Wikimedia CommonsFoto: US Navy. The Swiss Group SYZ & CO Moves into the Latin American Institutional Markets
The Swiss banking group SYZ & CO is moving into the Latin American institutional markets with the registration in Chile of the OYSTER European Opportunities fund. The clientele being targeted is mainly local pension funds, a fast- developing category of investors in the Andean region.
The assets of these pension funds are experiencing strong growth and should reach $800 billion by the end of 2013, of which an estimated $250 billion is potentially earmarked for international investments. The estimated growth for these pension funds exceeds 50% expected by 2016 with contributions running at nearly $2 billion per month. In Chile, for example, the assets in pension funds already amount to $170 billion, or 63% of GDP.
In order for the OYSTER funds to be distributed to pension fund administrators, SYZ & CO has entered into an agreement with HMC, a Chilean specialist in institutional distribution in the Andean markets.
Fast-developing pension funds
Apart from their swift growth, these pension funds also stand out in terms of their great openness to international investments. Chilean funds are, for example, allowed to invest up to 80% of their assets abroad. The total volume of investments that are possible abroad for the whole of Latin America therefore amounts to a potential nearly USD 250 billion, or more than 30% of the total. After having invested locally or in the North American markets, the region’s pension fund institutions are now showing an increased appetite for Europe, which offers some attractive prospects thanks to its lower share valuation levels and the diversification it allows, notably in terms of currencies.
A first OYSTER fund registered in Chile
SYZ & CO’s first fund to be registered in Chile is its flagship European equities fund, OYSTER European Opportunities. A second European corporate bonds fund should follow shortly, in order to satisfy Chilean pension funds’ appetite for fixed-income investments in euros.
A specialized local partner
In order for the OYSTER funds to be distributed to pension fund managers (PFMs), SYZ & CO has joined forces with HMC Partners, a local specialist in institutional distribution in the Andean markets. Established in Santiago (Chile) in 2009, HMC is also present in Colombia and Peru, two markets that are also very promising for institutional management. In Brazil, HMC has linked up with Itajubá, a company that distributes funds to a Sao Paulo-based institutional clientele. The cooperation with SYZ & CO is managed by Ricardo Morales, Managing Partner and co-founder of HMC.
Foto: Poco a poco. Crédit Agricole nombra a Jérôme Perrier director de su brazo financiero institucional en las Américas
Crédit Agricole Corporate and Investment Bank announced the appointment of Jérôme Perrier as Head of its Financial Institutions Group (FIG) for the Americas. At the same time, the bank named Jorge Fries as a Senior Banker for FIG, heading up the Insurance sector for the Americas.
Mr. Perrier was most recently Global Head of Strategy and Chief of Staff in Paris. He will make his headquarters in New York City, reporting to Jean-François Deroche, Senior Regional Officer for the Americas, and globally to Eric Chevre, Global Head of the Financial Institutions Group for Credit Agricole CIB.
Mr. Fries previously had been Managing Director and Co-Head of Special Situations and Current Assets with the Bank’s Securitisation team in New York, where he will continue to be headquartered. He will report to Mr. Perrier.
“Jerome brings important experience to a sector that we at Credit Agricole CIB regard highly to our strategic mission,” said Mr. Deroche. “With Mr. Fries for Insurance companies, and Gina Harth-Cryde and Rodrigo Rivera, our Senior Bankers in charge of the leading Banks and Financial Institutions in the US and in Latin America respectively, we have a very solid team that will enable us to further expand our services and involvement with the broad financial industry across the Americas.”
Mr. Perrier, who has been with the bank since 2007, has previously been in corporate strategy and development positions at Crédit Agricole S.A., Bank of America, PWC Consulting and Societe Generale, in New York, Boston and Paris. He has a BA from Middlesex University in London and a Masters from the Reims Management Business School in Reims, France.
Philippe Peirs has joined La Française to head-up International Real Estate Development. Philippe comes with a wealth of experience in the real estate industry and specifically in fundraising having worked for Société Générale for twenty years. His last position held was Managing Director and Head of Private Equity Fundraising Group. Philippe was instrumental in developing private fundraising advisory services at Société Générale CIB for third party investors that focused on European real estate, infrastructure and renewable energy. Philippe graduated from ESCP and has a Master of Science in Finance from London Business School.
Philippe Peirs is operating out of London. As Head of International Real Estate Development, Philippe will pursue Pan European, Middle Eastern and Asian development opportunities and work hand in hand with La Française partner Forum Partners, a global real estate investment management firm. “La Française is truly going in new directions and innovating in real estate asset management. The group has ambitious international development plans, and my arrival, which coincides with the capital stake taken in Forum Partners, clearly reflects the group’s commitment ,” comments Philippe.
Philippe Lecomte, CEO of La Française AM International and Head of Institutional Development (France and International) said, “Philippe is a valuable addition to our international development team. Having lived in London, the international real estate hub, for the past fifteen years, he has a full grasp of what motivates real estate investors. His extensive network should also contribute solidly to the funding of real estate transactions and future product launches. He’s a perfect match for the job.”
Citi Private Banking appointed Phillip Edwards as Director and Ultra High Net Worth Private Banker and Adam Gillam as VP and Ultra High Net Worth Private Banker to its team in Palm Beach, Florida.
According to the information, published by Reuters, prior to joining Citi, Edwards worked for JP Morgan Private Bank and Genspring Family Offices in Palm Beach Gardens. Gillam joins Citi from Wells Fargo in Palm Beach, where he was most recently a Vice President and Senior Private Banker.
Also in Florida, Raymond James recently recruited a team of advisors operating as Provenance Wealth Advisors (PWA). Headquartered in Fort Lauderdale, the firm is led by owners Eric Zeitlin, Todd Moll, Lee Hediger and Scott Montgomery.
According to Financial Advisor, the advisors at PWA joined Raymond James from Walnut Street Securities Inc., where they managed more than $1 billion in client assets and had annual fees and commissions of more than $5.4 million.
Co-owners Moll, Zeitlin and Hediger founded PWA in 2000 and affiliated with Berkowitz Pollack Brant, a large regional CPA and consulting firm in South Florida. Montgomery joined as a director/owner a few years later.
New research from Cerulli Associates finds that more than 60% of institutions’ asset flows were consultant-intermediated in 2012 with the rest coming from direct sales, according to their recent survey of institutional asset managers.
“Given the significance of investment consultants, just over half of the asset managers we polled plan on placing an even greater emphasis on fostering consultant relationships,” states Michele Giuditta, associate director at Cerulli. “This percentage initially appeared low to us, but our discussions with institutional distribution leaders confirmed that many firms are already devoting substantial resources to these efforts and plan on continuing to do so. This explains the high percentage of firms that plan on dedicating the same level of emphasis on the consultant relations effort in the future.”
In the fourth quarter issue of The Cerulli Edge – Institutional Edition, Cerulli analyzes distribution trends, including the changing consultant landscape and growth of outsourced chief investment officers, retirement distribution dynamics, and passive investing.
“Capital markets have become increasingly more complex, and the investment opportunity set has broadened to include more complicated investment products and vehicles,” Giuditta continues. “Given institutions’ growing needs, they seek more support and advice for their portfolios, which has led to an increase in the use of investment consultants.”
Cerulli reports that many investment committees are redefining their roles, delegating more of the day-to-day investment-related responsibilities to their gatekeepers, and focusing more on overall policy matters.
“Consultant relations professionals shoulder significant responsibility as investment consultants request more from their asset managers,” Giuditta explains.
Photo: Umbdet. How to Manage your Finances during the University Years
These days, providing children with the best education possible may come with a hefty price tag but there are some simple lessons parents should teach their budding scholars before they start their university life. Not always do children get financial education in schools until it is mandated by the school systems, which is why they must be trained by their parents or learn about finance in the school of hard knocks which is an unforgiving teacher.
Students need to be aware of their financial responsibilities and more importantly, the adverse consequences poor financial habits can create. Therefore, taking the time to discuss financial matters can help students to initiate sound budgeting measures and prevent them from becoming overcome by debt which will stalk them long after graduation. Financial management skills are extremely valuable later in life and are necessary in order to have a good enjoyable life. Moreover, parents must teach their children how to defer the instant gratification that comes with consumption in order to save enough money to reach their long term financial goals.
Whether entering college or getting ready to graduate, it is key that parents and students keep some essential actions in mind when managing their budget:
Becoming a frugal freshman
Put limits on spending: Make sure students know what they need to survive and determine how much they are allowed to spend on every expense category. Building a budget that works will make it easier to keep spending at a sustainable level, avoiding the need for excessive borrowing.
Major in debt management
Manage debt during and after university: Students really need to understand what debt means for them and set out a plan to pay off their student loans, and any other debt. It is important to consolidate loans in a way that ensures you are paying the lowest interest rate possible. If managed incorrectly, loans can easily become an anchor weighing on future saving and investments. Moreover, accepting a credit card that comes with your new student account can also be a massive mistake; credit cards are not a good idea unless you can pay them off each month before the high interest rates kicks in. Remember that your credit limit is not a target you have to reach, but rather something you need to manage carefully.
Graduating from the University of Mom & Dad
Prepare for life outside of the family financial comfort zone: Mom and Dad have spent years providing comfort, security and financing to their children, often at the expense of their own financial needs. Now that your offspring have completed their education, it is time for them to move out of the family nest, and parents should establish some timelines that will help transition their children towards financial independence. This is an important step not only for young adults but for their parents also. Parents can use this opportunity to reassess their own financial situation and perhaps they can now afford to save more towards retirement or make higher payments on their mortgage.
As students become more financially independent, they should start building on their financial stability and trust their financial behavior. Only recognizing their own behavior, they will be able to best identify a financial advisor they can trust to manage their investments in the future.
The school years may be the best years in life but they can leave students with a burden of debt that persists long after their studies. The lessons above should be taken into account to best learn how to manage your finances during the university years and prepare for the years ahead.
Opinion column by Robert Stammers, CFA, director of Investor Education for CFA Institute
Wikimedia CommonsPhoto: Katrina.Tuliao. Horizons ETFs Group Will Launch First Andean ETF in Colombia
S&P Dow Jones Indiceshas licensedthe S&P MILA 40 Index to Horizons ETFs Group to serve as the basis for an exchange traded fund. The ETF will be listed on the Bolsa de Valores de Colombia (BVC) and will be the first Andean equity focused ETF available in Colombia.
The S&P MILA 40 Index, launched in 2011, was the first in a series of indices for Latin America’s second-largest market. The Index gauges the returns of the largest and most liquid stocks trading on the Mercado Integrado Latinoamericano (MILA) platform, an integrated trading venture formed by the Chile, Colombia and Peru stock exchanges.
Alka Banerjee, Managing Director of Global Equity Indices at S&P Dow Jones Indices, said: “We are pleased to license the S&P MILA 40 Index to Horizons ETFs. As growth and development of the Andean equity markets continue, the S&P MILA 40 Index provides a transparent and relevant benchmark for this important region of the world.”
Howard Atkinson, Managing Director of Horizons ETFs Management (LATAM) LLC and Global Head of Sales and Marketing for the Horizons ETFs Group said: “We’re very pleased to expand our global partnership with S&P Dow Jones Indices. This is the second international market we’ve entered where the first ETF we launched has replicated an S&P index. The S&P MILA 40 Index offers a way for investors to follow the tremendous growth potential of the MILA region.”
By Dolmang. Hangang Railway Bridge, Seoul, Korea. Environmental Awareness in Asia
I traveled to China in September, quite possibly one of the best times of the year to visit in terms of weather. The air quality in both Beijing and Shanghai was actually pleasant and was very different from how it seemed during my previous visits as well as from the typical accounts one usually hears of the notorious smog in China’s major cities. It made me think about growing up during the industrialization of my home country, South Korea.
In the 1980s, I lived in an industrialized city close to Seoul. The city then was filled with factories and its harbor was dirty. In school, we had to boil the tap water before we could drink it. Sometimes, during outdoor activity, students would walk around to pick garbage in neighborhood clean-up efforts. The fast economic development and rapidly growing population of Seoul in the late 1980s also polluted the Han River—hardly the place for family picnics. Fast forward a couple of decades, however, and now it is much cleaner and frequently enjoyed as a good spot for leisure and sports.
While Korea can still do more to improve its environment, the country has done much to correct the adverse impacts of its earlier industrialization. Since systematic waste water collection and treatment systems were installed in the Han River, Korea has invested approximately 1.5% to 1.8% of its GDP each year in pollution abatement. Though overall spending in this area decreased just after the 1997 Asian Financial Crisis, it has continued to grow each year since then amid more stringent environmental rules.
Spending for environmental control in Korea is well balanced between the public and business sectors. Corporations do their share to help protect the environment and public awareness is high. In fact, many Seoul citizens seem to have the correct mindset, placing greater importance on their own actions and habits for environmental protection than relying on just infrastructure investment spending.
As a much bigger country, China’s efforts to restore its environmental health could take much longer. One of its biggest challenges may be to encourage local governments to balance economic growth with environmental health. There are many statistics to measure the costs of China’s environmental pollution to its economy. By some estimates, it could possibly cost tens of billions of dollars to install the basic infrastructure to combat China’s pollution.
But judging from Korea’s experience, environmental improvements for China should be about more than just infrastructure investment. Environmental infrastructure requires every citizen’s efforts as well as the long-term commitment of both the government and private sector. Exactly how the value of environmental improvements are measured in monetary terms concerns entrepreneurs as they develop business models accordingly. However, no doubt such improvements should benefit us in countless ways and provide for many positive opportunities going forward.
In-Bok Song, Senior Research Analyst at Matthews Asia
The views and information discussed represent opinion and an assessment of market conditions at a specific point in time that are subject to change. It should not be relied upon as a recommendation to buy and sell particular securities or markets in general. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Matthews International Capital Management, LLC does not accept any liability for losses either direct or consequential caused by the use of this information. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. In addition, single-country funds may be subject to a higher degree of market risk than diversified funds because of concentration in a specific geographic location. Investing in small- and mid-size companies is more risky than investing in large companies, as they may be more volatile and less liquid than large companies. This document has not been reviewed or approved by any regulatory body.
Wikimedia CommonsEd Cowart, CFA, Manafing Director at Eagle AM. VARG Better than GARP as an Investment Philosophy which Focuses More on Value Than on Growth
As part of Nordea’s strategy of signing exclusive agreements with boutique asset management companies specializing in asset classes that are outside its normal range, the Nordic management company agreed to launch a UCITS US AllCap Equity strategy in 2012, sub-advised by US’ Eagle Asset Management.
At the event held in Miami by Citywire, Funds Society had the opportunity to talk with Ed Cowart, CFA, portfolio co-manager of this US AllCap Equity strategy, as well as of the strategies Large Cap Value and Equity Income which are also managed by the company, although these last two are only available to the U.S. domestic investor.
“Our investment strategy follows the VARG (Value and Reasonable Growth) philosophy which comes before the traditional GARP (Growth at a Reasonable Price) model, because valuation is paramount,” says Cowart. The main idea behind the VARG investment philosophy is that it protects against paying too much for a company, while the reasonable growth vector provides protection from falling into value traps and unlocks the shares’ future valuation.
Thus, the strategy, which maintains between 30 and 50 stocks in its portfolio, brings together the best ideas of each of the four co-portfolio managers who make up this team and who have worked together for many years. “Whenever we see an idea in which we have a greater conviction, we will make room for it, ensuring at all times that we have our favorite stocks in the portfolio.”
This team of four co-managers has over 100 years of combined investment experience in a variety of market environments, with an excellent track record in terms of the capture ratio in both bull and bear markets.
Cowart, who is also Managing Director of Eagle Asset Management, explains that the team usually talks for months or even years before making the final decision to invest in a company where it is always fundamental to combine the two essential themes of the strategy : fundamentals + valuation. “Great companies can be terrible investments if the price is not adequate” he says.
When holdings are added to the portfolio, it is with the view of maintaining them for 2-3 years, so that on average, portfolio managers are adding a new name each month, usually to replace another one in the portfolio. “The catalyst which helps us decide to enter into a company which we like and which is cheap, varies. For example now, with the shale gas revolution in the U.S., the triggers required for manufacturing companies, not necessarily related to exploration, to be added to our portfolio are all in place. “
Eagle Asset Management’s US AllCap Equity strategy was launched in its U.S. domestic version in the last quarter of 1999, but it was not until June 2012, with its launch on Nordea’s SICAV, that it achieved greater successes, growing from an initial seed capital of $2 million at its launch to the $1.2 billion under management today.
“Together, in these three strategies we manage about $4 billion, and we find no problem seeing the AllCap strategy grow beyond $10 billion because our portfolio is more mid-cap than small-cap,” says Cowart.
Many investors have expressed concerns over the quality and general integrity of financial reports filed by Asian companies. Often cited as a reason to be less trusting are less stringent regulatory laws that have created a historical culture of accepting transgressions in corporate governance. Complicating matters are the size and maturity of capital markets in the region, particularly when compared to more advanced economies. Also, there are challenges faced by minority shareholders from company executives unaccustomed to outside interests in the management of their company. All of these are real concerns for investors in the region, and in many cases, can only be addressed through experience in different countries, industries and cultures—and even the variety of families that run each business.
As fundamental investors, being able to understand the myriad of complex accounting practices used in Asia, and ultimately being comfortable with them in order to make investment decisions, is critical for firms like ours. In what will be a series of commentaries, we will aim to dissect in more detail the often esoteric approach taken by many Asian companies to financial reporting and the communications around earnings management. This first issue will focus on “the numbers” and begin by looking at how we evaluate the quality of financial reporting. It will also explain what the role of forensic accounting—the process of taking a deeper look into a company’s accounting practices—plays within our firm.
At Matthews, the consistency with which a management team applies sensible and responsible accounting rules during both good times and bad is something we constantly evaluate and this presents a useful starting point for our discussion. Areas we pay specific attention to include determining whether the accounting policies a company elects to use increases management’s influence in setting executive compensation. For example, a company that incentivizes management with 10% growth in earnings per share (EPS), might see a consistent 10% improvement in its EPS year after year. In this instance, less volatile patterns of EPS are suspicious and we would tend to take a closer look into this area of their books.
We also pay attention to free cash flow generated by a company. While free cash flow is a fairly simple concept (cash flow from operations less capital expenditures), we tend to focus on those instances in which a company boosts cash flow from operations. For example, securitizing account receivables gives an exaggerated picture of the sustainable cash flow generated.
Related party transactions are another key area of concern. We tend to closely monitor these disclosures and try to understand the economic rationale behind these transactions. Corporate balance sheets are another factor to consider. For instance, there are many times when investors focus solely on the income statement. However, management might bypass the income statement altogether, and this may pose another red flag if the firm has unrecognized losses on its balance sheet without a credible economic explanation.
Opinion column by Sudarshan Murthy, CFA; Research Analyst at Matthews Asia
The views and information discussed represent opinion and an assessment of market conditions at a specific point in time that are subject to change. It should not be relied upon as a recommendation to buy and sell particular securities or markets in general. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Matthews International Capital Management, LLC does not accept any liability for losses either direct or consequential caused by the use of this information. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. In addition, single-country funds may be subject to a higher degree of market risk than diversified funds because of concentration in a specific geographic location. Investing in small- and mid-size companies is more risky than investing in large companies, as they may be more volatile and less liquid than large companies. This document has not been reviewed or approved by any regulatory body.
