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“In 2015 Feminism Is A Business Issue”

"En 2015 el feminismo se ha transformado en un asunto de negocios" — Barbara Stewa. "In 2015 Feminism Is A Business Issue"

The future looks very bright for women in finance, says Barbara Stewart, CFA. Author of the Book “Rich Thinking 2015: Future of Women& Finance”, and guest speaker at CFA Spain “Future of women and Finance” Forum. Stewart, portfolio manager at Cumberland Private Wealth Management Inc. Toronto. Canada, explains in this interview with Funds Society that the financially confident woman is the number one target market and technology has levelled the playing field for women.

How do you see the future of women in finance, and in the asset management industry in particular?

The future looks very bright for women in finance! Many studies now show that more women = more money and this is a very compelling equation for a still quite traditional investment industry. My research findings are clear that a) feminism makes good business sense, b) the financially confident woman is the number one target market, and c) technology has levelled the playing field for women. Women are huge users of social media and with respect to the asset management industry, – this is beginning to radically change the way we inform our clients about stocks and bonds, the way we find our clients, as well as the way we communicate with our clients.

Women presence is still poor in the investment industry … do you think it will grow over time? Will women take on positions of greater responsibility?

Because of the fact that we will have more and more financially confident women as clients, we will need more sophisticated advisors to work with them. My research has shown that women like to communicate in a language that makes them comfortable and they prefer to invest in causes and concerns that matter to them. The best advisor moving forward? A highly competent male or female advisor who uses a holistic approach and integrates the so-called feminine values of empathy and open communication. Many firms are attempting to attract female advisors because they are a natural fit for this role.

How these developments can benefit the financial and asset management industry?

These developments are great for the industry because once again, it has been proven that more women equals more money. Simply put, women are making more money, they are controlling more money and they are making most of the financial decisions in their families. Our industry needs to do a good job marketing to these financially confident woman – she is the future. If we market to these women properly (using their preferred method of communication and accurately reflecting their values when we suggest various investment alternatives) – we can capitalize on this opportunity to attract significant assets from this critical demographic.

What the advantages of diversity are for companies in the finance and the investment industry?

According to Dr. Ann Cavoukian, one of the ‘smart’ women that I interviewed for my white paper this year (Executive Director, Privacy and Big Data Institute, Ryerson University, Toronto, Canada) – “Feminism is not about saying no to makeup. It is about saying yes to academic, economic and social freedom for both men and women.” In 2015 feminism is a business issue. This type of open communication (through diversity) leads to a better functioning marketplace and a better functioning workplace. Progressive firms that embrace diversity currently have a competitive edge. Firms that “get it” have a But this won’t be the case for much longer. Soon ‘business feminism’ will be normal – just like using computers or using electricity.

How the role of women is as a customer of the financial industry? Is it an important target group? Are women needs different to those of men?

My research has shown that women prefer to learn about and/or hear about financial matters through either informal instruction (via social media/gamification/sharing platforms) or through real-life stories. This means that we need to be ultra-precise when communicating with or marketing to financially confident women. They prefer to invest in causes and concerns that matter to them so our job as advisors is to help them align investment ideas with their values. Most importantly, realize that women aren’t risk averse, they are risk aware. They may take longer to make an investment decision but they will do their homework and take calculated risks. Success with this number one target group will be all about better communication – in the way that they prefer to communicate. And if you make it meaningful to women, they will invest in your product or service, and they will do so with loyalty.

Every time there are more women in major positions: Mrs. Janet Yellen in the FED, Mrs. Christine Lagarde at the IMF… How do you think people perceive them because their women role? Do you think they are judged differently than men?

Actually no. I think there was a time when female role models were being judged differently than men but I don’t think that is still happening. Of course there will always be “unconscious bias” but ultimately it is results that count in the business world and as long as these highly visible women are producing results, well … it is becoming more and more accepted that they are truly top performers and we need them. The beauty of seeing more and more female role models is that it is self-perpetuating – it is becoming more mainstream to view women as effective leaders.

What is the role that women are called to play in the future of the financial industry in Spain, and worldwide?

We need women to act as excellent communicators and to enable the transformation of the industry. We need to restore trust and the best way to do this is through the integration of social media and marketing. One of my interviewees – a behavioural economist, Dr. Gemma Calvert (Founder of Neurosense, Singapore) said – “women may not trust the investment industry but they will trust each other”. The way forward is for smart women to share their positive stories about success in work and life … and inspire other girls and women to think “I can do that too!”

How the investment industry may become a better place for women?

The investment industry is the best place for a woman to work in my opinion. Why? Because you get rewarded for your results. So if you learn how to make money you will have not only financial independence but also the freedom to come and go as you please. And technology has changed everything. Women want to work from anywhere and now they are able to do just that. The role of an investment advisor can accommodate this need for flexibility so that women can continue to live their lives and structure their work schedules around their lives and competing responsibilities/interests.

UBP: “In Our Base Case, A December Hike by The Fed Remains A Possibility”

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Christopher Chu, Asian Markets Analyst at Union Bancaire Privée (UBP), explains the key implications of the Central Banks last discussions:

“For most of 2015, investors have been focused on two key issues: the timing of the Federal Reserve’s first rate hike and the degree to which China’s economy was decelerating. The two events are seen as highly critical given the impact of global borrowing costs and driver for the global economy. During the final week of October, major central banks across both developed and developing countries met, consolidating much of the anticipation generated over the summer.

The Federal Reserve met after both the European Central Bank and the People’s Bank of China announced plans to further loosen monetary policies. Sentiment had correctly guessed a no-hike outcome for the Fed given the data relevant softness in job growth momentum, and the less data relevant decision not to schedule a post meeting press conference.

However, markets were surprised when the FOMC released minutes showing that Fed Chair Yellen had stated that the current economic climate remained conducive for a possible hike in December, reflecting a change in tone following the central bank’s September meeting. The confusion has been further exacerbated as two members of the committee have publically spoken against raising interest rates, arguing that a premature hike could lead to more perilous impact. Subsequently, markets moved lower while the USD strengthened.

The FOMC concluded a day before the closing of China’s 5^th Plenum, a meeting of top leaders that outlines economic and social policies from 2016 to 2020. Similar to the FOMC, markets were combing through details to see if precedence of economic growth had overtaken attention for much needed reform. Beijing had already announced 3Q15 GDP of 6.9% YoY, better than market expectations but still showing a decline from the previous three month period. The PBOC had also cut interest rates earlier in the week, its sixth cut since November of last year, lowering the one year benchmark to 4.33%.

Emphasis on the growth was maintained, as the meeting stated China’s ambition to double its economy from 2010 to 2020, equaling that of the current US GDP. Based on first half of the decade suggests a minimum annual growth rate of 6.5%, which appears doable. The meeting also reemphasized further liberalization of financial markets and advancing its manufacturing services. However, the biggest surprise came when Beijing decided to relax its three-decade old Thomas Maltheus inspired old one-child policy.

The implications of the last days are numerous, though they unfortunately also raise additional questions. Transpiring is evidence of monetary bifurcation for the two largest economies with the US signaling tightening while China preferring loosening. The reality though is both nations recognize the current global environment is rigid and unable to manage aggressive opposing forces.

In our base case, a December hike by the Fed remains a possibility, given the need for the Federal Reserve to reestablish credibility that has been diluted this summer. However, we could see a likely outcome where the Fed tightens by raising the lower band of policy band, from 0.0-0.25% to 0.125-0.25%. In effect, Yellen maintains the bank’s credence of tightening policies in the calendar year of 2015 without materially impacting borrowing costs. This would also allow Yellen to signal a slower tightening process than previous cycles, while a stronger USD acts as monetary tightening mechanism.

We continue to see evidence of China’s economic reforms, including desire to rebalance the economy away from investment led growth. In addition to cutting interest rates, the PBOC also announced the removal of caps on deposit rates, allowing greater competition among the banks and focus loans towards more productive sectors of the economy while also improving incomes for household savings. In our view, the removal of the one-child policy exists as an important social improvement, assuaging concerns over the country’s aging population. However it does little improve productivity. Additionally, China’s traditional preference for males and unhealthy sex ratio of 120 boys to 100 girls is already placing strains on social stability. Economic implications are already limited, given that Beijing had already allowed couples to have two children provided one partner was an old child”.

BlackRock to Buy Bank of America’s Money-Market Fund Business

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BlackRock and Bank of America’s asset management business, BofA Global Capital Management have entered an agreement to transfer investment management responsibilities of approximately $87 billion of AUM currently managed by BofA Global Capital Management to BlackRock.

Upon closing, BlackRock’s global cash management platform is expected to grow to approximately $370 billion in assets under management, based on current asset levels.

The transaction is expected to close in the first half of 2016 and is subject to fund boards, BofA Global Capital Management’s fund shareholders and regulatory approvals. Terms were not disclosed.

Tom Callahan, BlackRock’s Co-head of global cash management. “At a time of tremendous change in the cash management industry, this alliance underscores BlackRock’s commitment to market leadership in delivering outstanding liquidity solutions to our clients.”

“BlackRock and existing BofA Global Capital Management clients will benefit from a combined platform with greater scale and global reach,” said Rich Hoerner, BlackRock’s Co-head of global cash management. “Additional scale will better enable BlackRock to continue to manage client balances of various sizes and investment time horizons.”

What Advisors Need to be Aware of When Assessing the True Cost of ETF Ownership

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Many of the well-known benefits of exchange traded funds (ETFs), including diversification, lower costs, flexibility and tax efficiency, tend to overshadow the complex features and pricing of these products, according to a whitepaper released by Pershing. The report, What Lies Beneath: Understanding the Structure and Costs in ETFs, outlines underlying components that impact ETF pricing, and identifies areas that advisors should keep in mind when evaluating the true cost of ETF ownership for their clients.

The tips include:

Look Beyond Expense Ratios– Advisors should also consider costs that are not included in the expense ratio that complex types of ETFs may accrue (i.e. deferred tax liabilities).

Understand Components of the Bid-Ask Spread– Investors and advisors should examine the underlying components that can significantly influence the value of the bid-ask spread and understand the implications it can have on the cost of ETFs.

Monitor Tracking Errors– Advisors should not overlook the tracking error – which is the risk that an ETF’s price might not match the fund’s benchmark.

Evaluate Spreads on Commission-free ETFs – Advisors should investigate whether the spread on no-transaction fee funds are wider than that of similar ETFs with transaction fees.

“As ETFs continue to grow in popularity, it’s important for advisors to be as well informed as possible about the apparent and underlying factors that influence the cost of their ownership,” said Justin Fay, vice president and solutions manager for alternative investments and ETFs at Pershing. “Taking these factors into account will help advisors make a more accurate ‘apples-to-apples’ comparison, between ETFs, as well as between other investment options – such as low-cost mutual funds.”

To obtain a copy of Pershing’s whitepaper you may use this link

Performance Drove Down European ETF’s AUM in September

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According to Detlef Glow, Head of EMEA research at Lipper, assets under management in the European exchange-traded fund (ETF) industry declined from €432.7 billion to €430.0 billion during September.

This decrease of €4.7 billion was driven mainly by the performance of the underlying markets, -where €7.2 billion were lost-, while net sales contributed €2.4 billion to the overall assets under management in the ETF segment. Amongst the funds, Equity ones enjoyed by far the highest net inflows for September receiving €2 billion in inflows. The best selling Lipper Global Classifications in September where:

Equity EuroZone with €1.2 billion
Bond EMU Government Short-Term with €0.7 billion
Equity Europe with €0.7 billion

Amongst ETF promoters, iShares with €1.6 billion (of which the iShares MSCI Japan ETF, the best selling ETF fund in September, accounted for €0.7 billion), UBS ETF with €0.5 billion and ComStage €0.2 billion, were the best selling ones.

For further details you can follow this link.

China Overtakes US as Global Leader in Built Asset Wealth

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China has overtaken the US as the world’s wealthiest country measured by the value of its built environment according to the latest Global Built Asset Wealth Index published by Arcadis. The index calculates the value of all the buildings and infrastructure contributing to economic productivity in 32 countries, which collectively make up 87% of global GDP.

For the first time, built asset wealth in the US no longer leads the world. With wealth of $36.8 trillion, the US now trails China at $47.6 trillion. The US built asset stock is largely unchanged in the past two years, while since 2000, China has invested $33 trillion in its built assets, a total exceeding all other economies combined. The growth is evidence of China’s unprecedented level of investment in its infrastructure – 9% of GDP – which dwarfs global competitors like the US, which currently invests just 2% of GDP.

Tom Morgan, vice president, head of business advisory, North America at Arcadis –a design & consultancy firm for natural and built assets – explains: “A prosperous society is underpinned by a well-developed built environment that meets the needs of its people and economy. Therefore, a strategically planned, highly developed and well maintained built environment is critical to the economic and social success of a nation.

“Developed economies have experienced a long-term stagnation and decline of their built asset stock, as aging infrastructure falls into disrepair and investment fails to keep up. This decline puts even more urgency on public owners to find creative ways to attract finance, make smarter decisions regarding the maintenance of existing assets and to maximize every dollar spent – the whole asset lifecycle must be considered to meet society’s needs.”

Morgan continues: “China’s ranking this year marks a profound change in the global league table of the world’s wealthiest built asset nations. However, with so much global uncertainty from financial imbalances, unprecedented currency volatility and crashing commodity prices, even China and its fast-growth neighbors will need a renewed focus on quality over quantity.”

US trends

The Index notes that while the US built asset wealth embedded in real estate has demonstrated solid long-term growth, public infrastructure has not seen the consistent funding and policy needed to build investor confidence in such long term projects. In addition, the report notes that the US needs to find ways to maintain the integrity and service levels of its aging asset base for less money.

The shifting wealth to emerging economies

The Index shows a dramatic shift of wealth to emerging economies, such as Indonesia and Thailand, with the traditional economic superpowers – the G7 – showing a net decline in the value of their built assets since the 2013 report. Structural assets depreciate at a rate of around 5% per year, meaning this level of investment is the minimum required to maintain the status quo, a figure equating to $1.4 trillion in the US.

In Europe, the almost decade-long economic slowdown has also had the negative effect of holding back investment.

The top ten nations in the Arcadis Global Built Asset Wealth Index are:

The full report can be downloaded at this link

Family Office Compensation Expected to Increase by 3 Percent in 2016

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Family Office Exchange (FOX) revealed that 88 percent of family offices plan to increase salaries next year with a median increase of 3 percent. By contrast, in 2014, 83 percent of family offices saw salaries rise, with a median increase of 4 percent. The finding is part of the 2015 FOX Family Office Compensation and Benefits Report.

New data, collected for the first time, shows a surprising proportion of the CEOs of family offices to be women. The study reports that 35 percent of the participating family offices have female CEOs, compared to just 4.6 percent of S&P 500 companies. The average family office CEO is 54 years old, and staff members range in age from 22 to 84 years old. Thirty-six percent of participants, with CEOs who are 60 years or older, are facing imminent succession issues.

“In an environment where finding and retaining talent is the number one concern, having peer data that addresses the entire package—from base salary to benefits and flexible work hours – helps the office leadership ensure that they are doing everything they can to be competitive.” Said Jane Flanagan, Director of Family Research at FOX.

This year’s report, which was co-sponsored by Grant Thornton LLP, contains compensation data for 25 different family office staff positions. The data comes from 112 different family offices reporting on nearly 800 individual staff positions, with information on salary, incentive compensation, benefit packages, and retirement plans.

“Long-term incentives are becoming more prevalent and can be a powerful tool for offices seeking to attract and retain the best available talent.” Said Bruce Benesh, Grant Thornton’s national partner-in-charge of Compensation and Benefits Consulting.

FOX is a global membership organization of enterprise families and their key advisors.

Big Alpha in Big Data

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Many investment insights that exploit market inefficiencies follow a fairly predictable performance arc. Those that are first to discover and implement effective insights tend to reap the most alpha from them in the early stages after implementation. However, as the insights become more widely known and followed by an increasing number of market participants, they start to deliver less alpha and may ultimately become commoditized. As competition in active management has grown more intense, the effective life span on many such insights has meaningfully decreased in recent years. The chart below* illustrates this.

Enlarge

This phenomenon is affecting the entire investment management landscape, most notably in recent years through the rise of smart beta strategies. Smart beta harnesses broad, persistent drivers of return such as quality, size and value that were once firmly the province of active investors—increasing the urgency for both quantitative and fundamental active managers to come up with innovative techniques to deliver differentiated alpha. So, as the traditional line between passive and active has begun to blur with the rise of smart beta strategies, true alpha has proven increasingly elusive. In response, managers across the spectrum from equity, to fixed income, to impact investing are looking to big data for an edge.

So, what exactly is “big data?”

Worldwide, humans are generating some 2.5 quintillion (2.5 x 10¹⁸) bytes of information every day, and IBM estimates that about 90% of this was created in the last two years. The potential that comes with an understanding of this data is practically unending, yet sifting through it is almost impossible without a solid understanding of what you are looking for and the ability to compute it. From an investment perspective, this mass of information is particularly valuable in how it relates to human economic behavior. To make sense of all the data some investors and asset managers are employing new approaches, and developing a different set of tools to search the entire universe of information for new and potentially market-moving information.

For example, text mining and machine reading algorithms are being developed to interpret vast quantities of written materials, such as company reports, regulatory filings, blogs, social media, etc. From this data, more accurate information on consumer confidence and corporate sentiment, among other things, can be derived. It is also possible to identify non-intuitive relationships between companies that are fundamentally related—and therefore are exposed to similar return drivers—despite differences in industry classification, country of domicile, market capitalization and supply chain position.

The above example harnesses the power of technology to create entirely new datasets, however techniques like machine learning can advance how we analyze existing datasets as well. For example, by employing machine learning to sort through data, find patterns and automate processes we can identify combinations of traditional investment signals (e.g. return on assets, ratios, momentum measures, etc.) in a more effective way than when looking at these signals individually. This type of process is heavily reliant on computer processing, as there are simply too many permutations and interactions for humans to consider effectively.

The data revolution is not limited to these strategies alone—natural language processing, scientific data visualization, distributed computing and other techniques will also change how we handle information. A data-driven, scientifically-based, technologically-aware research culture can produce sustainable alpha. This is true not only for quantitative investment approaches, but also for fundamental managers that can use data analytics to make more informed decisions.

As the landscape of investing evolves, it will become increasingly important to consider the capabilities of who you chose to help you manage your assets. Investment managers that are able to unleash more of the power of data may be best positioned to rise to the top—uncovering important new insights and putting them to work for their clients.

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Disclaimer:

*The strategies for the Tough Competition chart come from the following research papers: Do Stock Prices Fully Reflect Information in Accruals and Cash Flows about Future Earnings?, Richard G. Sloan, The Accounting Review, (July 1996); Accrual Reliability, Earnings Persistence and Stock Prices, Richardson, S. A., Sloan, R. G., Soliman, M. T., & Tuna, I, Journal of Accounting andEconomics (2005); and The Information in Option Volume for Future Stock Prices, Jun Pan, MIT Sloan School of Management and NBER and Allen M. Poteshman, University of Illinois at Urbana-Champaign, The Review of Financial Studies (2006).

This material is for educational purposes only and does not constitute investment advice nor an offer or solicitation to sell or a solicitation of an offer to buy any shares of any Fund (nor shall any such shares be offered or sold to any person) in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities law of that jurisdiction. If any funds are mentioned or inferred to in this material, it is possible that some or all of the funds have not been registered with the securities regulator in any Latin American and Iberian country and thus might not be publicly offered within any such country. The securities regulators of such countries have not confirmed the accuracy of any information contained herein.

Santander Private Banking Named “Best Private Bank 2015” in Latin America and Portugal, According to The Banker

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Santander Private Banking, elegido 'Mejor Banco Privado 2015' en Latinoamérica y Portugal por la revista The Banker — Ángel Rivera, Senior Executive Vice-President and head of the Retail & Commercial Banking Division at Banco Santander.. Santander Private Banking Named "Best Private Bank 2015" in Latin America and Portugal, According to The Banker

The Banker magazine named Santander Private Banking the “Best Private Bank” in Latin America for the third consecutive year and in Portugal, for the first time. These awards acknowledge its specialized advisory service model for private banking customers.

Ángel Rivera, Senior Executive Vice-President and head of the Retail & Commercial Banking Division at Banco Santander, states, “One of the main focuses in the transformation process under way at Santander is specialization, with a unique offering and a personalized customer-care model, which provides solutions tailored to each customer. The Santander Private Banking model draws from the Group’s strengths and expertise. The private banker is the main point of contact for the customer and is backed by the Group´s commercial networks, multidisciplinary specialists and technological tools. Together, they help customers take investment decisions based on their unique profile and needs, consolidating a long-lasting relationship of trust.”

In addition to this recognition, Global Finance magazine named Santander Private Banking’s units in Portugal, Mexico and Spain as the “Best Private Bank 2015”.

Santander Private Banking offers services to local clients in Brazil, Chile, Spain, Italy, Mexico and Portugal, , and also offers services to international clients through its presence in the United States, Switzerland and the Bahamas.

Santander Private Banking ended 2014 with assets under management of USD 218.3 billion (up 11%) and a 3% increase in the customer base. Net funds raised amounted to USD 11.414 billion, up 57% on 2013. In Latin America, assets under management increased by 14% and the customer base was up 23%. In Portugal, assets under management rose by 8% and the number of customers grew by 10%.

Preqin Highlights Significant Fee Disparity Between Private Equity Separate Accounts and Commingled Funds

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Figures compiled for the forthcoming 2015 Preqin Private Equity Fund Terms Advisor show the significant disparity in fees private equity fund managers offer investors in their separate accounts and co-investment opportunities, with that of commingled fund investments. When calculating performance fees, 48% of fund managers charge a 20% carry rate for separate accounts, compared to 85% of managers running comingled funds. 48% of managers charge no carried interest on co-investments, while only a quarter keep the same rate as in their main vehicle.

With regards to management fees, private equity separate accounts have a median average fee of 1.00%, and a mean average of 1.15%. In addition, 42% of fund managers will reduce or remove these fees after the initial investment phase. By comparison, almost three-quarters (73%) of commingled buyout funds currently in market or with a 2014/2015 vintage charge the “industry standard” management fee of 2.00% or more during the investment period. Forty-nine percent of managers charge no management fees on co-investments, with only 16% maintaining their standard rate.

The research also finds average rate of management fees on separate accounts varies significantly according to fund type. Mean and median management rates for a buyout separate account are 1.69% and 1.88% respectively, just below the standard 2.00%. However, the median fund of funds separate account rate is 1.00%, and private equity real estate funds charged a median 0.78% management fee.

The proportion of investors that cite management fees as an area in need of improvement has dropped from 59% in June 2013, to 40% in June 2015, while fees charged on unspent capital have fallen off the top list of investor concerns.

Investor concern with performance fees has risen, both over the amount paid, and the structure of charges. Data shows that the amount of performance fees, and the fee structures, concern 32% and 21% of investors respectively, up from 28% of investors that were concerned with carry structure in 2014.

Twenty nine percent of private equity fund managers contribute 0-1.99% of the value of their separate accounts, broadly in line with the typical 1% rate of GP commitment. Almost half (47%) commit 5% or more, while 15% of fund managers contribute over half the total value of their separate accounts.

“Preqin’s latest analysis of private equity fund terms and conditions shows some progress in aspects that investors have previously marked as areas of concern. Far fewer investors are concerned about the level of management fees at present, and at the same time, the proportion of investors that believe their interests are aligned with those of managers has risen significantly.

Separate accounts and co-investment opportunities offer sophisticated investors a number of benefits in accessing private equity beyond traditional commingled fund investments, and in addition, the fees associated with these investments are significantly lower. The growing appetite for alternative routes to private equity has the potential to threaten the traditional, commingled fund structure, and GPs that adapt to the evolving fundraising environment will better meet the needs of LPs and create long-term, mutually beneficial LP-GP relationships.” Says Selina Sy, Senior Manager

You can find more detaills on the report, you may use this link