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FESE Director General Judith Hardt to Step Down

The Federation of European Securities Exchanges (FESE) has announced that Judith Hardt, Director General, will step down from her role on 23 May.

Judith Hardt has been with FESE since 2005 and has led the organisation through a number of high profile mandates such as the development of the Code of Conduct on Clearing and Settlement for which Judith Hardt was nominated ‘lobbyist of the year’; the review of MIFID to reverse some of the negative impacts of MIFID I and developing industry thinking to improve SME financing. In addition, there have been numerous other regulatory initiatives in which Judith Hardt has helped the FESE steer through review and implementation.

During Hardt’s tenure FESE has become more focused and more effective in promoting the value of regulated exchanges through its activities across numerous mandates and improved interaction with actors in the financial and political landscape within Brussels and abroad.

FESE will commence a selection process to identify a successor.

Christian Katz, President of FESE said “I would like to thank Judith Hardt for all her hard work and tireless dedication to the Federation and our industry over the past nine years. FESE is now more organized and focused due to Judith’s leadership. On behalf of the Board and the entire Membership of the Federation we wish Judith Hardt well in her new endeavours”.

Judith Hardt said “After nearly 10 years at FESE and with the successful outcomes of MiFID II for exchanges, I believe that now is a good time to explore new opportunities. I immensely enjoyed leading this association during a fascinating period of fundamental regulatory overhaul and industry consolidation. I have also been privileged to work with incredible staff. I know that the dedication of the FESE team will ensure a seamless transition”.

The Federation of European Securities Exchanges (FESE) represents 41 exchanges in equities, bonds, derivatives and commodities through 21 full members from 30 countries, as well as 2 Observer Members. FESE is a keen defender of the Internal Market and many of its members have become multi- jurisdictional exchanges, providing market access across multiple investor communities. FESE represents public Regulated Markets. Regulated Markets provide both institutional and retail investors with transparent and neutral price-formation. Securities admitted to trading on our markets have to comply with stringent initial and ongoing disclosure requirements and accounting and auditing standards imposed by EU laws.

At the end of 2013, FESE members had up to 8,950 companies listed on their markets, of which 8% are foreign companies contributing towards the European integration and providing broad and liquid access to Europe’s capital markets. Many of our members also organise specialised markets that allow small and medium sized companies across Europe to access the capital markets; 1,478 companies were listed in these specialised markets/segments in equity, increasing choice for investors and issuers.

LarrainVial Signs an Agreement with U.S. Authorities to Adopt FATCA

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LarrainVial firma un acuerdo con las autoridades estadounidenses para adoptar FATCA — Photo: Tuxyso. LarrainVial Signs an Agreement with U.S. Authorities to Adopt FATCA

LarrainVial has signed an agreement with the Internal Revenue Service (IRS), the U.S. tax authority, to adopt the FATCA law (Foreign Account Tax Compliance Act), from the date of agreement.

The agreement with the IRS, an institution homologous to the Internal Revenue Service (SII) of Chile, was signed voluntarily by LarrainVial last Friday and before the expected legal time limits. The FATCA rules, which were adopted in 2010 by the U.S. Congress, begin to fully take effect and be obligatory for all financial institutions as from July 1, 2014.

The signing of this agreement is part of the cooperation agreement that the governments of Chile and the United States signed on March 5 to facilitate the implementation of U.S. legislation known as FATCA.

The agreement signed by Larrain Vial with the Internal Revenue Service, includes different LarrainVial Group companies, among which are LarrainVial Corredora de Bolsa (LarrainVial Brokerage); LarrainVial Administradora General de Fondos (LarrainVial General Funds Management); LarrainVial Activos Administradora General de Fondos (LarrainVial Assets General Funds Management), and its subsidiaries in Peru and Colombia.

The FATCA legislation provides for all financial institutions, including Chilean ones, the obligation to cooperate with the IRS by periodically sending information on the accounts or financial products of United States taxpayers (as such term is defined in the rule itself). The account information to be shared with the Internal Revenue Service shall apply only for those who meet that definition, informs LarrainVial.

The main benefit of having signed this agreement is that LarrainVial customers will not be exposed to sanctions by the U.S. tax authority, such as 30% withholding tax, which is the maximum penalty imposed by FATCA regulations.

Santander will Sell Part of its Custody Business in Spain, Mexico and Brazil

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Santander venderá parte de su negocio de custodia en España, México y Brasil — Photo: Ardfern. Santander will Sell Part of its Custody Business in Spain, Mexico and Brazil

Spain’s major bank will not restrict itself to selling part of its asset management business, as it did last year when it sold 50% of the business to Warburg Pincus and General Atlantic funds for US$1.3 billion.

Furthermore, according to the daily publication “Expansion”, the bank plans to dispose of half its custodial and depository business. Once again, one of the buyers is the equity fund Warburg Pincus, which, together with other partners, is apparently close to grabbing a 50% share of that business. According to the Spanish newspaper, the sale will initially affect the Global Custody & Securities Services business in Spain, Mexico and Brazil, but could later be extended to other countries. Besides those three markets, Santander has custody and depository business in Chile, Argentina and Portugal.

According to market sources consulted by Expansion, Santander’s division responsible for providing securities’ settlement, custody, and administration services, could be valued at between €0.5 and €1 billion.

Gaining muscle at the global level

Although the sale of 50% of Global Custody & Securities could be considered the first step out of the asset custody business, Expansion points out, citing market sources, that the bank’s intention could be quite the opposite, since the bank could be looking for partners which allow it to grow, especially outside Spanish borders, to become a strong player globally.

Following the sale, the bank could guarantee its partners liquidity over the medium term through an IPO, the same formula which the bank has used with Santander Consumer, Santander Consumer USA went public earlier this year, and which it also used with its asset management division. According to Expansion, the other option would be for the bank to sell the other half of its custody business to other international groups such as BNP Paribas, BNY Mellon or State Street.

The impact of regulation

One of the reasons why some companies are planning to sell their custody and depository businesses is the new regulation: UCITS V will increase the depositories’ costs and responsibilities. In this regard, UCITS V regulates three issues: the depositary liability regime; the content of the custody function in respect of the different types of financial instruments and of the function of supervision; and the requirements to act as depositary and the conditions under which this role may be delegated to sub-custodians.

As Ramiro Martinez, director of Gomarq Consulting, explained to Funds Society, the proposal introduces a new harmonized system of “quasi-strict liability” which deems the depositary liable if the assets are lost in custody (including assets transferred to a third party in sub-custody), replacing them with others of the same type or value. For the expert, this new liability regime “significantly increases the risk of the depository role and forces depositors to increase their control and will therefore increase their costs (and will probably involve additional capital requirements for the provision of this service). This will require specialization and the pursuit of economies of scale to absorb cost increases,” says Martinez.

That is why the experts are referring to a certain activity of sales of this business amongst those institutions which do not consider it core business, and its concentration among institutions which have enough financial muscle globally to meet the new requirements.

FIFA Seeks to Regulate Mutual Funds in the World of Soccer

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A few days ago, FIFA spoke out about investment funds in the soccer world, as it intends to regulate them as another vehicle at the service of clubs and players. The web site Iusport.com reports that FIFA approved a circular dated May 12, declaring itself in favor of regulating mutual funds, rather than banning them.

Despite FIFA’s approval, UEFA continues to disapprove of investment funds in the world of soccer. By means of this circular, FIFA seeks a solution to the conflict and the regulation of investment funds in order to provide legal assurance, transparency and clarity as a means of alternative funding for clubs, and to eliminate the current irregularities.

In the circular, signed by Jerome Valcke, FIFA’s general secretary, the sporting association explained that they have commissioned two studies to CIES and CDES in order to develop a final proposal. The aim is to raise the issue during the next FIFA Congress in Sao Paulo in mid-June.

Titled “Summaries & Comments of the Study on the Ownership of the Economic Rights of Players by Third-parties”, the circular begins by admitting that the matter of the ownership of the economic rights of players by third-parties has occupied an important place in discussions led by FIFA within the international soccer community, and that its competent committees have included it in their agendas in order to find an effective formula for addressing the issue.

FIFA also maintains that discussions about it have shown that so far, the soccer community has not established a common front to tackle the problem effectively, though apparently most stakeholders recognized that such practices may pose a threat to the integrity of soccer tournaments.

Given the complexity of this phenomenon and the strategies employed in various regions to regulate it, FIFA, as it had notified, commissioned two studies with the general purpose of gathering information on the ownership of the economic rights of players by third parties and about various aspects of this practice, which, in turn, would provide more data to support discussions and initiatives. The two studies have brought together a number of views on the subject from stakeholders in the soccer world, as well as its impact on the soccer sector in general.

FIFA’s primary objective is to tackle this problem from a solid foundation which takes into account all aspects related to this practice, so that it is possible to provide adequate and fair solutions within the framework of a well documented participatory process which includes the stakeholders within FIFA’s competent bodies.

Should you wish to learn more about it you can consult the circular, which is attached in a document.

BBVA Brings Chefs From Highly Acclaimed El Celler de Can Roca Restaurant to Texas Bank’s Clients

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Spanish financial services group BBVA announced Monday it is bringing three of Spain’s most prized personalities to the U.S.: the Roca brothers, whose El Celler de Can Roca has muscled its way to the top of the high-end restaurant world through the Rocas’ wondrous techniques that honor tradition and push culinary boundaries.

The restaurant — run by head chef Joan, sommelier Josep, and pastry chef Jordi — landed on the top of Restaurant magazine’s influential World’s 50 Best Restaurants list in 2013. At a press conference Monday in Houston, the bank and Joan Roca announced that all three brothers, along with 20 members of their staff, will shutter El Celler de Can Roca for five weeks this summer to travel to Houston and Dallas and recreate their Girona, Spain-based restaurant for clients of BBVA Compass, BBVA Group’s U.S. franchise.

“As part of a global bank, we’re drawn to endeavors that transcend boundaries — cultural, linguistic and, in this case, gastronomic,” said BBVA Compass Chairman and CEO Manolo Sanchez. “The Rocas are universal in their approach to food — bringing together tradition and modernity among other unlikely pairs — and we honor that spirit with this tour.”

During Monday’s press conference, Roca and bank officials announced details of the tour. The summer events in Texas will kick off a series of client dinners BBVA also will sponsor in other countries where it operates, including Colombia, Mexico and Peru. BBVA is sponsoring the chefs’ tour as part of its three-year partnership with El Celler de Can Roca.

Joan Rocaalso detailed the scholarships BBVA is providing for four Texas chefs. Two students from Houston and two from Dallas will have the opportunity to apprentice under the Roca brothers next year in El Celler de Can Roca. The four-month program begins in January. The scholarship includes airfare and housing in Girona as well as training at Spain’s Autonoma University of Barcelona.

“We consider it critical to support talent, and we want to help the next generation of chefs explore their skills and develop confidence in a collaborative environment,” Joan Roca said. “Every year, more than 400 people apply to study in our training program and we are looking forward to working with the students from Texas.”

Also on Monday, Joan Roca taught a master cooking class to a dozen student chefs at the International Culinary School at the Art Institute of Houston. Chef and television personality Ingrid Hoffmann served as emcee during the class.

Joan Rocais considered a pioneer in sous-vide, a cooking process where food is vacuum-packed and cooked in water. He developed the Roner, a professional sous-vide cooking device. Josep Roca, the sommelier, meanwhile, has won over critics with his unorthodox wine pairings and techniques. And Jordi Roca, the pastry chef, won the World’s Best Pastry Chef Award 2014. The judges called him “part chef, part architect, part magician” and an “eccentric but modest genius,” citing his work recreating famous perfumes in edible form.

BBVA Compass’ Sanchez said the brothers, all at the top of their games in three demanding disciplines, epitomize the collaborative spirit in an industry known for its fierce competition.

“Each of the Roca brothers could go off on his own and build an individual empire that’s quite successful, but they strongly believe that they can do more as a team,” Sanchez said. “That says something powerful to us because that same belief drives BBVA Compass.”

Citi Private Bank Announces New Family Office Leadership

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Citi Private Bank announced on Tuesday that William Woodson will join the firm in June as Managing Director and Head of the North America Family Office Group. Mr. Woodson will be based in West Palm Beach, FL and report jointly to Peter Charrington, CEO, Citi Private Bank, North America, and Catherine Weir, Global Head of Family Office Group, Citi Private Bank.

Stephen Campbell, formerly head of the group, has been named Chairman for the North America Family Office Group. In this role, Mr. Campbell will focus on advising the firm’s largest family office and foundation clients in North America and globally.

Mr. Campbell joined Citi in 2011 to build out the Private Bank’s North America family office platform. Since that time the business has grown its AUMs exponentially, becoming a significant part of the firm’s overall offering. Mr. Campbell has more than 25 years of diverse financial industry experience prior to joining Citi, having led investment management and technology organizations for Fidelity Investments in the U.S, Europe and Asia; founding as well as investing in early stage venture companies; and as Chief investment Officer of a family office.

Mr. Woodson joins Citi from Credit Suisse where he was Head of the Ultra High Net Worth and Family Office Business for the North American Private Bank. A tax professional by training, Mr. Woodson spent a decade in public accounting with both Coopers & Lybrand and Arthur Andersen before leaving to run the family office for one of his largest clients. Mr. Woodson was a founding member and Managing Director of myCFO and worked as a private banker with the Merrill Lynch Private Banking and Investment Group before joining Credit Suisse in 2007 to lead the firm’s Multi-family Office Practice and Wealth Planning Group.

Mr. Woodson holds a BS degree in Economics from the University of California and a MS degree in Accounting from New York University. “In Steve and Bill we have two exceptional family office resources for our clients. Steve has done a remarkable job leading this key business unit in the past three years and we look forward to its continued growth with Bill at the helm. We recognize that Family offices are as unique as the families they serve and our team’s mission is to help ensure the success of each individual family office we serve,” said Peter Charrington, Citi Private Bank.

“I look forward to helping address the evolving needs of Citi’s family office clients by providing the tailored investment, lending, banking and advisory services they need, and to building lasting relationships with new family office clients who can benefit from Citi’s vast global network of expertise, strategies and services,” said Woodson.

Buying Something You Don’t Understand

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El inversor compra cosas que no entiende — . Buying Something You Don't Understand

People are not great at assessing relative risk. Most of us know people who are afraid to fly but have no issue with driving long distances. While both have risks, it is generally understood that driving is far more dangerous than flying.

Investing is no different. You can’t avoid risks, but you should at least know what risks you’re taking.

According to one of the recent surveys by MFS Investing Sentiment Insights, many investors have very interesting ideas about the risks of passive investing.

The first finding that jumped out was that 64% of investors thought an index fund was safer than the market. This is a pretty clear example of someone not knowing what they’re buying or how it is designed.

The second finding was even more scarier. When asked why they purchased passive investments, 48% said a major factor in the purchase was “minimal risk.” Imagine how an investor who purchased an equity index fund because of minimal risks will react during the next downturn?

There is a role for both active and passive investments in a portfolio. However, it rarely ends well when we buy something we don’t understand.

Three Factors That Might Shape Global Markets

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Tres riesgos que pueden alterar los mercados globales — Bill McQuaker and Paul O’Connor, Co-Heads of Multi-Asset, Henderson Global Investors. Three Factors That Might Shape Global Markets

Markets are in the midst of a transition away from a world in which central bank liquidity boosted all assets, to a world of more limited policy support. The road back to ‘normality’ is likely to be bumpy as investors adjust to this new landscape. Here are three areas that we are currently watching for potential risks that could disrupt global markets.

Upside/downside surprises to US growth

The polar wave effects will soon work their way through US data, and with that we will start to get a much clearer picture of underlying economic growth in the US and what that may, or may not, mean for monetary policy. Undoubtedly, stronger US growth in 2014 would be a tailwind for risk assets in the long run. However, if data surprise strongly to the upside, this could produce a period of more significant market volatility in the short run as it would necessitate a rethinking of the profile for the federal funds rate, and inevitably other interest rates around the world. On the flip side, if it becomes evident that the weather was not to blame for economic weakness, we may once again see rallies in safe haven assets and vulnerability in cyclical regions and assets. Although our central scenario is that the US will resume a modest pick-up in growth this year, we remain alert to the possibilities of a different outcome.

China’s rebalancing act

China is in the midst of a tricky re-balancing act as it moves deliberately away from being an economy that is export-led towards one that is more domestically focused. China’s vast growth over the past couple of decades has been driven largely by the mass mobilisation of capital and labour, rather than growth in consumption. As the government undertakes unprecedented structural reforms and necessary financial deleveraging, the risks of a policy error are increasing. There is an outside chance that a financial crisis precipitates in China. A mistake in judgement in reigning credit, for example, could have dramatic knock-on effects not only locally in Asia, but in the worst case could trigger a global systemic shock.

Developments in Ukraine

News headlines have been dominated by the crisis developing across eastern Ukraine following Russia’s annexation of Crimea. At the moment, the immediate impact on the global economy of the crisis appears limited in that Ukraine accounts for only 0.2% of global GDP. A more genuine threat is posed, however, by the potential disruption of energy supplies to Europe and any retribution visited on Russia through trade embargoes. The conflict as it currently stands is not driving our positioning, but it does contribute to our wider sense of caution about risk assets and our preference for developed markets over emerging markets.

Column by Bill McQuaker and Paul O’Connor, Co-Heads of Multi-Asset, Henderson Global Investors

India’s Review of Depositary Receipts Could Open the Door to Increased Foreign Investment

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Many global investors are welcoming recommendations contained in the M.S. Sahoo Committee report, announced last week by India’s Ministry of Finance. The report recommends allowing over-the-counter (OTC) non-capital-raising American depositary receipt (ADR) programmes on any kind of securities, not only equity. Neil Atkinson, Asia-Pacific head of depositary receipts at BNY Mellon, discusses the case for DRs and why he believes this is positive news both for India and those investing in Indian securities.

“The M.S. Sahoo Committee’s ground-breaking recommendations are terrific news for India and the global investment community. The introduction of the new scheme for DRs will provide global investors with convenient access to Indian companies, who in turn can attract foreign investment through this flexible and cost-efficient securities product. In permitting OTC non-capital-raising DRs, India would join more than 60 countries worldwide whose companies have established non-capital raising DR programs for secondary market investors.

The case for India’s DR reform

“The M.S. Sahoo report is a remarkable study which acknowledges current regulatory constraints that inhibit foreign investment in India. There is significant international demand for Indian equity and greater access to DRs may meet some of the demand not satisfied through routes previously available. Conversations with global investors indicate they warmly welcome this news and look forward to exploring greater investment in India in the near future.

“While DRs remain a valuable source of capital-raising from overseas investors, today they are much more than that. DRs play an essential role in cross-border trading and are a preferred instrument for companies listing their shares on global markets and for investors seeking international portfolio diversification. Not only do they broaden and diversify the range of investors who participate in capital markets, but adding a DR programme can also provide greater visibility for issuers.

“For investors, DRs are an attractive route to entry in a market because they offer a combination of convenience, simplicity and flexibility when compared to direct investment in a foreign market. In our research report from March 2013, ‘India: Easing Conditions for Investors’, we found nearly half of all global funds that invest in India using DRs chose not to invest directly through local shares. Many indicated a preference for the familiarity and convenience of DRs and were unable or unwilling to invest directly or use derivatives.

“While it could be argued that the importance of DRs has subsided since India’s onshore market has developed, DRs remain an attractive route for foreign investment into India. At BNY Mellon, we commend these ground-breaking developments which should promote greater integration of the Indian financial system with international capital markets.”

Since the 1920’s, investors, companies, and traders have used DRs to meet their needs. According to BNY Mellon data as of 31 December 2013, there are more than 3,750 DR programmes available to investors, representing issuers from 75 countries. More than 4,400 institutions invest over $800 billion in DRs globally.

Institutional Use of ETFs Has Transformed in Five Years

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ETFs have become a standard tool in institutions’ investment toolkit, according to a study released today by Greenwich Associates. Nearly half (46%) of institutional ETF investors surveyed allocate 10% or more of total assets to ETFs and 47% say they expect to expand their use in the next year.

The study, “ETFs: An Evolving Toolset for U.S. Institutions,” conducted by Greenwich Associates and sponsored by BlackRock, presents the ETF usage trends of institutions, including corporate and public pensions funds, foundations and endowments, asset managers, investment consultants, insurance companies, and Registered Investment Advisors (RIAs).

Key findings include: all institutions are increasing their allocations to ETFs, ETFs have become critical long-term investment tools, the most common ETF application is core portfolio exposure and there has been a dramatic increase in adding fixed income ETFs to portfolios.

1. ETF allocations are growing across all types of institutional investors. Nearly half (46%) of institutional ETF users allocate 10% or more of total assets to ETFs. About 30% of institutional ETF investors report ETF allocations in the 10% to 25% range. RIAs, who are the largest users of ETFs by assets, have the largest ETF allocations with 41% of RIAs investing more than 25% of total assets in ETFs.

All institutional investor types expect to increase their ETF allocations in the coming year. 45% of insurance companies, who currently invest in ETFs, plan to increase their allocations in the 1-10% range. More than 50% of investment consultants expect their clients to boost allocations this year. In comparison, in 2010, the first year of the study, 33% said they would not change their ETF allocations over a three-year period.

2. ETFs have become critical strategic tools held for the long-term, particularly among pension plans. 63%of all survey respondents describe their ETF usage as strategic, up from 58% in 2013. This is remarkably different than in 2010, when approximately 20% of institutional ETF investors said they employed ETFs to implement strategic or long-term investment decisions.

Today, 49% of participants report average holding periods of two years or more, which is a jump from 36% in 2013. Among institutional investor types, 66% of pension plans’ strategic usage is up sharply from 47% in 2013.

While institutions are expanding their strategic usage, at the same time they continue to implement tactical allocations with ETFs. 81% of asset managers list tactical adjustments as one of the most common applications for ETFs.

Daniel Gamba, Head of iShares Americas Institutional Business at BlackRock, said: “We’re seeing the evolution of institutional investors’ usage of ETFs. Many institutions once confined ETFs to only cash equitization or transitions. Over the last few years, they’ve discovered their usefulness and broadened usage to many other portfolio applications including core portfolio exposure and liquidity and risk management.”

3. Most common ETF application is core portfolio exposure by all types of institutions. Approximately 80% of participating institutions are employing ETFs as a means of obtaining core portfolio exposures, up from 74% in 2013. This is in stark contrast to 2010 when only 19% of asset managers and 28% of pension plans used ETFs as a core/satellite application.

Core exposure is the most common ETF application by pension plans, RIAs and insurance companies. Regarding the latter, ETFs have been gaining significant traction among insurance companies as an efficient vehicle for surplus asset investment, which is considered a core exposure application. From 2013 to 2014 the share of insurers in the study using ETFs to invest surplus assets nearly doubled, from approximately 30% to almost 60%.

It appears that insurance companies are also becoming more comfortable using ETFs when investing reserve assets. In 2013, only 6% of participating insurers reported using ETFs to invest reserve assets. That share climbed to more than 25% in 2014.

4. Dramatic increase in use of fixed income ETFs. One of the drivers of ETF growth over the past few years has occurred with fixed income ETFs. Until recently, most institutions viewed ETFs as equity products. This year, 66% of institutional ETF investors are employing ETFs in domestic fixed income portfolios, up from 55% in 2013.

Over the past 12 months, the share of asset manager ETF investors employing fixed income ETFs significantly increased. The biggest and potentially most important increase occurred in domestic fixed income, where the share of asset managers jumped to 72% in 2014 from 30% in 2013. For international fixed income, in 2013, asset managers reported virtually nothing in the way of ETF. In 2014, nearly half of asset manager ETF investors are employing the vehicles in that asset class.

Daniel Gamba concluded: “The role that ETFs play in institutions’ portfolios has quickly transformed in five years. Today ETFs play an important role in institutions’ portfolios in multiple ways strategically and tactically. And all signs point to continued acceptance and usage by institutional investors.”