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Investors in Europe are Recognizing the Need to Become Engaged with China

A week in the UK attending our annual client symposium which was this year focused on China and a long weekend in Berlin highlighted that a year on from the Shanghai stock market crash, investors in Europe are recognizing the need to become engaged with China, albeit they are in no great rush.

It was this week last year that the Shanghai Composite hit its peak as a speculative bubble built around the potential inclusion of the China A share index in the MSCI indices, which would mean, according to the narrative, that a wave of index tracking ‘dumb money’ would be forced to come in regardless of price and valuation. As is so often the case, those buying into a ‘bigger fool’ theory turned out to be the bigger fools themselves. As previously discussed the decision not to include the China A shares triggered a run for the exits, but this was turned into a stampede as the Chinese authorities unfortunately decided to further limit leverage by brokerages the following day. With so much of the Shanghai Composite held by ‘weak hands’ and with the added impact of forced de-leverage, the market followed the old adage of up the staircase but down the lift shaft and the Chinese authorities morphed in the eyes of the western press from arch manipulators to keystone cops almost overnight. A year on and the market has stabilised, albeit at around 40% below those levels.

However, one of the points I made at our China symposium in London two weeks ago was that international investors need to realise that the Chinese stock market, despite its apparent size, does not play the same role in the Chinese economy as the S&P 500 does in the US. It represents only around 7% of household assets and is only really held by around 5% of the population. As such the wealth effect in either direction is relatively minor, while the composition of the index, dominated by state owned enterprises in terms of its market cap weightings, gives us little insight into the dynamics of the Chinese economy. This is a classic case of an increasingly common phenomenon, a belief that because we can measure something it is therefore important and even more that because we can plot the data on a chart, we can therefore infer predictions from it. The same applies to aggregate data such as GDP and inflation. The reality is that half of China is growing too fast and the government is trying to hold back excess leverage and liquidity, while the other half is barely growing at all and the government is trying to keep it ticking over. Clearly we want to have a greater exposure to the former than the latter – although opportunities exist in both areas and as such, at both the equity and the credit level, we continue to believe that this is an environment for stock selection and credit research – the index contains too many of the companies and credits you do not want, particularly if you use market cap weights. After the capitulation from emerging markets and to some extent Asia earlier in the year, the panic has subsided as people take a more considered look at the economics, but flows are still on balance negative, which is leading to a feeling of treading water.

This gives us time to focus on the structural trends and the big story remains the build out of a proper financial services infrastructure and in that sense the development of the bond markets in China are almost certainly a more important first step than the equity market as China moves away from the dominance of the (inefficient) banking system. At our symposium, while many of the clients were interested in understanding more about the prospects for Chinese equities, the potential for infrastructure bonds, corporate bonds and muni-bonds was also of great interest, especially in a world where over $10 trillion of government debt is now yielding less than zero. The notion that China can produce the same product (or perhaps even better) for half the price is coming to financial products as well. Recent announcements have made it even easier for international investors to access Chinese onshore bonds, while Chinese companies continue to issue onshore and redeem offshore bonds. This is a phenomenon we have discussed on previous occasions, not least because it appears in the national accounts as a reduction in foreign exchange reserves, and has been a strong stabilising factor in the market for Asian fixed income.

Perhaps I am spoiled by now living in Asia where there is (generally) a very different approach to work in the service sector. I was interested to see a report out last week based on a study from UBS – commented on here – showing that on average people in Hong Kong work over 50 hours a week – 62% longer than those in Paris. (Note to my colleagues in Paris and HR – I am simply picking the top and bottom cities honestly!) This could be that the people of Hong Kong are keener to earn money to buy ‘stuff’ – the money earned for a 50 hours’ worth of work in Hong Kong is almost enough to buy an iPhone – a good measure of purchasing power given Apple’s pricing model. Whereas the Parisian would have to work a longer week – 42 hours on UBS’s calculation. However, the Hong Kong worker is probably more focussed on trying to pay the rent while generally the cost of living in terms of goods and services is about the same in both cities – this is not true for rent. A three bed apartment in Hong Kong is twice the price of one in Paris. This is changing however. Hong Kong rents are starting to fall, as they are in much of Asia due to excess supply. Although as my colleague Simon Weston pointed out after a trip to Singapore last week, many of the developers are concerned that prices are not clearing properly. It also raises an interesting point about one of the long term fears about robotics – the idea that nobody will have a job and thus there will be significant social unrest. Workers in Hong Kong could work 40% less hours than they do at the moment and still be full time workers on a western European model, not to mention 28-30 days holiday rather than the current average of 17.

Excerpt from AXA’s Market Thinking column by Mark Tinker, Head of Framlington Equities Asia

Regulatory Requirements in EU legislation Form a Very Far-Reaching, Strict and Sound Regime

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The International Capital Market Association’s (ICMA) Asset Management and Investors Council (AMIC) and the European Fund and Asset Management Association (EFAMA) have published a report on the legislative requirements and market-based tools available to manage liquidity risk in investment funds in Europe. The report also offers some recommendations to further improve the general liquidity management environment.

The report was written in response to public concerns that liquidity has become more fragmented, whether as a result of the reduced role of banks as market makers and liquidity providers or the prolonged accommodative monetary policy of the world’s most prominent central banks.

The main topics it covers include documents in detail for:

The current regulatory requirements of EU legislation (namely UCITS and AIFMD), emphasising inter alia risk management and reporting
Market based liquidity risk management tools, for example swing pricing or redemption gates.

Peter de Proft, EFAMA Director General, commented: “Our industry acknowledges the virtues of the EU regulatory regimes for funds. Indeed, existing regulatory requirements in EU legislation such as the UCITS and the AIFMD regimes form a very far-reaching, strict and sound regime. The legal requirements have proven their merits and ensure appropriate liquidity management for investment funds”.

Martin Scheck, ICMA Chief Executive, explains, “This report adds an important element to the discussion regarding liquidity fragmentation, and complements the IOSCO Report. It shows that there is a comprehensive framework already in place available to managers to manage liquidity in difficult market conditions, through a combination of regulatory requirements and market-based tools.”

The report also proposes three recommendations that could lead to improvements in the general liquidity management environment in Europe. Firstly, it encourages that all European jurisdictions make available the full range of market based tools. Secondly, it strongly encourages the European Securities Markets Authority (ESMA) and the European Systemic Risk Board (ESRB) to make use of the existing liquidity data already currently reported to national authorities in Europe. Finally, it supports the continuing efforts by European and national trade associations to develop further guidelines for best practices in liquidity risk management.

To read the report, follow this link.

Technological Advances Changing the Way Providers Address Wealth Management Solutions

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Foto: Thelittletx, Flickr, Creative Commons. La tecnología hace la selección de fondos de inversión más rentable, barata y transparente

According to the latest research from Cerulli Associates, a global analytics firm, technological advances are pushing providers to keep up with investor expectations, and, ultimately, be the center of their clients’ financial lives.

“Wealth management providers, in particular, feel pressure from technology solutions (such as digital advice), changing financial planning expectations, and the commoditization of investment management services,” states Shaun Quirk, senior analyst at Cerulli.

“The retail investor is demanding more, forcing these firms to offer a deeper client experience,” Quirk explains. “Many advice providers tout a ‘holistic’ planning model to bolster their perceived value. However, this overused term in wealth management is vague and heavily focused on investment management as opposed to true financial planning.”

“As financial planning opportunities become available to a broader investor demographic, providers will need to leverage technological advances to scale the solutions, and streamline everything from the onboarding and information-gathering stage to the recurring planning conversations,” Quirk continues. “The providers that can take the abstract nature of financial and retirement planning and make it an engaging, tangible process will win client assets.”

Digital platform improvements and technological advances allow firms to interact with investors in ways that were not available just a few years ago. Investors desire deeper online, goal-oriented resources, research, and content to satisfy their investment management and financial planning needs. However, at the same time, they lack the bandwidth or attention span to dedicate significant time toward their financial well-being and the multitude of investment services used.

Cerulli’s second quarter 2016 issue of The Cerulli Edge – U.S. Retail Investor Edition examines wealth management and the evolving landscape.

Are Investors Overly Wary in the Currently Ragged Environment for Risk Assets?

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In looking at the current market climate, something that I find particularly striking is the dichotomy between investor sentiment and the changing global risk environment.

Across the board, measures of investor sentiment—whether fund flows or investor surveys—have recently reflected real skepticism about market prospects. According to the American Association of Individual Investors, for example, neutral or bearish sentiment stands at about 70%; that’s a bit better than it was but is higher than the historical average of roughly 60%. Lipper has reported continued flows out of U.S. equity mutual funds. And a few weeks ago, a BofA Merrill Lynch survey found that global fund managers were positioning themselves for an array of potential shocks in the coming months.

Litany of Fears
It’s easy to understand all the skittishness.
Negative headlines have been everywhere. The U.S. presidential election is one of the most inflammatory in recent memory, revealing a disturbing reservoir of economic resentment and creating an aura of unpredictability that is never good for markets in the near term. Politicians driven by nativist and socialist ideas have been gaining traction globally, with an extreme right party nearly gaining power in Austria. More immediately concerning, investors continue to assess the diminished, but still real, risk of a Brexit vote on June 23, and mull the political and economic crisis in Brazil. Meanwhile, fears over China’s growth have persisted, while recent statements by Janet Yellen have raised the specter of a Fed that could raise rates too fast in a climate where corporate earnings remains challenged.

A Shortened Tail
Still, for the most part, many of the drivers of tail risk that we’ve identified in this space have actually improved in the last few months. For example, the expensive dollar that has pressured earnings among large-cap U.S. companies has eased by about 5% (U.S. Dollar Index) since the end of January; oil is up, and at close to $50 (Brent) appears to be approaching a sweet spot that reduces strains on the oil patch but keeps fuel relatively affordable for consumers. More broadly, commodity prices generally have steadied, to a large degree based on a perception of stabilization in China, which itself has been a key driver of uncertainty.

Over the past few months, we’ve highlighted positives that have been peeking through the prevailing cloudy views on the markets. In Europe, for example, the perception of perpetual crisis obscures economic improvements and the strong positioning of some companies, offering up a long-term value opportunity. Emerging markets, although not yet in recovery, are benefiting from a shift to more market-friendly leadership, as well as the general stabilization of oil and the U.S. dollar. The latter trend, combined with a still accommodative Fed, could support wage and profit growth in the U.S.

Mixing Realism and Return
This is not to say that we are effusive about the current climate, but we believe assets are more apt to perform in line with the fundamental picture—both positive and negative. So, in our view, sovereign bonds have a low to negative return outlook, equities a modest return outlook, and credit falls somewhere in the middle. In other words, the balance of risk and reward across assets could lead to more normalized long-term relative return relationships.

That’s not to say that recently dominant risks couldn’t reassert themselves. Energy prices could experience another drawdown, Brexit could cause heightened angst in coming weeks, China could again disappoint. But overall we favor putting aside near-term distractions and maintaining consistent exposures across a diversified portfolio.

Neuberger Berman’s CIO insight by Erik L. Knutzen

Which One is the Best Passport to Have?

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A new index unveiled in Zurich this June is the first to ever objectively rank the quality of nationalities worldwide. The Henley & Partners – Kochenov Quality of Nationality Index (QNI) explores both internal factors (such as the scale of the economy, human development, and peace and stability) and external factors (including visa-free travel and the ability to settle and work abroad without cumbersome formalities) that make one nationality better than another in terms of legal status in which to develop your talents and business.

The QNI consistently ranks the German nationality the highest in the world over the last five years with a score of 83.1%. The nationality of the Democratic Republic of Congo sits at the bottom of the index on 14.3%.

Dimitry Kochenov, a leading constitutional law professor with a long-standing interest in European and comparative citizenship law, says the key premise of the index is that it’s possible to compare the relative worth of nationalities – as opposed to, simply, countries. “Everyone has a nationality of one or more states. States differ to a great degree – Russia is huge – Swaziland is small; Luxembourg is rich – Mongolia is less so. Just as with the states, the nationalities themselves differ too. Importantly, there is no direct correlation between the power of the state and the quality of its nationality. Nationality plays a significant part in determining our opportunities and aspirations, and the QNI allows us, for the first time, to analyse this objectively.”

A unique measurement tool
The QNI is not a perception index. It uses an array of objective sources to gauge the opportunities and limitations that each nationality gives its owners. Data from the World Bank, the International Air Transport Association, the Institute for Economics and Peace and our own research blends into this unique, objective and transparent measurement tool that divides the nationalities of the world into four tiers based on quality, from Very High to Low, giving a clear picture of the standing of each nationality at a glance. Christian H. Kälin, a leading specialist on international immigration and citizenship law and policy, and Chairman of Henley & Partners, says the QNI is relevant to both individuals interested in the mobility, the possibilities and the limitations of their nationality, and governments focused on improving the local, regional and global opportunities inherent in their passports.

Kälin states: “What makes the QNI so unique is that for the first time ever, we have combined the internal and external values of each nationality to create a true perspective of our globalized world. It is clearly better to have a nationality of a country with long life expectancy, good schooling and high prosperity – like Australia – than of a country which offers lower levels of security, schooling and healthcare to its nationals – like Ukraine.” This is what the QNI shows, and Kälin adds: “It is better to have a nationality with the rights to work and reside in several countries, like the Netherlands, with work and residence rights throughout the EU, rather than, say, Japan, which, although equally prosperous, does not offer its nationals any rights at all outside their own borders. It is also better to have a nationality of a peaceful and stable country, like Denmark, rather than of a country with security risks, like Venezuela.”

What is measured and how?
To calculate the internal value of each nationality, which comprises 40% of the score, the QNI takes into account three sub-elements:

The economic strength of the country, measured by Gross Domestic Product (GDP): 15%
The scale of human development, as expressed by the United Nations Human Development Index (HDI): 15%
The level of peace and stability, according to the Global Peace Index (GPI): 10%
The external value of nationality accounts for 60% of the ranking score. “The more you are restrained by national borders, the less the value of your nationality; the less noticeable the borders, the higher the value. While many opt for a life at home, an increasing number of people want to build a new life somewhere else or live their lives transnationally”, explains Kälin. There are four sub-elements:
- The diversity of settlement freedom: 15%
- The weight of settlement freedom: 15%
- The diversity of travel freedom: 15%
- The weight of travel freedom: 15%

Kochenov adds that it’s the first time that the diversity of settlement freedom provided by a nationality has been quantified and measured. “As no analogous source exists on global settlement freedom, the QNI provides the first and only such source worldwide. We gathered data through extensive research as well as consultation with countless experts on the legal requirements of settlement throughout the world, using IATA data as the starting point. For instance, the Liechtenstein nationality, although conferred by a tiny country, gives its bearers full access to all of the EU, the European Economic Area and Switzerland, a total of 31 countries, enjoying all the key rights which the bearers of the local nationalities enjoy. Compare this with Canadian nationality – which is associated with no such extra-territorial rights at all – and the difference becomes clear,” explains Kochenov.

“When assessing the external value of nationalities, it is important to take into account both diversity and weight. Diversity refers to the sheer number of countries accessible visa-free, while weight accounts for the quality of such countries. This allows the QNI to escape the simplifications of other indexes, valuing visa-free travel to the US as equal to visa-free access to Kiribati. While being able to travel to Kiribati is great, the empowering potential of accessing the US is infinitely higher,” says Kochenov.

Regional and Country Results
Europe and North America outperform the QNI’s global mean of 38.7% by a wide margin, with means of 62.8% and 58.1% respectively. The EU nationalities derive particular value from their unmatched Settlement Freedom, thereby boosting the continent’s Overall Value

Within the EU, the older EU Member States’ nationalities have very stable levels of quality. Newer Member States – particularly Bulgaria, Romania and Croatia – have greatly benefitted from EU integration and are likely to continue to improve

The nationalities of the US and Canada benefit primarily from very strong Internal Value and spectacular visa-free travel, but lie in the lower ranks of the Very High quality nationalities along with countries like Japan, Singapore and South Korea which cannot compete with the superb Settlement Freedom of EU nationalities, but perform well in all other aspects

South American nationalities have experienced a substantial increase in value due to significant progress made in the area of Settlement Freedom and the mutual gradual removal of the barriers related to settlement and work

None of the nationalities of the former Soviet Union are of Very High value and while the Russian nationality experiences a gradual increase in quality due to the constant conclusion of new visa-free agreements, the recent shift in Russian policy vis-à-vis the nationalities of the Commonwealth of Independent States makes it more difficult for CIS nationals to settle in Russia, and explains a general decrease in the quality of nationalities with important ties to Moscow

Destabilization in North Africa and the Middle East has adversely affected the quality of the nationalities in these regions. Libya, Bahrain and Oman experienced major blows to the value of their nationalities, and Syria has, unsurprisingly, been in free fall

Central America and the Caribbean generally score lower on the majority of sub-elements and the lack of significant Settlement Freedom prevents even the top-ranked nationalities from matching the European, North American and some of the East Asian nationalities

The Asian and Pacific regions sit quite far below the global mean. However, Asian nationalities occupy positions across the entire spectrum of the QNI, from the Very High Quality tier (for example Japan, New Zealand, and Singapore) to Low Quality (Myanmar, Pakistan, and Afghanistan)

Kälin says The Henley & Partners – Kochenov Quality of Nationality Index, now covering the five years between 2011 and 2015, will be updated annually to ensure a current picture of the quality of world nationalities is readily available at any moment in time, illuminating medium to long-term trends in nationalities’ development. He adds: “The QNI is a vital resource for financially independent individuals who wish to acquire the benefits of dual citizenship, as it provides assistance in selecting the most valuable second nationality for themselves and their families.”

To visit the Quality of Nationality Index (QNI) website and see how the nationalities you are most interested in score in the ranking follow this link.

Uncertainty Reigns Ahead of EU Referendum

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Uncertainly as to the consequences for the UK’s fund industry in the event of Britain exiting the European Union is adding to the ‘fear factor’ ahead of the June 23 referendum, according to a poll conducted for the latest issue of The Cerulli Edge – European Monthly Product Trends Edition.

Nearly 54% of respondents expected sales of funds across Europe to be affected to varying degrees should the UK pull out of the EU, says Cerulli Associates, a global analytics firm. Just over 30% foresaw some hurdles to doing business for up to three years, while 15.4% predicted long-term disruption that would require new distribution and sales strategies. Just under 8% of respondents envisaged difficulties for up to 12 months. The largest individual
grouping–46% of those polled–did not feel that a Brexit would affect sales.

“Cerulli believes that if only half of asset managers’ worries about Brexit are justified, then the industry should be firmly in favor of remaining in the EU,” says Barbara Wall, Europe managing director at Cerulli Associates, adding that the vast majority of asset managers seem to regard voting to remain as a no-brainer, even if an exit would only cause anxiety and inconvenience rather than a catastrophe.

“Uncertainty abounds, partly due to no one knowing whether a Brexit would result in Britain’s relationship with the EU looking more like that enjoyed by Norway, Switzerland, and South Korea, or something else. Nor does anyone know how long the renegotiating of agreements would take. This uncertainty is feeding the ‘fear factor’,” says Wall.

While it is unlikely that a Brexit would stop UK asset managers from managing funds sold in the EU or prevent sales of funds in the other direction, Cerulli believes that it would be disproportionately expensive for many smaller companies to make the necessary adjustments, and it could threaten the viability of some operations.

“Whether Britain stays in the EU is a matter for the electorate. Many voters will feel the businesses in which they work have given them a strong steer, usually to vote to remain in the EU. Cerulli believes this is because those who would be charged with adjusting for a Brexit have examined this scenario–as far as it is possible to examine it–and can see far more downside than upside,” says Wall.

Nancy L. Bosley Named Director of Strategic Business Development for Global Insurance Solutions Group

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Nancy L. Bosley has been named Director of Strategic Business Development for Global Insurance Solutions Group (GISG), an independent insurance brokerage firm with offices in Greater Philadelphia and Miami, as announced by Michael Blank, managing partner. In this role, Bosley is responsible for the strategic development aspects of GISG, with specific emphasis on the firm’s expanded services for the international and domestic wealth management, private banking, and investment advisory channels.

Bosley most recently served as President of Transamerica Life Brokerage after serving as the organization’s Senior Vice President, Chief Marketing Officer, and Chief Sales Officer. Prior to joining Transamerica, Bosley served as President and Chief Executive Officer of LifeMark Partners, a national brokerage marketing organization. Bosley has been in the life insurance industry since 1980, first serving as a principal in Security House, for 20 years, an independent life brokerage firm.

“Our firm is privileged to be a recognized leader in insurance-based solutions for businesses and families world-wide. With the additional bench strength of Nancy, we are further positioned for expansion and growth in 2016 within the registered investment advisory and private banking channels,” said Blank. “Our expanded team further elevates our support model to assist wealth managers and private banks as they grow and scale their businesses.”

A Dollar That Stays Within the Lines

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As I look back at some of the comments made in CIO Weekly Perspectives about our constructive views on non-U.S. equity markets, a key aspect of the story has been improvement in sentiment and growth fundamentals in various countries and regions around the world. Another crucial element in my view has been a shift in currency market dynamics.

Unlike in 2014 and the first half of 2015, the recent market price action has not featured a sustained rally in the U.S. dollar. Instead, we’ve seen a healthy correction in the dollar relative to other currencies including the euro and in particular the yen, with the Fed’s U.S. Trade Weighted Major Currency Dollar Index declining almost 7% during the first four months of the year.

Our general view is that this is a positive development. Especially in the U.S., earnings growth has been a cloud over the markets since the third quarter of last year. The absence of further dollar strength, coupled with firmer energy prices, may be setting the stage for a better earnings picture in the second half of the year.
Fundamental Reasons for Dollar Decline

A key question, however, is whether recent dollar weakness is justified. We believe the answer is yes, based on both the fundamentals and technical factors.

First, the fundamentals. Prior to the dollar correction that started in early February, pessimistic views prevailed regarding the trajectory of the global economy, but we’ve since seen improved sentiment on China as well as encouraging signs in Europe.

Then there’s central bank policy. Back in Q3 and Q4 of last year, the Federal Reserve seemed determined to execute multiple rate hikes in 2016. But in the midst of a soft patch in U.S. growth, they turned more dovish in Q1, to the point where markets anticipated just one—or at most two—rate increases this year.

Unlike in previous episodes, other central banks have not aggressively “played down” their currencies so far in 2016, effectively giving a green light for the dollar to correct lower. Earlier this year, the Bank of Japan and, to a lesser degree, the ECB seemed poised to move aggressively into negative rates territory. However, following the market’s hostile reaction to the BoJ’s January rate cut, central banks appear to be pursuing alternative, more tempered, policy options.

Finally, from a technical standpoint, we think the U.S. dollar bull market simply exhausted itself. So many strategists, from asset allocation gurus to FX experts, were still in the dollar-strength camp last year. Recently, they’ve changed their minds, piling into the short dollar trade versus the euro and yen.

Where We Stand
Although we acknowledge the reasons for the dollar decline, we’re not in the bearish camp at this point. Rather, we think the dollar is settling into a trading range that could last for the rest of the year and into 2017, driven by the factors I’ve mentioned—a healthier mix of growth dynamics and cautious central bank policy. Indeed, we’ve recently seen headlines about central banks disappointing markets in their “failure” to take action, and I think we’ll see a lot more of that, and fewer surprises from monetary policymakers.

Overall, we believe there are currently few drivers to justify a sustained breakout from current trading ranges. In terms of our views and given the more attractive levels, this translates into a tactical net-overweight dollar exposure and a modest short in the yen.

A connected issue relates to commodity-driven currencies. Since mid-January, the Canadian and Australian dollars have seen a strong recovery. Although we think there is fundamental justification (i.e., better Chinese data), the move is also largely technical in nature. A recent decision by the Australian central bank to ease rates is symptomatic of the underlying reality that Australia is not immune from global disinflationary pressures. Despite opinions to the contrary, in the near term we see limited potential for a new bull market in commodities or, by extension, commodity-driven currencies.

Smoother Ride? More Potential for Shocks
In this environment of subdued market drivers, there are risks. An obvious one is the potential for a vote for Britain to leave the EU late next month. While polling numbers are still implying a reasonable chance of Brexit, bookmakers now price only a 30% chance of separation. Sterling has been factoring in a high Brexit premium for some time but it recently rebounded to reflect lower Brexit probabilities.

A more subtle issue is posed by the subdued, range-bound environment. Without big differences in growth or drama from central banks, currency markets can become more technical in nature, and more vulnerable to shocks from exogenous events.

Circling back to where I started, how does all this affect risky financial assets? For much of 2016, we’ve been talking about the potential for better earnings in the absence of headwinds from the strong dollar or commodity weakness. Now that they are actually out of the way, and central banks are becoming quieter, we believe that the focus is likely to shift to individual company and sector fundamentals. Rather than dwelling on the macro, the challenge and potential could be far more extensive at the micro level.

Neuberger Berman’s CIO insight by Brad Tank

Bolton Global Capital Adds a 173 Million Team

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Bolton Global Capital recently announced that Alex Astudillo has joined the firm’s Miami office. Alex held the position of Senior Vice President with Merrill Lynch where he worked for the past 14 years and built a successful international wealth management practice with $173 million in client assets and $1.8 million in annual revenues. “We are proud to have such a distinguished professional affiliate with our organization and look forward to supporting the continued growth of his business.” stated Ray Grenier, CEO of Bolton. Angela Canas will manage client support operations for the team which will be branded under the name Private Wealth Advisors. Angela has been with Merrill Lynch for the past 9 years.

With the acquisition of the Astudillo team, Bolton is continuing to establish its position as a premier destination for top wirehouse teams transitioning to the independent business model. Over the past 3 years, the firm’s Miami office has acquired seven major teams from Merrill Lynch and a half dozen other teams from Morgan Stanley, RBC Wealth Management as well as Citi and HSBC Private Banks.

The Bolton Massachusetts based firm offers teams with $100 million or more in AUM, access to a wealth management platform with all of the capabilities of the major firms for both domestic and international business. Even with robust growth in AUM over the last five years, Bolton is highly selective in accepting new teams. According to Grenier “Quality is our number one criteria for affiliation. The most successful teams in the business generally focus on client satisfaction and on mitigating portfolio exposure to losses. Affiliating with the highest quality professionals is the key to sustainable growth in the wealth management industry.

Ireland, Malta, Belgium, the Netherlands, Cyprus and Luxembourg, the Most Affected if Brexit Happens

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An exit from the EU by the UK (‘Brexit’) would weigh on the economies of other EU countries and increase political risks in Europe, Fitch Ratings says.

They mention that although they would not expect to take any immediate negative rating actions on other EU sovereigns if the UK left, negative actions would become more likely in the medium term if the economic impact were severe or significant political risks materialised.

“The economic impact of a yes vote in the 23 June referendum would be lower for the EU than for the UK, but would still be palpable. It would reduce EU exports to the UK, although the extent would depend on the nature of any UK-EU trade deal and the degree and duration of sterling depreciation.” The most exposed countries would be Ireland, Malta, Belgium, the Netherlands, Cyprus and Luxembourg, all of whose exports of goods and services to the UK are at least 8% of GDP.

EU countries could gain from the shift of some FDI from the UK to the EU. However, countries such as Luxembourg, Malta, Belgium and Germany, with a large stock of FDI and financial assets in the UK, would suffer losses in the euro value of those assets if there were a permanent depreciation of sterling. The banking sectors of Ireland, Malta, Luxembourg, Spain, France and Germany have sizeable links to that of the UK.

Brexit would reduce the UK’s contribution to the EU budget (a net EUR7.1bn in 2014 after rebates), potentially to zero. This would imply that other net contributors would have to increase payments, or net recipients accept lower EU expenditure. Brexit would create a precedent for countries leaving the EU. “It could boost anti-EU or other populist political parties, and make EU leaders more reluctant to implement unpopular policies with long-term economic benefits. Negotiating the terms of the UK’s exit could exhaust the EU’s time and energy and open up new fronts of disagreement. Brexit could shift the centre of gravity of the EU, making it more dominated by the eurozone core, poorer, more protectionist and less economically liberal. If the UK were to thrive outside of the EU, it might encourage other countries to follow suit.”

Brexit could precipitate Scotland leaving the UK, which might intensify secessionist pressures in other parts of the EU, such as Catalonia in Spain.

Fears of other countries leaving could widen bond spreads for “peripheral” countries, potentially increasing the average cost of debt and making it more challenging to reduce government debt/GDP ratios.

Fitch is not recommending any particular position, vote or outcome regarding the referendum vote on June 23rd 2016. If you want to read their report titled “‘Brexit’ Would Raise Downside Risks to EU Sovereigns”, follow this link.