We have a deal

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US Senate leaders reached a last-minute deal on reopening the government and suspending the debt ceiling. As the debt limit is only extended by a few months, the relief will only be temporary. It is nevertheless a reason for us to increase our risk-on stance by upgrading equities, real estate and credits.

The improvement in economic fundamentals and the ongoing support from monetary policy are the main reasons why we held on to our growth oriented, moderate risk-on stance in the past weeks. Now that the deal is reached, we have increased our risk positions somewhat.

Markets have priced in a more dovish Fed outlook 

Debt ceiling deal is a temporary relief
One day before the ‘infamous’ deadline of October 17, The US Senate and House of Representatives finally managed to pass a deal to get the government back to work and suspend the debt limit, albeit for a short time. The deal opens government again until January 15 and suspends the debt ceiling until February 7, 2014. It also requires negotiations to reduce the budget deficit to be completed by December 13. The automatic, across-the-board spending cuts (also known as sequestration) that began in March, were not lifted. The next round of cuts is due to take effect in January when the temporary spending measures end. Their removal is expected to be a key part of the budget negotiations.

Given the short window for successful budget negotiations the current deal has delivered, this chapter in American politics is not over yet. We may yet return to similar brinksmanship later this year or early next year.

Economic and corporate fundamentals give support
However, economic and corporate fundamentals continue to improve, while tapering seems to be postponed until 2014. The nomination of Yellen as the next Fed chair gives us every reason to believe in a ‘lower for longer’ monetary policy. European data surprise to the upside and also the Japanese recovery gains further traction. Emerging markets got some more room to breathe from the delay in tapering.

We have increased our risk-on positioning
The improvement in economic fundamentals and the ongoing support from monetary policy are also the main reasons why we held on to our growth oriented, moderate risk-on stance in the past weeks. Now that the deal is reached in the US, we have increased our risk positions somewhat. We upgraded our neutral positions in real estate equities and credits from neutral to overweight, while we moved equities from a small to a medium overweight position. Meanwhile we have moved government bonds from neutral back to a small underweight position.

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Robert B. Zoellick to serve Goldman Sachs as Chairman of International Advisors

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Goldman Sachs announced that Robert B. Zoellick, former president of the World Bank Group, will serve as chairman of Goldman Sachs’ international advisors. In this role, Mr. Zoellick will advise the firm on global strategic issues and oversee the work of the firms 16 international advisors.  He will be based in Washington, DC.



“Bob Zoellick has extraordinary knowledge of the global economy and has devoted himself to helping emerging economies realize more of their potential,” said Lloyd C. Blankfein, Chairman and CEO of Goldman Sachs.  “His experience and judgment will be important to our clients and to our focus on helping them identify growth opportunities around the world.”



”Goldman Sachs is a premier firm, with superb people, and global reach,” said Mr. Zoellick. “I look forward to working with senior management and teams across the firm to help serve clients in a rapidly changing and challenging global context.”



For the past year, Mr. Zoellick has been the distinguished visiting fellow at the Peterson Institute for International Economics and senior fellow at the Belfer Center for Science and International Affairs at Harvard University.



Timing, Timing, Timing, the New Mantra for Real Estate Investors

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Timing, Timing, Timing, the New Mantra for Real Estate Investors
Photo: Daniel Mayer. Atlanta y Miami ofrecen oportunidades inmobiliarias que escasean en los mercados primarios de EEUU

Selected secondary markets such as Atlanta and Miami appear to have more potential for private real estate investors than primary markets such as New York, Washington and Boston, which have been the top performers in recent years, according to a study from Siguler Guff & Company, a BNY Mellon investment boutique.

The report, “Why Commercial Real Estate Investors Should Think Timing, Timing, Timing“, was written by James Corl, Managing Director of Siguler Guff.

Real estate values traditionally have been affected by location.  While that continues to be the case, Siguler Guff notes the cyclical nature of real estate markets could create arbitrage opportunities between the valuation of a property at the bottom of the market cycle and value of that property at the top of that same cycle.  

“While most investors seek increasingly expensive core assets in a handful of locations, they often overlook the opportunities offered by underpriced properties in recovering markets elsewhere,” said Corl. 

Investors have been driven by fear, looking to buy properties in liquid markets that have done well such as New York, Washington and Boston, the report said.  However, investors are realizing they need to look elsewhere as prices rise and inventory shrinks in these markets.

For example, Siguler Guff points to buildings in Atlanta that trade at a nine percent yield versus typical New York buildings trading at a yield of approximately four percent. 

“In a year or two, investors are likely to consider places such as Atlanta, where we have bought properties that are being leased up,” said Corl.  “Warehouses in the U.S. southeast are another area that appears attractive now.”

According to Siguler Guff, many investors are avoiding the risks of the past, such as liquidity risk and leasing risk, and are not focused on current risk of valuation.  Corl said, “Looking at liquidity and leasing risks makes sense if you look backward at the 2009 pricing shock, but it doesn’t protect from the risk of paying too much.”

Another area of opportunity cited by Siguler Guff is smaller properties, which the private equity manager said are more likely to be priced inefficiently as they are not as heavily analyzed as larger properties.

National Crowdfunding Association Welcomes SEC’s Proposed Investment Crowdfunding Rules

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National Crowdfunding Association Welcomes SEC's Proposed Investment Crowdfunding Rules
Photo: Sailko. La SEC sienta las bases para un mercado de inversión de crowdfunding

The National Crowdfunding Association (NLCFA), welcomes the unanimous vote by The Securities and Exchange Commission to issue proposed rules for Investment Crowdfunding under Title III of the JOBS Act.  As Commissioner Daniel M. Gallagher stated, “In Title III of the JOBS Act, Congress recognized the potential of the Internet to facilitate capital formation for very small companies at a critical stage of their growth.”  The NLCFA agrees with Commissioner Gallagher when he goes on to say he is “glad that the President and Congress have forced the Commission to focus on small businesses, as they are the engine of growth for our economy.”

“We are pleased that the SEC has given the industry a framework from which to build on,” said Howard Landers, Director of Regulatory Affairs for the NLCFA and Co-CEO of eBarnRaiser, LLC a funding portal developer. “The industry will now study the proposed rules and engage with the regulators to ensure that investment crowdfunding in the United States is efficient, effective, and aids in capital creation while taking investor protection into account.”  Mr. Landers added, “The NLCFA looks forward to working with all regulatory bodies; the SEC, FINRA, and members of the North American Securities Administrators Association (NASAA) to help create the investment crowdfunding marketplace, and to give the industry participants a voice through the NLCFA.”     

The NLCFA will be reviewing the 585 pages of proposed rules along with the 295 questions in the release, and issue a comprehensive response to the SEC, thus providing a voice for the small business entrepreneurs and those investors who look forward to supporting them.

“That wind you felt today was the industry finally exhaling,” said David Marlett, Executive Director of the NLCFA.  “It has been long anticipated.”  He added, “We have a top notch regulatory team that crafted one of the definitive white papers during the first round of comments last year.  I am looking forward to their analysis of these proposed rules.”

Active Safety – the Next Car Industry Revolution

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Seguridad activa: la próxima revolución de la industria automovilística
Photo: IntelFreePress . Active Safety – the Next Car Industry Revolution

It used to be the case that investors turned to automobile manufacturers as a secure, long-term option for growth. But those days have passed. The world might still run on cars, but in terms of being a sector in which to invest, it requires selectivity. In Europe, weak consumer spending and saturation of the market has sapped demand for such big-ticket items. This has left the car industry in Europe in a category we term as ‘euro grunge’ – the value end of the market.

However, times are changing once again. Following years of economic uncertainty and industry restructuring, strong Chinese sales and pent-up demand for replacement cars in the US has provided some reasons for optimism. But the automotive industry remains at a crossroads. Its future is bound closely to the growth of technology, with consumers increasingly focused on fuel efficiency (in response to stricter governmental regulations on emissions), hybrid and electric vehicles, and safety. Those firms that can meet those needs are those that will be able to sell more vehicles and raise their market share.

The safety trend is one that looks particularly interesting. Passive safety is something we all know about, such as that provided by airbags and seatbelts. But active safety, technology that helps to prevent accidents from happening, is seeing more and more growth. Active safety started out with technologies such as anti-lock braking systems (ABS) and Electronic Stabilisation Programs (ESP), but has now extended to driver assistance systems that can prevent the driver from moving into the wrong lane on a motorway, alert the driver to pedestrians, assist with parking, or even apply the brakes early to avoid an accident.

Technology is unpredictable, but the line between driver assistance and automatic driving will continue to blur the further we go. Germany-based automotive industry supplier Continental believes that vehicles will be driven motorway distances on a fully automated basis by 2025 utilising vehicle-to-vehicle communication, while car manufacturer Renault believes that this could be a reality by 2020.

A lot of the growth we see in safety is being driven by regulation. Safety assistance is one of four areas in which the European New Car Assessment Programme (NCAP) regulations judge cars. NCAP rewards and recognises car manufacturers that develop new safety technologies, from blind spot monitoring to systems that detect drowsiness. From a regulatory perspective, from 2014 it will not be possible for cars to receive a 5* rating without an active safety component. This creates an element of embedded structural growth that should help to partly offset the cyclical nature of the broader automobiles sector.

We remain very cautious about the prospects for big car manufacturers, away from the premium brand market (where we continue to favour BMW). Firms that specialise in developing technology and components seem well positioned to meet the demand for active safety technology and therefore offer great investment opportunity. Continental, French vehicle components provider Valeo or Swedish-American automotive safety systems producer Autoliv are amongst the names that we like at present. A key benefit of these component suppliers is that not only are they at the forefront of these heavily-demanded technologies but in having partnerships with several automakers around the world, their revenues are spread across numerous car brands and geographies, helping to spread risk.

Opinion column by John Bennet, Portfolio Manager at Henderson Global Investors

Elyssa Kupferberg joins Barclays Wealth & IM in Palm Beach

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Barclays announced the appointment of Elyssa Kupferberg as a Director and Investment Representative in the Wealth and Investment Management Division. Based in Palm Beach, Florida, Ms. Kupferberg will be responsible for implementing the organization’s global wealth management programs and sophisticated investment alternative strategies to high net worth individuals, foundations, corporations and not-for-profit organizations.

Ms. Kupferberg reports to John Cregan, Regional Manager for Palm Beach.

“We are thrilled to have such a talented and experienced individual join our team,” said Mr. Cregan. “Elyssa is well-known and enormously well-respected throughout the state of Florida and we’re especially excited about her deep roots in the Boca Raton community. Her hiring underscores our goal of serving the complex needs of high net worth clients throughout the region as well as our commitment to attracting the very best wealth and investment management professionals.”

Ms. Kupferberg joins Barclays after having spent 14 years at BNY Mellon, most recently as the Senior Sales Director and Senior Vice President. Prior to joining BNY Mellon in 1999, Ms. Kupferberg was with Chase Manhattan Private Bank for 13 years.

Ms. Kupferberg is a professional advisory committee member of Boca Regional Hospital Foundation, Anti-Defamation League, and Jewish Adoption and Foster Care Options. She serves as a board member of Florence Fuller, Jewish Association for Residential Care, American Jewish Committee, Israel Cancer Association, Greater Boca Raton Estate Planning Council, and the Federation of South Palm Beach County where she is also vice chair of the Foundation.

OPIC Launches New Global Call for Emerging Market Private Equity Managers

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The Overseas Private Investment Corporation (OPIC), a US Government’s development finance institution, launched a call for proposals to support qualified private equity investment funds in emerging markets worldwide. OPIC will consider providing between $35 million and $150 million in capital to each of one or more selected funds, which will represent generally no more than 33 percent of a fund’s total capitalization. The balance of each selected fund’s capital will be raised from private investors, international finance institutions and other interested parties.

This Global Engagement Call is inviting proposals from private equity fund managers seeking OPIC financing for funds that plan to invest in emerging market countries that are eligible for OPIC support. Fund managers investing in infrastructure and infrastructure-related sectors within sub-Saharan Africa, including energy and energy-related services, will receive additional consideration. Deadline for the submission of proposals is December 2, 2013.

“The Global Engagement Call is one of the tools OPIC uses to support sustainable economic development in less developed countries,” said OPIC President and CEO Elizabeth Littlefield. “The focus on infrastructure and energy is an important component of OPIC’s support for President Obama’s Power Africa initiative, aimed at doubling access to power on the continent.”

OPIC has engaged TorreyCove Capital Partners, an alternative investment advisor, to assist in evaluating proposals received in response to call.

Peru’s External and Fiscal Balance Sheets Underpinn Upgrade to BBB+

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Fitch Ratings has upgraded Peru‘s long-term foreign Issuer Default Ratings (IDR) to BBB+ from BBB. According to Fitch Ratings, Peru’s upgrade is underpinned by the strength of the sovereign’s external and fiscal balance sheets, continued growth outperformance in relation to BBB peers and a long track record of macroeconomic and financial stability. The rating agency also highlights Peru’s established track record of “policy coherence and credibility” and its “strong shock absorption capacity”. Finally, it adds that “continued pragmatism under the Humala administration and a steady progress on reforms suggests that the risk of a marked departure of economic policies has reduced”.

Fitch’s new rating for Peru, following an upgrade from Standard & Poor’s to BBB+ in August, places the Andean country above Mexico and Brazil and only below Chile in the region. Moody’s rates the country Baa2 with a positive outlook.

Macroeconomic vulnerabilities posed by strong credit growth and an elevated current account deficit (forecasted to reach 5% of GDP) appear manageable

The long-term local currency IDR to A- from BBB+. The Rating Outlook is Stable. Fitch has also upgraded the country ceiling to A- from BBB+ and affirmed the short-term foreign currency IDR at ‘F2’.

Despite the slowdown to an estimated 5.4% in 2013, Peru’s economic growth performance will be one of the strongest in the BBB category during 2013-2015. Growth prospects appear favorable in the coming years due to strong mining investment flows and the expected doubling of copper production by 2016.

Government debt remains low relative to rating peers and is expected to decline to 18.9% of GDP in 2013, likely approaching 15% over the forecast period. While foreign currency debt stands at 49%, which is above similarly rated peers, the strengthened net FX position of the central government partly mitigates this vulnerability.

Peru’s international reserves (33% of GDP) mitigate risks related to high commodity dependence, the large participation of non-residents in the domestic debt market and financial dollarization. The central bank has also been gradually increasing the flexibility of the PEN.

Macroeconomic vulnerabilities posed by strong credit growth and an elevated current account deficit (forecasted to reach 5% of GDP) appear manageable. After rapid loan expansion in 2011 and 2012, authorities took measures to bring credit growth under control and improve its composition, thus reducing potential risks to financial stability. Strong FDI flows, relatively manageable external financing requirements (at around 20% of international reserves in 2013-2014) and Peru‘s position as the second strongest net sovereign external creditor in the BBB category should allow the country, accoriding to Fitch Ratings,  to navigate through temporary higher current account deficits.

Europe, On the Road to Recovery

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Europa, en la senda de la recuperación
Photo: Rock Cohen- rockcohen. Europe, On the Road to Recovery

The potential breakup of the European Union and the demise of the Euro now seem to be a threat of the past. Just twelve months ago, the old continent seemed to be in a freefall situation. Four peripheral countries were virtually intervened, and there were considerable doubts concerning Spain and Italy. The European Central Bank’s intervention, cutting interest rates, coupled with a large injection of public money, has managed to stop the bleeding.

Institutional players have been starting to invest in Europe waiting for a slow but sustainable recovery

During the past 24 months, financial markets focused in the U.S. stock market, taking advantage of the sharp rise in fixed- income prices. The latter has already concluded, and unless a disaster occurs, the future will bring higher interest rates. However, European stock markets as well as many Asian ones, lag far behind their American counterparts.

Investors typically buy based on expectations of change and on future valuations. Currently, and for the last few weeks, institutional players have been starting to invest in Europe waiting for a slow but sustainable recovery, which would help to reduce the valuation difference with other markets. The important thing is to find good managers who invest in companies which are fundamentally sound and which can also benefit from a very hard hit domestic market.

At this stage we see three different types of opportunities in Europe. The first is the market for assets in liquidation. These can be high-quality companies which are facing a lack of liquidity due to the lending restrictions practiced by the majority of the continent’s financial institutions. They would be companies with solid bases, but which are currently in need of support in order to progress. Normally, these companies are not listed on the stock exchange, and in many cases either still belong to family groups, or are non-strategic assets of some of the multinationals. The best way to find these investment options is through venture capital funds (“private equity”), with local presence and access to groups needing support.

The second area where we see opportunities is in those countries that have had sharp declines in their real estate prices. In some cases, we are seeing their valuations bottoming out, while in others there may still be some further drops. The regulators’ new capital requirements are causing many financial institutions to package those assets on which their loans are not being paid or which they have received as guarantees, and are selling them in bulk to large funds. This move has been seen in recent weeks in Spain, Portugal and Ireland. Other operations are the purchase of corporate buildings with tenants (in many cases the vendors themselves sell it with a long-term lease and even with a repurchase agreement in time). This helps them to obtain the liquidity they need by removing an asset which may be substantial from their balance sheet, while being able to continue to occupy it. What is important in these cases is that the tenant is reliable, as the last thing we want is to be stuck with an unproductive asset. We are now seeing several cases of international HNWIs entering directly into this type of investment.

Finally, we are currently seeing an inflow of direct capital into the European stock markets, which in some cases have seen their indexes increase by more than 20% from their June lows. Despite these large increases, they still remain cheap, historically, in relation to other markets, as well as in relation to their price / earnings ratios. There are two ways to invest in this area, the easiest, fastest and cheapest is through a passive vehicle like ETFs; however, there is also an opportunity through active managers who can add value by taking advantage of specific growth opportunities of some sectors or of specific companies.

It seems, or I would like to think, that we have already seen the worst of the financial crisis, and that the old continent is beginning to enter into the growth path, and to be once again targeted by investors.

Opinion column by Santiago Ulloa, founder and managing partner at WE Family Offices.

Goldman Sachs AM Grows its Liquidity Management Businesses

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Goldman Sachs AM Grows its Liquidity Management Businesses
Foto: Yeowatzup. Goldman Sachs Asset Management adquiere los fondos monetarios de RBS

Goldman Sachs Asset Management (GSAM) announced that it will acquire the Global Treasury Funds, which are a range of money market funds managed by RBS Asset Management.

GSAM has a long history of partnering with institutions to deliver liquidity solutions and over 30 years of experience managing money market funds using a conservative approach. This transaction complements GSAM’s strong fixed income and liquidity management businesses in Europe and globally.

“GSAM’s acquisition of these money market funds emphasizes our strong and continued commitment to providing liquidity solutions on a global scale,” said Timothy J. O’Neill and Eric S. Lane, co-heads of the Investment Management Division at Goldman Sachs.

“GSAM is a global leader in liquidity management with $195 billion in money market fund assets under management, 33% of which is in Europe,” said Kathleen Hughes, GSAM’s Global Head of Liquidity Sales and European Head of Institutional Sales. “This acquisition has the potential to nearly double the size of our Sterling-denominated offering and strengthen GSAM’s position in the European market, ensuring we are well positioned to deliver the scale and service that our clients have come to expect.”

Commenting on the transaction, Scott McMunn, CEO, RBSAM said: “From RBS’s perspective, this transaction represents another stage in our strategic plan to focus on our core customer franchises. We are confident that this represents the best deal for our clients.”

Both RBS and GSAM have said they are fully committed to continuing excellent service for RBS money market fund clients and will work in partnership to ensure a seamless transition. There will be no changes in how accounts will be managed during the transition period and no expenses will be borne by any of the funds or investors.

The transaction is expected to close in the first quarter of 2014, subject to approval by the Central Bank of Ireland and the Irish Stock Exchange (the Global Treasury Funds are Irish domiciled funds), as well as a fund investor vote.