical energy as cost-effectively as possible. As we make a political shift around the world, certainly in Europe, to reduce our carbon footprint, a zero-carbon path is definitionally going to be inflationary to energy prices. If producing energy from wind were more economical than oil, then that would be the primary source of energy right now.

All those reasons argue for a level of inflation that would be higher than it was in the past and that causes an interesting dynamic with inflation volatility. My prediction is that higher inflation prevails for the next few months, then it surprisingly falls for the next several months after, then perhaps climbs again before finally settling into a 3 to 4% range longer-term.

 

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Pictet Asset Management: Earnings Maths Does Not Add Up

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Slowing economic growth, surging inflation, tighter monetary policy and heightened geopolitical risks have all taken their toll on financial markets. However, we believe most risky asset classes have yet to fully price in a recession – a scenario which to us looks increasingly likely.

Although world stocks’ 12-month price/earnings ratios have declined by more than 30 per cent since September 2020, consensus forecasts for corporate earnings remain remarkably optimistic (at 11 per cent this year and close to 8 per cent over the next two), starkly at odds with underlying economic conditions. We expect those projections to be revised sharply lower. History shows that when a recession hits, corporate profits fall by as much as 25 per cent – a drop that looks all the more likely given that company earnings are currently running at record levels.

We therefore remain underweight on equities, waiting for either a stabilisation in earnings revisions and economic momentum or, indeed, a confirmation of a sharper than anticipated disinflation before considering an upgrade. We have an overweight in cash, which we are ready to deploy when conditions improve, and a neutral allocation to bonds.

Our business cycle indicators show a growing chasm between business and consumer sentiment surveys and hard data. While the former are deteriorating sharply, the latter have so far remained relatively strong, likely supported by excess savings among households and pricing power of corporations.

Such resilience may not last, as we are already starting to see in the US, where tightening financial conditions are beginning to bite. We downgrade our US macro-economic score to negative and cut our 2022 GDP growth forecast to a near-consensus 2.2 per cent (from 3.0 per cent previously).

The silver lining for the US economy is growing evidence suggesting inflation may be about to peak.

The situation appears bleaker for the euro zone. Here, our leading economic indicator is now below pre-pandemic levels. Momentum continues to deteriorate, dragged down by Germany, while price pressures are still accelerating. The European Central Bank is clearly some distance behind the curve in fighting inflation compared to the US Federal Reserve, which last month raised interest rates by an additional 75 basis points.

Emerging Asia is one of the few economic bright spots, supported by a recovery in China – an economy with the tail wind of reopening as well as the headroom, means and motivation to stimulate growth. Although this must be balanced against the ongoing problems in China’s property market, we believe the backdrop is broadly positive for Chinese equities.

Our liquidity indicators suggest riskier asset classes could continue to struggle. Across most major economies, central bank interest rate hikes and quantitative tightening measures are leading to a contraction in excess liquidity. In all, over the past quarter, the world’s five major central banks have removed USD1.8 trillion of liquidity.

While the Fed has now raised policy rates to neutral territory and has indicated that the future course of action would be guided by incoming data, markets have taken a dovish interpretation of the central bank’s stance. Indeed, current market pricing has the Fed funds rates peaking in December this year, a full 50 basis points below the Fed’s own estimate. Although we do not rule out the possibility of a Fed pause, we caution that this is far from a certainty at this point.

Our analysis of valuations shows stocks are approaching fair value the market’s sharpest peak-to-trough market fall in decades: our models indicate that equities are trading close to the mid-point of their historical valuation range (based on a range of measures from price multiples to the equity risk premium).

Bonds, meanwhile, remain relatively cheap, despite the recent rally. Some of the best value, however, is found in the riskier parts of the market, such as emerging debt and credit.

Technical indicators indicate that sentiment is now neutral across all major equity and bond markets. However, equities are still subject to negative scores both in terms of market trends and seasonal factors (with summer historically a problematic period for stocks).

 

 

 

Opinion written by Luca Paolini, Pictet Asset Management’s Chief Strategist.

Discover Pictet Asset Management’s macro and asset allocation views.

 

 

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PIMCO Hires Richard Clarida as Managing Director and Global Economic Advisor

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Photo courtesyRichard H. Clarida began a four-year term as vice chairman of the Board of Governors of the Federal Reserve System in September 2018 and took office as a Board member to fill an unexpired term ending January 31, 2022. He resigned on January 14, 2022. FED.

PIMCO announces that Richard Clarida, former Vice Chairman of the Board of Governors of the Federal Reserve System, will rejoin to the firm as Managing Director and Global Economic Advisor, a role similar to the one he held during his previous 12 years at PIMCO.

He will join in October and be based in PIMCO’s New York office.

Joachim Fels, Managing Director and currently PIMCO’s Global Economic Advisor, will retire from PIMCO at the end of the year after a long and illustrious career spanning almost four decades as an economist.

“PIMCO has been extremely fortunate to have these two giants in the field of economics contribute to our global macroeconomic views for nearly two decades, helping the firm frame a rapidly changing world so we can make the best investment decisions for our clients,” said Dan Ivascyn, PIMCO’s Group Chief Investment Officer. “Rich’s work as architect of PIMCO’s New Neutral thesis in 2014, how lower interest rates for longer would impact valuations in fixed income markets, is just one example of the invaluable insights he has provided to PIMCO clients for many years. He rejoins at another inflection point for markets and we look forward to his insights and guidance on emerging trends.”

Mr. Clarida will advise PIMCO’s Investment Committee on macroeconomic trends and events. In his previous tenure at PIMCO from 2006-2018, Mr. Clarida served in a similar role as Global Strategic Advisor and played a key role in formulating PIMCO’s global macroeconomics analysis.

He will be supported by PIMCO’s team of economists and macroeconomic research experts in the Americas, Asia-Pacific and Europe, and will work closely with PIMCO’s four key regional portfolio management committee – the Americas Portfolio Committee (AmPC), European Portfolio Committee (EPC), Asia-Pacific Portfolio Committee (APC) and Emerging Markets Portfolio Committee (EMPC).

Prior to returning to PIMCO, Mr. Clarida was the former Vice Chairman of the Board of Governors of the Federal Reserve System, and he is currently the C. Lowell Harriss Professor of Economics and International Affairs at Columbia University.

Mr. Clarida also served as chief economic advisor to two U.S. Treasury Secretaries when he was the former Assistant Secretary of the Treasury for Economic Policy.

On the other hand, Mr. Fels, who joined PIMCO in 2015, is retiring from PIMCO at the end of 2022. He has provided invaluable leadership of global macroeconomic analysis for PIMCO’s Investment Committee, the broader firm and commentary for clients around the world. As a leader of PIMCO’s annual Secular Forum, Mr. Fels helped establish macroeconomic guardrails on how the firm approached investing over a three to five year period.

 

How to Overhaul the Tried-and-Tested Investment Portfolio When Inflation Soars

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The tried and tested 60/40 formula for buy-and-hold investment portfolios got off to its worst start since World War II.

The 60/40 portfolio — split between the S&P 500 Index of stocks (60%) and 10-year U.S. Treasury bonds (40%) — fell about 20% in the first half of 2022, the biggest decline on record for the start of a year, according to Goldman Sachs Research. Such ‘balanced’ portfolios, meant to blend the higher risk of stocks with the relative safety of government bonds, often have different formulations, such as a mix of corporate credit or international stocks. But virtually all of them had one of their worst starts to a year ever, according to Christian Mueller-Glissmann, head of asset allocation research within portfolio strategy at Goldman Sachs.

Almost all assets were in a precarious position at the start of the year, as valuations for stocks and bonds were hovering around their highest levels in a century, Mueller-Glissmann says. Decades of tame inflation allowed central banks to drive interest rates ever lower to try to smooth out the business cycle, which in turn pushed assets from stocks to house prices higher. In fact, in the decade before the COVID-19 crisis, a simple U.S. 60/40 portfolio delivered three-times its long-run average for risk-adjusted returns.

And then 2022 hit. As consumer prices and wages accelerated, central banks like the Federal Reserve scrambled to reverse their policies. That resulted in one of the biggest ever jumps in real yields (bonds yields minus the rate of inflation).

As policy makers try to contain skyrocketing inflation, stock investors are increasingly concerned that those efforts will slow growth, potentially tipping large economies like the U.S. into recession. Indeed, investor concerns have recently shifted from inflation to recession concerns as soaring inflation expectations have fallen, but it might be too early to fade inflation risks, at least in the medium-term, says Mueller-Glissmann.

“In contrast to the last cycle, you’ve had a mix of growth and inflation conditions that are quite unfriendly,” Mueller-Glissmann says. Rising inflation weighs on bonds, as does monetary policy tightening (when central banks increase interest rates). This also means weaker growth, meanwhile, which is a headwind for equities, and equity valuations suffer from rising rates as well. “That is a backdrop that’s very bad for 60/40 portfolios, irrespective of valuations,” he said.

That means there’s less diversification potential between equities and bonds, as they have been more positively correlated this year — in fact this has been more often the case than not historically.

The outlook for the 60/40, however, might not improve right away, as long as inflation is percolating up and central bank tightening weighs on growth. “I don’t think it’s dead, because the current environment won’t last forever, but it’s certainly ill-suited for that type of backdrop,” Mueller-Glissmann says. “In an environment where you have both growth risk and inflation risks, like stagflation, 60/40 portfolios are vulnerable and to some extent incomplete. You want to diversify more broadly to asset classes that can do better in that environment.”

Real assets could be more important in a cycle where inflation is higher than the world has been used to over the past two or three decades. Things like residential real estate can generate profits that exceed inflation. Precious metals and even fine art and classic cars can help protect purchasing power when consumer and commodity prices are climbing quickly.

A portfolio with a slice of real assets, like gold and real estate, performed even better than the 60/40 over the long run. In that case the optimal strategic asset allocation since World War II was closer to one-third equity, one-third bonds and one-third real assets, Mueller-Glissmann says.

Investors have picked up on this shift. Instead of a tech startup that might not produce a profit until many years from now, investors are favoring companies that can already produce earnings and dividends. Warehouses have been a popular investment as e-commerce accelerates. Demand for companies that make battery storage has grown amid an increasing focus on renewable energy infrastructure.

But as recession risks rise, some real assets have also become more volatile in recent months. Nobel prize winning economist Harry Markowitz is credited with saying that diversification is the only free lunch in finance. Mueller-Glissmann says that principle applies to investing in real assets as well. They tend to be heterogeneous, with different risks.

“You want to have a bit of diversification within real assets as well,” Mueller-Glissmann says. Goldman Sachs Research has run the numbers and found that a roughly equal weight (about 25% in each) between real estate, infrastructure, gold and a broad commodity index has led to the best risk-adjusted performance in periods of high inflation. Allocations to Treasury Inflation-Protected Securities (TIPS), which were created in the late 1990s and are a more defensive real asset, can help lower cyclical risk while providing inflation protection.

Going forward, active portfolio management, allocations to alternative assets — such as private equity but may also include hedge funds — and new strategies for mitigating risk, like option hedges, are going to be more important in multi-asset investing, Mueller-Glissmann said.

“I would disagree that diversification is the only free lunch in finance,” he added. “But certainly it remains a core investment principle for any investor.”

 

Florida’s Governor Announces Initiatives “to Protect Floridians from ESG Financial Fraud”

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By Funds Society, Miami

Florida’s Governor Ron DeSantis announced legislative proposals and administrative actions “to protect Floridians” from the ESG movement, according the Florida administration web site.

“The leveraging of corporate power to impose an ideological agenda on society represents an alarming trend,” said Governor Ron DeSantis. “From Wall Street banks to massive asset managers and big tech companies, we have seen the corporate elite use their economic power to impose policies on the country that they could not achieve at the ballot box. Through the actions I announced today, we are protecting Floridians from woke capital and asserting the authority of our constitutional system over ideological corporate power.”

Governor DeSantis’ proposed legislation for the 2023 Legislative Session will prohibit big banks, credit card companies and money transmitters from discriminating against customers for their religious, political, or social beliefs; prohibit State Board of Administration (SBA) fund managers from considering ESG factors when investing the state’s money and Require SBA fund managers to only consider maximizing the return on investment on behalf of Florida’s retirees.

“The proposed legislation will amend Florida’s Deceptive and Unfair Trade Practices statute to prohibit discriminatory practices by large financial institutions based on ESG social credit score metrics. This “ESG score” is a framework created to force companies to meet ESG standards and arbitrarily includes metrics based on political affiliation, religious beliefs, certain industry engagement, and ESG benchmarks. Violations will be considered deceptive, and unfair trade practices will be punished according to the law”, the press release said.

At the next State Board of Administration meeting, Governor DeSantis will propose an update to the fiduciary duties of the State Board of Administration investment fund managers and investment advisors to clearly define the factors fiduciaries are to consider in investment decisions. Environmental, social, or corporate governance factors will not be included in the state of Florida’s investment management practices, the text added.

“Governor DeSantis will work with likeminded states to leverage the investment power of state pension funds through shareholder advocacy to ensure corporations are focused on maximizing shareholder value, rather than the proliferation of woke ideology”, concluded the statement.

Citi and Insigneo Complete Sale of Citi’s International Personal Bank Business in Puerto Rico and Uruguay

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By Funds Society, Miami

Citi and Insigneo closed the transaction under which the Miami-based independent broker-dealer and Registered Investment Advisor (RIA) acquired Puerto Rico-based broker-dealer Citi International Financial Services, LLC (CIFS) and Citi Asesores de Inversion Uruguay S.A. (Citi Asesores), an investment advisory firm in the country’s free-trade zone.

The transaction has received regulatory approval.

 

With the acquisition of CIFS and Citi Asesores, Insigneo will now exceed $17B in client assets and serve over 400 investment professionals. The acquired entities will continue to operate independently under the Insigneo brand.

“We’re prepared for a seamless transition of the businesses we are acquiring, and we welcome all incoming employees, investment professionals and their clients, to Insigneo’s growing independent platform,” added Raul Henriquez, Insigneo’s Chairman and CEO

Citi maintains all existing bank deposit relationships with wealth clients moving to Insigneo, which offers a broad spectrum of investment products and wealth management capabilities, according the firm information.

“Citi will continue to serve institutional clients through its Puerto Rico and Uruguay branches, as it has done so for the past 104 and 107 years; respectively. The U.S. Consumer Wealth team and the bank remain deeply committed to Latin America, where Citi has operated for more than a century and built an unmatched network across 20 countries. Citi’s U.S. Consumer Wealth business will continue to serve clients using the Citigroup Global Markets Inc. broker dealer”, the press release says. 

“The closing of the deal allows Citi to simplify its U.S. Consumer Wealth Management business model, focused on providing leading wealth management solutions through Citi Global Markets Inc. broker-dealer and investment advisor, while strengthening our banking relationships with our existing clients in Uruguay, Puerto Rico, and throughout Latin America.  In addition, it provides us an opportunity to expand banking services over time with Insigneo’s growing client base,” said Scott Schroeder, head of U.S. International Personal Bank at Citi.

The transaction is the latest in a series of ongoing strategic moves and acquisitions as Insigneo continues to execute on its business model, which received a boost with the recent $100M financing commitment by global investment firms Bain Capital Credit and J.C. Flowers & Co.


 

 

Secular Outlook 2022: Asset Class Return Forecasts for the Next Five Years

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Dividing a portfolio’s investments more or less evenly between developed market stocks and bonds has proved a rewarding strategy over the past few decades. The annualised return investors have secured by pursuing this approach has been in the high single digits – gains that have come courtesy of steady economic growth, an almost continuous fall in interest rates and inflation, and relatively calm financial market conditions.

Yet our forecasts covering the next five years indicate investors will need to plot a different course to achieve a similar result. This will involve allocating less capital to the developed world, increasing holdings of emerging market assets, and investing far more in alternatives, particularly commodities and gold.

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A key finding from our research is that returns from equity markets will fall victim to an unfavourable shift in the business cycle. The global economy is approaching the end of its post-Covid expansionary phase. Tighter financial conditions, a peak in US jobs growth and large output gaps all point to a recession this year or next. This has significant investment implications. There is a considerable difference between making an allocation to stocks in the lead-up to a slump and doing the same once recovery begins to take root. And that’s true even for those who invest over long time horizons.

Our analysis of the past 100 years shows that an initial investment in developed market stocks after the end of a recession delivers a price return of 10 per cent a year for the following five years; investing before a recession, as would be the case today, has by comparison typically delivered only a 4 per cent annualised return – a shortfall of some 6 per cent per year.

A key finding from our research is that returns from equity markets will fall victim to an unfavourable shift in the business cycle. The global economy is approaching the end of its post-Covid expansionary phase. Tighter financial conditions, a peak in US jobs growth and large output gaps all point to a recession this year or next. This has significant investment implications. There is a considerable difference between making an allocation to stocks in the lead-up to a slump and doing the same once recovery begins to take root. And that’s true even for those who invest over long time horizons.

Our analysis of the past 100 years shows that an initial investment in developed market stocks after the end of a recession delivers a price return of 10 per cent a year for the following five years; investing before a recession, as would be the case today, has by comparison typically delivered only a 4 per cent annualised return – a shortfall of some 6 per cent per year.

Another obstacle for developed equity markets is a looming squeeze on corporate profit margins. With wages and raw materials prices rising, more stringent regulations adding to the costs of doing business and the prospect of a rise in corporate taxation, margins can be expected to fall by a cumulative 10 per cent over the next five years.

But it is not only developed market stocks that will struggle to match their past performance. Developed government bonds will also labour to deliver what investors require of them over the next five years. Such securities have traditionally served as an anchor for a diversified portfolio – a crucial source of income and capital protection during periods of economic uncertainty.

Yet outside the US – where initial valuations for government and investment grade bonds are becoming more attractive thanks to this year’s spike in yields – returns from developed market fixed income will fall below inflation over the next five years.

To make up for the lacklustre returns and income on offer from the developed world, investors will have to strike a delicate balance. On the one hand, our analysis indicates that, on average, portfolios will require higher allocations to stocks and bonds from emerging markets, as well as commodities – riskier investments that offer higher prospective returns. On the other, it would be prudent to accompany this dialling up of risk with a higher allocation to assets that do not move in lockstep with mainstream stocks and bond markets, such as liquid alternatives, gold and private assets.

Within emerging markets, Chinese stocks look particularly attractive while emerging market bonds’ income-generating potential should grow, enhanced by what we believe will be a steady appreciation in developing world currencies.

Among alternatives, non-energy commodities look especially appealing; their returns should be in excess of inflation over the next half a decade.

Our analysis also shows real estate and private equity both outperforming developed market equities over our five-year forecast horizon. Allocations to gold and infrastructure, meanwhile, make sense at this juncture as a means to diversify risk and protect portfolios against the possibility of stubbornly high – or volatile – inflation.

Investors can remain faithful to the traditional balanced portfolio of mainstream bonds and stocks but, in doing so, accept a lower return and potentially higher volatility.

The next five years, then, present investors with a conundrum. They can remain faithful to the traditional balanced portfolio of mainstream bonds and stocks but, in doing so, accept a lower return and potentially higher volatility. Or they can take a less familiar path and allocate more of the capital to alternative assets. Our analysis suggests, the second option is the wiser course.

 

Opinion written by Luca Paolini, Pictet Asset Management’s Chief Strategist, and Arun Sai, Senior Multi Asset Strategist.

 

Download the full investment outlook to read more on this subject.

 

 

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