With a new direct daily flight between Dubai and Orlando offered by Emirates Airlines from September 1st, “Florida Dubai Link:Lifestyle and Business Exhibition” will showcase the new business, lifestyle and travel prospects that this will open up. Capital Assured, a real estate investment, management and development firm, is to become the strategic partner for the exhibition to be held in Dubai, September 6-7th 2015.
The 2 day exhibition will bring together 15 leading international companies to share knowledge, build partnerships and develop investment opportunities. This Florida focused event will feature educational seminars and round tables on topics including real estate, international taxation, immigration, the US school system, business expansion to the US, health, leisure and travel. Other event partners and sponsors include Emirates Airlines, the Greater Orlando Aviation Authority, U.S.-U.A.E. Business Council, and Dubai Chamber.
“Emirates Airlines’ opening its wings to fly to Orlando directly will offer new, interesting opportunities and we are ready to merge deals and relationships,” explains Robin Titus, General Manager at Capital Assured. “We have also noticed substantial interest for Florida lifestyle opportunities from Dubai, and we want to provide the perfect platform to facilitate the opportunity to invest.” Headquartered in Miami, and with offices in Dubai, Capital Assured has strong ties with both communities and supports the developing relationship between these two major international commercial hubs.
Photo: Jorge Díaz Barros / Courtesy Photo. Credit Suisse Names Jorge Diaz Barros Country Manager for Chile
Credit Suisse announces that Jorge Diaz Barros joined the bank this month as the new Head of the Chile Advisory Office and Chile Country Manager, a role in which he will partner with representatives from across our fully integrated Investment Bank and Private Bank to ensure a coordinated approach to all of our activities in the country.
Jorge Diaz Barros, who brings nearly 20 years of experience in the financial industry to his new position, joined Credit Suisse from JP Morgan Private Bank, where he worked in Miami and Santiago de Chile as a Relationship Manager and a Business Developer for UHNW clients in Latin America.
Jorge holds an MBA in International Business from Gabriela Mistral University, Business School in Chile.
With the arrival of the new Country Manager, Credit Suisse confirms its commitment to Chile, reinforcing the bank‘s growth strategy with a priority focus on the global offerings of our integrated bank in the country and across Latin America.
Foto: ChemaConcellon, Flickr, Creative Commons. Casi un tercio de las entidades de banca privada en Suiza desaparecerán del mercado en los próximos 3 años
A recent study conducted by KPMG Switzerland and the University of St. Gallen has shown that the gap between Swiss private banks is widening. While many private banks are in the process of adapting their business models to the changing environment, very few have succeeded in increasing their profitability. Only a small group of private banks have been able to pull away from the rest of the industry and make lasting improvements to their managed assets, efficiency and profitability. Meanwhile, smaller financial institutions in particular have felt increasing pressure this year.
As the study «Clarity on Performance of Swiss Private Banks – The widening gap» shows, the pressure on smaller banks in particular continued to increase this year. For many, the decision is clear: either they must leave the market or they must make fundamental changes to their business model so that they can continue to operate their business profitably and sustainably. «However, they don’t have much time left to make the necessary changes», warns Christian Hintermann, Head of Advisory Financial Services at KPMG Switzerland. «In general, many banks still appear to be undecided on which path to choose. We can expect the face of the industry to change significantly over the coming years.»
Banks must decide: Flight or fight?
According to the study, smaller financial institutions in particular have felt increasing pressure this year. They face a stark decision: either leave the market or adapt their business models. However, not much time remains to make the necessary changes. In general, many banks still haven’t decided and lack a clear strategy despite the continued decline in their development. The further decrease in the number of banks in Switzerland can be attributed to M&A transactions and – to an even greater extent – liquidations and the withdrawal of primarily Anglo-American private banks from the market. “We anticipate that around a further 30% of Swiss private banks will disappear from the market over the next three years through acquisitions and liquidations. This will reduce the number of private banks from 130 at the last count to fewer than 100″.
The study also shows a pause in mergers and acquisitions for 2015 despite driving forces remaining strong: The first seven months of this year saw a pause in M&A transactions, in contrast with 2014’s flurry of activity. This is largely due to a lack of sellers as well as potential buyers’ concerns about unforeseeable risks related to undeclared client funds and business practices that are no longer accepted. However, we expect M&A activities to regain momentum, in part thanks to the increase in settlements between banks and the US Department of Justice. The study shows that, even within the first two years of undertaking a major acquisition, banks see a significant increase in return on equity and revenue per employee.
The gap
«While private banks are attempting to adapt their business models, only a small group of very strong institutions have managed to increase their profitability», says Philipp Rickert, Head of Financial Services and Member of the Executive Committee at KPMG Switzerland, summarizing the results. He also points to the falling number of banks that still rely on undeclared legacy assets, predicting that «this concept will not survive in the medium term.»
Market drives growth in managed assets while net new money inflows remain negligible: The 7.3% growth in managed client assets last year is attributable to positive market developments and a strengthening US dollar. In contrast, net new money inflows made up a modest 0.5% of assets. There were marked differences between the various banks: those in the groups «Strong Performers» and «Turnaround Completed» achieved net inflows of 24.9 billion Swiss francs in total in 2014. Meanwhile, banks in the groups «Decline Stabilized» and «Continuing Decline” saw net outflows amounting to 17.9 billion Swiss francs. Overall, the median for managed assets among the «Strong Performers» group has increased by 146% since 2008 thanks to higher net new money inflows, inflows from mergers and acquisitions, and returns on managed assets. Consequently, the ability to grow is a critical success factor.
«Strong Performers» stay in the fast lane while the rest grapple with poor returns on equity: The private banks in the study had more to contend with than just weak growth. With a median value of 3.5%, returns on equity stayed at modest levels and saw little improvement in 2014. 80% of the private banks surveyed achieved returns of below 8% for the year. Only «Strong Performers» generated returns of above 9%, while most banks in the «Continuing Decline» group posted operating losses. Smaller financial institutions with less than 10 billion Swiss francs in managed assets are feeling the pressure in particular, with 41% of these falling into the «Continuing Decline» group. Returns on equity for the smaller banks were less than half those achieved by banks with more than 10 billion Swiss francs in managed assets.
Significant differences in efficiency within bank clusters
Increased operating efficiency and economies of scale have a positive effect on returns. Last year, «Strong Performers» achieved revenues of 585,000 Swiss francs per full-time employee, with this figure only reaching 357,000 Swiss francs for banks in the «Continuing Decline» group. The «Strong Performers» had just under 15 full-time employees per billion Swiss francs of managed client assets, with other banks had almost twice as many at 26 full-time employees. The «Strong Performers» appear to owe their success to their stronger focus on core markets, their increased operating efficiency thanks to outsourcing and economies of scale, and their strong growth rates.
A new CEO does not improve financial results
More than one third of the private banks in the study have replaced their CEO at least twice in the last nine years. In many cases, this has done nothing to improve their financial position in the two years after the changeover. Therefore, there is little to suggest that private banks can improve their results only by making changes to the upper echelons of management. Financial institutions that had kept the same CEO for the last nine years or only changed CEO once achieved higher returns on equity than banks that changed CEO two or more times.
Foto: Luis, Flickr, Creative Commons. ¿Falsas promesas? Dudas en Europa sobre la protección de los UCITS
The ‘protection’ afforded by the rapid redemption rights of a UCITS-compliant structure is of limited value, if the fund’s investments cannot be easily liquidated or only at fire-sale values, according to the latest issue of The Cerulli Edge – Europe Edition. With illiquidity fears mounting, Cerulli Associates, a global analytics firm, says the UCITS brand faces a denting if the professed safeguards of regular and speedy withdrawals prove of limited worth to redeemers if markets dry up.
One Genevan house directing insurers’ cash into UCITS-compliant hedge funds, told Cerulli that illiquidity risk is already evident in the investments of some liquid vehicles. It contends that given some of this sector’s largest portfolios grew so rapidly, and bought into mid- and small-caps, some of their equities positions “could take up to two years to unwind.” This, says Cerulli, could make it very difficult to sell some holdings at reasonable prices, to honor redemption requests in a matter of days.
It seems that portfolio managers in the UCITS hedge fund sector are not blind to the illiquidity risks sometimes attached to their strategies. At periods during last year, for instance, up to 40% of assets in onshore directional equities hedge funds were in portfolios that were closed to new business.
“It seems somewhat contradictory to deploy a liquid hedge fund vehicle, but then to restrict investors’ entry to it in any way,” says David Walker, European institutional research director at Cerulli. “However, limiting subscriptions to a fund makes good sense overall for the manager and clients, if the manager’s ‘alpha’ is threatened by fund size, or if shallow markets would stop significant withdrawals being met readily.”
Many European institutional investors Cerulli Associates speaks with at present express concerns that fixed income instruments right across the spectrum of credit worthiness could face illiquidity problems if holderstake flight.
Institutions are faced with a conundrum, says Barbara Wall, Europe research director at Cerulli. “Not only is the fixed-income complex they are most familiar with worthless as anything but a cushion or safe harbor. Now it threatens to turn illiquid.”
Threadneedle Investments has appointed Chris Wagstaff as Head of Institutional Marketing.
Chris will be instrumental to Threadneedle’s effort to further cement its presence in the institutional market and enhance its DB and DC client propositions, through educational & thought leadership initiatives and the development of investment strategies for a post-annuities world. His appointment follows the recent addition of Craig Nowrie to Threadneedle’s Multi- Asset Allocation team, in an effort to expand the firm’s proposition in the multi-asset and solutions space.
Chris joins from Cass Business School Executive Education, where he was Client Director with responsibility for the development, design and delivery of bespoke pensions and investment programmes. Prior to this, he was Head of Investment Education at Aviva Investors.
Dominik Kremer, Head of Institutional Sales at Threadneedle Investments, said: “The fact that the institutional market is a key focus for Threadneedle is perhaps one of our best kept secrets. We are the fourth largest manager of UK retail assets, yet 67% of our global investments and mandates across equities, fixed income, multi-asset and real estate are managed for institutional clients.
Chris is the co-author of “The Trustee Guide to Investment”, published in 2011. He has an Economics degree from Cardiff University and is a graduate of the London Business School Investment Management Evening Programme. Chris holds several certificates and diplomas, including the Chartered Institute for Securities and Investment Diploma, the Chartered Insurance Institute Personal Finance Society Diploma, the UK SIP Investment Management Certificate and the Pensions Management Institute Award in Trusteeship.
Foto: Steve Rainwater
. BlackRock compra FutureAdvisor
BlackRock has entered into a definitive agreement to acquire FutureAdvisor, a digital wealth manager. The company will operate as a business withinBlackRock Solutions (BRS), the firm’s investment and risk management platform.
The transaction is subject to customary closing conditions and is expected to close in the fourth quarter of 2015. The financial impact of the transaction is not material to BlackRock earnings per share. Terms were not disclosed.
The combined offering will enable financial institutions to grow their advisory businesses by leveraging technology to meet a growing consumer trend of engaging with technology to gain insights on their investment portfolios, including when making critical decisions around retirement. This need is particularly acute among the mass-affluent – a large segment accounting for 30% of total U.S. investable assets.
This acquisition helps the company meet the needs of a range of financial institutions including banks, insurers, large and small broker-dealers, 401(k) platforms, and other advisory firms looking for a digital-advice platform to increase customer loyalty and grow advisory assets.
“As demand for digital wealth management grows, we believe that our combined offering will accelerate our partner firms’ abilities to serve the mass affluent in a convenient, scalable way,” said Tom Fortin, Head of Retail Technology for BlackRock.
“BlackRock has dedicated enormous effort over the years to improving financial outcomes through its leading active and passive investment offerings as well as innovative retirement planning tools including its CoRI™ Retirement Indexes. We look forward to integrating and delivering this expertise to investors in partnership with financial institutions in the months to come,” said Bo Lu, Chief Executive Officer and Co-Founder of FutureAdvisor.
The People’s Bank of China (PBoC) moved to cut both the benchmark interest rate and reserve requirement ratio (RRR) on August 25. The stimulus measures should help market sentiment, but Craig Botham does not expect a resurgent China as a result.
The Emerging Markets Economist says: “The cuts, of 25bps and 50bps respectively, follow a disastrous few days on the equity markets, but we do not believe the PBoC wishes to reflate that particular bubble. However, the magnitude of the slump in the stockmarket is likely to have a negative impact on sentiment, especially given a weak economic environment (we saw a much softer-than-expected manufacturing Purchasing Manager’s Index (PMI) print last week).”
In addition, Schroders´s economist considers the change in exchange rate policy which resulted in a devaluation of the renminbi has seen capital outflows, which in turn have reduced liquidity and led to tighter monetary conditions. By cutting the RRR, alongside recent market operations, this liquidity is restored and lending supported. Interest rate cuts, meanwhile, should reduce borrowing costs for existing borrowers, particularly households and state-owned enterprises.
Will this stimulus drive a growth rebound? “We are doubtful. As mentioned, the RRR cut likely just restores lost liquidity. The rate cut, while helpful, probably just forestalls defaults, rather than encouraging investment in an economy beset by deflation, overcapacity, and high debt levels. Further, previous rate cuts have done little to lower borrowing costs for new borrowers, as bank interest margins have been squeezed by asymmetric effects on deposit rates compared to lending rates. This asymmetry has eased thanks to further deposit rate liberalisation, but banks may still seek to restore some of their lost margins, particularly given their mandatory participation in the local government debt swap.
“The stimulus measures should help market sentiment, but we do not expect a resurgent China as a result.” Concludes the economist.
Photo: Marcos Martínez Gavica (left) and Hector Grisi Checa (right) / Courtesy photo. Santander Mexico Appoints Hector Grisi as Executive President and CEO
Grupo Financiero Santander Mexico, S.A.B. de C.V. and Banco Santander (Mexico), S.A. Institucion de Banca Multiple, Grupo Financiero Santander Mexico, pursuant to the announcement dated August 12, 2015, in connection with the changes to their Boards of Directors and CEO, announce that their Boards of Directors held a meeting, in which Mr. Marcos Martinez Gavica was appointed as Chairman of the Board and Mr. Hector Grisi Checa as Executive President and CEO, subject to applicable regulatory approvals.
After years of committed and strategic leadership as Chairman of the Boards of Directors of the Group and the Bank since his appointment more than 18 years ago, Carlos Gomezy Gomezhas expressed his intention to retire. Mr. Marcos Martinez Gavica has been appointed as his successor as Chairman of the Group and the Bank beginning January 1, 2016, currently Executive President and CEO of the two companies.
The Board also approved the appointment of Mr. Hector Grisi Checa as the new Executive President and CEO of the Group and the Bank, replacing Mr. Marcos Martinez Gavica beginning December 1, 2015.
The new Executive President and CEO, Mr. Hector Grisi Checa, has extensive experience in the Mexican financial system, having been Executive President of Credit Suisse Mexico until last August 13, 2015.
Foto: Thomas Leth Olsen. La industria ha perdido el toque: hay que volver a lo básico
Generations of scribes have benefited from George Orwell’s famous rules for writing, guidelines that are still cited in the style manuals used at The Economist and Bloomberg. The author of 1984 and Animal Farm teaches us: never use a long word when a short word will do; if it is possible to cut a word out, always cut it out; and never use a foreign phrase, a scientific word, or a jargon word if you can think of an everyday English equivalent. In other words, keep it simple.
Orwell, like all masters of their craft, knew that simplicity is the ultimate goal of any endeavour. Simplicity aids understanding. Simplicity promotes efficiency. Simplicity means fewer things can go wrong. And yet, simplicity, ironically, is hard to achieve. Mathematicians seek ‘elegant’ solutions to problems – solutions that are simple yet effective. Stephen Hawking, arguably the most famous scientist alive, spent many years searching for the single, as yet elusive, ‘theory of everything’.
Sadly, simplicity has eluded the financial industry, opines the Asian Equity Team at Aberdeen Asset Management. More than 50 years ago Benjamin Graham, Warren Buffett’s investing mentor, warned that the more elaborate the mathematics used to support an investment strategy the greater the likelihood experience was being replaced by theory, investment with speculation.
And yet complex mathematical models that nobody understood underpinned the most egregious products to blow up ahead of the financial crisis. ‘Modern finance is complex, perhaps too complex. Regulation of modern finance is complex, almost certainly too complex,’ said Andy Haldane, chief economist at the Bank of England, as recently as 2012. ‘That configuration spells trouble.’
“Asset management, in line with the broader financial industry, faces reform as regulators seek to prevent the repeat of abuses. They are subjecting fund managers to unprecedented scrutiny and censure even as new evidence of wrongdoing is being uncovered at the banks. Investors are also questioning whether so- called ‘actively managed’ funds offer value for money, while opting for low-cost index-tracking alternatives. Years of central bank stimulus policies have neutered the volatility in stock markets on which active fund managers depend”, writes the Aberdeen´s Asian Equity Team.
One of the biggest challenges the industry faces, continue the team, lies in winning back the trust of sceptical investors and market watchdogs. The challenge is both ethical and organisational. A simpler compensation structure helps remove some of the conflicts of interest that were inherent. For example, the U.K. has banned the payment of commissions by fund managers to financial advisers, a system which disadvantaged investors. This is something other jurisdictions are now looking to adopt.
Meanwhile, regulators need reassurance that financial institutions are behaving.
Whether they like it or not, fund managers are being treated more like banks, amid proposals in the U.S. to categorise them as being ‘systemically important’ to the financial industry and therefore subject to much of the restrictive legislation created after the financial crisis.
Asset managers would argue their industry does not pose the same risks, since it does not commit its own capital.
Creating and selling products that everyone understands is a priority, points out Aberdeen Asset Management. Regulators are trying to introduce more investor safeguards, but this can spawn more complexity not less. For example, excessive small print designed to highlight investment risks may serve the opposite purpose because the longer the disclaimers the less likely they are to be read. In an attempt to address this problem easier-to-understand ‘mini prospectuses’ are now mandatory in some jurisdictions.
“Disgust over the way some companies behaved before the financial crisis has paved the way for the return of simplicity as business proposition and regulatory imperative. However we believe that financial institutions, especially asset managers, should embrace the principle not because they have to, but because they want to. There should be nothing to fear if you have confidence in your investment process. Scrutiny should be something to be welcomed rather than avoided. We welcome the move towards simplicity, which is just as well, because simplicity is here to stay”, conclude.
Investors must, of course, be vigilant of the Black Monday events and what has led to them. They need to ensure that their portfolios are properly diversified by geography, industrial sector and asset class in order to manage risk and navigate the growing volatility.
If their portfolio is indeed well-diversified, for the time being at least I would urge investors to remain cautious and consistent.
In terms of what investors should do, it is not ‘sell in a panic’, or the opposite reaction: ‘fill your boots with bargains’. For most long-term investors, it is ‘keep calm and carry on’.
It’s nearly impossible to predict what the stock market is going to do in the immediate future – and it is much too early to say if the current sell-off is nearing its bottom.
However, stock markets can be fairly predictable over long periods of time. They tend, over time, to go up over multi-year time periods. With this in mind, a sensible strategy is dollar cost averaging.
Investors need to ask themselves ‘will stock markets be higher than this when I retire? Looking at financial market history, the answer is probably ‘yes’, if they have a decade or more ahead of them. So, logically they should carry on buying as markets fall.
It is often said that the key to investment success is to buy low and sell high. The only problem with that theory is that trying to accurately time the weakest point in the cycle is impossible.
As such, it is best to just feed the money in over time in a measured way in order to take advantage of the long-term trend of stock markets to deliver long-term capital growth.
History teaches us that panic-selling in stock market crashes can be potentially financially disastrous for investors.
Nigel Green is founder and chief executive of deVere Group. He established deVere in 2002 and today his organisation has more than $10bn under advice from 80,000 clients in 100 countries.
