Wikimedia Commons. BigSur Closes its Eighth Commercial Real Estate Transaction in Five Years
BigSur Partners, a multifamily office based in Miami headed by Ignacio Pakciarz and Rafael Iribarren, has completed its eighth Commercial Real Estate transaction in five years. This is the fifth acquisition in the Class A office market. The first acquisition took place in 2009, selling it a year and a half later, and earning an IRR of 30% for its investors. The other properties acquired were an industrial distribution center on the outskirts of Atlanta, Georgia in 2010, 100% of which was leased to General Mills, and a ‘Multifamily’ complex built in 2012 on the outskirts of Dallas-Fort Worth; its acquisition was completed in late 2012.
The latest acquisition is one of the four ‘Pods’ of the Merrill Lynch Campus in Princeton, NJ, which has a covered surface area of 1.8 million square feet. The campus was built in the year 2000 at a total cost of $ 800 million ($ 447/per square foot). Today the campus houses 6,800 employees of Bank of America Merrill Lynch and for the financial institution is an important complex within the private banking sector globally.
BigSur decided five years ago to seek income diversification for its clients and saw an opportunity to take advantage of extremely attractive valuations for what they call “core assets”. What they have been doing since 2009 is looking for investments which are rented with good tenants, in good locations and with the expectation that the yield is achieved by the rental income generated by the properties and not by the potential appreciation of the assets.
Another important decision made by BigSur Partners is to invest jointly and directly with institutional funds in projects personally selected by them, instead of investing through funds or REITS. “What we achieve by this is to offer our clients the option of investing in each property the amount of their choice and they all appreciate this flexibility”, said Rafael Iribarren, founding partner of BigSur.
Although the cost of funding has risen in recent months, BigSur still sees potential in certain sub-markets, although they admit they are seeing fewer projects which are as ‘obvious’ as what they saw two or three years ago. They are currently studying new alternatives for investors who are looking for solid investments which generate fixed incomes with low correlation to the bond market.
Wikimedia CommonsFoto: Poco a Poco. Cayman Islands Signs FATCA Agreement Increasing Pressure on Other Fund Domiciles
USA has reached a preliminary agreement with the Cayman Islands for the Caribbean nation to meet FATCA rules. This could act as pressure for other “tax havens” which for the moment have failed to adopt those rules.
The Cayman Islands have said they will comply with FATCA regulations which will come into force in July 2014, and for which the foundations for an intergovernmental agreement (IGA) have been laid, and, as recorded by Reuters, the official signature will be held soon
FATCA requires for foreign financial institutions to notify the U.S. tax authority (IRS) of the accounts held by U.S. citizens with more than $ 50,000. Financial institutions which do not comply will see their benefits in the U.S. undergo tax withholding of 30%, which in fact, in most cases, means evicting them from the country.
The Cayman Islands are a popular destination for registration of investment funds. The country has no income tax and is often referred to as a “tax haven”. According to industry sources, the thousands of hedge funds, private equity funds and mutual funds domiciled in Cayman Islands were in favor of reaching an agreement to preserve their access to the U.S. market.
The official signing of the FATCA agreement by Cayman Islands will put pressure on other low-tax countries which harbor investment instruments, such as Luxembourg, Bermuda and the British Virgin Islands. Ireland and Switzerland have already signed agreements with the U.S. for FATCA regulation in January and February this year.
August 19th will see the opening of a webpage for banks to register with the IRS and to ensure their compliance with FATCA. The deadline for registration is until April 25, 2014.
Wikimedia CommonsRBC Office, Zonamerica. Royal Bank of Canada Announced the Closure of its Uruguayan Branch
According to a statement distributed by email, the Royal Bank of Canada Wealth Management will close its Uruguay branch on the 31st of October and the 41 employees at the branch will be relocated to other offices of the Canadian bank. The bank has reported that its closure in Uruguay “is part of a strategic review” of its business in Latin America.
RBC has commenced to notify its customers of this decision, offering to transfer their funds to other branches of the bank either in Europe or North America.
Two months ago, RBC facilities in Uruguay suffered a raid at the request of Argentine Judge Norberto Oyarbide amid an investigation for alleged tax offenses. It so happens that the Argentine judge is in charge of a megacause in which he is investigating the transfer of dozens of footballers in money laundering maneuvers worth millions of dollars. However, RBC sources told the El Observador newspaper in Montevideo that the closedown of its business in this country is not related to this incident.
“The criminal investigation involving the Uruguay branch is a separate issue and RBC will continue to work with the authorities to resolve it,” a bank source informed the newspaper.
This raid has caused great concern amongst the international customers of the bank in Uruguay, 70% of who are Argentineans with, on average, about $600,000 in accounts in Uruguay.
The executive director of the Uruguyan Association of Private Banks and former BCU president, Julio deBrun, told the newspaperEl País that the RBC raid caused “concern” and warned that the episode is “a bad sign” because it affects “the image of the bank and of the country.”
Wikimedia CommonsFoto: Danielparker. Calamos Adds Two Portfolio Managers to High Yield Expertise
Calamos Investments announced the addition of two co-portfolio managers to its investment team. Jeremy Hughes, CFA, and Chris Langs, CFA, have joined Calamos with more than 40 years of collective investment experience. Most recently, Messrs. Hughes and Langs worked together at Aviva Investors overseeing high yield assets.
At Calamos, the pair will contribute their expertise to managing the firm’s fixed income/high yield strategies, including the Calamos High Income Fund. Like all Calamos strategies, the firm’s fixed income/high yield portfolios are managed within a team-driven structure.
“A team approach benefits our clients by ensuring continuity of process and philosophy. Each team has specialized responsibilities—in this case, fixed income/high yield—but all teams draw upon each other’s insights and research. This balance of specialization and collaboration gives us an edge in identifying opportunities in the fixed income/high yield market”, stated John P. Calamos, Sr., CEO and Global Co-Chief Investment Officer.
The addition of Messrs. Hughes and Langs to enhance management of the firm’s fixed income/high yield strategies continues a measured and strategic expansion of the Calamos investment team, including the addition of a Value Equity Team and a Long/Short Team in 2012, as well as numerous additional hires at all levels of the investment organization.
Wikimedia CommonsFoto: Hex. Panamá: algo más que sombreros de paja
The small isthmus of Panama has a fascinating history, with the forging of the Panama canal being one of the world’s greatest engineering feats. The canal has resulted in Panama becoming a vital cog in the global supply chain, with approximately 5% of world trade passing through its locks. Growth in revenues from the canal have provided support for Panama’s economy, enabling it to be the fastest growing in the whole of the Americas last year. This should continue as a $5.25bn canal expansion project is underway that will allow larger modern container ships to fit through the canal.
But there is more to Panama than a stretch of water that links the Pacific and Atlantic oceans. The economy is becoming more diversified with growth from projects related to mining and construction, as well as services industries such as tourism and banking. Panama claims to have the fourth largest undeveloped copper reserve in the world. Panama City already houses numerous regional banking headquarters and has ambitions to become the financial hub of the Central American region. The government is spending on various infrastructure projects, the need for which are obvious from a visit to the city – tall skyscrapers are interspersed with areas of extreme poverty, as well as terrible traffic and broken pavements.
The local stock market lacks liquidity so there are few ways for investors to get direct exposure to the country other than buying an apartment in Donald Trump’s new 70-storey tower. Copa Airlines and Banco Latinoamericano are based in Panama and are listed in New York. As regional players they demonstrate Panama’s ability to extend its influence beyond its borders. Panama is a fine example of how small countries can often punch above their weight.
Nicholas Cowley, Investment Manager, Global Emerging Market Equities, Henderson Global Investors
Wikimedia CommonsFoto: Daniel Schwen. AllianceBernstein adquiere W.P. Stewart, gestora especializada en growth
AllianceBernstein and W.P. Stewart have entered into a definitive agreement whereby AllianceBernstein will acquire W.P. Stewart, an equity investment manager that currently manages $2 billion in U.S., Global and EAFE concentrated growth equity strategies for institutional and retail clients, primarily in the U.S. and Europe. Upon completion of the acquisition, W.P. Stewart’s investment services will be added to AllianceBernstein’s equity offering. W.P. Stewart’s team of investment managers will remain in place and continue to manage their investment services as they do today. At the same time, they will gain access to AllianceBernstein’s global reach and research team,
“I’m excited to be adding W.P. Stewart’s complementary concentrated growth equity services and strong bench of talent to our equity platform,” said Peter S. Kraus, Chairman and Chief Executive Officer of AllianceBernstein. “While our equity business is well-positioned to deliver in many areas, we also understand that our clients want more options, particularly in concentrated strategies that can help improve alpha generation potential within their portfolios”
To help ensure a smooth transition, founding partner William P. Stewart, an esteemed investor with nearly 60 years of industry experience, will stay on through the earlier of the end of this year or the close of the transaction, at which point he will retire from the firm.
At the closing of the transaction, AllianceBernstein will pay W.P. Stewart shareholders $12 per share in cash and will issue to W.P. Stewart shareholders transferable contingent value rights entitling the holders to an additional cash payment of $4 per share if the assets under management in the acquired W.P. Stewart investment services reach $5 billion on or before the third anniversary of the closing. W.P. Stewart currently has approximately 5 million shares outstanding. The closing is expected to occur in approximately four to six months and is subject to customary closing conditions, including W.P. Stewart shareholder approval and requirements relating to retention of assets under management and cash.
Wikimedia CommonsFoto: Totya. El rally bursátil de julio y qué hacer a partir de ahora
After a torrid June, stock markets rallied strongly in July, with the FTSE World index up well over 4% in local currency terms. Pleasingly, the UK, which is a large overweight in most of our multi-asset portfolios, also had a stellar month, with the FTSE All-Share producing a sterling total return of 6.8%. Year-to-date total returns for the FTSE All-Share now stand at 15.9%, and within this the Mid 250 has been very strong, with sterling total returns in excess of 20%.
Looking further afield, US and European equity markets also performed strongly, while Japan struggled to make headway. However, Japan’s muted performance needs to be seen in the context of very strong performance year to date, and recent news flow from the likes of corporate bellwethers such as Toyota suggests that Japanese companies really are reaping significant benefits from the softer yen. Asian and emerging markets also rallied in July, although the latter in particular continue to disappoint in terms of their year-to-date performance.
Two key things helped to underpin the July equity rally. First, the US Federal Reserve has been at great pains to point out that the withdrawal of policy support will be gradual and data dependent. This helped to stabilize bond markets during the month, with benchmark 10-year US Treasury yields rising to only 2.6% from 2.5% at the beginning of July. From here, we anticipate a gradual rise in bond yields, not the rout that some market participants have feared. Nonetheless, despite further modest increases in yields in July, we still see better value in high yield and investment grade credit within fixed income, and are not inclined to close our large underweight in core sovereigns at current valuation levels. For investment grade credit markets, yield spreads continue to provide support but valuations will not be immune to the gradual rise in sovereign yields that we expect. It is for this reason that we have been reducing our large overweight in recent weeks. We remain constructive on high yield, and while market liquidity is thin, valuations are supported by the shorter duration of the asset class relative to investment grade.
The second thing supporting equity markets in July was the general improvement in global macroeconomic data – even in the most stressed areas, such as the peripheral Eurozone. While the better data is clearly positive in terms of sentiment, we are not inclined to reduce our European ex UK equity underweight, given the current political uncertainties and risks. However, this is likely to be something that we discuss in more detail in the months ahead, particularly if the better data starts to translate into meaningful earnings upgrades – although it remains to be seen how well European manufacturers will cope with the global competitive threat that is posed by a weaker yen.
In equity markets, we retain a large overweight in the UK, and are also overweight the Pacific ex Japan, emerging markets and Japan. Our overweight in emerging markets has worked against us this year, but the strength of our asset allocation decisions elsewhere has meant this has not mattered in terms of overall portfolio performance. Moreover, given where valuations are now, we do not think it makes sense to start unwinding this position. In the UK, we continue to regard equity valuations as attractive and further support comes from the UK’s high proportion of overseas earnings, which gives the UK leverage to the global recovery.
Turning to alternative assets, we remain overweight UK commercial property as the high real yield on property remains very attractive and anecdotal evidence suggests that forced sellers have now diminished significantly. Commodities also rallied in July, although perhaps counter intuitively they have been quite volatile when economic data releases have been strong, as market participants have viewed stronger data as hastening the likely demise of quantitative easing. For the year to date, however, returns from commodities remain poor.
Investment Strategy by Mark Burgess, Chief Investment Officer at Threadneedle Investments
Wikimedia CommonsAll Rights Released. BNY Mellon Announces Five-Year Commitment to World's Largest Rowing Competition
BNY Mellon announced an exclusive multi-year sponsorship of the Head Of The Charles Regatta, held annually in Boston and Cambridge, Mass.
One of the world’s pre-eminent rowing competitions, the 2013 Head Of The Charles Regatta presented by BNY Mellon is free to the public, and features a variety of races for local and international rowers of all skill levels and ages. The event draws global participation, including a number of national, international and Olympic athletes. The 49th Regatta, scheduled this year for October 19 and 20, is expected to attract almost 10,000 competitors and more than 400,000 spectators.
To highlight this key sponsorship, BNY Mellon also is sponsoring the inaugural BNY Mellon Championship for collegiate competitors in the Regatta’s Men’s and Women’s Championship Eights. Winners will be presented with the BNY Mellon Championship Trophy.
“Teamwork, excellence and delivering world-class performance are all values to which we aspire at BNY Mellon,” said Curtis Arledge, vice chair of BNY Mellon and CEO of BNY Mellon Investment Management. “The sport of rowing has these values in abundance, and we are privileged to play such a key role in this event’s ongoing success.”
Frederick V. Schoch,executive director of the Regatta, said, “We are delighted that BNY Mellon is becoming part of the Head Of The Charles family, a relationship we look forward to continuing for years to come. The Regatta is a cherished Boston tradition, and our partnership with BNY Mellon will further enhance race weekend, building on a proud legacy for both organizations. This sponsorship is not only a boon for our race, but for the entire city of Boston.”
Larry Hughes, chairman of BNY Mellon New England and CEO of BNY Mellon Wealth Management, noted Boston’s importance to BNY Mellon: “This is the hometown of BNY Mellon Wealth Management, and across all our businesses we employ more than 4,000 people throughout New England. Our commitment to Boston is key to our continued growth, and we are proud to support this historic Regatta.”
Family-friendly activities for all ages include a Rowing and Fitness Expo and food vendors serving worldwide delicacies. The Reunion Village at the race’s mid-way point, will serve as a fun and casual spot for clubs, schools, alumni groups, parents and boosters to catch up and relax during the event. The picturesque race course begins at Boston University’s DeWolfe Boathouse and ends at Artesani Park in Brighton.
BNY Mellon’s sponsorship continues the firm’s long history of partnerships with institutions worldwide to bring iconic events to a broader audience. The firm is currently the title partner of theannual rowing competition between the Oxford University Boat Club and the Cambridge University Boat Club on the River Thames in London. BNY Mellon seeks to create a legacy of involvement through its sponsorships. During its five-year commitment to the Head Of The Charles Regatta, BNY Mellon aims to develop the championship, engage audiences across the event, and generate interest and enthusiasm from national and international audiences.
Wikimedia CommonsBy auriarte. International Equity and Value Funds Benefit From Bond Fund Sell-Off
Morningstar reported estimated U.S. mutual fund asset flows for July 2013. Investors added $15.9 billion to long-term mutual funds in July, driven by inflows of $7.9 billion into international-equity funds. Outflows from taxable-bond funds ebbed to $1.3 billion after record outflows of $43.7 billion in June, with investors continuing to favor bank-loan and nontraditional bond funds at the expense of more traditional intermediate-term bond categories.
Detroit’s bankruptcy filing kept municipal-bond funds in heavy redemptions; the category group lost $10.3 billion in July to mark the fifth straight month of outflows.
Value offerings led the way among equity funds, which was likely a result of yield-starved fixed-income investors seeking dividend income. Large-value funds collected $3.3 billion, the category’s strongest inflow since February 2007.
JPMorgan led all providers with inflows of $3.4 billion. Dimensional Fund Advisors, Oakmark, Principal Funds, and MFS have also gained market share over the last year.
Investors pulled $7.5 billion from PIMCO Total Return in July, its third month of outflows. The fund has seen outflows of $18.4 billion over the previous three months compared with inflows of $21.5 billion over the 16-month period from January 2012 through April 2013.
Wikimedia CommonsBy Hans Hillewaert. How Will Latin America Weather a “Sudden Stop” in Investment?
Since May, over one-quarter of the past five months’ foreign portfolio investment into emerging markets has been withdrawn, according to the latest available data from Emerging Portfolio Fund Research. For the Latin American economies, this is likely to result in slower growth, but the impact may be milder this time around.
The type of “sudden stop” that we’ve seen in investment flows this year is typically associated with currency depreciations, wider current account deficits and slower GDP growth. Generally speaking, those symptoms are now present across Latin America. The recent selloff followed the announcement that the US Federal Reserve was considering tapering asset purchases later this year. But the deceleration in growth and the increase in external deficits in the region had begun before that, mainly because of weak external demand for the region’s exports and softer commodity prices amid still subpar global growth—and particularly concerns about demand from China.
Previous episodes of capital flow reversals, for instance in 1994, generated significant dislocations across Latin America; they gave rise to sharp contractions in domestic economic activity and prompted emergency adjustment policy packages and multilateral and bilateral loans to help some countries remain current in their external obligations. This happened because countries in the region were overindebted in foreign currency, which after a significant correction in exchange rates required a tightening of fiscal policy to service the debt. That is, the external shock was amplified at the local level.
We believe that although the sudden stop is still likely to result in slower growth in the region, the impact of the flow reversal on Latin American economies should be milder this time around. This is because macroeconomic conditions in the region are now sounder. We see five important differences relative to the situation in the 1990s.
First, current account deficits are generally smaller. Second, fiscal performance is stronger, with some countries even generating an overall surplus. Third, the stock of international reserves is higher, both in absolute terms and as a proportion of GDP, imports or debt payments. The two last and more important differences are that exchange rates are now flexible (see chart), and that the public sector is a net creditor of the rest of the world in hard currency in most countries.
This means that movements in exchange rates will act as partial buffers of the external shock, thus preventing a more severe domestic contraction in those countries with currency flexibility. In our view, this also means that the dynamics of the adjustment will be different, as the depreciation will not give rise to undesirable pro-cyclical fiscal policies. Therefore, we think that although the outflows will prompt diminished macroeconomic performance, most countries in the region are on a sufficiently solid footing to withstand the external shock.
The backup in bond yields is likely to result in increased credit quality differentiation. Thus, there is a good chance that countries with better fundamentals will outperform in the coming quarters. We favor those countries with smaller current account deficits and fiscal imbalances; low external debt amortization schedules; and low foreign holdings of domestic securities. We continue to believe that Mexico is a candidate to perform well in the coming months, while we maintain our view that Venezuela presents significant vulnerabilities.
Fernando J. Losada is Senior Economist—Latin America, at AllianceBernstein
