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Legg Mason Announces Acquisition of Martin Currie

Legg Mason has announced the acquisition of Martin Currie, an active international equity specialist based in the United Kingdom. With offices in six locations, Martin Currie expands Legg Mason’s product capabilities in active equity strategies including Global Equity, Global Emerging Markets, Asian Equity, European Equity and strategies specifically focused on Japan and China.

The transaction is expected to be slightly accretive to Legg Mason’s earnings in the first year and is scheduled to close during the fourth quarter of 2014. Terms of the transaction were not disclosed.

The firm will become a core independent investment affiliate of Legg Mason, along with Brandywine Global, ClearBridge Investments, The Permal Group, QS Investors, Royce & Associates and Western Asset Management.

Also as part of this transaction, Legg Mason Australian Equities with US$2.5 billion in AUM and a 14-person team led by Reece Birtles, will become part of Martin Currie, consistent with Legg Mason’s strategy of creating fewer and larger investment affiliates. LMAE is an active Australian equities manager, offering clients strategies that include Small Cap, Property/Infrastructure, Income and Large Cap Value. These strategies will continue to be managed by the LMAE investment teams, while the combined business will benefit from an expanded global institutional reach.

With over 130 years of history and as an active international equity specialist, Martin Currie is focused on alpha generation alongside building superior client relationships. As such, it adds significantly to the Legg Mason affiliate lineup:US$9.8 billion of assets under management; afundamental research-driven investment process to deliver index-relative,  unconstrained, absolute return and equity income strategies through both segregated  mandates and fund products; an investment philosophy and process that is both scalable and distinctive. The  group has key capabilities in Global Emerging Markets, Asian, European and Global  equities; adeeply-resourced and experienced investment team, with 46 investment  professionals and a risk team that is integrated into the investment process and has  strong analytic capabilities, technology and resources; a multi-award winning alternative product range with a 14-year track record in both Japan and European long/short; a broad institutional client base including sovereign-wealth funds, pensions, corporations, foundations, charities, family offices and financial institutions; a truly international client base with a balanced spread across Australia, Asia, EMEA and the US.  

Joe Sullivan, President and CEO of Legg Mason said, “Martin Currie’s active international equity capabilities fill our largest product gap and are a perfect complement to our existing investment capabilities. The Martin Currie management team shares our passion for innovation, our commitment to delivering compelling investment results and our singular focus on the needs of our clients. Martin Currie is a perfect strategic fit for our growing equity business in Australia, where we see meaningful opportunity. We believe that, over time, our global retail distribution platform will be able to meaningfully leverage Martin Currie’s broad based investment capabilities. We are delighted to be the partner of choice for great investors such as Martin Currie.”

Willie Watt, Chief Executive of Martin Currie, said: “We believe Legg Mason is the ideal strategic partner to grow our business further and will position us as the strategic international equities specialist in one of the most powerful independent investment management companies globally. Most importantly for our clients, the partnership gives us investment and operational autonomy, and this means our client proposition remains unchanged.

“In partnership with Legg Mason we will have efficient access to new markets and client segments through their market-leading and sizeable retail distribution network as well as valuable seed capital which will allow us to be at the forefront of new product innovation”.

The senior management team at Martin Currie has signed new long term contracts in conjunction with the transaction providing continued strength and stability.Legg Mason was advised by J.P. Morgan Securities LLC and Dechert LLP; Martin Currie was advised by UBS Investment Bank; and the Institutional Selling Group was advised by Herbert Smith Freehills CIS LLP.

FlexFunds Launches FlexETP, Tailor Made ETPs for any Asset Allocation

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FlexFunds lanza los FlexETP, ETPs hechos a la medida para la gestión de cualquier activo — CC-BY-SA-2.0, FlickrLeft to right, Roberto Garcia from Mora WM, and Mario Rivero, Director at FlexFunds. Courtesy Photo . FlexFunds Launches FlexETP, Tailor Made ETPs for any Asset Allocation

Asset management is currently undergoing a business model transition. Financial advisors are beginning to use a fee-based approach rather than the traditional management model based on transactions which, until recently, had been the standard approach in broker compensation, explains FlexFunds’ director, Mario Rivero, to Funds Society.

According to Rivero, the classic model did not always align the client’s best interests with those of the advisor. “Financial advice should be based on a management model which is not dependant on the number of transactions, and, like the industry, the advisor seeks greater consistency and transparency in this regard,” he said.

Rivero explains that in this respect, FlexFunds, a company with offices in Miami and New York, moves ahead of this need in the market by approaching it with a new solution. FlexFunds issues an Exchange-Traded Product, called FlexETP, which is tailored for managing any asset class. FlexETPs have the distribution power of an ETF and the management versatility of a mutual fund.

The underlying assets can be either public or private. These assets are packaged into a product listed with ISIN / CUSIP, and multi-currency custodiable via Euroclear, which makes it very easy for any institution or bank to acquire, deposit, and value.

“Creating an investment fund has restrictions on the type of assets and commissions, as well as requiring a tangible investment of both time and capital,” Rivero added.

“For a complete asset management solution, FlexETP can securitize any investment strategy, and their distribution may be accessed from any country. This is very useful, especially in fragmented markets like Latin America,” he explained.

FlexFunds works in collaboration with Citi, PricewaterhouseCoopers and Sanne Group. As to how they operate and work at FlexFunds, Rivero said that a fund or product is issued within a period of two weeks at a cost affordable to any broker, “which is a great advantage over comparable structures which are more complex and costly.”

In this respect, Rivero explained that Roberto Garcia from the Miami office of Mora Wealth Management is an example of firms which have already opted for FlexFunds vehicles. He launched an investment fund with FlexFunds, focused on a systematic strategy with ETFs, a year ago.

“I found the program very simple and useful for creating my fund,” says Roberto, “having the fund’s administration covered allows me to focus on its management and the relationship with my investors. Membership in the FlexETP is simple and has enabled us to attract clients from other institutions to our strategy. Since its launch, the subscription has multiplied by more than six times the initial amount,” said Garcia.

Lombard Odier Appoints Henry Fischel-Bock as Head of its Domestic European Private Client Business

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Lombard Odier Group has announced the appointment of Henry Fischel-Bock as Head of its domestic European private client business, effective 1 January 2015.

Henry Fischel-Bock joins Lombard Odier from Barclays Wealth where he led the UK & European wealth management business until July 2014. In his new role Mr. Fischel-Bock will report to Frédéric Rochat, a Managing Partner of Lombard Odier.

“We have built a significant private client business within the European Union with a single and efficient technology platform that allows us to offer clients solutions to their increasingly complex needs,“ said Mr Rochat. “We are delighted to welcome someone at our Group with Henry’s longstanding wealth management experience. His drive to offer clients a differentiated and long-term value proposition is closely in line with our own business model.”

Lombard Odier’s domestic European private client business offers wealthy individuals and their families a full range of integrated services in the areas of estate planning, investment management, tax reporting and custody services. It operates through offices in Amsterdam, Brussels, London, Madrid, Paris and Luxembourg.

Schroders Appoints Two New Commodity Experts

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Schroders announced the appointment of two commodity experts, James Luke and Dravasp Jhabvala, to further strengthen its Commodities team.

James Luke joins the London-based team, headed by Geoff Blanning, as Commodity Fund Manager/ Metals Analyst and Dravasp Jhabvala as Commodity Quantitative Analyst.

James was previously Co Head of Metals Research at J.P. Morgan. He has 9 years’ of experience within commodities in London and Hong Kong and will provide Schroders with invaluable specialist insights into metals.

Dravasp joins Schroders from Palaedino Group in Geneva where he specialised in developing investment strategies for commodities. Dravasp holds a Master of Science in Statistics and will work on enhancing Schroders’ quantitative models for commodities.

Schroders is a market-leader in the active management of commodity futures with a 9 year track record and current assets under management, for clients around the world, of $7.8 billion.

Geoff Blanning, Head of Commodities at Schroders, said: “I am delighted to announce James’ and Dravasp’s arrival, which will strengthen our strong expertise in commodities at Schroders, at a time when we see a positive outlook for the asset class. Both bring with them a wealth of experience and will add significant value to our commodities product.”

California Agriculture Faces Greatest Water Loss Ever Seen

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El sector agrícola californiano se enfrenta a la mayor pérdida de recursos acuíferos de la historia — Photo: Karin Higgins/UC Davis; Video: Reuters via Youtube. California Agriculture Faces Greatest Water Loss Ever Seen

A new report from the University of California, Davis, shows that California agriculture is weathering its worst drought in decades due to groundwater reserves, but the nation’s produce basket may come up dry in the future if it continues to treat those reserves like an unlimited savings account.

The UC Davis Center for Watershed Sciences study, released last week at a press briefing in Washington, D.C., updates estimates on the drought’s effects on Central Valley farm production, presents new data on the state’s coastal and southern farm areas, and forecasts the drought’s economic fallout through 2016.

The study found that the drought -the third most severe on record- is responsible for the greatest water loss ever seen in California agriculture, with river water for Central Valley farms reduced by roughly one-third.

California produces nearly half of U.S.-grown fruits, nuts and vegetables and nearly a quarter of the nation’s milk and cream. Across the nation, consumers regularly buy several crops grown almost entirely in California, including tomatoes, carrots, broccoli, almonds, walnuts, grapes, olives and figs.

Groundwater pumping is expected to replace most river water losses, with some areas more than doubling their pumping rate over the previous year, the study said. More than 80 percent of this replacement pumping occurs in the San Joaquin Valley and Tulare Basin.

The results highlight California agriculture’s economic resilience and vulnerabilities to drought and underscore the state’s reliance on groundwater to cope with droughts.

“California’s agricultural economy overall is doing remarkably well, thanks mostly to groundwater reserves,” said Jay Lund, a co-author of the study and director of the university’s Center for Watershed Sciences. “But we expect substantial local and regional economic and employment impacts. We need to treat that groundwater well so it will be there for future droughts.”

Other key findings of the drought’s effects in 2014:

Direct costs to agriculture total $1.5 billion (revenue losses of $1 billion and $0.5 billion in additional pumping costs). This net revenue loss is about 3 percent of the state’s total agricultural value.
The total statewide economic cost of the 2014 drought is $2.2 billion.
The loss of 17,100 seasonal and part-time jobs related to agriculture represents 3.8 percent of farm unemployment.
428,000 acres, or 5 percent, of irrigated cropland is going out of production in the Central Valley, Central Coast and Southern California due to the drought.
The Central Valley is hardest hit, particularly the Tulare Basin, with projected losses of $800 million in crop revenue and $447 million in additional well-pumping costs.
Overdraft of groundwater is expected to cause additional wells in the Tulare Basin to run dry if the drought continues.
Agriculture on the Central Coast and in Southern California will be less affected by this year’s drought, with about 19,150 acres fallowed, $10 million in lost crop revenue and $6.3 million in additional pumping costs.
Statewide dairy and livestock losses from reduced pasture and higher hay and silage costs represent $203 million in revenue losses.
The drought is likely to continue through 2015, regardless of El Niño conditions.
Consumer food prices will be largely unaffected. Higher prices at the grocery store of high-value California crops like nuts, wine grapes and dairy foods are driven more by market demand than by the drought.

Groundwater a “slow-moving train wreck”

If the drought continues for two more years, groundwater reserves will continue to be used to replace surface water losses, the study said. Pumping ability will slowly decrease, while costs and losses will slowly increase due to groundwater depletion.

California is the only state without a framework for groundwater management.

“We have to do a better job of managing groundwater basins to secure the future of agriculture in California,” said Karen Ross, Secretary of the California Department of Food and Agriculture, which largely funded the UC Davis study. “That’s why we’ve developed the California Water Action Plan and a proposal for local, sustainable groundwater management.”

Failure to replenish groundwater in wet years continues to reduce groundwater availability to sustain agriculture during drought -particularly more profitable permanent crops, like almonds and grapes- a situation lead author Richard Howitt of UC Davis called a “slow-moving train wreck.”

“A well-managed basin is used like a reserve bank account,” said Howitt, a professor emeritus of agricultural and resource economics. “We’re acting like the super rich who have so much money they don’t need to balance their checkbook.”

To forecast the economic effects of the drought, the UC Davis researchers used computer models, remote satellite sensing data from NASA, and the latest estimates of State Water Project, federal Central Valley Project and local water deliveries and groundwater pumping capacities.

The analysis was done at the request of the California Department of Food and Agriculture, which co-funded the research with the University of California.

The report’s other co-authors include UC Davis agricultural economists Josué Medellín-Azuara and Dan Sumner, and Duncan MacEwan of the ERA Economic consulting firm in Davis.

Through these links you may read the full report and Watch the recorded webcast of report press briefing.

Fitch: Negative Ratings Bias for LatAm Sovereigns Amid Slowing Regional Growth

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Negative sovereign rating actions exceeded positive actions in the first half of 2014 in Latin America and the Caribbean, according to Fitch Ratings. While the Rating Outlooks for most countries in the region remain Stable, Negative bias remains for ratings as currently more countries have Negative Outlooks than Positive Outlooks.

Fitch downgraded the sovereign ratings of Bermuda, Guatemala and Venezuela by one notch each during the first half of 2014. However, Fitch also took two positive rating actions in the region, upgrading Jamaica to ‘B-‘ from ‘CCC’ and assigning a Positive Outlook to Paraguay.

The Stable Rating Outlooks for the majority of sovereigns in the region suggest that positive and negative rating pressures are balanced. Currently, only Paraguay has a Positive Outlook while Argentina (Local IDR only), Aruba, El Salvador and Venezuela have Negative Outlooks.

‘Softer commodity prices, China’s slowdown, slower domestic demand and country-specific factors are clouding the near-term prospects of the Latin American region,’ said Shelly Shetty, Head of Fitch’s Latin America Sovereigns Group. ‘Structural constraints including low investment rates and infrastructure gaps, are also biting in some countries and highlight the need for a broader reform effort to improve the medium term growth trajectory,’ she added. Slower growth will likely constrain improvements in fiscal and external solvency ratios and dampen the sovereign credit momentum in the region, particularly as the rating cycle for the region has been quite positive in recent years.

At the same time, Fitch does not anticipate broad-based negative rating actions either as several Latin American countries have adequate external liquidity and credible policies in place to confront potential higher international volatility. Market access remains relatively robust for most countries. Fiscal room to stimulate domestic economies is more constrained although countries like Chile and Peru with countercyclical buffers and low government debt burdens have room to implement such policies.

Fitch is projecting Latin America’s real GDP growth will reach 1.9% in 2014 compared to 2.6% last year with modest recovery expected in 2015. The regional growth forecast masks important differences between countries. Brazil and Mexico are likely to under-perform this year with growth in the former reaching only 1.5% and remaining below 3% in the latter. Even the previously fast growing Chilean economy is losing steam as it confronts lower copper prices and China’s deceleration. Growth will also slow although remain relatively robust in Bolivia, Panama, Paraguay and Peru, while Colombia and the Dominican Republic are the only economies expected to accelerate this year. On the other hand, Argentina and Venezuela will likely experience recession.

Among the inflation targeting countries inflation remains elevated in Brazil and Uruguay. Chile, Mexico and Peru have cut interest rates amid slowing growth. Brazil has halted its monetary tightening cycle arguing the impact of the rate increases is cumulative and operates with a lag. Colombia is the only country in a tightening mode given its robust domestic demand dynamics. Argentina and Venezuela will continue to have the highest inflation rates in the region.

A gradual fiscal deterioration is forecasted in 2014 for several countries due to slower growth, lower commodity prices and continued spending pressures amid a heavy electoral calendar. The two largest economies of Brazil and Mexico will see higher deficits this year. Aruba, Costa Rica, El Salvador and Suriname will incur among the highest deficits in the region (surpassing 4.5% of GDP in each case). Only Bolivia and Peru are forecasted to run a small surplus or near balanced budget positions. Commodity dependent and recession-stricken economies of Argentina and Venezuela will have to manage their fiscal accounts within the constraints imposed by their limited financing options. Nevertheless, the modifications to Venezuela’s FX regime and the weaker average official exchange rate will likely benefit government oil receipts.

The regional current account deficit is forecasted to reach 2.6% of GDP in 2014. Current account deficits remain elevated in several countries including Brazil, Costa Rica, El Salvador, Jamaica, Panama and Uruguay. However, in most cases, external vulnerability is mitigated by healthy external reserves cushion, the continued resilience of FDI flows and access to markets and multilaterals. On the other hand, international reserves of Argentina and Venezuela have faced pressure over the past year. While they have stabilized in recent months, Fitch will continue to monitor their trajectory as significant drainage could further undermine their external debt repayment capacity.

The electoral calendar was heavy in the first half of 2014 with Presidential elections held in Colombia, Costa Rica, El Salvador and Panama. The election outcomes do not materially impact sovereign credit trends in these countries. However, countries like El Salvador and Costa Rica face the challenge of implementing fiscal reforms to secure better fiscal and government debt trajectories. Bolivia, Brazil and Uruguay will hold elections in the second half of 2014. The Bolivian President Evo Morales is expected to win the re-election bid which would imply broad policy continuity. Uruguay’s market friendly policies are likely to remain in place after the elections in which former President Tabare Vasquez is the current frontrunner. The polls in Brazil suggest that the likelihood of a second round have increased. Regardless of the electoral outcome, the next administration will confront the challenge of making policy adjustments to reduce the existing macroeconomic imbalances and take measures to boost confidence and competiveness of the economy. Political polarization will remain high in Venezuela and could make it difficult for the government to make faster progress on the much needed policy adjustments to ease foreign exchange constraints and address issues of scarcity, crime and very high inflation. Periodic periods of social instability cannot be ruled in Venezuela.

Material structural reforms to boost the lagging productivity growth in the region have not made significant headway. Mexico is the only exception where the government has been making progress on long-standing issues.

CBH Compagnie Bancaire Helvétique Acquires Latam and Iberian Private Banking Business of Banque Privée Espírito Santo

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Espírito Santo vende su cartera suiza de clientes latinoamericanos e Iberia a Compagnie Bancaire Helvétique — Photo: Romazur. CBH Compagnie Bancaire Helvétique Acquires Latam and Iberian Private Banking Business of Banque Privée Espírito Santo

Banque Privée Espírito Santo (BPES) has announced the sale of a significant part of its private banking business to CBH Compagnie Bancaire Helvétique SA, a Swiss independent private bank. The agreement covers the bank’s clients in the Iberian and Latin American regions.

The similarities in terms of culture and approach between the two banks will ensure continuity of the high-quality service and proximity to which BPES clients are accustomed. CBH and BPES will now work closely together to complete the transfer of the clients involved under the best possible conditions.

“I firmly believe that in CBH Compagnie Bancaire Helvétique we have found an excellent solution that will enable us to continue to work in the interests of our clients and our staff in the best way posible,” stated José Manuel Espírito Santo, Chairman of the Board of Directors of BPES.

Banque Privée Espírito Santo will continue to support its clients that are not transferred, maintaining a high-quality service and then gradually reducing its activities while at the same time developing its partnership with CBH Compagnie Bancaire Helvétique.

“We are very pleased to have concluded this agreement and we believe that it represents a significant step forward in the development of our bank, enabling the expansion of our business into the Latin American and Iberian markets. We are delighted to welcome the new team, with which we share a common strategic vision that is focused on a close relationship with our clients,” said Philippe Cordonier, CEO of CBH Compagnie Bancaire Helvétique.

Concierge-Style Insurance Brokerage for Latin America’s Most Affluent

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For Latin America’s ultra-high-net worth individuals and families— and for the financial institutions and advisors who serve them—the gateway to culturally tailored wealth protection can be found in Miami, Florida. That’s the home of International Wealth Protection, an insurance brokerage firm unlike any other in the U.S., according to Forbes.

Founder and longtime industry veteran Mary Oliva, who wields 20+ years of international marketplace experience, has traveled extensively throughout Latin America. She understands its wealthiest citizens’ unique needs and challenges; more importantly, she has the knowledge, tools and acumen to effectively address them.

“We work jointly with other wealth advisory professionals who want to fully service their foreign national clients but aren’t familiar with the cultural intricacies and regional realities that complicate plan- ning,” Oliva says. “We’re on the ground in Latin America, meeting with clients on a regular basis. The full scope of service we provide and the way we provide it truly set us apart.”

Managing the Many Facets of Risk

International Wealth Protection provides insurance-based wealth protection and wealth transfer strategies designed to protect clients’ assets, sustain their lifestyles and safeguard their legacies—all in a region too often beset by military insurrection, political instability and currency volatility.

“Ninety percent of Latin American businesses are family owned, yet only 1 percent reach the fourth generation due to a lack of planning,” Oliva says. “We understand our clients’ unique concerns as well as the nature and degree of risk they face, and we’re focused on having the conversations no one else is having with them—what keeps them up at night and the future they envision.”

International Wealth Protection also stays a step ahead of emerging regional trends. “We’ve now entered a global era of transparency and compliance,” Oliva says. “Our firm is pioneering the utilization of life insurance, including private placement policies, to meet Latin Americans’ growing need for tax-planning strategies.”

Protecting Your World: Concierge-Style Service

International Wealth Protection delivers straightforward insurance-based solutions to the highly complex and diversified jurisdiction that is Latin America. With complete understanding of the regulatory and tax environment of the region’s 20 different countries, Oliva is able to implement personalized solutions in a compliant and tax-efficient manner.

These solutions include but are not limited to: general risk evaluation ; multijurisdictional tax planning; charitable giving strategies ; U.S. beneficiary planning ; business continuity ; extraordinary risks ; asset protection ; multigenerational planning .

“Our goal is to help our clients mitigaterisk in a seamless fashion,” Oliva says. “We go to great lengths to provide an excep- tional client experience.”

Black Diamond Capital Management Appoints Jerome Shapiro as Managing Director

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Black Diamond Capital Management has announced the appointment of Jerome Shapiro as a Managing Director and Structured Product Portfolio Manager.

Mr. Shapiro joined the firm on June 1 at its Greenwich, Connecticut office and has responsibility for structured product investments across the Black Diamond platform.

“Jerome’s hiring expands our structured product capabilities and reflects Black Diamond’s view that structured investment opportunities are an attractive asset class for generating returns for our clients,” said Stephen Deckoff, Managing Principal of Black Diamond. “Jerome is a seasoned professional and his expertise will enable us to continue to enhance our capabilities in this important area.”

“It’s a privilege to join the Black Diamond team,” said Mr. Shapiro. “I’m confident that we have the experience and ability to significantly enhance and grow our structured products portfolio.”

Mr. Shapiro was most recently a Senior Vice President at One William Street, an alternative investment firm, managing an asset-backed portfolio across multiple commercial and consumer sectors. He previously worked at Merrill Lynch & Co. in the Principal Investment Group, co-managing a whole loan portfolio. He also held positions in trading and structuring CMBS and other mortgage products at Bear, Stearns & Co. Mr. Shapiro holds a BS in Mathematics from Tufts University.

Pimco and Source Expand Listings on the SIX Swiss Exchange

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PIMCO and Source announced the listing of two ETFs on the SIX Swiss Exchange. The PIMCO Euro Short Maturity Source UCITS ETF and the PIMCO US Dollar Short Maturity Source UCITS ETF were launched in 2011, initially on Xetra and the London Stock Exchange, and since then have gathered assets of €1.3 billion and US$1.8 billion respectively.

These short maturity funds – known as ‘MINT’ – were the first actively managed ETFs to be listed in Europe and offer investors direct access to PIMCO’s global cash management expertise.

Their aim is to preserve capital and provide the potential for superior income and total returns compared to traditional money market funds. They do this by investing in baskets of short-term investment grade debt securities. The funds are wholly transparent, with full disclosure of holdings published daily.

The fund managers look to take advantage of opportunities in the market by actively managing exposure to duration and credit. Currently, the Euro fund has an effective duration of 0.98 years, while the US Dollar fund has a shorter duration of 0.51 years. Both funds maintain duration of up to 1 year. In terms of credit exposure, the average rating within the two funds is currently A+.

The PIMCO Euro Short Maturity Source UCITS ETF and the PIMCO US Dollar Short Maturity Source UCITS ETF both have an annual management fee of 0.35%.