According to research conducted by Schwab Advisor Services on merger and acquisition (M&A) transactions in the independent registered investment advisor (RIA) industry, the first half of 2014 experienced a continued healthy pace of activity, with 29 completed deals totaling $32.6 billion in assets under management (AUM).
Transaction activity picked up in the second quarter of 2014, with deal flow increasing from the first quarter. Sixteen deals were inked in Q2 totaling approximately $19 billion in AUM, compared to 13 deals totaling $14 billion in AUM completed in Q1. Second quarter activity nearly reached the record high levels of Q3 and Q4 of 2013, each of which saw 18 completed transactions. The average deal size also increased during the first half of 2014, reaching $1.13 billion, compared with $808 million in the first half of 2013.
“While we see consistency in M&A activity in the RIA industry, with strategic acquiring firms continuing to show their buying power, we are not seeing the spike in industry consolidation that many analysts and observers have been predicting,” said Jonathan Beatty, senior vice president, sales and relationship management, Schwab Advisor Services. “Based on the data in our research, it appears RIAs are indeed in a good position to monetize their firm’s value, but they are more often looking to preserve the owner-operator model and retain their independence through internal succession.”
Data from Schwab’s 2014 RIA Benchmarking Study released in July, indicated that 9 in 10 RIA firms are looking to develop internal successors, suggesting that founders and principals are seeking continuity of their firm’s people, culture and values. Although M&A data for the first half of the year indicates a seller’s market in the RIA industry, many advisors are actually choosing not to sell. Instead they are continuing to grow organically and create value in their firms by building enduring enterprises.
With more than one-third (36%) of all firms participating in Schwab’s Benchmarking Study having doubled their AUM and revenues since 2009, the steady M&A activity this year also reflects the healthy ecosystem of the RIA industry. The RIA model continues to attract not just investors and advisors, but also more types of acquirers – in the U.S. as well as internationally.
M&A data for first half of 2014 showed activity among Strategic Acquiring Firms (SAF) moving upward from the levels of 2013, representing 38 percent of the total deals closed, versus 31 percent of deals completed by RIAs. Additionally, the data shows an increase in acquisitions by offshore-based entities, which represent seven percent of the total deals recorded for the first half of the year.
“As RIA firms grow and continue to evolve into efficiently managed businesses built for enduring success, they will increasingly appeal to a broader range of buyers,” said Beatty. “Internal succession is one of the best ways to strengthen, scale and grow a firm to potentially make it more attractive to a buyer. I expect we will continue to see consistent M&A activity in the coming months as acquirers seek opportunities and advisors consider more choices to monetize their firm’s value as part of a succession strategy.”
Schwab Advisor Services reports M&A industry data twice yearly as part of a continued commitment to advancing the interests of RIAs, including a consultative approach that helps firms determine their transition options and plan strategically toward them.
You may access additional data in the pdf file attached-
After the 2008-‘09 financial crisis, we have been in a long and slow moving economic and market cycle, where immense amounts of money creation from global central banks have flown to the more liquid areas of the capital markets. This long and slow dynamic has been characterized as the “turtle cycle,” with a recovery that inches forward, pushed by consistent flows of created capital. As the Fed ends quantitative easing in October, we think the European Central Bank will start quantitative easing very soon, prolonging this “turtle cycle” for at least another two or three more years.
This “turtle cycle” fueled by extraordinary money creation has inflated financial assets, especially the most liquid and mature markets. It is difficult to detect clear value in the three traditional assets classes going forward, in particular in the fixed income space. Our Investment Committee forecasts that a moderate risk traditional portfolio will have a return of 4-5% over the next 10 years. Cash yields are negative in real terms; bonds offer limited value with record tight spreads and high valuations; and equities are approaching the “beginning of the end” of the bull market. We share Professor Siegel’s (from the Wharton School of Business) view that the market will peak at 18X versus the present 16X EPS. So where does this leave us? We are focused on finding “non-traditional” revenue producing assets which offer intrinsic value of 8-11% (i.e. real rates of 6-8%). We believe with time, liquidity will end up flowing into and appreciating the values of these non-traditional asset types, as investors recognize the opportunities. These non- traditional asset types constitute an opportunity for investors to position their portfolios for multigenerational wealth. Our Investment Committee forecasts that a moderate risk portfolio which includes non- traditional asset types will have a return of 6-7% over the next 10 years.
We’re looking at non-traditional asset types such as: revenue producing core commercial real estate; opportunistic hard money lending (against high quality assets); private debt; infrastructure and other niche asset types. Each of these briefly described below.
Revenue Producing Core Commercial Real Estate . While we started investing in CRE in 2009 right after the crisis, our focus has shifted from Trophy Assets/ Markets to Non- Trophy Assets or Trophy Assets in Secondary Markets.
Opportunistic Hard Money Lending. Another non-traditional asset type we like is hard money lending against high quality assets or Bridge Loans. Bridge loans are often used for commercial real estate purchases to quickly close on a property, retrieve real estate from foreclosure, or take advantage of a short-term opportunity in order to secure long-term financing.
Private Debt . Private debt is often utilized by small and mid-sized companies looking for capital or financing. Because of their size, these middle-market firms have limited access to liquid capital markets, which have high minimum issuance sizes. Also, these companies historically have had access to funding from banks but this changed after the 2008 financial crisis. Regulations such as Basel III were enacted, forcing banks to clean up their balance sheets and focus on core tier assets. As a result, many banks stopped lending to middle-market companies. In 2013, the majority of these loans were provided by non-banks, an opportunity for third party private debt suppliers (i.e. Shadow Banking). We see an opportunity for our clients in private debt, as the risk premium of over 5% above comparable high yield bonds compensates nicely for the illiquidity of this asset class.
Infrastructure. Assets Infrastructure assets are loosely defined as “the facilities and structures essential for the orderly operations of an economy.” Examples of infrastructure assets include transportation networks, community facilities, and water and energy distribution systems. Investments in shale oil and gas, are examples of infrastructure assets. Typically, infrastructure assets offer non-correlated returns as the underlying assets have a different sensitivity to economic cycles than typical financial assets have. They also benefit from growing demand for essential services provided, and monopoly-like characteristics of high barriers to entry in their markets. Infrastructure investment shares some of the characteristics of fixed income (long-term steady income stream), real estate (physical assets) and private equity.
To read BigSur Partners’ complete report, please use this link.
Threadneedle Investments announces that Simon Brazier, Head of UK Equities, and co-manager Blake Hutchins have resigned. Leigh Harrison, Head of Equities at Threadneedle has resumed responsibility for the UK Equities team. Leigh has overseen Threadneedle’s highly successful Equities franchise since 2010, and was previously Head of UK Equities from 2006 to May 2011.
Mark Burgess, Chief Investment Officer at Threadneedle said: “Threadneedle has one of the largest and best performing UK Equities teams in the industry, and I am confident that under the resumed leadership of Leigh Harrison the team will continue to deliver for our clients. We place great emphasis on teamwork and integrated research to ensure that our process is robust. This approach has produced a strong, consistent track record of results for our clients and this will not change. We will continue to invest to build additional resource in the team.
“Threadneedle’s UK Equities team of nine manages approximately £18 billion across a variety of strategies including core, alpha, high alpha, income, mid 250, smaller companies and long-short portfolios. There is a wealth of talent within the team and the breadth of experience and range of strategies managed enhances research ideas and maximises our ability to identify investment opportunities across the range,” he said.
Chris Kinder will become lead manager of the Threadneedle UK Fund, effective immediately. Mr Kinder, who is A-rated by Citywire, also manages the Threadneedle UK Extended Alpha Fund which has achieved top quartile performance over one year and since Chris took over management of the fund in 2010.
“Chris is a senior fund manager and a core member of the UK team. He has an excellent track record and we are very confident that he will continue the strong performance of the Threadneedle UK Fund,” Mr Burgess said.
Simon and Blake will leave with immediate effect. Three junior members of the team, with roles primarily supporting Simon, will also leave Threadneedle. According to information published by Citywire, Simon, Blake and the three junior members of the team who are leaving Threadneedle will formally join Investec Asset Management in November.
De izquierda a derecha, Satya Patel, Teresa Kong y Gerald Hwang. Matthews Asia lanza la versión UCITS de su fondo de renta fija asiática Strategic Income Fund
Matthews Asia has launched a new strategic income fund, as an expansion of its Luxembourg-domiciled UCITS fund range.
The Matthews Asia Strategic Income Fund is managed by the same managers and will be run on the same philosophy as the firm’s US-based Asia Strategic Income strategy that was launched three years ago.
The fund is managed by Teresa Kong and co-managed by Gerald Hwang and Satya Patel, and will invest primarily in both local and external currency Asian corporate and sovereign bonds, in a bid to provide a total return over the long term with an emphasis on income, Matthews Asia said.
The fund takes a bottom-up approach to securities selection in order to construct a portfolio based on creditworthiness, exposure to the interest rate cycle and the potential for currency appreciation.
According to Matthews Asia, the significant structural reforms undergone by Asia’s bond markets and their subsequent growth has been “one of the region’s most important economic developments during the last decade”.
Kong added: “Investors’ fixed income portfolios tend to be underinvested in Asia since widely used global debt benchmarks generally allocate to the most indebted countries as opposed to the most creditworthy. Dedicated Asian fixed income allocations enable investors to potentially create a more diversified exposure across interest rate, credit and currency while enhancing the overall risk-return profile of a fixed income portfolio.”
Seúl. Foto: Esteban Mendieta, Flickr, Creative Commons. Threadneedle crece en Asia con una oficina de representación en Corea del Sur
Threadneedle Investments will open a representative office in Seoul, South Korea as part of the company’s expansion in Asia. Chris Lee joins Threadneedle as the Korea Chief Representative from Samsung Asset Management.
Mr Lee and his team in Korea can better understand and appreciate the ongoing interests and requirements of the Korean investors, which means we are in a stronger position to offer better service and attractive global investment products to the Korean community.
“In recent years, the Korean market has become increasingly integrated with global financial markets and, as a result, Korean institutional investors are increasingly seeking to access overseas markets in order to achieve better risk diversification and improved returns,” said Raymundo Yu, Chairman, Asia Pacific, Threadneedle Investments. “We believe that Korea presents great opportunities for us to serve institutional investors in Asia by offering our suite of outstanding investment strategies across asset classes. The opening of our Korean representative office marks yet another key milestone for Threadneedle’s growing presence in Asia.”
Part of Ameriprise Financial, Threadneedle established its presence in Asia in 2008 and has offices in Singapore, Hong Kong, Taiwan and Malaysia. The company’s growth in Asia builds on its established presence and considerable investment capabilities as well as those of Columbia Management, the group’s US-based investment manager.
“The establishment of a representative office in Korea is only the first step in our long-term commitment to the market. Mr Lee is an invaluable addition to Threadneedle’s Asia team. He brings a wealth of local market intelligence and fund industry expertise that will greatly benefit our clients in Korea as we build closer relationships with them,” said June Wong, Threadneedle’s Vice Chairman, Asia Pacific and Chief Executive Officer, Hong Kong.
Mr Lee has over 20 years of experience in managing and advising on institutional investments as both an internal and external investment manager. Before joining Threadneedle, he has led the global business as head of overseas investment team in the Global Business Division at Samsung Asset Management, Korea, where he was responsible for global asset allocation funds and managing key relationships with Korean institutional investors. In addition he established and led Samsung Asset Management operations in Singapore as Managing Director and CEO. Mr Lee also worked at various investment units of Samsung Life Insurance in Seoul and Samsung Life Investment in the UK.
“Threadneedle’s presence in Korea is essential for our global business strategy and will enable us to capture opportunities in a highly relationship-driven environment. I look forward to working closely with Threadneedle’s Asia team to deliver client-focused solutions to institutional investors in Korea,” said Mr Lee.
Threadneedle Investments has appointed Maya Bhandari as Investment Strategist in its Multi-Asset Allocation team. Maya, who started on 18 August, is based in London and reports to Toby Nangle, Head of Multi-Asset Allocation. Her appointment follows the recent appointment of Craig Nowrie as Client Portfolio Manager to the Multi-Asset Allocation team.
Maya joins Threadneedle from Citigroup, where she was a Director of Global Macro Strategy & Asset Allocation. Prior to that, she was a Director and Head of Emerging Market Analysis at Lombard Street.
Toby Nangle, Head of Multi-Asset Allocation, said: “I am thrilled that Maya has joined the team. She has a strong track record in calling markets and economic developments ahead of the pack and her appointment will strengthen further Threadneedle’s excellence in active asset allocation. Maya’s insights will help us tackle the challenges facing today’s investors and deliver solutions in an area of increasing demand. With approx. 40% of Threadneedle’s assets in some form of asset allocation mandate, we have an established and successful offering in this space.”
Photo : Thomas Bresson . “The Dow Will Trade Significantly Below its Current Level at Some Point Over the Next Five Years”
We compare the rise in the Dow Jones Industrials index from its March 2009 low with increases after six previous bear markets involving a peak-to-trough fall of about 50%. (The Dow declined by 54% between October 2007 and March 2009.) As explained below, the current level of the Dow is slightly above the top of the range spanned by these prior rises.
The six bear market troughs considered in this analysis occurred in November 1903, November 1907, December 1914, August 1921, April 1942 and December 1974. The Dow Industrials fell by between 45% and 52% into these lows. (The 1929-32 bear market was excluded because it involved a much larger decline, of 89%.) In each of the six cases, the trough of the bear market was rebased and shifted forwards in time to align with the March 2009 low. The subsequent rises were then traced out and an average calculated – see chart.
The current rise broadly tracked the “six-recovery average” until late 2011 but has since diverged positively, standing 39% higher as of yesterday’s close. The average remains below the current Dow level through end-2019.
The Dow is 4% above the top of the range spanned by the prior rises. The range top is defined by the “roaring twenties” increase from the August 1921 trough – black line in chart. The equivalent month to August 2014 was March 1927. If the Dow were to replicate its performance then, it would rise to 18,000 at end-2014 and 22,000 at end-2015 en route to a peak of 39,000 in January 2017, corresponding to September 1929.
As noted, the 1929-32 bear market wiped out 89% of the Dow’s peak value, returning it to the equivalent today of 4,000.
The historical analysis, therefore, suggests that the Dow will trade significantly below its current level at some point over the next five years. A further substantial rise first, however, cannot be ruled out.
The “monetarist” perspective here is that bear markets are normally triggered by money supply expansion falling short of the needs of the economy – such a shortfall crimps future activity and is associated with a withdrawal of liquidity from markets. Annual real narrow money growth moved well beneath industrial output expansion from late 1928, signalling a deteriorating liquidity backdrop. The real narrow money / industrial output growth gap remains positive currently, both in the US and globally.
Please note: references to individual companies or stocks should not be construed as a recommendation to buy or sell them. These are the fund manager’s views at the time of writing and may differ from those of other Henderson fund managers.
Foto: "Beldorf - Grünentaler Hochbrücke 08 ies" de Frank Vincentz. La economía de EE.UU. conseguirá crecer por encima de su potencial en 2015
Pioneer Investments has published a forecast update for the US economy, revising growth and inflation upwards. Tapering would be definitely over by October and interest rates should start to rise in 2015. The report is signed by Monica Defend Head of Global Asset Allocation Research, and Annalisa Usardi, Economist, US & LATAM Global Asset Allocation Research. The main highlights of the revised forecast are:
Growth: Pioneer Investments has revised its 2014 growth forecast to 2.0% based on the Bureau of Economic Analysis July 30th data release, which encompasses the advance estimate of 2Q GDP14, together with a revision of the GDP and underlying expenditure components. They also revised upward their growth expectations for 2015, to 2.7%. While 2014 will again be a sub-par growth year for the US, Pioneer Investments expects growth for 2015 to be above par, helping to close the output gap that opened with the “Great Recession”.
Inflation: Pioneer Investments believe the turning point in inflation has been reached and they now see CPI moving above 2% YoY in the coming quarters. The asset manager has revised upward both their forecasts for 2014 (CPI now at 2% YoY) and 2015 (CPI now at 2.3% YoY). Given the revisions in Wages and Unit Labor Costs, it expects CPI inflation to move modestly above the 2% level, but is not expecting dramatic upward pressure to build. Inflation expectations remain well behaved and Personal Consumption Expenditures (PCE) inflation is still below the 2% level.
Federal Reserve: The next scheduled Fed meeting is on September 17. Quantitative easing (QE) is likely to continue to be “tapered” going forward as announced and completely wound down by October 2014. Interest rates could then start to slowly rise during 2015. Pioneer Investments currently assumes that the Fed will start increasing rates during 2015 (fed fund futures currently expect rates to start to rise above 0.25% in the summer of 2015).
Triggers
Stronger-than-expected global growth and trade, resulting in higher demand for U.S. exports, could lift confidence and add to internal demand drivers to lift growth.
Improvements in consumer balance sheets, coupled with stable income growth and anchored inflation expectations, could trigger higher confidence and support more sustained patterns of consumption than we currently envisage.
Improving business sentiment underpinned by accelerating and external sales and coupled with capacity utilization levels higher than we currently estimate could support further acceleration in capital expenditures.
Risks
A significantly stronger dollar might adversely impact the export sector by making U.S.-produced goods and services more expensive in foreign markets.
After the multi-year forced deleveraging, the U.S. consumer might be more reluctant to re-leverage notwithstanding a better balance sheet, and this change in attitude might subtract steam from growth.
A faltering real estate recovery could lead to lower growth prospects.
Renewed geopolitical tensions, involving directly or indirectly the U.S., could be highly disruptive for the flow of oil and for financial markets in general.
Mid-term elections results this fall could disrupt the smooth progress of political activity and represent a risk for business stability and consumer confidence.
. Gabino Tuero, director de desarrollo de negocio de Dagong Europe
Dagong Europe Credit Rating -Dagong Europe- has announced the appointment of Gabino Tuero as Business Development Director, effective from 18 August 2014 based in the Milan office. Mr Tuero will be in charge of all business development activities both in the financial institutions and the corporates sectors of the major Southern European economies Italy, Spain and Portugal. He will also cover Eastern Europe and Corporates in the United Kingdom, reporting directly to Ulrich Bierbaum, the General Manager.
Ulrich Bierbaum, GM said ‘Dagong Europe is expanding our business development department to meet the enquiries and demands of our tailor-made rating services. Gabino’s arrival will certainly reinforce our commitment to the market. With his all-round, cross-industry background in sales, marketing, research and product development from leading financial services providers and his long standing relationships with clients and stakeholders, I am certain that we can foresee progress at a rapid pace shortly. We look forward to working closely with him.’
‘I am delighted to take on this role. I strongly believe in the potential and the unique positioning of Dagong Europe. The combination of Western methodology and the Chinese philosophy intrigues me very much. I am eager to bring my experience to the multicultural environment and am excited to be part of the team that will help to quickly strengthen Dagong Europe’s presence in this area.’ Mr Tuero added.
Mr Tuero, a Spaniard, joins Dagong Europe from Credit Suisse where he was Vice President of the External Asset Manager department since 2012, being the main point of contact with Iberian and LATAM clients from the Luxembourg office. Prior to that, he was Senior Relationship Manager at Nordea Asset Management, covering Iberia and LATAM markets. Before relocating to Luxembourg, he was Business Development Director, Financial institutions at Aviva Investors in Spain, responsible for developing relationships mainly with institutions in the Spanish, Portuguese and Andorran markets. He also spent 8 years in the Marketing department of Fidelity Investments, primarily involved in On-line and Product & Market Research functions, supporting the generation of key sales opportunities. He holds a degree in Marketing Research (ITM) and Business Administration (E-2) from Universidad Pontificia de Comillas (ICADE).
Dagong Europe
Dagong Europe Credit Rating srl (Dagong Europe) was established in March 2012 with headquarters in Milan, Italy. In June 2013, Dagong Europe received authorization and registration by the European Securities Market Authority (‘ESMA’) under the Article 16 of the CRA regulation.
Dagong Europe, a joint venture between Dagong Global Credit Rating (60% ownership) and Mandarin Capital Partners (40% ownership), is led by Mr. Ulrich Bierbaum as General Manager. Mr. Guan Jianzhong, President of Dagong Global, is the Chairman of Dagong Europe’s Board of Directors, while Mr. Lorenzo Stanca, Managing Partner of Mandarin Capital Partners, is the Deputy Chairman.
Dagong Europe provides credit opinions on financial institutions including insurance companies and non-financial corporates, producing autonomously Procedures, Criteria and models that are the foundations of the credit rating process. Dagong Europe is dedicated to bringing the financial markets with an independent, objective, fair, transparent, timely and prospective credit opinion.
An effective value proposition strengthens audience connections and fosters growth, yet many advisors have had little objective guidance in formulating such statements until now, according to a new study released today from Pershing, a BNY Mellon company. What Do Top Advisors Say and What Do Investors Really Think? reveals how an advisor can communicate their value proposition to investors and differentiate themselves from other advisors in the industry.
A unique value proposition answers the critical question “Why should I choose you?”, yet according to the survey 60 percent of investors say that many advisors make similar promises, making it difficult to distinguish between them. The strongest value propositions incorporate these four key elements:
attributes of the advisor;
benefits for the investor;
a rational explanation of how the firm’s attributes benefit the client;
and language that evokes emotion.
“Developing an effective value proposition can have larger implications on an advisor’s overall business than they may realize,” says Kim Dellarocca, managing director at Pershing. “In many instances, the value proposition is the first impression potential clients experience and can be the catalyst for a future relationship. It is also an opportunity for advisors to promote business growth by using language that differentiates themselves and targets their ideal client base by articulating attributes and features that appeal to specific demographics. Of course, the real test is delivering on what you promise.”
Choosing the right language can make a big difference for investors. Pershing’s study found that investors prefer value statements that incorporate “comprehensive” over “holistic” by a ratio of seven to one. Additionally, two topics that investors care about most – conservative investment approaches and trust – are under-represented in most value propositions.
Based on a systematic look at the value propositions used by top advisors, and investor reactions to these and other value propositions, Pershing has identified key takeaways for advisors to consider when creating a value proposition of their own. They are as follows:
Include core promises—but add more. Investors found three themes to be the most compelling among advisors’ value propositions: tailored solutions to meet their needs, advisors working for the investors’ best interest and experienced investment managers. An advisor’s website and marketing materials should include these top promises. Advisors who do not mention these in their value propositions risk being excluded from consideration by potential clients. Successful advisors also need to include something extra to differentiate themselves, such as why investors should choose them over other advisors or unusual client benefits like building a family legacy or understanding personal aspirations.
Don’t oversell simplicity. Many websites promise to simplify investing and relieve clients of the burden of managing wealth, but according to Pershing’s study, most investors accept the need to take an active role in managing their own finances.
Give conservative approaches more prominence. If advisors’ money management approaches place special emphasis on preservation of capital, it should be a highly visible component of their value proposition.
Work hard to establish trust. Trust remains a much bigger concern for investors than the financial industry realizes. Advisors must ensure their value propositions include a message on why investors should trust in them and includes themes like trust, accountability, integrity and fiduciary responsibility.
Tailor the message to the ideal client profile. Different market segments place higher emphasis on different attributes. Advisors should know who their ideal client base is and what is most important to them in an advisor, and make sure their value propositions exhibit those points. For instance, investors under 40 place higher importance on advisors who will provide guidance through life’s major events and relieve the burden of managing finances.
Watch your language. Investors dislike jargon and favor words with emotional connotations- that means how the value proposition is formulated is just as important as the message it is trying to portray. For example, when judging between near-synonyms, investors prefer words with an emotional punch, such as “unwavering” and “passionate” rather than “committed” and “dedicated”.
To learn more about the makings of a winning value proposition, please visit this link.
