A new survey of financial services professionals conducted by Cipperman Compliance Services (CCS) reveals that asset managers, broker-dealers, and other firms are embracing compliance as a core function of their business, with an equal number of respondents reporting that they now spend as much on compliance as they do their legal counsel.
The second annual “C-Suite Survey”, drawn on responses from 180 leaders tasked with compliance in the financial services industry, finds that although a greater number of firms have formed compliance committees and conducted reviews of their compliance programs in the past year, only18% allocate more than the industry-benchmark 5% of revenues to such activities.
As regulatory scrutiny of the industry continues, client pressures have driven an industry-wide march toward adopting formal compliance procedures.
Eighty-one percent of respondents are “concerned” or “very concerned” by the Securities and Exchange Commission’s practice of naming and prosecuting individuals. Moreover, 70% of respondents also report that prospective clients have asked to review compliance policies or interview compliance personnel, suggesting that compliance is now seen as an integral part of a desirable financial firm.
“Gaining the trust of clients is essential in asset management,” said CCS Managing Principal Todd Cipperman. “A manager’s ability to demonstrate a strong compliance program is a big factor in landing asset management business from institutional and individual investors.”
Accordingly, firms have taken concrete steps to formalize their compliance procedures. Sixty-three percent of asset managers indicate they have a compliance committee at their firm, rising from 48% reporting the same in 2014. Moreover, 88% of all respondents report that they have conducted a compliance review in the last year, as opposed to the 67% who answered as such in 2014.
“Firms are choosing to vest these duties with committees and individuals whose sole responsibility is compliance, as opposed to wearing multiple hats, which has proven to be the most effective means of maintaining a culture of compliance,” said Cipperman. “Truly dedicated compliance personnel reduce conflicts of interest, stay on top of the shifting regulatory landscape, and ensure compliance doesn’t take a backseat to other business functions.”
Resources Don’t Match Commitment
Even as firms report dedicating personnel to compliance, they have yet to fully devote the appropriate amount of resources to their programs. Just more than half of respondents, 53%, report spending between 0 and 5% of their total revenues on compliance.
Alarmingly, a significant number of respondents (who are charged with compliance activities at their firms) were unaware of how much they spend altogether. Twenty-nine percent of asset managers, 35% of broker-dealers, 14% of alternative managers, and 31% of wealth managers could not identify what they spend on compliance.
“These figures show, as they did last year, that it is much easier to talk the compliance talk then walk the walk,” noted CCS Managing Director Jason Ewasko.“Firms should spend a minimum of 5% of revenues or two basis points of assets under management on compliance in order to have an effective program. Less than that and they are putting their businesses, and in extreme cases their personal finances, at risk.”
Outsourcing Compliance Function Grows in Appeal
On the heels of recent acknowledgements by the SEC of outsourced compliance activities and court rulings validating the practice, the C-Suite Survey found that the industry has rapidly adopted the practice. Fifty-seven percent of all respondents say they outsource some or all of their compliance function, a rise from the 24% who outsourced in 2014. Leading the trend of firms embracing outsourcing are broker-dealers at 65% and alternative managers at 68%.
Foto: Luis, Flickr, Creative Commons. Los fondos monetarios captan 77.000 millones de dólares en julio ante la incertidumbre en el mercado
Global assets under management did not move significantly in July and stood at $35.9 trillion USD at the end of the month. Estimated net inflows amounted to $114.9 billion USD, while market movements in the reporting month delivered an $86.7 billion USD loss. In terms of market share, the trend continues to favour Equity Funds (+0.2 %) over Bond Funds (-0.2%) and Money Market funds (+0.1%), according to Lipper Thomson Reuters figures.
All asset types posted negative average returns, with Commodity Funds taking the biggest hit (-8.7 %) due to a further drop in energy prices after settling the Iran deal and a significant decline in precious metal prices. A further depreciating Euro versus US Dollar (-0.8%) had an additional impact on Lipper’s USD calculated fund market statistics.
Regardless of negative average returns, nearly all asset types except Bond and Commodity funds could profit from net inflows. Leading the way was Money Market Funds with $77.7 billion USD inflows, indicating some money being put aside because of uncertain market outlook, followed by Equity Funds with $29.5 billion USD. Bond Funds lost $0.6 billion USD and Commodity Funds some $1.7 billion USD, due to outflows.
Apart from the two big Money Market Classifications US Dollar ($41.0bn) and Euro ($29.5bn), the Equity Global ex US ($17.0bn), Equity Japan ($9.4bn), and Equity Europe funds with $7.1 billion USD estimated net inflows were able to attract the greatest interest from investors. As was the case in June, the Equity US fund classification had to accept redemptions, this time amounting to $7.3 billion USD which marked this the worst classification for fund flows in the top 50 Lipper Global Classifications league.
“The outlook for the securities market does not give a clear indication where it is heading. On the one hand it is anticipated that the FED will raise interest rates this year but, on the other, this seems unlikely as US macroeconomic data shows little signs of significant improvement. Cheap money (from borrowing at low rates) isn’t finding its way into the real economy, as investors prefer to stay on the sidelines, accepting lower interest rates for less risk in fixed income markets”, Otto Christian Kober, Lipper’s Global Head of Methodology and author of the report, comments.
“The situation is not much different in Europe. It doesn’t look like the ECB will raise interest rates any time soon, due to highly-indebted southern European countries. For Europe as a whole, the money continues to flow into Equity markets, with notable movement into Money Markets as well.”
Over the past few years, we have seen the launch and rise of several new companies like Uber, Groupon, and AirBnB. These companies may have started in local markets with a mostly Millennial customer base, but they have now evolved into global enterprises used across generations, creating a viable alternative to traditional methods of transportation, lodging, computing, food delivery and even legal services. These companies are all part of a group known as the “Sharing Economy.”
There has been quite a bit of buzz in the investment world about these companies, which often boast sky-high valuations. Many of these companies have the backing of important venture capital firms or titans of Silicon Valley. Clients have been asking us whether it makes sense to consider some of these companies as potential investments. It is our belief that while companies in the Sharing Economy have made things much more efficient by using technology, It remains uncertain that they will build a business of lasting value, or have a clear path to shareholder value creation. There are just not enough profits to share in the “Sharing Economy”. Most of the benefits are for consumers –which is why we believe clients should be consumers and not investors in these companies.
What is the Sharing Economy?
The Sharing Economy encompasses a new wave of companies that use the Internet to attack inefficiencies in the supply of goods and services. These companies create attractive offerings for customers by making them highly convenient and cost efficient. Perhaps the most well-known is Uber, the on-demand personal car service that is typically cheaper than a taxi. Uber is now available in 58 countries, 300 cities worldwide and services more than 8 million users.
The Sharing Economy has taken off in the last few years, thanks to the use of mobile technology and popularity of smartphones (85% of 18-29 year olds and 79% of 30-49 year olds in America own smart phones). Mobile technology allows consumers and producers to be instantly connected at any time and any place, removing barriers to supply and demand and creating more efficient markets.
The Sharing Economy has opened up the marketplace for providers of goods and services, allowing many local businesses or individuals-who did not have the correct infrastructure-to compete. Now consumers have more to choose from –and these providers must differentiate themselves by offering more competitive pricing and more added value.
What are the Implications for Investors?
Uber, a company founded only 6 years ago (and only operating outside of San Francisco since 2011) is currently valued at $50 billion, similar to the market cap of Kraft Foods or Target. Avis, a global rental company, is worth 10x less than Uber’s current valuation –Uber’s valuation is more on par to global car manufacturer Ford. AirBnB, the home sharing company (which owns no properties), estimates its current valuation is $20 billion, similar to that of Marriott International, the leading global hotel brand, and double the size of the global brand Hyatt.
Are these valuations justified? Revenues and other key financial data of these companies are kept under close wraps as they are private companies, so it is hard for outsiders to understand exactly the base of these valuations. However, we encourage our investors to look at these companies with caution. It is still unclear whether these companies are going to build lasting value for shareholders. Creating markets that are more efficient does not necessarily translate into creating output –or value.
Some analysts fear that companies will make profits in the short term –picking the “low hanging” fruit or profits that initially result from the market reaching a more natural equilibrium. Companies may use these profits as a base of unrealistic projections of future earning and valuations, which could be unsound as they may be based upon unsustainable initial success which maybe difficult to replicate in the longer term.
In conclusion, the Sharing Economy will likely continue to use technology in fascinating ways to make markets more efficient and bring more interesting options to consumers. We think it is much better for clients to thus use these companies as a customer, rather than an investor.
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Citi has hired Stephen Roti as Managing Director and Global Head of Corporate Equity Derivatives (CED). In this position, Mr. Roti will be responsible for the overall strategy for originating high value added CED transactions and will lead the marketing and education efforts with business partners in Investment Banking, Capital Markets Origination, and Citi Private Bank. He will be based in New York and report to James Boyle, Global Head of Equity Derivatives, Tyler Dickson, Global Head of Capital Markets Origination and Andres Recoder, Global Head of Corporate Sales and Client Solutions.
Mr. Roti brings more than 20 years of structuring and origination of equity related products to Citi including equity derivatives, convertibles, and hybrid securities. He will join the Bank from Nomura where he was Head of Equity Capital Markets for the Americas. Before Nomura, he served at Barclays Investment Bank, where he was Global Head of Equity Linked Origination in New York.
“We are extremely pleased to have Stephen on board,” said Boyle. “He has extensive industry experience and a proven track record that will have an immediate, positive impact on our franchise.”
“This hire complements our existing team well and underscores our commitment to the sector,” said Derek Bandeen, Global Head of Equities. “As our platform evolves, we will continue to invest in the business and expand our services globally.”
Mr. Roti earned a JD from Yale Law School and a BA in Economics and Japan Studies from Macalester College.
Foto: Victor Camilo, Flickr, Creative Commons. Peter Röhrenbach: nuevo responsable de Real Estate de UBS Global AM para Benelux, Francia, Iberia y países nórdicos
UBS Global Asset Management has appointed Peter Röhrenbach as its regional head of Benelux, France, Iberia and the Nordics for its global real estate business, according to Investment Europe. Röhrenbach will leave its role of head of Iberia with immediate effect but will continue to be based in Madrid.
He will oversee and support the acquisitions and dispositions as well as asset management activity in the region in addition to defining the long-term strategic priorities for these markets.
Röhrenbach will retain his Senior Investment Advisor role for a key pan-European institutional investment mandate, according to the publication.
Röhrenbach has joined UBS in 2003 where he set up the Iberian property business currently managing assets exceeding €700m. Prior to joining UBS, he worked for Lend Lease as head of Real Estate Investments and Eurohypo AG as head of Iberia (Spain and Portugal).
Jesus Silva Gallardo: New Head of Iberia
Röhrenbach will be replaced by Jesus Silva Gallardo as head of Iberia. Gallardo was working as head of Asset Management for the Iberian Peninsula.
Foto: Robert Sheie
. OMGI lanza un fondo de rentas y bolsa global para el mercado offshore y cierra su homólogo onshore
Old Mutual Global Investors has confirmed that the offshore Old Mutual Global Equity Income Fund, managed by Ian Heslop, Amadeo Alentorn and Mike Servent has now launched. The Fund is a sub-fund of the Dublin domiciled Old Mutual Global Investors Series plc umbrella fund.
According to the company, the fund has been developed in response to client demand for an income-generating product managed by the award winning Old Mutual Global Investors Global Equity Team. The Fund is designed to service Old Mutual Global Investors’ UK and offshore client base and targets a total return through a combination of income and capital growth, with a monthly income targeted at 30% above that of the benchmark (MSCI All Countries World Index).
OMGI has also confirmed that its$60.75m (£38.8m) onshore Old Mutual Global Equity Income Fund will be closing on 15 September 2015, subject to regulatory approval. This fund was sub-advised by O’Shaughnessy Asset Management.
In a press release, OMGI informs that this onshore fund has seen a gradual decline in assets over the last few years. Given the small size of this fund and the associated operating costs, they believe that it is no longer in the best interest of clients to continue running this fund and that investors will be best served by having their proceeds returned in order for them to reinvest in other products.
Warren Tonkinson, Managing Director at Old Mutual Global Investors, comments: “We’ve experienced a high level of client demand for an offshore global equity income fund managed by Ian Heslop and his team. We are delighted that this fund is now live and will become a core part of our global fund range, available to both UK and offshore investors.
“We believe our decision to close the onshore Old Mutual Global Equity Income Fund is in the best interest of investors. Clients have been informed of our decision to close this fund and of the options available to them. We would like to thank O’Shaughnessy for their management of the fund.”
Foto: Steven Depolo
. Guggenheim Lanza un ETF sobre el índice S&P 500 Equal Weight Real Estate
Guggenheim Investments recently announced the launch of Guggenheim S&P 500 Equal Weight Real Estate ETF (EWRE). The ETF tracks the newly created S&P 500 EWRE Index, which equally weights the index constituents in the S&P 500 that are classified in the Global Industry Classification Standard (GICS) Real Estate Industry Group with an emphasis on exchange- traded equity REITs and real estate management and development companies, and excluding Mortgage REITs.
“Recognizing that real estate is evolving into a separate asset class as a result of its growing importance to advisors and investors searching for income and capital appreciation and underscoring our firm’s commitment to providing clients with innovative investment solutions, Guggenheim is first to market today with a new equal-weighted sector ETF which could have considerable impact on portfolio planning and research,” said William Belden, Managing Director of Product Development for Guggenheim Investments.
The new real estate sector includes equity REITs and real estate management and development companies. Mortgage REITs, which facilitate the financing of commercial and residential real estate, will remain in the financials sector. On September 16, 2016, S&P Dow Jones will implement the GICS real estate sector change as a part of their annual index rebalancing.
“There are several reasons real estate can be considered an attractive asset class,” Belden said. “First, real estate securities offer potentially attractive long-term total returns coming from both capital appreciation and higher-than-average income when compared to other equities. Second, EWRE’s underlying portfolio will be comprised primarily of equity REITs, which have a history of providing consistent, above-average dividends which can be used to meet current income needs or reinvested to accumulate wealth. Also, investing in real estate securities can be used as a hedge against inflation.”
EWRE becomes the 15th equal-weighted ETF in Guggenheim’s product line. Guggenheim pioneered the concept of strategic beta with the launch of Guggenheim S&P 500 Equal Weight ETF (RSP) in April 2003. The Firm’s strategic beta ETFs assets totaled $18.7 billion as of July 31, 2015.
“The time-tested equal weight strategy can help long-term performance by reducing the bias towards the largest individual companies within a particular cap-weighted strategy,” Belden said. “An equal-weight approach also may enhance portfolio diversification by reducing concentration risk often found in cap- weighted indices and provide a more balanced exposure across market capitalizations.”
Foto: John
. Cantor Fitzgerald refuerza su equipo de Portfolio Solutions
Cantor Fitzgerald has announced the continued expansion of the Portfolio Solutions team with the appointments of Filip Skala, CFA and Kenneth Wong inNew York, and Khairul Hussainand Jemma Broadgate in London. The team will report to Michael Gardner, Global Head of Portfolio Solutions.
Mr. Skala will serve as Head ofU.S. Portfolio Solutions, and focus on business development and implementation across the team’s main lines of business. Mr. Wong will serve asSenior Vice President and Portfolio Manager, focusing on the portfolio restructuring process and on developing, managing, and executing trading strategies for client events. Mr. Hussain joins as Director of IT, focused on managing technology and developing applications for the Portfolio Solutions group. Ms. Broadgate will serve as Director of Institutional Sales, responsible for growing the business in the UK.
Prior to joining Cantor, Mr. Skala led the U.S. implementation and strategy team of transition management at J.P. Morgan. Mr. Skala holds a BS from Rutgers University, an MBA from Pace University, and is a CFA charter holder.
Previously, Mr. Wong held senior positions in the Transition Management and Business Intelligence Group at J.P. Morgan. Mr. Wong has a BA in Economics from the University of Michigan Ann Arbor.
Before joining Cantor, Mr. Hussain served on the Transition Management trading desk and the Electronic Client Solutions trading desk at J.P. Morgan. Mr. Hussain received a degree in Computer Science from Kings College London at the University of London.
Prior to joining Cantor, Ms. Broadgate served as the Head of UK Pensions and Charities in the Investor Services Group at J.P. Morgan. Before that, she was the head of UK Pensions Sales for Northern Trust’s custody business. Ms. Broadgate received a degree in French and German from Queen Mary College at the University of London.
Foto: Archer10Dennis, Flickr, Creative Commons. De Grecia a China: los inversores mundiales temen una recesión en China y vuelven la espalda a los emergentes
Global investors have shifted their attention from Greece to China amid continued concern of a Chinese recession, according to the BofA Merrill Lynch Fund Manager Survey for August. Respondents are scaling back their expectations for economic growth.
China recession is now rated the number one “tail risk” by 52 percent of panel. And fifty-three percent of investors say the global economy will strengthen in coming year, down from 61 percent in July. “Investors are sending a clear message that they are positioned for lower growth in China and emerging markets,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
The survey reports the lowest allocations to emerging markets equities since April 2001 and to the Energy sector since February 2002. More investors say Global Emerging Markets is the region they most want to underweight; Europe is the region they most want to overweight.
“European stocks remain in favour – but investors like domestically focused names and are avoiding anything exposed to China or commodities,” said James Barty, head of European equity strategy.
The survey notes a rising consensus that the Fed will raise rates in third quarter; the majority of panel now expects the yield curve to flatten in next 12 months.
An anti-commodities stance is evident with moves out of Energy and Materials while defensive weightings increase.
An overall total of 202 panelists with US$574 billion of assets under management participated in the survey from 7 August to 13 August 2015. A total of 162 managers, managing US$449 billion, participated in the global survey. A total of 100 managers, managing US$224 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Global Research with the help of market research company TNS.
Richard Buxton, uno de los inversores más respetado de Reino Unido, es el nuevo CEO de OMGI - Foto cedida. Richard Buxton, nuevo CEO de OMGI, reportará a Martin Baines, responsable de la nueva división OM Wealth Investment
Richard Buxton, one of the UK’s most respected investors, becomes CEO of OMGI alongside the management of his portfolio. Reporting to Richard, Warren Tonkinson becomes MD of OMGI, enabling Richard to remain focused on his fund whilst providing overall investment leadership as CEO. Julian Ide is stepping down as CEO of OMGI and leaves with the gratitude and good wishes of the company.
Mr. Buxton will report to Martin Baines, who will lead the new Old Mutual WealthInvestment Division. Mr. Baines steps up from being CEO of Quilter Cheviot to become Chief Investment Director of Old Mutual Wealth. In Quilter Cheviot, David Loudon, a company and industry veteran with 25 years’ experience, is stepping up to be CEO and will also report to Martin Baines.
Richard Buxton comments: “I joined OMGI to help build an outstanding investment management business over the coming years, primarily through investment leadership and managing my UK Alpha funds. Today’s announcement is completely aligned with that goal and I look forward to contributing further to the realisation of OMGI’s ambitions. Investment remains my first passion and priority – I would not have accepted any additional responsibilities which would compromise my ability to invest on my clients’ behalf.”
The new organization presents the opportunity to more effectively leverage the combined investment knowledge of Quilter Cheviot and OMGI for the benefit of the clients, particularly in the multi asset areas. However, the brands and propositions of both remain distinct and their independence in regard to investment selection will be maintained and is assured.
Paul Feeney, CEO of Old Mutual Wealth, comments:
“At the heart of our wealth proposition is our ability to bring together the best investment minds in the market for the benefit of our clients. It therefore makes sense to bring Quilter Cheviot and OMGI together within one division under the leadership of Martin.
“I’m extremely grateful to Julian for his leadership in growing OMGI to be the exceptional business it is today. The quality of what Julian has created and the talent he has attracted is unparalleled in recent asset management history. OMGI’s phenomenal bench strength is a testimony to what Julian has delivered for clients.
“I can think of no better person to appoint as CEO of OMGI than Richard – his experience, exceptional investment skill and his principles will take our asset management business forward with a clear focus on delivering the wealth creation that is at the heart of our business.
