Lombard Odier Group has announced the appointment of Henry Fischel-Bock as Head of its domestic European private client business, effective 1 January 2015.
Henry Fischel-Bock joins Lombard Odier from Barclays Wealth where he led the UK & European wealth management business until July 2014. In his new role Mr. Fischel-Bock will report to Frédéric Rochat, a Managing Partner of Lombard Odier.
“We have built a significant private client business within the European Union with a single and efficient technology platform that allows us to offer clients solutions to their increasingly complex needs,“ said Mr Rochat. “We are delighted to welcome someone at our Group with Henry’s longstanding wealth management experience. His drive to offer clients a differentiated and long-term value proposition is closely in line with our own business model.”
Lombard Odier’s domestic European private client business offers wealthy individuals and their families a full range of integrated services in the areas of estate planning, investment management, tax reporting and custody services. It operates through offices in Amsterdam, Brussels, London, Madrid, Paris and Luxembourg.
Dravasp Jhabvala se ha unido a la gestora británica. Schroders une a sus filas a dos expertos en materias primas
Schroders announced the appointment of two commodity experts, James Luke and Dravasp Jhabvala, to further strengthen its Commodities team.
James Luke joins the London-based team, headed by Geoff Blanning, as Commodity Fund Manager/ Metals Analyst and Dravasp Jhabvala as Commodity Quantitative Analyst.
James was previously Co Head of Metals Research at J.P. Morgan. He has 9 years’ of experience within commodities in London and Hong Kong and will provide Schroders with invaluable specialist insights into metals.
Dravasp joins Schroders from Palaedino Group in Geneva where he specialised in developing investment strategies for commodities. Dravasp holds a Master of Science in Statistics and will work on enhancing Schroders’ quantitative models for commodities.
Schroders is a market-leader in the active management of commodity futures with a 9 year track record and current assets under management, for clients around the world, of $7.8 billion.
Geoff Blanning, Head of Commodities at Schroders, said: “I am delighted to announce James’ and Dravasp’s arrival, which will strengthen our strong expertise in commodities at Schroders, at a time when we see a positive outlook for the asset class. Both bring with them a wealth of experience and will add significant value to our commodities product.”
CC-BY-SA-2.0, FlickrPhoto: TaxRebate.org.uk. The “Crazy” Euro, too Expensive?
In an interview with the Financial Times, Fabrice Bregier, chief executive of Airbus’s passenger jet business, called on the ECB to tackle the “crazy” strength of the currency.
Before we try to assess whether the strength of the euro is indeed “crazy”, it should be mentioned that commercial jets are priced in dollars. Airbus, therefore, faces very significant currency risks as much of its cost base is in Euros. One would thus not be surprised that someone from Airbus should complain about the euro.
Having said this, is the euro strength “crazy”. To answer this question, the logical angle is to look at long-term fair value models. Here the problems start.
First, there are several ways of determining the fair value for a currency. The oldest is based on the theory of purchasing- power parity (PPP): the idea that, in the long run, exchange rates should equalise prices across countries. More sophisticated PPP models adjust for differences in productivity or income per head, because it is natural for prices to be lower in low-income countries.
Another definition of the fair value of a currency is the exchange rate that corresponds to a trade position considered “sustainable”. One approach is to estimate the fundamental equilibrium exchange rate (FEER). This is the rate consistent with both a sustainable current-account balance and internal balance (ie, full employment with low inflation).
A third method of calculating the fair value of a currency is the so-called behavioural equilibrium exchange rate (BEER). This does not attempt to define long-term economic equilibrium. Instead it analyses which economic variables, such as productivity growth, net foreign assets and the terms of trade, seem to have determined an exchange rate in the past, and then uses the current values of those variables to estimate a currency’s correct value.
Apart from the fact that there are different approaches (PPP, FEER, BEER), there are also many different ways of estimating the models.
Therefore, one should not be surprised to see a wide range of fair value estimates. Fortunately, at this moment there seems to be quite a ‘consensus’ on where fair value of the euro-dollar exchange rate should be, meaning that they are all in a ‘narrow’ range of around 10%. We checked several fair value models of official institutions and brokers. Many BEER models indicate a EUR/USD fair value of 1.20 (with one outlier at 1.40). FEER estimates are around 1.30-1.32. Finally, PPP, the most simplistic measure, suggests a 1.22- 1.29 range. Hence, on average, fair value for EUR/USD seems to be around 1.25.
In the last few months, EURUSD was trading around 1.37, so around 10% overvalued. In general, developed currencies valuations are only seen as excessive if they are 20% or more away from fair value. Calling the current strength of the euro “crazy” seems an exaggeration.
Investment commentary by Jaco Rouw, Core FI Senior Investment Manager, Global Foreign Exchange, at ING Investment Management and Thede Rüst, Core FI Investment Manager, at ING Investment Management
Photo: Karin Higgins/UC Davis; Video: Reuters via Youtube. California Agriculture Faces Greatest Water Loss Ever Seen
A new report from the University of California, Davis, shows that California agriculture is weathering its worst drought in decades due to groundwater reserves, but the nation’s produce basket may come up dry in the future if it continues to treat those reserves like an unlimited savings account.
The UC Davis Center for Watershed Sciences study, released last week at a press briefing in Washington, D.C., updates estimates on the drought’s effects on Central Valley farm production, presents new data on the state’s coastal and southern farm areas, and forecasts the drought’s economic fallout through 2016.
The study found that the drought -the third most severe on record- is responsible for the greatest water loss ever seen in California agriculture, with river water for Central Valley farms reduced by roughly one-third.
California produces nearly half of U.S.-grown fruits, nuts and vegetables and nearly a quarter of the nation’s milk and cream. Across the nation, consumers regularly buy several crops grown almost entirely in California, including tomatoes, carrots, broccoli, almonds, walnuts, grapes, olives and figs.
Groundwater pumping is expected to replace most river water losses, with some areas more than doubling their pumping rate over the previous year, the study said. More than 80 percent of this replacement pumping occurs in the San Joaquin Valley and Tulare Basin.
The results highlight California agriculture’s economic resilience and vulnerabilities to drought and underscore the state’s reliance on groundwater to cope with droughts.
“California’s agricultural economy overall is doing remarkably well, thanks mostly to groundwater reserves,” said Jay Lund, a co-author of the study and director of the university’s Center for Watershed Sciences. “But we expect substantial local and regional economic and employment impacts. We need to treat that groundwater well so it will be there for future droughts.”
Other key findings of the drought’s effects in 2014:
Direct costs to agriculture total $1.5 billion (revenue losses of $1 billion and $0.5 billion in additional pumping costs). This net revenue loss is about 3 percent of the state’s total agricultural value.
The total statewide economic cost of the 2014 drought is $2.2 billion.
The loss of 17,100 seasonal and part-time jobs related to agriculture represents 3.8 percent of farm unemployment.
428,000 acres, or 5 percent, of irrigated cropland is going out of production in the Central Valley, Central Coast and Southern California due to the drought.
The Central Valley is hardest hit, particularly the Tulare Basin, with projected losses of $800 million in crop revenue and $447 million in additional well-pumping costs.
Overdraft of groundwater is expected to cause additional wells in the Tulare Basin to run dry if the drought continues.
Agriculture on the Central Coast and in Southern California will be less affected by this year’s drought, with about 19,150 acres fallowed, $10 million in lost crop revenue and $6.3 million in additional pumping costs.
Statewide dairy and livestock losses from reduced pasture and higher hay and silage costs represent $203 million in revenue losses.
The drought is likely to continue through 2015, regardless of El Niño conditions.
Consumer food prices will be largely unaffected. Higher prices at the grocery store of high-value California crops like nuts, wine grapes and dairy foods are driven more by market demand than by the drought.
Groundwater a “slow-moving train wreck”
If the drought continues for two more years, groundwater reserves will continue to be used to replace surface water losses, the study said. Pumping ability will slowly decrease, while costs and losses will slowly increase due to groundwater depletion.
California is the only state without a framework for groundwater management.
“We have to do a better job of managing groundwater basins to secure the future of agriculture in California,” said Karen Ross, Secretary of the California Department of Food and Agriculture, which largely funded the UC Davis study. “That’s why we’ve developed the California Water Action Plan and a proposal for local, sustainable groundwater management.”
Failure to replenish groundwater in wet years continues to reduce groundwater availability to sustain agriculture during drought -particularly more profitable permanent crops, like almonds and grapes- a situation lead author Richard Howitt of UC Davis called a “slow-moving train wreck.”
“A well-managed basin is used like a reserve bank account,” said Howitt, a professor emeritus of agricultural and resource economics. “We’re acting like the super rich who have so much money they don’t need to balance their checkbook.”
To forecast the economic effects of the drought, the UC Davis researchers used computer models, remote satellite sensing data from NASA, and the latest estimates of State Water Project, federal Central Valley Project and local water deliveries and groundwater pumping capacities.
The analysis was done at the request of the California Department of Food and Agriculture, which co-funded the research with the University of California.
The report’s other co-authors include UC Davis agricultural economists Josué Medellín-Azuara and Dan Sumner, and Duncan MacEwan of the ERA Economic consulting firm in Davis.
Negative sovereign rating actions exceeded positive actions in the first half of 2014 in Latin America and the Caribbean, according to Fitch Ratings. While the Rating Outlooks for most countries in the region remain Stable, Negative bias remains for ratings as currently more countries have Negative Outlooks than Positive Outlooks.
Fitch downgraded the sovereign ratings of Bermuda, Guatemala and Venezuela by one notch each during the first half of 2014. However, Fitch also took two positive rating actions in the region, upgrading Jamaica to ‘B-‘ from ‘CCC’ and assigning a Positive Outlook to Paraguay.
The Stable Rating Outlooks for the majority of sovereigns in the region suggest that positive and negative rating pressures are balanced. Currently, only Paraguay has a Positive Outlook while Argentina (Local IDR only), Aruba, El Salvador and Venezuela have Negative Outlooks.
‘Softer commodity prices, China’s slowdown, slower domestic demand and country-specific factors are clouding the near-term prospects of the Latin American region,’ said Shelly Shetty, Head of Fitch’s Latin America Sovereigns Group. ‘Structural constraints including low investment rates and infrastructure gaps, are also biting in some countries and highlight the need for a broader reform effort to improve the medium term growth trajectory,’ she added. Slower growth will likely constrain improvements in fiscal and external solvency ratios and dampen the sovereign credit momentum in the region, particularly as the rating cycle for the region has been quite positive in recent years.
At the same time, Fitch does not anticipate broad-based negative rating actions either as several Latin American countries have adequate external liquidity and credible policies in place to confront potential higher international volatility. Market access remains relatively robust for most countries. Fiscal room to stimulate domestic economies is more constrained although countries like Chile and Peru with countercyclical buffers and low government debt burdens have room to implement such policies.
Fitch is projecting Latin America’s real GDP growth will reach 1.9% in 2014 compared to 2.6% last year with modest recovery expected in 2015. The regional growth forecast masks important differences between countries. Brazil and Mexico are likely to under-perform this year with growth in the former reaching only 1.5% and remaining below 3% in the latter. Even the previously fast growing Chilean economy is losing steam as it confronts lower copper prices and China’s deceleration. Growth will also slow although remain relatively robust in Bolivia, Panama, Paraguay and Peru, while Colombia and the Dominican Republic are the only economies expected to accelerate this year. On the other hand, Argentina and Venezuela will likely experience recession.
Among the inflation targeting countries inflation remains elevated in Brazil and Uruguay. Chile, Mexico and Peru have cut interest rates amid slowing growth. Brazil has halted its monetary tightening cycle arguing the impact of the rate increases is cumulative and operates with a lag. Colombia is the only country in a tightening mode given its robust domestic demand dynamics. Argentina and Venezuela will continue to have the highest inflation rates in the region.
A gradual fiscal deterioration is forecasted in 2014 for several countries due to slower growth, lower commodity prices and continued spending pressures amid a heavy electoral calendar. The two largest economies of Brazil and Mexico will see higher deficits this year. Aruba, Costa Rica, El Salvador and Suriname will incur among the highest deficits in the region (surpassing 4.5% of GDP in each case). Only Bolivia and Peru are forecasted to run a small surplus or near balanced budget positions. Commodity dependent and recession-stricken economies of Argentina and Venezuela will have to manage their fiscal accounts within the constraints imposed by their limited financing options. Nevertheless, the modifications to Venezuela’s FX regime and the weaker average official exchange rate will likely benefit government oil receipts.
The regional current account deficit is forecasted to reach 2.6% of GDP in 2014. Current account deficits remain elevated in several countries including Brazil, Costa Rica, El Salvador, Jamaica, Panama and Uruguay. However, in most cases, external vulnerability is mitigated by healthy external reserves cushion, the continued resilience of FDI flows and access to markets and multilaterals. On the other hand, international reserves of Argentina and Venezuela have faced pressure over the past year. While they have stabilized in recent months, Fitch will continue to monitor their trajectory as significant drainage could further undermine their external debt repayment capacity.
The electoral calendar was heavy in the first half of 2014 with Presidential elections held in Colombia, Costa Rica, El Salvador and Panama. The election outcomes do not materially impact sovereign credit trends in these countries. However, countries like El Salvador and Costa Rica face the challenge of implementing fiscal reforms to secure better fiscal and government debt trajectories. Bolivia, Brazil and Uruguay will hold elections in the second half of 2014. The Bolivian President Evo Morales is expected to win the re-election bid which would imply broad policy continuity. Uruguay’s market friendly policies are likely to remain in place after the elections in which former President Tabare Vasquez is the current frontrunner. The polls in Brazil suggest that the likelihood of a second round have increased. Regardless of the electoral outcome, the next administration will confront the challenge of making policy adjustments to reduce the existing macroeconomic imbalances and take measures to boost confidence and competiveness of the economy. Political polarization will remain high in Venezuela and could make it difficult for the government to make faster progress on the much needed policy adjustments to ease foreign exchange constraints and address issues of scarcity, crime and very high inflation. Periodic periods of social instability cannot be ruled in Venezuela.
Material structural reforms to boost the lagging productivity growth in the region have not made significant headway. Mexico is the only exception where the government has been making progress on long-standing issues.
Photo: Romazur. CBH Compagnie Bancaire Helvétique Acquires Latam and Iberian Private Banking Business of Banque Privée Espírito Santo
Banque Privée Espírito Santo (BPES) has announced the sale of a significant part of its private banking business to CBH Compagnie Bancaire Helvétique SA, a Swiss independent private bank. The agreement covers the bank’s clients in the Iberian and Latin American regions.
The similarities in terms of culture and approach between the two banks will ensure continuity of the high-quality service and proximity to which BPES clients are accustomed. CBH and BPES will now work closely together to complete the transfer of the clients involved under the best possible conditions.
“I firmly believe that in CBH Compagnie Bancaire Helvétique we have found an excellent solution that will enable us to continue to work in the interests of our clients and our staff in the best way posible,” stated José Manuel Espírito Santo, Chairman of the Board of Directors of BPES.
Banque Privée Espírito Santo will continue to support its clients that are not transferred, maintaining a high-quality service and then gradually reducing its activities while at the same time developing its partnership with CBH Compagnie Bancaire Helvétique.
“We are very pleased to have concluded this agreement and we believe that it represents a significant step forward in the development of our bank, enabling the expansion of our business into the Latin American and Iberian markets. We are delighted to welcome the new team, with which we share a common strategic vision that is focused on a close relationship with our clients,” said Philippe Cordonier, CEO of CBH Compagnie Bancaire Helvétique.
Mary Oliva, fundadora de International Wealth Protection. Foto: Forbes. Servicio de seguros 'concierge' para los más acaudalados de Latinoamérica
For Latin America’s ultra-high-net worth individuals and families— and for the financial institutions and advisors who serve them—the gateway to culturally tailored wealth protection can be found in Miami, Florida. That’s the home of International Wealth Protection, an insurance brokerage firm unlike any other in the U.S., according to Forbes.
Founder and longtime industry veteran Mary Oliva, who wields 20+ years of international marketplace experience, has traveled extensively throughout Latin America. She understands its wealthiest citizens’ unique needs and challenges; more importantly, she has the knowledge, tools and acumen to effectively address them.
“We work jointly with other wealth advisory professionals who want to fully service their foreign national clients but aren’t familiar with the cultural intricacies and regional realities that complicate plan- ning,” Oliva says. “We’re on the ground in Latin America, meeting with clients on a regular basis. The full scope of service we provide and the way we provide it truly set us apart.”
Managing the Many Facets of Risk
International Wealth Protection provides insurance-based wealth protection and wealth transfer strategies designed to protect clients’ assets, sustain their lifestyles and safeguard their legacies—all in a region too often beset by military insurrection, political instability and currency volatility.
“Ninety percent of Latin American businesses are family owned, yet only 1 percent reach the fourth generation due to a lack of planning,” Oliva says. “We understand our clients’ unique concerns as well as the nature and degree of risk they face, and we’re focused on having the conversations no one else is having with them—what keeps them up at night and the future they envision.”
International Wealth Protection also stays a step ahead of emerging regional trends. “We’ve now entered a global era of transparency and compliance,” Oliva says. “Our firm is pioneering the utilization of life insurance, including private placement policies, to meet Latin Americans’ growing need for tax-planning strategies.”
Protecting Your World: Concierge-Style Service
International Wealth Protection delivers straightforward insurance-based solutions to the highly complex and diversified jurisdiction that is Latin America. With complete understanding of the regulatory and tax environment of the region’s 20 different countries, Oliva is able to implement personalized solutions in a compliant and tax-efficient manner.
These solutions include but are not limited to: general risk evaluation ; multijurisdictional tax planning; charitable giving strategies ; U.S. beneficiary planning ; business continuity ; extraordinary risks ; asset protection ; multigenerational planning .
“Our goal is to help our clients mitigaterisk in a seamless fashion,” Oliva says. “We go to great lengths to provide an excep- tional client experience.”
Black Diamond Capital Management has announced the appointment of Jerome Shapiro as a Managing Director and Structured Product Portfolio Manager.
Mr. Shapiro joined the firm on June 1 at its Greenwich, Connecticut office and has responsibility for structured product investments across the Black Diamond platform.
“Jerome’s hiring expands our structured product capabilities and reflects Black Diamond’s view that structured investment opportunities are an attractive asset class for generating returns for our clients,” said Stephen Deckoff, Managing Principal of Black Diamond. “Jerome is a seasoned professional and his expertise will enable us to continue to enhance our capabilities in this important area.”
“It’s a privilege to join the Black Diamond team,” said Mr. Shapiro. “I’m confident that we have the experience and ability to significantly enhance and grow our structured products portfolio.”
Mr. Shapiro was most recently a Senior Vice President at One William Street, an alternative investment firm, managing an asset-backed portfolio across multiple commercial and consumer sectors. He previously worked at Merrill Lynch & Co. in the Principal Investment Group, co-managing a whole loan portfolio. He also held positions in trading and structuring CMBS and other mortgage products at Bear, Stearns & Co. Mr. Shapiro holds a BS in Mathematics from Tufts University.
Identifying “economic moats,” or structural barriers that protect companies from competition, is the cornerstone of Morningstar’s equity analysis. Similar to the way castles are protected by moats, companies with economic moats are great businesses that can fend off competition and earn high returns on capital for many years. Morningstar’s new book, Why Moats Matter: The Morningstar Approach to Stock Investing, helps investors find superior businesses and determine when to buy them to maximize returns over the long term.
Why Moats Matter outlines the basic idea of economic moats, a concept pioneered by Warren Buffett, and gives investors a fundamentals-based framework for successful long-term equity investing. Why Moats Matter is co-authored by Heather Brilliant, co-chief executive officer of Morningstar Australasia and recently global head of equity and corporate credit research for Morningstar, and Elizabeth Collins, Morningstar’s director of equity research, North America. Other members of Morningstar’s equity and corporate credit and quantitative research teams also contributed to the book. In Why Moats Matter, Morningstar’s experts:
Explain the concept of economic moats and moat trends and the five sources of sustainable competitive advantage—Intangible Assets, Switching Costs, Network Effect, Cost Advantage, and Efficient Scale.
Establish the difference between business quality and undervalued stocks.
Discuss standards for evaluating moats by sector and industry.
Clarify how moats affect stock returns and stock valuation.
Offer portfolio strategies for putting the power of moats and valuation to work.
“When Morningstar started analyzing stocks more than a decade ago, we began with some core principles that guide our research to this day. Then and now, our analytic work has centered on three primary elements—sustainable competitive advantages, valuation, and margin of safety—that we believe are the keys to outperforming the stock market over time,” Brilliant said. “Why Moats Matter delves into each of these ideas and is intended for investors with a long-term perspective. When you focus on a company’s fundamental value relative to its stock price, and not on where the stock price is today relative to a month ago or a day ago or five minutes ago, you start to think like an owner rather than a trader. It’s this mindset that we believe is key to helping people become successful stock investors.”
Why Moats Matter is now available wherever books and e-books are sold. More information about Why Moats Matter, including author biographies and headshots, cover art, and methodology documents, is available at this link. To view a video about economic moats and download sample equity research reports, please visit this site. Morningstar applies this wide-moat philosophy in its Morningstar® Wide Moat Focus IndexSM, which consists of 20 stocks that represent the most compelling values as determined by the ratio of Morningstar’s estimated fair value to the stock’s current market price.
PIMCO and Source announced the listing of two ETFs on the SIX Swiss Exchange. The PIMCO Euro Short Maturity Source UCITS ETF and the PIMCO US Dollar Short Maturity Source UCITS ETF were launched in 2011, initially on Xetra and the London Stock Exchange, and since then have gathered assets of €1.3 billion and US$1.8 billion respectively.
These short maturity funds – known as ‘MINT’ – were the first actively managed ETFs to be listed in Europe and offer investors direct access to PIMCO’s global cash management expertise.
Their aim is to preserve capital and provide the potential for superior income and total returns compared to traditional money market funds. They do this by investing in baskets of short-term investment grade debt securities. The funds are wholly transparent, with full disclosure of holdings published daily.
The fund managers look to take advantage of opportunities in the market by actively managing exposure to duration and credit. Currently, the Euro fund has an effective duration of 0.98 years, while the US Dollar fund has a shorter duration of 0.51 years. Both funds maintain duration of up to 1 year. In terms of credit exposure, the average rating within the two funds is currently A+.
The PIMCO Euro Short Maturity Source UCITS ETF and the PIMCO US Dollar Short Maturity Source UCITS ETF both have an annual management fee of 0.35%.
