Wikimedia CommonsYves Bonzon, CIO de Pictet. Los hedge funds, ¿siguen siendo convenientes?
Hedge Funds have performed poorly for the last three years compared to treasuries and corporate bonds, therefore people are questioning their relevance in portfolios. “We believe there’s a place in each portfolio for this kind of investment as long as it is allocated in the relevant asset class and, most importantly, when the mangers are carefully selected fort their skills and capacity to deliver performance”, says Pictet CIO, Yves Bonzon, in this video.
Investment banking faces a leaner, humbler future, says Jonathan Rosenthal, in a Special Report about International Investment Banking published by The Economist, though a select few banks will emerge from the financial crisis even larger and more powerful.
The report posts that revenues in investment banking have shrank from US$350 billion in 2009 to US$250 billion last year, a massive drop that has more to it than the typical cyclical factors.
According to Rosenthal, new regulation, such as Basel III and derivatives regulation is to blame. Investment banking is becoming a less profitable business forcing several players to quit the market. The problem is that big banks post big systemic risks, and regulators would not approve mega mergers in the sector. In the recorded interview Rosenthal explains how European banks are facing stricter capital requirements and as they cannot sell their investment banking business to other players, they are simply being forced out of the business, as has happened with UBS that has decided to scale down dramatically its investment banking operations to concentrate in private banking and wealth management.
The Economist notes how, in 2008 just after the financial crisis exploded, European Banks thought that it was their opportunity to catch up with their American counterparts. For example, Barclays took advantage of Lehman Brothers failure buying its investment bank activities, but in the end, American regulators invested massively in the recapitalization of their banking system whereas European banks are still coping with this issue. As a result, The Economist points out that without any doubt, “Wall Street is Back”.
This special report will be published in The Economist magazine on May 11th, 2013.
They lived among the dinosaurs. They live among us now. They’re the hardiest insects on the planet, able to survive up to 45 minutes without air and a month without food.Cockroaches. Cucarachas. Most people find them disgusting. Serious investors should find them enlightening.
After all, these hard-boiled insects didn’t endure hundreds of millions of years of volcanoes, shifting tectonics, meteoric explosions, Ice Ages and, for the past couple millennia, relentless attack from the human race without doing something right.
So here are the lessons they can teach even the savviest corporate acquirers and private equity investors:
1. Don’t die. As most anyone knows, killing a cockroach—if you can catch one before it scurries away—is difficult. Stomp on it, squish it however you can, and when you’re done, most of them will still be squirming. One source says they can live for up to 30 minutes without their heads. That’s one tough insect.
For investors, the lesson is to never acquire a business that will kill your chances of survival if the deal sours. While this may seem common sense, the record of successful mergers and acquisitions isn’t all that great, especially among mid-market companies with between $20 million and $100 million in revenue. Research shows the M&A success is about the same as a coin toss—about 50 percent.[1]
While large corporations have the resources to absorb the consequences of a bad deal, mid-market companies typically don’t. So mid-market transactions, where many corporate acquirers and private equity funds play, need to be wary and hedge against failure.
One way to do so is to never pay all cash. Structure acquisitions so they’re made in incremental steps over time via buyout rights, installments or “earn-outs” that use current cash flows to pay the sellers. This strategy provides room to maneuver (or scurry) should your due diligence not have uncovered some lethal rot in the company you’ve acquired.
2. Stay in the dark. Cockroaches hate light. Investors should, too. Unfortunately, many acquirers draw attention to their deals unnecessarily either through exercising their bragging rights, getting tied up in an auction or targeting companies that are already in the limelight, for better or worse.
The safest approach, like the cockroach, is to stay in the dark, “under the radar” as they say. This way, negotiations can continue unfettered before unmanageable political, regulatory, labor, tax or other issues arise that can slow or even stop a deal in its tracks. Part of any due diligence should be to measure a company’s relative “radioactivity” regarding any of these matters. Staying dark also minimizes the risk of competitive bidders coming forward, which can lead to an auction.
Auctions can be especially troublesome for two reasons. One is that the business press likes nothing better than reporting conflicts, and most auctions pit different suitors against each other. The other is that the purpose of auctions is to get sellers the highest prices possible, which means investors are encouraged to pay the most – sometimes more than the business is worth. Then, on top of that, the deal is already in the public eye and subject to increased scrutiny—a double whammy.
3. Eat whenever you can. Cockroaches, as noted, can go a month without food. Investors should be just as patient. But once the right deal is made, investors need to seek a return of their capital as soon as they can. The way to do this is to structure the deal as an installment acquisition or as a partnership or joint venture that means you, the buyer, participates in all future cash flows. In other words, the seller gets paid while you get paid.
Not only does this approach accelerate an investor’s return on capital, it also helps minimize risk. In part that’s because—if Lesson #1 was followed—the amount of up-front capital at risk was minimized. It’s also because paying sellers from their companies’ future cash flows aligns their interests in maximizing those cash flows with your interest in a return not just of your capital but a profit from it as well.
* * *
As Charles Darwin reportedly said in describing the essence of evolution’s survival-of-the-fittest concept: “It’s not the smartest or strongest creature that survives; it’s the one that responds best to change.” If investors keep these three lessons from the lowly cockroach in mind, they’ll usually find that they, too, will be able to respond to change, to hide from danger, and even better, to thrive and prosper.
[1]Why Half of All M&A Deals Fail, and What You Can Do About It, by Robert Sher. Forbes, March 19, 2012
As a headhunter with a special focus on the asset management industry, I have often found that the business head responsible for Iberia was also good enough for Latin America, even though the person was based in Spain, London, or other European financial centers. I believe that these managerial decisions do not fit with current market trends which are mainly based on strategies highly focused on partnership with business associated on location and third party distribution structures, totally directed towards the penetration and growth within the investment world of pension funds with a primary focus in Chile within the AFP segment, including Peru and Colombia.
However, today there is a better understanding among those in the business of funds sales that brings up the question of whether this is really the right strategy or if they are missing an important market share… The market has evolved and managers are obliged to do likewise in their business strategies. The past international managers’ agreements with local correspondents to meet their business relationships with major players in the buy side of the industry (AFPs, AFORES … first in Chile and then to a greater or lesser extent Peru and Colombia), are giving way the analysis of managing potential conflicts of interest in their representatives, the transfer of income and, most importantly, realize that today the buy side want your counterpart to be based locally. It has also opened the door to a market beyond pensions. And it is the distribution market through private banks, broker dealers, family offices… in countries with excellent growth strategies and professionalization of its industry, where the regulator increasingly allows greater international exposure … to this we can also add the recent granting of important management mandates in the region.
Chile pioneered AFPs industry – private fund managers – with a turnover of over US$150 billion, with figures that will further international investments, today and some other firms such as JP Morgan, Schroders double those of just five years ago. Colombia and Peru are both boiling with pension systems increasingly sophisticated and open to actively managed funds, private equity, thematic funds, structured notes … as well as insurers, trusts, etc. …. distribution networks and private banking ….. Family offices, whether of the single and multi types, with capabilities to execute above US$10 million tickets. A market like Mexico, with fresh air under a new government with a new industry which has already reached US$ 250 billion between mutual and pension funds and pondering whether or not to open to active management. Blackrock signed their first agreements of asset managers that receive attractive mandates from the Afores, in this case Banamex, while Sura Afore just announced the same with Pioneer, Investec, Morgan Stanley and Blackrock. Not to mention Brazil, a country with a high development in the international investment where large houses have wanted to make local acquisitions to take relevant market positioning.
No doubt Latin America has much to contribute. The market is fully alive and growing, where in order to take advantage of the opportunities you have, without a doubt, to be close to your client and potential business. Sooner or later location will be crucial for business expansion, but today firms are already entering the feasibility analysis phase and market positioning, and more importantly, firms are evaluating what is the opportunity cost of not being present. Some have already arrived, very few were pioneers, others are doing prospective trips, and there are still many who still are considering it … What I think it is very clear, Latin America is not Iberia ….
Wikimedia CommonsFoto: Marcus Quigmire. Reconocen a empresarios impulsores del cambio social en Canadá, EE.UU. y México
American Express, in partnership with Ashoka Changemakers, is recognizing 45 social entrepreneurs as top innovators in the United States, Canada, and Mexico. They are most likely the next generation of leaders that will work to solve some of the world’s most critical challenges.
“The strength of our global society depends on the work of passionate innovators who can respond to the needs of our communities,” said Timothy J. McClimon, president of American Express Foundation. “These 45 young entrepreneurs have channeled their empathy and commitment to create solutions that are currently changing lives throughout North America.”
The innovators will attend the American Express Emerging Innovators Leadership Boot Camp in their respective countries where they will have the opportunity to seek guidance from leaders including president of American Express’ U.S. Consumer Services Group, Josh Silverman; Ashoka Fellows Charles Best, Molly Barker, Tonya Surman, George Roter and Ai Jen Poo; author and entrepreneur, Seth Godin; and Huffington Post Media Group Chief of Staff, Koda Wang.
The two-day Boot Camps in New York City, Toronto, and Mexico City are part of the American Express Emerging Innovators campaign, which aims to accelerate and highlight the ideas of tomorrow’s leaders through training, mentorship, promotion, and collaboration. An online campaign which can be accessed here will feature videos, interviews, and insights from the 45 innovators, as well as notable thought leaders who will share their knowledge and advice about leadership, social change, and entrepreneurship. The campaign will be translated into both Spanish and English.
The American Express Emerging Innovators are:
United States:
Adam Lowy , Move For Hunger
Andrew Posner , Capital Good Fund
Cristi Hegranes , Global Press Institute
Curt Bowen , Semilla Nueva
Danielle Miller , Cell-Ed
Dante Cassanego , Juntos Finanzas
Jason Young , Mindblown Labs
Kalsoom Lakhani , Invest2Innovate
Lisa Curtis , Kuli Kuli
Manjula Dissanayake, Educate Lanka
Maurya Couvares , ScriptEd
Sara Potler , Move This World
Shivani Siroya , InVenture
Sombit Mishra, QMedic
Tinia Pina , Re-Nuble
Canada:
Abid Virani , Hope in The Fight Productions Inc.
Asha Suppiah , Enviro Spinnovations
Athena Theny , Athena Atelier
Corey Cook , Mino Bimaadiziwin “The Good Life”
Katie Jeanes , A Little More Good
Kelly Lovell , My Clean City
Patrick Shannon , Project Gwali
Robyn Ashwell , Shift Delivery
Saksham Uppal, Social Spark
Scott Oldford, FundUni
Simon Pickup , Youth Hydrogen
Sonam Swarup , Fusion Kitchen
Tara Mahoney , Gen Why Media Project
Taylor Conroy , Change Heroes
Yang (Linda) Liu , Sprouts
Mexico:
Alejandro Maza , Yo Propongo
Ana Lucia Cepeda , VidaMujer
Areli Rojas , Quien Habla por Mí
Citlali Salas , Mision Planeta
David Hernandez , CAPTAS
Gregorio Desgarennes , Hub Oaxaca
Hector Elizondo , yoReciclo
Jesus Gastelum , GC Ingenieria Social
Jesus Herrera , Conciencia Hídrica y WETnology Challenge
Juana Jurado , tuOla
Marco Vinicio Barcena , Red Mexicana de Debate
Marisol Campos , Fundacion Rayuela para la Cultura A.C.
Monica Seoane , NUSCAA TIERRA NUEVA
Nancy Amado , Trascendiendo con Resilencia y Dignidad A.C.
Pedro Agustin Gomez , Proyecto METAS
One of American Express’ three platforms for its philanthropy is Developing New Leaders for Tomorrow. Under this giving initiative, which recognizes the significance of strong leadership in the nonprofit and sectors, American Express is making grants focused on training high potential emerging leaders to tackle important issues in the 21st century. The Academy brings together emerging leaders from a diverse set of nonprofit, social sector and non-governmental organizations.
American Express is a global services company, providing customers with access to products, insights and experiences that enrich lives and build business success. Ashoka Changemakers is a community of action that connects social entrepreneurs around the globe to share ideas, inspire, and mentor each other. Through its online collaborative competitions and Open Growth platform, Ashoka is the global association of the world’s leading social entrepreneurs—more than 2,500 men and women with system-changing solutions for the world’s most urgent social problems.
Wikimedia CommonsSteven Wieting en una intervención en Bloomberg TV. . Citi Private Bank nombra a Steven Wieting director de Estrategia Global
Citi Private Bank announced the appointment of Steven Wieting as Global Chief Strategist, with responsibility for formulating investment views and strategies for the business and its clients around the world, said the bank in a statement.
Steven is currently Managing Director and US Economist in Citi Research, and is held in high regard for his views including his extensive work on demographic and policy challenges with a focus on the implications for long-term asset market performance.
Steven will report to Eduardo Martinez Campos, Global Head of Investments at Citi Private Bank, and will remain based in New York in the role. He will be appointed Chair of the Global Investment Committee for the Private Bank, and joins the Investments Leadership Team.
Steven joined Smith Barney in 1996 and was appointed Lead Economist for Citigroup’s US Institutional Equities business in 2000. In this role, Steven advised Citi’s institutional investor and government clients globally on using macro developments to guide their portfolio decisions. While serving as both an economic forecaster and advisor to asset managers, Steven examined credit, commodity and foreign exchange market influences as well as corporate earnings forecasts and equity market insights.
He also served as economic advisor to the Morgan Stanley Smith Barney Global Investment Committee until early 2013 and was a voting member of predecessor Asset Allocation Committees at Citi. Prior to joining Smith Barney, Steven was an economics correspondent with Dow Jones, and he also served as a contributor to the Wall Street Journal’s “Credit Markets” column. Previously Steven worked for the US Department of Commerce.
Wikimedia CommonsFoto: Marc Faber at the Robeco World Investment Forum. “We are all doomed”: Q&A with Dr. Doom
Another crisis is inevitable, argued Marc Faber at the Robeco World Investment Forum. So how should investors position themselves? And how can you spot when the asset-price bubble will burst?
Q: Do you believe that current asset prices are an accurate reflection of risks?
A: No, certainly not. I believe that asset prices today have been distorted by artificially low interest rates. If interest rates are at zero, it is difficult to value anything. There is no real value.
Q: Would you say that the monetary easing in the US has been the core of the financial problems we are facing at the moment?
A: Yes, monetary easing and the expansionary monetary policies over the last 30 years, which led to excessive credit growth, have been a major factor in causing the financial crisis of 2007/2008 and the continuous malaise we have up to today. But I would also say that other interventions by governments, their fiscal measures, have also been very disruptive for the economy.
Q: You have talked about how these expansionary policies are like taking a mortgage out on future generations. Can they ever repay the debts that have been built up?
A: Future generations will never be able to pay their debts and the entitlements for retirees. But I also would like to introduce another concept: it depends on what you use the debt for. If you borrow money and build a factory that produces something that results in cash flow and profits, and allows the interest on the borrowings to be repaid, and to have surplus cash for further investments, that it is one story. But if you just borrow money to go on holiday, that is another story.
Q: What is the way out?
A: The way out is to do something different from what we have done in the past. Under the influence of today’s central bankers and neo-Keynesian politicians, there is more stimulation, more government intervention and more money printing. They do precisely the things that led to the crisis. But that is not the right medicine. The best thing would be for all the boards of central banks to resign. We need new people running central banks that have monetary responsibility.
Q: What should investors do?
A: We have to live with the fact that money is being printed. This money will flow into different sectors and different markets around the world. This will not lead to less volatility, it will lead to more. So you will have bubbles in NASDAQ, real estate, commodities, emerging markets and government bonds. Now we have a gigantic bubble in sovereign debt. Investors need to diversify and avoid buying asset markets that have become overly popular.
Q: We are still in the monetary easing phase. What is going to happen?
A: We will have a huge systemic crisis. The last time the financial sector went bust, it was bailed out by governments. The next phase is governments themselves go bust. Before they do that, they print money like there is no tomorrow. We do not know when the crisis will happen. It could happen tomorrow, but it could also happen in three, five or ten years’ time. Like when your computer crashes, there will be a re-booting of the global economy. But before that, most likely we will have high inflation rates, maybe we will have a deflationary collapse and we will have wars. We are all doomed.
Q: Are there indicators that can predict when the bubble will burst?
A: In my opinion, there is already one indicator that is already flashing a very heavy warning signal. Asset prices are going up, but the standards of living of the typical household in Europe and the US—I am not talking about the people who work for Goldman Sachs—are going down. The industrial economy is doing badly. The linkage between money printing and the industrial economy has already broken down. The rich are buying second homes in the Hamptons, luxury apartments in New York City and Mayfair, paintings, gold—all completely unproductive assets. They are not going to build a new factory. They are not going to start a new business. Nothing is being created economically.
Q: Why aren’t they investing?
A: They are not investing because of excessive regulation. Take, for example, ObamaCare. It is an administrative nightmare. People are reducing their business activity. Firms are not investing in the US, but instead they acquire other companies and downsize. They lay off people.
Q: Do you predict a revolution if income inequality increases further?
A: When the masses of the poor become more powerful than the few, the rich have to pay. Usually history has solved this problem through redistribution through taxation or by revolution. The bailout of Cyprus is the beginning: the rich have to pay more than the poor. In Cyprus, there is a social element where they go after the rich. Even in America there are clear signs, like individual retirement accounts being limited to USD 3 million. The writing is on the wall.
Wikimedia CommonsBy NASA. Capital Strategies come into agreement with REYL AM to distribute their funds in Latin America
Capital Strategies, a firm specialized in the representation of international managers with a niche profile, has signed an agreement to distribute the funds of Reyl AM in Latin America.
Reyl AM, is an investment boutique based in Geneva. With more than US$8 billion in assets under management, they offer equity, fixed income, and alternative funds. Their philosophy of investment is based on preserving the capital that generates sustainable alpha across all market cycles.
Nicolás Lasarte, partner of Capital StrategiesPartners and responsible of business development in LatAm comments, “Reyl is an asset management that is very known around Europe, especially in Switzerland. However, they have had no presence in Latin America. Capital Strategies will provide institutional distribution of their product in the region. Specifically Mexico, Peru, Colombia, Chile, Uruguay, and of course Brazil.”
Their flagship is the Reyl Emerging Markets Equities, which was awarded by Morningstar with 5 stars. Launched in 2009 with US$1.7 billion in assets under management, their main focus is based on a process of balanced and disciplined investment that will identify opportunities along all of the sectors, while investing in any capitalization. With a quantitative bias, their objective is to generate alpha in all of the market cycles.
“Besides being a number in terms of return, the size of the fund is very important to us,” notes Lasarte. “It allows us to access to small or medium companies, which is partly fundamental in the universe of emerging markets, by maximizing the uptake of growth of these countries by fund investors.”
“By having a policy in controlling the growth rate of assets like the policy that Reyl has, it appears to us as well that it is fundamental to have this policy in the universe of investment. Other funds with a bigger size have difficulties in investment with little companies because their tickets are way too big which decreases the generation of alpha,” he adds.
Wikimedia CommonsBy Humayunn Peerzaada . India, una joya que necesita capital extranjero para seguir creciendo
Given the amount of cash in the pockets of global investors today, India presents a wealth of potential. But to harvest this, the country needs capital. And while it does have a decent savings rate, it falls short on capital formation; it therefore needs long-term foreign capital, hubbies.comsaidin itsGuide to Investing in India 2013 divided into sixchapters: Demographics and consumption; Equity Markets; Fixed Income; Real Estate; Private Equity and How to Access the Indian Market.
In the absence of much organised analysis that helps long-term investors make sound decisions, Hubbies objective with this Guide is to provide a useful starting point to help answer some of the key questions in the minds of investors: What does the economy look like? What are its long-term drivers? What road-blocks does it face? And even if investors are convinced about the long-term fundamentals of the economy, are there shorter and medium-term factors that could de-rail the secular trend?
Assuming investors are convinced about the economy – how can they leverage the fundamentals? What asset classes are available? For each asset class, what are the fundamentals, as well as risk/return equations? And if investors are ready to buy, how do they access the investments? Should they invest through globally recognised fund managers or do the local investors have some competitive advantage? How can they access the local fund managers? Are there are restrictions or disincentives that change the risk/return equation?
If you want tosee thecomplete guideyou cansee this link
Wikimedia CommonsFoto: Marcosleal. Las trabas económicas de Brasil reducen el número de UHNWI del país y su fortuna total
UHNW population growth in has suffered from the steep drop in GDP growth but may stabilize should appropriate policies be adopted. This is one of the conclusions highlighted in the World Ultra Wealth Report 2012-2013 by Wealth-X, which, on the other hand, notes that Brazil’s attraction as an investment destination is supported by its net global creditor status, stable external liquidity position as well as enviable international reserves, which are approaching the US$380 billion mark, approximately half the region’s reserves. “Though the negative impact on an appreciating currency is widely recognized, there is official support for policies that support a strong Brazilian Real”, it adds, noting that the Real is expected to appreciate in view of excess global liquidity and investor thirst for high yield investment options, particularly in terms of global fixed income investments.
The total wealth in Braziliam UHNWI’s hands has fallen 6.7% from a year ago reaching US$865 billion while the number of UHNW individuals falls 1.7% up to 4,640 individuals.
According to the report, further liberalization of state-controlled sectors and companies, such as state-controlled banks and Petrobras, could boost Brazil’s attraction for investors, who have felt locked out of state controlled monopolies. Brazil reportedly received close to US$60 billion FDI flows from June 2011-2012. “The need to invest in energy and transport infrastructure, prerequisites for future growth, is urgent and should be at the forefront of government policy”.
Other hurdles that Brazil potentially faces would include, the inclination towards increased trade protectionism perceived growth in corruption and the need to address challenges face by the manufacturing sector in relation to the tax structure.
Wealth-X analysis shows there are 49 billionaires in the country. This group of billionaires, representing the top 1.1% if the UHNW population, control 34.7% of the total fortune attributable to the ultra wealthy segment. On average, these billionaires are US$6.1 billion each.
The lowest tier of the UHNW group represented by those worth US$30 million to US$49 million is the largest group, making up 40.8% of the total UHNW population in Brazil. They have combined fortune US$75 billion or 8.7% of the total wealth of Brazil’s ultra affluent.The report concludes pointing out that the Brazilian UHNW individuals are mobile and versatile, with at least 10% of UHNWI’s conducting business primarily outside of Brazil and at least 9% owning residences outside of Brazil.
Next month, Latin Markets is bringing over 400 industry leaders to the Private Wealth Brazil Forumon June 11 at the Tivoli Hotel in Sao Paulo. The one day forum focuses on providing updates regarding regulation, investment management, trust issues and strategies to protect and grow wealth. You can register through this link.
