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Man Group Completes Acquisition of Aalto

Man Group has announced it has completed the full acquisition of London-headquartered real asset manager Aalto for €25m, after plans to buy the boutique were unveiled on 14 October 2016.

Man Group payed $25m (€22.7m) to purchase Aalto – two thirds in cash and one third in new Man Group ordinary shares.

Luke Ellis, CEO of Man Group, commented: “We are delighted to have completed the acquisition of Aalto, which is a key step in the development of Man Global Private Markets, our new investment engine for private asset classes, and in the ongoing diversification of Man Group.

“The acquisition of Aalto represents an attractive opportunity for clients, who will have access to longer term investment strategies offering a complementary risk reward profile to our current products.”

Aalto is set to become a component of the newly formed Man Global Private Markets (“Man GPM”).

Mikko Syrjänen and Petteri Barman, the founders of Aalto, will become co-heads of Real Assets within Man GPM, taking on a leading role in the strategic development of the unit’s offering in real assets.

Aalto has offices in the US and Switzerland, and had $1.7bn (€1.5bn) of assets under management as at 30 September 2016.

As at 30 September 2016, Man Group’s assets under management were $80.7bn (€73.3bn).

Emerging Market Hedge Fund Assets Rise To Record As Global Trade Adjustments Begin

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Emerging Markets hedge funds ended the third quarter at a new record asset level, eclipsing the prior record from 2Q15. Assets dedicated to Emerging Markets hedge funds increased to $199.66 billion in 3Q, up $9.8 billion from the prior quarter as a result of strong performance-based quarterly gains and despite a net investor outflow of $850 million, according to the latest HFR Emerging Markets Hedge Fund Industry Report, the established global leader in the indexation, analysis and research of the global hedge fund industry.

The HFRI Emerging Markets (Total) Index gained +5.06 percent in 3Q and added +1.10 percent in October, led by regional exposures to Latin America, Russia, and Emerging Asia; the HFRI EM Index is up +9.1 percent YTD through October.

“Emerging Market hedge fund capital increased to a record level in 3Q as currency, fixed income and commodity markets adjusted to the impacts of shifting trade and monetary policies from both Brexit and the U.S. election,” stated Kenneth J. Heinz, President of HFR.

“As regional EM equity markets have surged, EM hedge funds have effectively complemented these directional gains and mitigated risks with tactical, non-directional trades created by shifting policies and temporary dislocations. The coming period of US and UK trade and monetary policy adjustments are likely to produce compelling opportunities for EM hedge funds, extending their performance leadership and capital expansion into 2017,” points out Heinz.

Hedge funds focused on Latin America extended the powerful YTD surge, leading all areas of hedge fund performance through October. The HFRI EM: Latin America Index vaulted +6.2 percent in 3Q, and added another +5.4 percent in October, bringing YTD performance to +33.0 percent. Recent gains for the volatile LatAm Index follow performance declines in four of the last five years, including the last three. The total number of hedge funds focused solely on investing in Latin America remained at 107, while total capital increased to $6.7 billion in 3Q.

Hedge funds investing in Russia and Eastern Europe also posted strong gains, with the HFRI EM: Russia/Eastern Europe Index gaining +6.5 percent in 3Q16 and +1.0 percent in October, increasing YTD performance to +20.7 percent, driven by gains in both Russian equities and the Rouble. As of 3Q, over 170 hedge funds were regionally focused on Russia/Eastern Europe, with these managing an estimated $28.9 billion.

PCR: Bob Miller Succeeds Rob Fiore as CEO

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PCR, the wealth data aggregation and reporting service for UHNW Advisors and Clients, has announced that Bob Miller has succeeded Rob Fiore as CEO. Mr. Miller was formerly the founder and CEO of CorrectNet and a pioneer in ultra-secure client reporting solutions for the top global institutional wealth managers.

Mr. Miller joined PCR as its Vice Chairman and Strategic Advisor last year to help bring the company’s recent technology investments to market. During this period, PCR crystalized its value proposition, introduced disruptive non-basis point pricing, and launched a distributor program that is now enabling software and other technology providers to re-sell the company’s unique UHNW services.

“My mandate from our owners is crystal clear. First, make sure the 1,200 families we currently serve benefit from the innovations we are now bringing to market – they helped build our business and we are committed to their continued success. Next, capitalize on our unique capabilities and recent investments to grow the business in new ways from our current $125B to $500B in assets aggregated,” said Mr. Miller.

The company also announced executive team promotions. Adam Carta, formerly Senior Director of Operations, was promoted to COO with responsibilities over every aspect of the delivery platform. Bill Hiza, formerly manager of the financial analyst team, was promoted to Sr. VP Client Experience. Bill Lichtwald, a 20 year FinTech enterprise sales veteran, has been moved to Sr. VP Head of Sales.

Mr. Miller added, “We address the needs of the almost 72,000 North American UHNW families different than many of the new comers – primarily the software providers. We were founded by wealthy families that felt they could not get a complete and accurate picture of their wealth. As the industry evolved and many UHNW advisors connected with this need, our business grew to include major private banks, registered investment advisors and MFO’s. PCR clients value that we deliver more than technology. We understand the critical nature of client interactions and provide the people and processes to make sure data is right and communications are accurate.”

Potential US Trade Ramifications of the Trump Election

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According to public statements from President-elect Trump, reshaping U.S. trade policy will be a high priority for the incoming Trump Administration. President-elect Trump has announced his intention to, among other things:

Withdraw from the Trans-Pacific Partnership (“TPP”).
Renegotiate terms of the North American Free Trade Agreement (“NAFTA”), and if NAFTA partners do not agree to participate in renegotiations, submit notice that the United States intends to withdraw from NAFTA.
Pursue bilateral trade deals.
End unfair trade practices.

Jones Day explores whether and to what extent the Trump Administration may be able to accomplish President-elect Trump’s U.S. trade policy goals and the associated implications for U.S. international trade.

Trade Agreements

Trans-Pacific Partnership (“TPP”)

President-elect Trump has indicated that he will issue a notification of intent to withdraw from the TPP, which was signed in 2015 by the United States and 11 other nations, but has not yet been approved by the U.S. Congress. In a June 2016 campaign speech, Trump stated that, “The TPP would be the death blow for American manufacturing … It would make it easier for our trading competitors to ship cheap subsidized goods into U.S. markets—while allowing foreign countries to continue putting barriers in front of our exports.”

Together with transparency provisions, labor and environmental protections, and other elements, the TPP contains provisions to lower both non-tariff and tariff barriers to trade among the member countries and establishes an investor-state dispute settlement mechanism. For some time, Obama Administration officials were optimistic that the TPP would be submitted to Congress for approval before the end of 2016, but the current political climate appears to have foreclosed this possibility, and the TPP now appears to be dead, at least in its current form. Indeed, Republican leadership in Congress recently confirmed that there would not be a vote on the TPP during the lame-duck session of Congress.

By its terms, the TPP would enter into force 60 days after all 12 member countries confirm domestic ratification. If all 12 countries do not confirm domestic ratification by February 4, 2018, the TPP would take effect once at least six original signatories that account for at least 85 percent of the combined gross domestic product (“GDP”) of the original signatories ratify the agreement. The United States represents approximately 62 percent of the aggregate GDP of the TPP member countries. As such, it would be impossible for the TPP, in its current form, to enter into force without domestic ratification by the United States.

There could be further discussions regarding a trade agreement with one or more of the TPP member countries. With Trade Promotion Authority, which was passed in 2015 and will be available until 2018, the President can send trade agreements to Congress for an up or down vote. This authority makes it easier for trade agreements to be passed by Congress, since members of Congress cannot amend any provisions of the agreements.

North American Free Trade Agreement

NAFTA is a free trade agreement between Canada, Mexico, and the United States that became effective on January 1, 1994. NAFTA was the most comprehensive free trade agreement negotiated at the time and contained several key provisions, including provisions relating to removal of trade barriers, services trade, foreign investment, intellectual property rights protection, government procurement, and dispute resolution.

President-elect Trump has stated that he will notify Canada and Mexico that the United States intends to immediately renegotiate the terms of NAFTA to “get a better deal” for U.S. workers.

During the campaign, Trump described NAFTA as “the worst trade deal ever signed” and said that the agreement has and continues to kill American jobs.

Under Article 2202 of NAFTA, the parties are permitted to renegotiate NAFTA and amend or add provisions. Both Canada and Mexico have stated that they would renegotiate NAFTA, and some renegotiations have occurred as part of the TPP, to which Canada, Mexico, and the United States are signatories.

Should it occur, the renegotiation process would be complex, as the respective legislative bodies in each country also would need to approve amendments to the agreement.

It is uncertain which of the 20 chapters of NAFTA the countries would renegotiate. The likeliest may be Chapter Three, which focuses on duties, non-dutiable barriers, rules of origin, and customs procedures. The Canadian and Mexican governments could use the opportunity to seek to reopen negotiations in areas of importance to them, including the alternative dispute resolutions mechanisms available under NAFTA. After a renegotiation, the legislative amendment process in each country could be lengthy and burdensome.

President-elect Trump has stated that if Canada and Mexico do not agree to a renegotiation, the United States will submit notice that it intends to withdraw from NAFTA. The Trump Administration would have the authority to do so under the President’s power over foreign affairs and Article 2205 of NAFTA, which states: “A Party may withdraw from this Agreement six months after it provides written notice of withdrawal to the other Parties. If a Party withdraws, the Agreement shall remain in force for the remaining Parties.”

Withdrawal from NAFTA would not, by itself, increase U.S. tariffs on imports from Canada and Mexico, which, prior to NAFTA, averaged approximately 4.3% on imports from Mexico. Instead, raising tariffs on Canadian or Mexican goods following a U.S. withdrawal from NAFTA would require a presidential proclamation.

Past proclamations have lowered duties. However, by issuing a new proclamation, or by revoking President Clinton’s earlier proclamation eliminating duties upon implementation of NAFTA, President-elect Trump could increase tariffs pursuant to Section 201 of the NAFTA Implementation Act, which authorizes the President to, following consultations with Congress, proclaim additional duties as necessary and appropriate to maintain the general level of reciprocal concessions with Canada and Mexico.

Any such actions could face Congressional criticism and court challenges by affected parties. Given that the United States is a member of the World Trade Organization (“WTO”) and, therefore, is bound by the Most Favored Nation (“MFN”) clauses under the WTO agreements, the Trump Administration would be required to apply the preferential rates set forth in the Harmonized Tariff Schedule, the rejection of which could result in a complaint by Canada or Mexico before the WTO.

Transatlantic Trade and Investment Partnership

Although President-elect Trump has not publicly discussed the Transatlantic Trade and Investment Partnership (“TTIP”), which is being negotiated with the European Union, as much as the TPP, the future of negotiations for TTIP also are uncertain given President-elect Trump’s statements that he would review and renegotiate all trade agreements.

Prospects of a successful conclusion of the negotiations, which have already been fraught with opposition from several actors, seem increasingly unlikely in the foreseeable future.

In that regard, following the election, the EU Commissioner for Trade stated that the TTIP negotiations would be placed “in the freezer” for “quite some time.”

Bilateral Trade Agreements

Although, as noted above, the Trump Administration’s support for multilateral trade agreements (i.e., agreements involving the United States and more than one other country) may be uncertain, President-elect Trump has stated that he will pursue bilateral trade agreements (i.e., agreements between the United States and one other country). For example, if the United States withdraws from NAFTA, the Trump Administration could seek bilateral trade agreements with Canada and/or Mexico. In addition, in the wake of a British exit from the European Union, the Trump Administration may pursue a bilateral trade agreement between the United States and the United Kingdom.

In 2017, Diversification and a Selective Approach Will Be Key in Seeking out Yield

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According to Natixis Asset Management, in the current market context characterized by political uncertainties and increased volatility, diversification and a selective approach will be key in seeking out yield.

2016 was eventful and full of surprises, from the Brexit vote to Donald Trump’selection, and 2017 looks set to be equally unpredictable, with some major political events coming up and a likely divergence in monetary policies.

According to Natixis Asset Management’s experts, investors who are seeking out yield will need to adopt an increasingly selective approach in view of the numberof risks we are currently seeing on the financial markets.

Shift in worldwide macroeconomic balance

According to Natixis Asset Management’s Chief Economist Philippe Waechter, we are set to see a change in the economic system in 2017 as a result of an in-depth shift in the balance of economic policies in the US. “As is the case for other developed countries, monetary policy has so far underpinned private domestic demand”, he states. “This explains why central banks kept their interest rates very low. But the tax cuts pledged by Donald Trump will buoy US domestic demand and give the Fed back some leeway, enabling it to raise its key rate and reclaim some flexibility as it manages monetary policy.”

Across other developed countries, the framework remains unchanged: the central bank’s policy is still the key decisive factor in driving growth momentum. In this respect, at its December meeting the ECB clearly announced that it would keep its key rate low, even after the end of its Quantitative Easing program.

“This new order for US economic policy is set to trigger a divergence in monetary policies and hence push up US interest rates” adds Philippe Waechter. “We are not expecting any strong moves to underpin economies in other developed markets, so this will lead to an increase in the dollar over the long term.”

Inflation is set to remain limited, well under the ECB target in the Eurozone and close to this target in the US. Meanwhile, energy will no longer make a negative contribution to inflation, but against a backdrop of modest growth worldwide, Philippe Waechter does not see a strong or lasting rise in oil prices.

Bond markets faced with rising interest rates

2016 was characterized by renewed volatility due to political risk. Concerns on the cycle in China at the start of the year, question marks over OPEC’s strategy after plummeting oil prices, along with various protest votes (Brexit, Trump, Italian referendum) turned out tobe decisive for the financial markets. The Fed’s caution and the ECB’s active approach buoyed bond performances. The low interest rate context continued, particularly as the ECB extended its asset purchase program to credit in particular. However, the trend towards yield curve flattening gave way to a sharp steepening movement in the second half of the year.

According to Ibrahima Kobar, Co-CIO and Head of Fixed Income, uncertainties and political risk will still be ever-present in 2017. “Europe will remain at the very heart of concerns due to Brexit and elections in France”, he explains. “Divergence of monetary policies may also trigger pressure on the bond markets. Lastly, OPEC members’ resolve will be tested when faced with the expected rebound in US output. The steep yield curve will safeguard investors on the fixed income markets, but we should expect greater volatility in 2017. Diversification will be key.”

However, against this backdrop, Natixis Asset Management expects neutral to positive performances across the various bond indices. “On the credit market, we prefer products where duration to interest rates is virtually zero, such as ABS or loans, followed by shorter duration products, High Yield as a whole as these bonds are negatively correlated with interest rates, and lastly, convertible bonds”, concludes Ibrahima Kobar.

European equities: a year of two halves

On the equity markets, against a backdrop of ongoing very sluggish growth and weak inflation, Donald Trump’s election quickened expectations of price increases and broke with the trend towards fiscal consolidation. “The configuration in Europe is different, but equities have followed trends on the US stock market, stepping up the sector rotation that kicked off mid-2016”, states Yves Maillot, Head of European Equities. “Cyclical and banking stocks have swiftly corrected part of their discount, to the detriment of defensives.” The key question remains the sustainability of this trend.

According to Yves Maillot, the US recovery looks logical, but transposing it to Europe is not a given. “We therefore think it is appropriate to follow the shift towards banking stocks in the short term, but we must consider revisiting defensive stocks in the second half of 2017 as the recovery in growth will be more limited in Europe. We are also keeping an eye on oil stocks due to the combination of more stable oil prices, a drop in oil exploration spending and the increase in free cashflow. Lastly, small caps’ increasing profit growth advantage over large caps continues to make this segment attractive”, concludes Yves Maillot.

Asset allocation: emergence of new correlations between asset classes

According to Franck Nicolas, Head of Investment & Clients Solutions, we could see anumber of shifts in the usual correlations between the various assets in 2017.

All eyes will be on changes in US economic policy. Tax cuts are set to swiftly prompt renewed confidence in both consumer spending and corporate investment, yet the fiscal stimulus from infrastructure will take much longer and looks less certain. “This change in direction comes at a time when risky assets are carrying demanding valuations due to several years of accommodative monetary policy, and this could trigger long-lasting disaffection in the shape of several months of stock market stagnation”, explains Franck Nicolas. Similarly, political and economic risks in the Eurozone, such as the severe disparity of emerging regions, make a highly selective approach to asset allocation absolutely vital.

“More than ever, the secular trend towards a widespread rise for financial assets seems interrupted, so a more discerning stance will be required to seek out yield”, adds Franck Nicolas. “We are fairly positive on US equities at this stage, although they are somewhat pricey. In the second part of the year, we will likely take profits, and if the yield curves steepen, we will bolster our allocation on US bonds. Meanwhile in Europe, we underweight both equities and fixed income. Lastly, on emerging markets, selection will be the watch word: fundamentals are admittedly stabilizing, but the rising dollar could hamper growth in some regions”, concludes Franck Nicolas.

Pioneer: ‘In China we still see a more stable overall picture than in other emerging markets’

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Pioneer: "En China todavía vemos un panorama general más estable que en otros espacios en los mercados emergentes" — . Pioneer: 'In China we still see a more stable overall picture than in other emerging markets’

Yerlan Syzdykov, head of fixed income and high yield strategies for emerging markets at Pioneer Investments, explains in this interview his vision for emerging debt in the coming year and the reasons why his team rather invest in Asia over Latin America.

What is your outlook for Emerging Markets Debt for 2017?

We are forecasting a pickup in growth in Emerging Markets in 2017. However, of course, the outlook from the returns perspective could be influenced by what’s happening in the U.S., given that interest rates have started to move upwards and that could really add pressure in terms of real returns. So, we think we are looking at low positive returns from emerging markets, and we believe that we are probably going to see flat performance in terms of local currency.

Within Emerging Markets Debt, will Government or Credit market be more interesting next year?

They are going to be broadly the same in terms of performance, by our estimates. We still have a preference for government debt next year. We believe that there is a little bit of inertia in terms of growth that will still put pressure on corporates. Higher refinancing rates are probably something that we need to be aware of in 2017 and 2018. So, we are looking at the higher default rates that we are forecasting for corporates compared to sovereigns and therefore, our preference is with sovereign debt.

How does the outcome of the U.S. elections affect Emerging Markets Debt?

We are all used to watching the monetary policy of the U.S. as it so important for us. Now, we are starting to see a shift in fiscal policy, in foreign policy and potentially also in trade policy. That could potentially have a negative impact on emerging markets in the long run. However, of course, we need to see how urgent those changes could be and what shape they will take. So, overall, we are going to be monitoring those changes and readjusting our positioning accordingly.

What regions could provide the most interesting opportunities in 2017?

We still see the opportunity to grow in Asia given the structural reforms that we have seen in countries like India and even in China, which are still supporting a good growth story. We are seeing more volatility in Latin America as we are witnessing the impact of lower commodity prices potentially, especially in metals (at least initially). We are also looking very carefully at the negative credit re-rating cycle in Eastern European markets, which would also be affected by political volatility in Europe itself. Therefore, we prefer Asia.

What’s your view on China’s economy and leverage levels?

We have seen some investors getting worried given the 20% growth in leverage levels just to sustain that level of growth. We are looking for some more structural reforms, especially in state-owned enterprises (SOEs), something that has not really happened yet, and we are probably going to see a bit of a slowdown in that structural reform drive given that the beginning of the political succession in China. So, therefore, Chinese growth may underperform somewhat, but we still see a very healthy and more stable overall picture compared to other spaces in Emerging Markets.

What is your view on EM currencies?

Although we see a pickup in growth in the emerging world, the differential between emerging markets and developed markets is still shrinking, especially if we are looking at the prospect of higher U.S. growth next year and lower productivity growth in the emerging world going forward. That means that currencies are probably not going to be appreciating strongly against the U.S. dollar – we are moving into a strong dollar world if the reforms in the U.S. are going to take place. Therefore, there is probably going to be a little bit of upside in dollar versus emerging currencies so we will be very cautiously positioned in local currencies this year.

The Vital Guide to Hiring FP&A Experts

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Financial Planning and Analysis (FP&A) experts are a pillar of any finance team, only building their models after feeling the pulse of every part of the business. This guide -published by a group of Toptal writers- will help you identify the very best FP&A candidates, arming you with the right sets of questions to make sure they are best suited to your specific needs.

Financial Planning and Analysis (FP&A) experts are jacks-of-all-trades and the master of most others, making them both difficult to come by and desperately valuable. According to a CEB report, “Finance and its HR partners have become adept at recruiting accountants and [other] technical professionals who have learned how to apply new regulations quickly to financial statements and manage short-term variation in their careers. However, very few professionals have been taught the skills that will help them succeed in a more judgment-based role, which also requires advanced analytical and interpersonal skills.”

Recruiting for a role that is still taking shape can be difficult and downright frustrating. This may be particularly true for FP&A, a role in which sales targets, marketing campaigns, product launches, planned investments, capital needs, political risks and far more variables besides are pored over and broken down. This guide is designed to help you spot top financial planning and analysis experts, who combine strong analytical mindsets and technical ability with top-notch people skills.

While there’s no hard and fast recruiting method, there are certain questions you can ask, allowing you to identify the skillsets needed.

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Learners at Heart

FP&A consultants need to be learners at heart. They must strive to know your business inside and out, as well as understand external factors, such as emerging trends within your industry. They will display a natural curiosity and the ability to learn quickly, turning new knowledge into valuable insights. To assess this, consider asking candidates questions like the following:

Q: The CFO of a $400M company has tasked you with an urgent project to identify the leading cost drivers in the company’s flagging pharmaceutical division, where costs have spiked 30% in the last year, while profitability has remained stagnant. This is an area of the business with which you are not familiar, and the CFO has given you a week to prepare a presentation for the executive team with a plan to increase the division’s profitability by 10+% in 12-18 months. How do you approach this project?

Top FP&A specialists know the right questions to ask in order to rapidly understand the financial dynamics of any area of the business & how to address any problems. Here are a few key questions good candidates may ask.

What are the financial results & trends for this division over the last few years?
What are the trends in the division’s industry, including competitive overview?
What are the key metrics for this division? How are performance & success measured?
What are the division’s strategic & financial goals/targets, both short-term and long-term?
What are the cost drivers for this division?
How do you allocate costs within this division? What is the methodology used? How do you measure return on investment?
Who are the decision makers within this division?

Top FP&A specialists are quick to absorb relevant data and know to disregard superfluous information, all while driving toward solutions-oriented analysis.

Talented Communicators

“I have seen people who are Excel wizards, but can’t convey key messages [for their companies]. They struggle with taking it to the next level. How do you turn a financial model into a clear message with specific recommendations and solutions? That’s the key skill,” according to Carlos Aguirre, VP of Finance @ Toptal.

It’s not enough to have outstanding analytical skills. Top FP&A consultants must be able to establish their own credibility, explain complex financial problems in simple terms to key stakeholders, and propose clear solutions, backed by accurate data and insightful analysis.

When communicating with FP&A candidates, the following traits, which are commonly valued in many new hires, are especially important to emphasize and screen for:

Intellectual curiosity (i.e. the ability to ask the right questions)
Patience with your questions
Politeness
Social skills and a great first impression
Ability to clearly teach you about something that you don’t already know

FP&A experts need to inspire confidence through skillful communication. Otherwise, their business recommendations will fall flat, and the company won’t benefit.

Q: Your client, the CEO of a $200M late-stage startup, has asked you to analyze the company’s financial results over the past year and prepare a capital allocation model for the upcoming year to present to the executive team. In the process, you uncover multiple inaccuracies in their underlying data, and you know that the company’s CFO was responsible for building their accounting/finance system from the ground up. How do you approach the project?

Elite FP&A consultants must be confident in their analyses, be capable of addressing data issues head-on, and proactively propose solutions that fix the roots of these problems. They need to be able to instill confidence that they have a detailed understanding of the situation at hand.

In responding to this question, a good FP&A candidate will clearly outline their plan for:

Communicating with the CFO to discuss & further investigate data issues.
Helping fix the underlying issues and assembling accurate financial data for the successful completion of the project at hand.
Providing a strong position on what the organization stands to gain by following the proposed capital allocation model vs. other alternatives (including those that may have been taken in the past).
Ensuring a long-term fix for the data issues and a more robust system and/or process for the organization’s financial data gathering & analysis, so as to ensure that inaccuracies don’t happen again (while also making it clear how this fix / investment will benefit the organization in the long run).

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Critical Thinkers

The difference between average FP&A talent and top FP&A talent often comes down to their ability to handle large amounts of data & tight deadlines. You need to understand whether a candidate is prone to analysis paralysis.

Top FP&A experts have a keen sense for how to approach each project, how much time to allocate to each step, and which areas deserve most of their time & focus.

Q: Profit, which is currently hovering at 3% of revenue, has declined 20% over the last year within Top Flight’s core business unit–its fleet of private jets. What is your approach for efficiently identifying the main issues & making recommendations for improvements? What specific data would you leverage? What would be an alternative approach, and why?

FP&A experts will begin by outlining an overall framework, as well as the key questions that they think will most efficiently help uncover the underlying issues & help shape a successful solution. They will outline the data set needed for efficient analysis.

They will also think of strong alternative solutions in case the original approach does not yield efficient answers & optimal solutions.

FP&A experts will be able to evaluate a variety of different analytical approaches in parallel, quickly determine which one has the highest potential to be fruitful, and tackle it by asking some of the following questions:

What are the financial results & trends for this business unit over the last few years?
What are the key performance indicators & metrics for this business unit? How are those performing versus historical periods?
How is the industry performing? Are there macroeconomic issues at hand? Or is this company’s business unit underperforming the industry & the competition?
What do leaders within the business unit think is causing the underperformance? What do they think is an optimal strategic path forward? Does the data & analysis support this?
Have any initiatives have been put into place already? What were the results? Are there elements that have not been contemplated which may be contributing to the issue? (i.e. need to “peel the onion” and fully understand performance drivers & the root causes of the issues in each sub-segment within the business unit).

Creative Problem-Solvers

Along with being strong critical thinkers, top FP&A specialists are also creative problem-solvers. You want eager and adept solutions-oriented candidates. They should be hungry to proactively solve problems across the organization, horizontally and vertically.

Q: Your client is a small, privately-held business that has experienced 20% year-over-year revenue growth over the last three-year period. Lately, however, the company has been more budget-constrained, and growth has stagnated. You know that the company has ambitious long-term growth goals. How do you optimize the organization’s capital structure in order to reignite growth while keeping costs under control?

Top FP&A consultants will be able to assemble creative, innovative solutions to open-ended problems like this one. Here, it seems that the client needs more capital to invest and jump-start revenue growth. What’s the best way to tackle this issue?

For starters, FP&A experts need to be make an assessment to determine how efficiently current capital is being used, and what the return on invested capital is. Does the company really need to find additional capital? Or can existing capital usage be further optimized?

An FP&A expert can help identify creative options for reallocating existing capital & budgets to funnel more capital towards the areas with highest value from a strategic & return on investment perspective. If cost-cutting is a must, then a return on invested capital analysis can help make the most efficient cost cutting (optimization) decisions – fully backed by proper analytics.

If additional capital is needed, an FP&A expert needs to be able to advise the client on the different options available (i.e. both debt & equity) and the pros and cons of each. This includes impact to ownership, tax implications, interest costs involved, covenants or other thresholds/requirements imposed by the capital issuer, etc. In making a recommendation, FP&A experts will account for the different risks & benefits involved with each option, as well as take into consideration the client’s short & long term goals.

Patient, yet Ambitious

FP&A experts must walk a fine line between being patient and being ambitious. Weeding through reams of technical data requires both perseverance and the ability to see the light at the end of the tunnel. Experts must display patience while learning about every facet of the company as they hone their basis for analysis.

Their patience should be matched with an ambition to be a vital key player and strong voice at the decision-making table. Experts should be zealous in their ability to influence the trajectory of the business with their unique efforts. FP&A is not a passive function, and a candidate’s attitude should reflect this activist spirit.

Q: Your client is the board of a $1B pharmaceutical company and has asked you to build a rolling 13-week cash flow forecast to present at the organization’s next board meeting. However, the company’s CFO has been slow to provide all the information you need. How do you keep the process moving while waiting for this critical information?

Top-flight FP&A consultants can read the room and pragmatically assess possible solutions to roadblocks.

This is where patience comes into play. FP&A consultants must be able to successfully work with the CFO and build healthy credibility. However, they will ultimately never sacrifice their focus on providing their client, the board, with the comprehensive forecast requested (and on a timely basis).

An FP&A consultant will understand that a CFO is a very busy individual, and will take a proactive approach in outlining a clear framework with specific data & information requirements so as to avoid any time wasting. The FP&A expert will also offer to connect and work with the CFO’s Team directly to gather such data & information in a timely manner.

If the CFO has been very busy, it is possible that he/she will feel uneasy about not being able to spend enough time on this project. It is therefore imperative for the FP&A expert to masterfully walk the CFO through the analysis in detail, giving him/her the necessary comfort about the accuracy of the end product and building credibility along the way.

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Essential Technical Skills

The best FP&A experts need to be competent with the tools that companies are using for their financial planning and analysis activities (i.e. BI / EPM software).

As part of the hiring process, it is important to evaluate how (and how well) candidates engage with key tools of the trade (besides Excel, which is a must!). Ask them to walk you, in detail, through their experience in working with some of the tools noted below. Specifically, inquire what their level of interaction with those tools was (i.e. did they help implement them? Were they super users? Did they use them on a regular basis for their analysis activities? etc.).

Financial planning and analysis specialists need to be familiar with tools that enable monitoring and analyzing of an organization’s performance, key metrics & KPIs (such as revenue & profitability, margins, ROI, net working capital, cash conversion cycle, etc.). It’s important for FP&A consultants to be well-versed in how such tools (e.g. Hyperion, Business Objects, Cognos, etc.) work & support strong analytics.

Q: A medium-sized firm in Silicon Valley is seeking your help to select the platform the company should use next year to support their FP&A activities. Walk us through your decision-making process.

FP&A experts will need to ask and answer several key questions when considering platforms alternatives, for example:

What are the client’s key needs for the system? What type of analytics are best suited for the business?
What is the client’s budget and timeline for this implementation? Can the vendor provide estimates on implementation & recurring costs based on scope?
How rapidly is the client expanding? This is key to ensuring the solution addresses both current & future needs.
What system alternatives are out there that may suit the client’s needs? What have other companies in the client’s space used? Are there reviews/ratings available? Does online research unearth a stellar track record of system performance & service?
Does the vendor have partnerships with complementary third-party professional services or applications?
What resources does the client currently have in place for this implementation project? Which gaps need to be filled to ensure successful implementation?

And That’s How You Find the Best Talent

“It’s all about closing the gap between raw data, insights, and action”, says Dylan Hoffman, former VP of Finance @ DNA Marketing.

Technical skills in finance are only as good as the business solutions they produce.

FP&A experts are creative problem solvers, who help you look backward and forward to answer the most pressing challenges facing your organization. The best FP&A experts will also be able to quickly bridge the gap from raw data to solutions. For the best among them, not only do they think outside the box – there is no box.

You can read the original article in this link.

Billionaire’s Overall Wealth Declined by USD 300 Billion

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UBS Group AG and PwC presented their joint annual billionaires report, “Are billionaires feeling the pressure?” The report examines wealth creation within the billionaire segment in 2015 and singles out the transfer of USD 2.1 trillion in billionaire wealth that is expected over the next two decades.

2015 saw a pause as total billionaire wealth fell by USD 300 billion to USD 5.1 trillion. Headwinds such as the transfer of assets within families, commodity price deflation and an appreciating US dollar, impacted the growth of billionaire wealth. Average billionaire wealth dropped from USD 4.0 billion to USD 3.7 billion and the US added only five net new billionaires in 20151. In contrast, Asia produced one billionaire every three days, with China alone accounting for over half of the 113 additions.

The findings build on UBS/PwC’s previous Billionaires Reports, released in May and December 2015. According to the new report, we are about to witness the greatest transfer of wealth in human history. Approximately 460 billionaires will transfer USD 2.1 trillion, the equivalent of India’s GDP, to their heirs over a period of just 20 years. For most of Asia’s young economies, where over 85% of billionaires are first- generation, this will be the first-ever handover of billionaire wealth.

Josef Stadler, Head Global Ultra High Net Worth, UBS, said: “The findings of this report help us stay ahead of the issues that matter to better advise our clients, which include over half the world’s billionaires and three out of every five billionaires in Asia. Even as China’s growth moderates, it is the bright spot for great wealth growth. Led by a tech sector on the rise, China minted 80 new billionaires in 2015 and Asia overall created a new billionaire nearly every three days. Meanwhile Europe’s billionaires stood out for maintaining and passing wealth down to their heirs. This is something that regions like Asia, where many more billionaires are first generation, can learn a lot from, especially as we head into the greatest period of wealth transfer we’ve ever seen. Just as Asian billionaires can gain from the experience of wealth transfer in Europe, there’s much that Europe can learn from the rapid billionaire growth in Asia.”

Michael Spellacy, Global Wealth Leader at PwC US added: “As the shockwaves from regulatory upheaval in the EU continue to trigger global currency fluctuations, strategic planning becomes even more crucial for wealth preservation. Those who control assets face tough investment questions. Encouragingly, this year’s report shows that Europe’s billionaires were the most resilient with many of the 60 individuals from Europe inheriting their fortunes in 2015 for the first time. The US, which boasts the biggest collection of billionaires by region, sets the trend. Total US billionaire wealth fell, but ‘new money’ fared better than old, falling by just 4%, from an average of USD 4.7bn per individual to USD 4.5bn.”

Key findings from the report include:

A USD 2.1 trillion inheritance
The past 20 years of exceptional wealth creation will soon be followed by the largest-ever wealth transfer. We estimate that less than 500 people (460 of the billionaires in the markets we cover) will hand over USD 2.1 trillion, a figure equivalent to India’s GDP, to their heirs in the next 20 years. For most of Asia’s young economies, where over 85% of billionaires are first generation, this will be the first-ever handover of billionaire wealth.

The Gilded Age pauses
After more than 20 years of unprecedented wealth creation, the Second Gilded Age has stalled. The transfer of assets within families, commodity price deflation and an appreciating US dollar have emerged as significant headwinds. In 2015, in the markets we cover, 210 fortunes broke through the billion-dollar wealth ceiling and 160 billionaires dropped off, leading to a net increase in the billionaire population of 50 to 1,397. Yet their total wealth fell from USD 5.4 trillion to USD 5.1 trillion. Average wealth fell from USD 4 billion in 2014 to USD 3.7 billion in 2015. It is still too early to tell if 2015 signals a pause in the Gilded Age or something more.

Old legacies’ lessons for new billionaires
Of the billionaire fortunes that have fallen below the billion dollar mark since 1995, 90% were not preserved beyond the first and second generations. At a time of economic headwinds and imminent wealth transfer, Europe’s old legacies are a model for new billionaires to avoid this fate. Germany and Switzerland, in particular, are the countries with the greatest share of ‘old’ wealth. Asia’s family- orientated billionaires may wish to adapt the European model of wealth preservation to their own needs.

New philanthropic models
In the first half of the 20th century, entrepreneurial families such as the Carnegies and Rockefellers funded significant advances in areas such as education and health. By doing so, they displayed many traits associated with billionaires – chiefly business focused and smart risk-takers – to drive success. After over three decades of this new Gilded Age, billionaire philanthropy is growing all over the world. New philanthropic models are emerging (loans, guarantees, contracts, impact investing etc.) and the millennial generation is putting philanthropy at the heart of their family values. In spite of this the current Gilded Age may not match its predecessor’s record.

You can read the full report here.

The Impact of Brexit on Hedge Funds: Year – End 2016 Update

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Sólo el 21% de los hedge funds sufren un impacto negativo por el Brexit — Pixabay CC0 Public Domain. The Impact of Brexit on Hedge Funds: Year - End 2016 Update

Preqin’s year-end update on attitudes to Brexit in the hedge fund industry has found that managers have become more upbeat about the result in the intervening five months. As the majority of fund managers believed the UK would vote to remain in the UK (71%), it is unsurprising that a large proportion were caught out by the immediate market turbulence. In July, 34% of firms thought Brexit had negatively impacted their performance in the aftermath of the vote, although 27% managed to capture this volatility and boost returns.

Since then, managers have been able to navigate the market more adeptly, despite the vote still considerably affecting performance. In November, just 21% of firms have seen a negative impact from Brexit over H2, while 32% have seen their performance affected positively. Going forwards, a quarter of hedge fund managers expect the impact of Brexit to be positive for their portfolios, and now the industry has an opportunity to prove its value in generating non-correlated returns. Investor confidence in the UK also seems to have returned since the referendum.

Immediately after the referendum, 31% of hedge fund investors expected to invest less in the UK over the next 12 months, and 24% expected to invest less in the longer term. As of November, those proportions have fallen to 21% and 18% respectively, while the proportion looking to invest more in the UK over the coming year has risen from 7% in July to 13% currently.

Other Key Facts on the Impact of Brexit on Hedge Funds:

Performance Recovery: UK-and Europe- focused hedge funds incurred steep losses in June 2016, immediately following the referendum result. However, both have more that recovered those losses in Q3, and as of the end of October are showing YTD gains of 1.91% and 0.99% respectively.
Business as Usual: The majority of investors do not think Brexit will alter their hedge fund commitments in either the EU or the UK. Three-quarters of investors plan to invest at the same level in the UK over the long term, while 81% of investors will maintain their current level of investment in EU-based hedge funds.
Fund Manager Location: Although the majority (70%) of UK-based hedge fund managers surveyed in November do not anticipate changing location, this proportion has shrunk since July (80%). Meanwhile, a greater proportion of firms (24%) are now uncertain of their position compared to five months ago (17%).
Firms and Investors: The UK is still home to the majority of hedge fund industry participants. Preqin tracks 944 EU-based hedge fund managers of which 590 (63%) are headquartered in the UK, and 757 EU-based investors of which 408 (54%) are located in the UK.
Size of EU Industry: As of 30th September 2016, the UK hedge fund industry dwarfs that of the rest of the EU market. The UK-based industry currently holds $478bn in assets, while the EU market (minus the UK) is worth $125bn.

You can read the full report in the followig link.

FOX Report Reveals How Advisors are Handling the Loss of Pricing Leverage

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A recent report from Family Office Exchange (FOX) has uncovered new strategies that forward-thinking advisors are beginning to use to better link value and price with their ultra-wealthy clients in the face of increasing price competition.

The findings stem from the recently released 2016 FOX Value Price Study: The Critical Link in Ultra-Wealth Market, which is available to all FOX members. According to the report, advisors have lost at least some pricing power with prospects, as fees quoted to prospective clients have dropped 17% since 2008 and 15% since 2012. Among current clients, fees have flattened-out—in large part due to the difficultly advisors encounter in articulating value.

In response, some advisors have begun utilizing four strategies to better link value and price:

Mastering Underlying Economics: Achieving sustainable business economics by thoroughly understanding value while making pricing and cost management everyone’s job at the firm.
Realigning Price and Value: Making it easier for clients to see how competitor fees line up, and enabling a more effective method to match firm talent against client needs.
Adapting Resources to Meet Changing Client Needs: Making it easier for clients to access the firm’s capabilities, and determining more efficient ways of bringing resources to bear on the client’s most pressing needs.
Managing Perception of Value: Better connecting client needs to the full value the firm may provide to them, and continually assessing whether their fees are aligned with that value

“The 2016 FOX Value Price Study reveals that the state of the ultra-wealth business remains quite healthy, even in the face of market volatility and growing competitive intensity. However, we have uncovered mounting evidence that the prevailing pricing model employed by ultra-wealth advisors needs attention,” said David Toth, Director of Advisor Research at Family Office Exchange. “The value/price relationship deserves careful thought when considering what changes to make to the pricing model. This report takes a look at how some firms are taking on the challenge of finding better ways to demonstrate value to their clients while refining their pricing models.”