Adam Butler, Michael Philbrick and Rodrigo Gordilloare the executive team behind ReSolve Asset Management and the authors of the new book, Adaptive Asset Allocation: Dynamic Global Portfolios to Profit in Good Timesand Bad.
In their new book, Butler, Philbrick and Rodrigo, argue that picking stocks can only get you so far…true portfolio diversification cannot be achieved by picking a set of securities within a single asset class.
Given the current difficult market conditions, the traditional means of portfolio management simply won’t help investors achieve their financial objective. Static stock and bond portfolios, strategic asset allocation, and buy-and-hold might work during certain market regimes, but if they didn’t get the job done over the last 15 years. ReSolve Asset management is expecting 20 more years of the same, investors have to make some real changes.
Adaptive Asset Allocation presents a framework that addresses these major challenges, emphasizing the importance of an agile, globally-diversified portfolio:
Scrutinizes the relationship between portfolio volatility and retirement income.
Details the historic divergence between economic reality and investor behavior.
Demonstrates a model for predicting long-term returns on the basis of current valuations.
Examines the difference between Strategic Asset Allocation, Tactical Asset Allocation, and Dynamic Asset Allocation.
Adopts an investment framework for stability, growth, and maximum income.
An optimized portfolio must be structured in a way that allows a quick response to changes in asset class risks and relationships, and the flexibility to continually adapt to market changes. To execute such an ambitious strategy, it is essential to have a strong grasp of foundational wealth management concepts, a reliable system of forecasting, and a clear understanding of the merits of individual investment methods.
“The portfolio management industry is undergoing a revolution analogous to the shift that occurred after Markowitz introduced his modern portfolio theory in 1967. Managers who embrace the new methods will increasingly dominate traditional managers, and those who fail to adapt will, inevitably, face extinction,” assert the authors.
Nigel Green. El escándalo de los #panamapapers no representa a la industria offshore
The Panama Papers is a global investigation into the sprawling industry of offshore companies. According to the International Consortium of Investigative Journalists (ICIJ), which conducted the investigation of more than 11 million leaked files, “the investigation exposes a cast of characters who use offshore companies to facilitate bribery, arms deals, tax evasion, financial fraud and drug trafficking.” However the allegations made in the Panama Papers case are not representative of the international financial services industry, affirms the boss of one of the world’s largest independent financial advisory organizations.
According to Nigel Green, founder and chief executive of deVere Group, the leaked documents from Panamanian law firm, Mossack Fonseca suggest there might have been tax evasion on a grand scale, but in is opinion, those allegations are not representative of today’s wider international financial services industry. “The overwhelming majority of the offshore sector only provides services that are fully compliant and legal and they are used by law-abiding clients, who are simply looking for typically better returns, more investment options and greater flexibility.”
He believes that the idea of a ‘tax haven’, in the traditional sense of the phrase, is now somewhat outdated. “In today’s world, in which financial information is being automatically exchanged with tax authorities globally, it is almost impossible to hide money. No longer can people stash assets on ‘treasure islands’ and not expect to be caught.” Green mentions that in his experience working with expatriates and international investors, who have generally more transient lifestyles, “offshore accounts are preferable simply for convenience. They offer centralised, safe, flexible and international access to their funds no matter where they live and no matter to which country the individual moves to in the future. In addition, they offer a wide choice of multicurrency savings and investment solutions.”
Amongst the benefits of offshore financial centres, Green highlights that they allow those who qualify to do so, to use legal, bona fide international investment products to form part of a robust and sensible financial planning strategy. As well as that they allow companies to avoid getting taxed twice on the same income and that they offer legitimate financial refuge for those in countries where there is economic and political turmoil, such as extremely volatile currency and confiscation of assets.
Green claims that the current scandal is an opportunity “to further enhance the effectiveness and credibility of these international financial centres and the sector. This is especially important as the industry is set to grow exponentially in the coming years as individuals and companies become ever more globalized.”
Mercer Advisors and Kanaly Trust last week announced that they have reached a definitive agreement to merge. Upon the merger completion, the combined company will manage assets exceeding $8 billion making it one of the largest independent wealth managers in the United States. Terms of the private transaction were not disclosed.
The combined company will be led by David H. Barton, Chief Executive Officer of Mercer Advisors. Mercer Advisors was acquired by Genstar Capital, a private equity firm, last year. Kanaly Trust is owned by Lovell Minnick Partners, a private equity firm that invests in the financial and related business services sectors, which will retain a stake in the combined company.
Mercer Advisors is a total wealth management firm that provides fee-only comprehensive investment management, financial planning, family office services, retirement benefits and distribution planning, estate planning, and tax management services. Based in Santa Barbara, Mercer has over $6 billion in assets under management and more than 5,000 clients.
Kanaly Trust provides comprehensive wealth management and financial planning and trust/estate services to families, individuals, and estates. The Houston-based company manages and advises on assets totaling over $2 billion on behalf of more than 500 families, and serves as the trustee or executor for estates totaling more than $2.5 billion.
“This transaction brings together two great companies and creates a strong partnership of people who have the benefit of a stronger platform from which to offer expanded services with the personal and customized service clients demand,” said Barton. “Genstar has been instrumental in helping us rapidly grow our company, and we are well-positioned to build on our momentum. Paramount in Kanaly Trust’s decision to join Mercer Advisors was our shared commitment to the highest level of service, which makes this combination such a great fit.”
“The merger with Kanaly Trust is a significant step forward towards scaling a national wealth management firm to a broader base of sophisticated clients,” said Anthony J. Salewski, a Managing Director at Genstar. “This transaction combines the complementary resources of two important players, and we are excited about this transformative partnership. We are pleased with Mercer Advisors’ progress, led by Dave, and we plan to continue to invest in and support the company as it continues to build its presence in the wealth management sector.”
“This merger brings together two world-class wealth management firms, which will allow us to expand client resources beyond the high-levels we have today,” noted Drew Kanaly, Chairman of Kanaly Trust. “Our extensive experience working with high-net-worth entrepreneurs and executives, and family offices is highly complementary to Mercer Advisors, and this partnership will allow us to provide those services on a national level.”
“The talented Kanaly Trust team remains focused on providing high touch, highly personalized financial advice and customized solutions, which we believe will continue to be in high demand among clients,” said James E. Minnick, Co-Chairman of Lovell Minnick Partners. “We look forward to our continued involvement and support in working with Mercer and Kanaly in growing the combined company.”
The merger is subject to customary regulatory approval.
Investors domiciled in Europe and Asia are shifting their attention in regards to sector allocation says trendscout, a service offered by fundinfo that measures fund interest based on online views of their 16+ million fund documents database.
According the their latest insight, Technology and HealthCare had attracted a lot of interest for quite some time, but the tide has recently turned. HealthCare has been losing steam since last fall, and Technology has corrected from its year-end rally. Investor’s focus is now shifting towards depressed cyclical sectors like Gold Mining and even towards Physical Gold ETFs:
Other trendscout highlights include that amongst the categories losing attention are Equity Europe, Equity Japan and Fixed Income Relative Value, while Equity World, Flexible Allocation and Equity Gold Mining are gaining attention with the iShares Core and Comstage driving interest for Equity World.
Other funds gaining attention according to trendscout are:
Foto: Mike Beales
. Julius Baer aumenta su participación en Kairos en un 60,1%, hasta alcanzar el 80%
Julius Baer yesterday announced that the transaction to acquire an additional stake of 60.1% inKairos Investment Management for EUR 276 million (US$ 314,51 million) was completed on 1 April 2016, bringing the Group’s total ownership of Kairos to 80%.
Julius Baer first announced the transaction to increase its stake in Kairos by acquiring an additional 60.1% of the Milan-based companyin November 2015, following its initial purchase of 19.9% in 2013, and has since then received the relevant regulatory approvals.
The executive management of Kairos will remain unchanged and the transaction will significantly reinforce Julius Baer’s and Kairos’ long-term position in Italy and further fuel Kairos’ ambitious growth trajectory.
Kairos was established as a partnership in 1999 and today employs a total staff of over 150. The company is specialized in wealth and asset management, including independent best-in-class investment solutions and advice. As at 31 December 2015, Kairos’ assets under management had reached over EUR 8 billion (US$ 9,12 billion), up from approximately EUR 4 billion (US$ 4,56) billion when Julius Baer and Kairos started their strategic partnership in 2013.
The old adage says that “time in the market” is more important than “timing the market.” Anyone who needed a reminder of that truth got it in spades during the first quarter of 2016. Who would have thought, on the dark morning of February 12 with the S&P 500 Index down more than 10%, that U.S. equities would finish the quarter up 0.8%?
Only the very brave, or the very foolish. And that’s the point of the adage: As long as you remain convinced that underlying economic fundamentals have not changed, trying to call the bottom of a volatile market is just as misguided as panic selling into tumbling prices. The “W-shaped” market kicked off by China’s devaluation last August is the perfect exhibit to back up our philosophy of maintaining a long-term view, putting the headlines into perspective, staying diversified and looking for opportunities to buy on volatility.
Things were never as dark as they seemed on February 12, and despite the arrival of daylight saving time they are probably not as bright as they seem today. Purchasing Managers’ Indices, a key measure of industrial activity, have been positive but not exciting; GDP expectations have not improved meaningfully; deflation fears still darken Europe and Japan; and China is still muddling through. High-profile defaults in the energy and mining sectors appear priced in but will likely cause shocks when they materialize, nonetheless. U.S. corporate earnings are still struggling—when the first profits estimates for Q1 came in a week ago they revealed a drop of almost 12% year-over-year, which would be the biggest decline since the depths of the financial crisis.
Markets show signs that they recognize this. For sure, there have been extraordinary rallies in some unloved places. The Brazilian stock market is up 18% on the year, and more than 25% since its mid-February lows. The Brazilian real is up almost 9%. Emerging market currencies as a whole enjoyed one of their strongest rallies ever in March.
After falling precipitously, the price of oil has recovered to finish the quarter near where it began the year; this, in our view, should reduce the uncertainty around the deflationary impulse and the distress levels in the wider economy. There has even been some outperformance of value over growth stocks in the U.S. If sustained, that would represent a bullish reversal of a multiyear trend, which may suggest that investors expect a return to more broad-based economic growth and no longer feel compelled to pay a premium for the most visible earnings.
But not everything fits this script. Gold, considered by many a safe haven asset, has hung on to most of the 20% gain it made during the New Year turmoil. So far, value is leading growth only by a small margin, and the underperformance of smaller companies this year is not characteristic of a full-throttle rally. Where growth and deflation concerns are most acute, stock markets have not drawn the same “W” as they have in the U.S.: Germany is down 6% year-to-date, and both Japan and China are down more than 10% year-to-date.
Market participants are watching the fundamentals and saying, “show me the money.” They know the next leg up in equity market valuations depends upon improving profits in the second half of the year, and while we believe they are likely to get this after the recent weakness, they need more reassurance that the headwinds of the falling oil price and the rising dollar have eased. They want to see clearer evidence that the “Third Arrow” of Abenomics can translate into real economic results. They want to see some inflation in Europe. They want more certainty that China is not planning another surprise currency devaluation.
We’d like further evidence of stabilization and improvement in these areas before we add aggressively to risk, too—but we are also prepared to hold fast to our steady-but-cautious outlook when markets have their next tantrum, as they inevitably will. We know that “time in the market” is critical, because it is often hard to see the turn of the cycle until it is behind you.
Column by Erik L. Knutzen, featured on Neuberger Berman’s CIO insight
In the wake of a sharp recovery, equity market investors’ attention has been drawn to geopolitics. From the terrorist attack in Belgium, to President Barack Obama’s historic visit to Cuba, to the narrowing of the U.S. presidential field, newsworthy but largely noneconomic events have predominated. Post earnings season, without key data announcements, markets have lacked meaningful drivers and have been largely directionless, but without the turbulence that has often been seen recently.
Investors can be forgiven for pushing the pause button. In the opening five weeks of the quarter, the markets were characterized by fears of global deflation, apprehension over growth rates in the U.S. and China—and price volatility. At the time, we suggested that economic concerns were exaggerated. Indeed, reassuring consumer, manufacturing and housing trends in the U.S. and a rebound in oil prices, along with a modest increase in the renminbi’s valuation, helped ease fears and contributed to the market’s subsequent V-shaped recovery. On the monetary front, the market’s expectations for a pullback by the Federal Reserve on planned rate increases and the ECB’s easing actions reduced headwinds for risk assets and alleviated concerns about a damaging deflationary cycle.
In a sense, the relative market stability of the past week should be reassuring in the context of the global newswire. Investors have learned that geopolitical events, no matter how tragic or appalling in nature, need to be assessed in relation to economic impact. The terrible bombings in Belgium had an immediate but moderate effect on the markets. But only if such tragedies lead to meaningful changes in personal spending, business confidence and the like do they affect the broader economic picture.
A more positive narrative could be found in President Obama’s visit to Cuba—the first such visit by a sitting U.S. president since 1959. But, again, the economic significance is more tied to future developments: whether the current thaw between the two countries extends to a lifting of the U.S. embargo and the development of meaningful business relationships. Substantial disputes remain, most prominently on human rights, and we will be watching the situation with interest.
Finally, the turbulent U.S. election race is at long last narrowing, as Donald Trump and Hillary Clinton have solidified their front-runner status but continue to face rearguard competition from Ted Cruz and John Kasich, and Bernie Sanders. This is an important election, with real economic impacts for the U.S., particularly as they relate to the health care sector, infrastructure and tax policy (among other key flashpoints), as well as for our global trading partners. The unpredictable nature of this year’s process has been, to a degree, a headwind for equity markets. As the race continues to develop, and as we have a clearer sense of what the major candidates would seek to achieve in office, we may start to see market action reflecting the anticipated outcome. The situation bears watching, because, as we’ve said, fiscal policy is an important component in driving U.S. economic growth to a higher level. Monetary policy cannot alone solve the current growth problem.
More than likely, investor attention in the short term will move away from these situations as we start to see more market data that clarifies the Fed’s path on interest rates, economic growth and, ultimately, the outlook for earnings in the latter part of 2016. At that point, equities will have reason to get back into motion.
Neuberger Berman’s CIO insight column by Joseph V. Amato
Asset management companies with flexible bond products that outperform have a chance of reversing the recent run of outflows but fee cuts may be a decisive factor in tempting back investors, according to the latest issue of The Cerulli Edge – European Monthly Product Trends Edition.
Flexible bond products, a category which usually includes strategic and unconstrained bond funds, fell out of favor in 2015 after soaring in popularity the previous two years, partly on the perception that they were better able than other bond funds to cope with the U.S. Federal Reserve’s supposedly imminent rate rises, notes Cerulli Associates, a global analytics firm.
The entire bond market suffered last year, but funds with a substantial high-yield element were hardest hit. However, Cerulli believes that the policies of central banks can benefit flexible bonds. The European Central Bank has cut its main refinancing interest rate to zero and announced an extension of bond buying. With some yields already negative, value in European bonds is proving hard to come by. This strengthens the case for a fund to be as unconstrained as possible as it searches for alpha. If emerging market corporate bonds seem to offer better value than eurozone sovereigns, the fund can act accordingly.
“Flows for flexibles may take some time to come back and many will fall by the wayside,” says Barbara Wall, Europe managing director at Cerulli Associates. “However, stronger funds may benefit from the shakeout. The longer established ones with better past performances may be able to convince investors they can recapture the glory days. Their chances of doing so will be that much greater if they reduce charges, even if only temporarily.”
Wall points out that Goldman Sachs, PIMCO, and M&G, which charge in the 1.4% to 1.7% range, look expensive given recent negative returns, especially when compared with the likes of Artemis and BNY Mellon, which charge well under 1%. She adds that some funds should consider ditching their performance fee, even though this has been largely irrelevant given the losses.
Accuity, the leading global provider of risk and compliance, payments and know-your-customer solutions, announced on Wednesday that it is opening an office in Miami to serve new and existing clients in Miami, Central America, Mexico, Colombia, Venezuela, the Caribbean and Gulf countries.
Accuity is part of Reed Business Information (RBI), which is in turn is part of RELX Group, a world leading provider of information solutions, listed on the London and Amsterdam Stock Exchanges.
The opening of Accuity’s Miami office is in response to the firm’s rapidly expanding business in Central and Latin America. It reflects Accuity’s strategy in LATAM, which has been to grow its Sao Paolo office to meet demand in the South of LATAM region (SOLA) and grow its Miami base for Northern LATAM and the Caribbean. Accuity has more than 200 clients in LATAM and predicts continuing growth across the region as a whole – across the breadth of Accuity’s payments, risk and compliance solutions. Being in Miami will enable Accuity to enhance its service levels to new and existing regional clients who already include some of the region’s leading financial institutions.
Hugh Jones, President and CEO of Accuity, said: “The opening of our Miami office brings us closer to our Central and Latin American customers, many of whom have branches in Miami. We see Miami as a financial services hub for the region and we look forward to forging ever stronger relationships with the financial services community there. Our local team, now based in Miami, will work closely with our Sao Paulo office to leverage our deep Brazilian market experience. Together, they will build on Accuity’s reputation for improving operational efficiency and protecting our financial and corporate clients against sanctions and compliance violations.”
Accuity’s new office is located at: 1101 Brickell Avenue, 8th Floor, South Tower, Suite #102. Miami, FL, 33131, USA.
According to Jodie Gunzberg, Global Head of Commodities and Real Assets at S&P Dow Jones Indices, March saw the biggest comeback in commodities.
St. Patrick’s Day didn’t just have a pot of gold at the end of the rainbow, but had basically the whole commodity basket. The S&P GSCI that represents the world’s most significant commodities, ended March 17th with a positive total return year-to-date for the first time in 2016, up 1.9%.
The index reached its highest level since December 10th, 2015, and gained 18.8% since its bottom on January 20th, 2016. This is the most the index has ever increased in just 40 days after bottoms.
Further, now in March, 23 of 24 commodities are positive. This is the most ever in a month with one exception when all 24 commodities were positive in December 2010. It is also the fastest so many monthly returns of commodities changed from negative to positive, making a comeback from November 2015 when just two commodities were positive.
Now, only aluminum is negative in March, down 3.1%. However, its roll yield recently turned positive that shows more scarcity (that is very rare for aluminum,) indicating it may turn with the rest of the metals. Especially if the U.S. dollar weakens, the industrial metals tend to benefit most of all commodities. That says a lot about their economic sensitivity given all commodities rise with a weak dollar.
