Ignacio Pakciarz, BigSur's CEO. BigSur, a Model of Independent Portfolio Management
If not administered and managed correctly, family wealth is squandered in three generations. The success, happiness and peace of future generations depend on the ability of wealth managers, either of their own wealth or that of others. “The reality is that wealth is consumed in three generations. One of our functions is to eliminate or mitigate the possibility that the legacy is destroyed,” says Ignacio Pakciarz, CEO ofBigSur, in an interview with Funds Society.
Pakciarz is well aware of that fact because he has been managing wealth for many years, first from larger institutions and for the last six years at the helm of Big Sur, a “multi family office” which he founded with Rafael Iribarren in 2007, thanks to the support of six Latin American families who had faith on a group of professionals who were looking for a model capable of offering solutions tailored to clients’ needs, independently and without conflicts of interest.
In this respect, Pakciarz explained that previous experience of the BigSur team in large institutions, JP Morgan, Deutsche Bank and Goldman Sachs, to name just e a few, allowed them the opportunity to build a model without the shortcomings of the largest institutions and to give a bespoke service. “A business focused on avoiding many mistakes and conflicts of interest that occur in traditional private banking business.”
At BigSur, says the manager, “we align the objectives, so there is zero conflict of interest and we are one hundred percent independent. It is about trying to provide a solution tailored to the clients: in terms of investment, fiduciary structure and the client’s stage of life. “
The average net worth of each of their client families is at about $ 50 million and the smallest around $10 million. Most are of Latin American origin, although many of them are international families, in which members are spread across countries, subject to different jurisdictions.
An advisory committee
As for its investment universe, Pakciarz said the firm has an investment committee which not only aims to improve clients’ returns, but also to minimize the risks, when faced with the possibility of negative market movements.
They invest according to the models developed in the firm, not only in stocks and bonds, but also in alternative products such as “private equity”, commodities, real estate and a small percentage in hedge funds, an asset that is not among their favorites. They have a team of 14 people with extensive experience in various financial instruments. “My focus as CEO is to assemble the best team in the market,” said Pakciarz. BigSur has appointed two new professionals in the last year with over 23 years of experience in “research” and “trading”.
One of the features of BigSur is “always think of your clients as partners.” After the crisis in the U.S. housing market, together with their clients, they found that the bond market had significantly decreased its appeal, and, on the other hand, that the property market had become very attractive, “both for the value of the properties as for the income which their rental produces.”A group of professionals, together with the firm’s clients, detected the most efficient way to capture such an alternative, which benefits its Investors Club.
Pakciarz also explained that being independent; they associate with whoever may provide greater benefits to their clients-partners at any one time. These associations are based solely on the benefits to client-partners; since BigSur does not earn commissions on transactions or on products.
Finally, the executive said that BigSur wish to become the best alternative so that their clients do not suffer from one of the common characteristics of the financial market, “fear”. “This occurs when there is no transparency, the clients are uninformed, clients’ interests are not the same as those of the consultant, or a clear plan of investment is lacking. Families who come here are aware of what they want. They are concerned about their legacy and maintaining their wealth. “
Mathieu Ferragut, new head of Crédit Agricole Private Banking Américas. Mathieu Ferragut, New Head of Crédit Agricole Private Banking for the Americas
Mathieu Ferragut has been appointed as the new head ofCrédit Agricole Private Banking Américas, a position which he will carry out from the offices of the French bank in Miami, as he himself explained in an interview with Funds Society.
The Crédit Agricole private bank, present in Latin America for over 30 years, is a boutique business, as Ferragut himself describes it; he goes on to add that they have a great advantage because they have the backup of Crédit Agricole, which is the world’s fourth largest bank in terms of assets, but of medium-size within the private banking business, giving them a lot of flexibility, which doesn’t mean that it is not an aggressive bank with the same nerve as the big market players. “We have the best of both worlds”.
Ferragut assumes this position after the management of the French company decided to go for further regionalization of business. Crédit Agricole has a strong network of international private banks They have a bank in Brazil, they have a presence in Uruguay, in Switzerland they are the third largest foreign bank, they stand as the leading bank in Monaco and the second largest foreign bank in Luxembourg, plus they are present in Singapore, Hong Kong, Dubai, Spain and Italy.
The management in Paris has chosen Ferragut, a man from within company ranks, to manage the private banking business in the Americas.
To date, Ferragut worked as general manager of Crédit Agricole in Miami, a position he held since 2008. Previously, and also within the bank, he was second regional deputy general manager and chief operating officer for private banking in Asia from Singapore, where he lived for five years.
Ferragut, with over 15 years of industry experience, through his time spent in both Singapore and Miami has acquired great knowledge of Asian and Latin American markets, which are actually, “the bank’s two priorities”.
The manager has a Commerce MBA from France and a postgraduate degree in Finance and Markets, which was also completed in France.
As for his vision of the private banking industry, Ferragut believes that it’s currently a good moment for the sector, which is developing strongly and with many opportunities. “There are many players, but there is room for everyone”.
In the case of Latin America, he believes that private banking is covered by U.S. and European banks, so there is plenty of room for local banks, in a region undoubtedly considered to be the best emerging market at the moment.
Finally and regarding how he is facing his new stage, the executive said he expects the business to grow in a strong way, with at least 15% increase in annual turnover. The growth will come primarily from the organic side, with the possibility of external growth if the opportunities come along.
“We don’t want to become a giant, we would like very selected, and controlled, quality growth”. The business will primarily focus on Brazil, Mexico and the Andean Group.
Wikimedia CommonsBill McQuaker (pictured), Deputy Head of Equities for Henderson, highlights the firm's Outlook for the second half of 2013. This is the third and last part of this investment outlook. Not too hot, not too cold
The rally in global equities since last summer has been driven primarily by the wave of liquidity provided by central banks. This wave will not last forever. We have seen the first indications of an exit strategy from the US Fed. As it has done since the Global Financial Crisis began, the US central bank will set the template for its peers when it decides to withdraw stimulus and move towards re-establishing a more ‘conventional’ relationship with its economy. The signs are that a return to ‘normality’ is tentatively underway, and this is no bad thing if growth continues to improve steadily. Since 2010 global economic expansion has been somewhat disappointing, but at the same time it has not been so fragile that there has been a real danger of renewed recession. This type of ‘Goldilocks world’ that we have been inhabiting has been a relatively benign one – banks have kept the wolves from the door while the porridge warms on the stove.
Duration, duration, duration…
For some time, we have been assessing the potential vulnerability of bond portfolios if the outlook for rates changes dramatically. If the world economy continues to heal as we think it will, bonds will have less appeal than they have had in the past. If a substantial weight of money begins to rapidly exit the bond markets, liquidity issues could resurface. Making the correct call on fixed income exposure could potentially be more important in terms of asset allocation than equity sector and regional positioning within multi-asset portfolios. For example, we currently have very limited exposure to conventional gilts or US treasuries, preferring corporate bond funds with short maturities and flexible mandates.
The intensifying search for yield has been leading investors to the higher risk end of the corporate bond markets. The valuation argument for high yield corporate bonds continues to centre upon their spread to government debt: the continuation of current central bank policies has been instrumental in suppressing interest rates and bond yields, supporting equity markets and keeping corporate defaults low. However, high yield bonds have seen significant inflows, and it is becoming more difficult to argue that their coupons provide sufficient compensation for risks taken by the investor, especially in the event of rising rates. Similarly, emerging market debt is another area of concern for us.
…Location, location, location
Partly as a result of our views on the potential dangers in the bond market, we have been shifting some of our exposure into property. In some respects, property can be perceived as a ‘stepping stone’ asset for investors who are looking to rotate out of bonds, but who are not yet comfortable investing in equities. It offers a similar yield to high yield bonds, but with arguably fewer valuation concerns. In comparison to a considerable sum of money that has been parked into bonds over the past few years, property has had very little direct investment. Although we do not expect much in the way of capital gains in the short run, running yields from commercial property are relatively attractive. We anticipate a yield in the area of 4.5%-5% over the course of a year if achieved through carefully managed strategies.
Opinion column by Bill McQuaker, Deputy Head of Equities for Henderson Global Investors.
Wikimedia CommonsBy Dong L. Zou . Román Blanco to Head Santander in the United States
Román Blanco has been appointed as Santander’s new Country Head in the United States, replacing Jorge Morán, who has decided to leave the group to pursue other professional interests.
Román Blanco was born in Sendelle, Pontevedra (Spain) in 1964 and joined Santander in 2004. He was an executive in Brazil before being appointed Country Head for Colombia in 2007. In 2012 he took charge of Santander’s operations in Puerto Rico, which, in June this year, became part of the group’s organizational structure in the U.S.
“He will now take over from Jorge Morán, who has completed the reorganization of the group’s business units in the United States and Sovereign Bank’s implementation of the Santander group technical and operating platform”, said the bank in a press release.
By Nangua . Investors Still Confident In Global Growth Despite China Doubts
Global investors remain confident in the outlook for economic growth despite their sharply decreased growth expectations for China, according to the BofA Merrill Lynch Fund Manager Survey for July. A net 52 percent of respondents now expect the global economy to strengthen over the next year, close to last month’s reading and up four percentage points from May’s.
Sentiment towards China has continued to worsen, however. A net 65 percent of regional panelists now see the country’s economy weakening in the next year, compared to a similar majority anticipating stronger GDP as recently as December 2012. A “hard landing” in China stands out as a major tail risk that fund managers identify, with over half (56 percent) ranking it first on this measure – compared to one-third of respondents a month ago.
Investors’ conviction that developed economies – the U.S. and Japan in particular – will still achieve growth is reflected in their growing appetite for equities. A majority of asset allocators are now overweight equities, up nine points in two months to a net 52 percent. Confidence in the U.S. is also apparent in a net 83 percent favoring the dollar over other currencies, the highest reading yet recorded by the survey.
Stances towards bonds are increasingly negative. A net 55 percent of fund managers are now underweight fixed-income instruments. They have also lifted their cash holdings to 4.6 percent. This is the highest level in a year and represents a contrarian buy signal for equities.
“With the support of a host of buy signals in recent weeks, the ‘Great Rotation’ is in full force. Our positive view of equities would be further reinforced if the loss of faith in China’s growth story turns out to be overdone,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research. “Global investors are trailing the eurozone’s economic momentum. They should prefer cheap domestic exposures to its rich EM exposures,” added John Bilton, European investment strategist.
GEM sentiment souring
The shift in sentiment towards China shows through in investors’ broader stance on global emerging markets (GEM). A net 44 percent now view GEM countries as offering the worst outlook for corporate earnings of any region – the most negative level yet recorded in the survey, following an 18 percentage point decline from last month. They are similarly unimpressed by the region’s quality of earnings.
GEM valuations do not appear to have yet declined sufficiently to reflect these views. Indeed, investors see eurozone equities as cheaper. A net 18 percent of fund managers are now underweight GEM equities, down from a net overweight just two months ago and the lowest level recorded in the survey since 2001. An unprecedented net 26 percent expects to underweight GEM equities on a 12-month basis.
However, Russia is attracting increased interest. A net 50 percent of specialist GEM fund managers are now overweight the country’s equities, up 12 points from last month.
Positive on Japan
Japan stands out as one of the survey’s most positive themes. Investors’ assessment of the risk of the reflationary “Abenomics” policy failing has receded sharply this month. Their view that the country offers the best outlook for corporate profits of any region has strengthened further. All regional fund managers surveyed expect companies to achieve double-digit earnings growth over the next year.
Against this background, appetite for Japanese equities has risen sharply. July’s net 27 percent overweight is up 10 points from last month, the biggest rise of any major market. Investors’ stance on the market is now almost as positive as that towards U.S. equities (up four points this month to a net 29 percent overweight).
Inflation in focus
With growth in prospect, inflation is increasingly on investors’ minds. A net 38 percent of panelists now expect global core inflation to be higher in a year’s time, a rise of seven percentage points from last month.
This is reflected in some “short-covering” in commodities, an asset class especially sensitive to inflation (though also very exposed to demand from China). A net 26 percent of panelists are now underweight commodities, up six percentage points since June to the most positive level in three months – though this is an improvement from notable weakness since June marked a record low for positioning in commodities.
Wikimedia CommonsYerlan Syzdykiv, Head of Emerging Markets - Bond & High Yield, Pioneer Investments. Pioneer Investments Strengthens Fixed Income Capability in Its London Investment Hub
Pioneer Investments has announced several developments to its Emerging Market and High Yield Fixed Income capability in its London investment hub. Yerlan Syzdykov, Senior Portfolio Manager Emerging Markets and High Yield Fixed Income, and Lead manager of Emerging Markets Bond strategy has been appointed Head of Emerging Markets – Bond & High Yield.
Yerlan, who will remain lead portfolio manager for Pioneer Investments’ Emerging Market Debt strategies, will take on overall performance responsibility for all Emerging Markets & Euro High Yield investment strategies managed by a team of 6 portfolio managers. He takes over from Greg Saichin, who has resigned his position as Head of Emerging Markets and High Yield to pursue another opportunity outside the firm.
Yerlan has been involved in the managing of Pioneer Investments’ Emerging Market Debt strategies since 2000 and “has had a key role in evolving our investment capability in this area over the last 13 years”, highlights Pioneer Investments through a release. He will report into Mauro Ratto, Head of Emerging Markets.
Over the last few months, Pioneer Investments has been expanding its investment footprint in its Emerging Markets & High Yield team in London.
In order to help exploit attractive opportunities available in local currency emerging market debt and credits, notably loans, 2 new portfolio managers with local currency and loan expertise, will join the firm in August. Desmond English joins from Commerzbank as Portfolio Manager with a specific focus on loans. He has 16 years of experience in this area. Esther Law joins as co-manager on EM Debt Local Currency strategy with focus on local currency debt and relative value strategies. Esther has 15 years of experience in emerging markets, joining Pioneer Investments from Societe Generale.
Further, as part of the continued efforts to enhance Pioneer Investments’ research capacity, 3 dedicated research analysts have recently joined, bringing total headcount of the EM & High Yield team to 10 analysts, averaging 12 years of experience. Marina Vlasenko brings 13 years of experience to the firm and has taken responsibility for Emerging Market financials. Paul Cheung, an analyst of 6 years’ experience, and Ray Jian, 6 years, deepen our capacity to form views on real estate and industrials respectively.
“These additional hires will allow for a greater degree of specialisation among the investment team”, follows the firm adding that the specialist portfolio managers and analysts concentrating on specific segments of the fixed income market are dedicated to delivering the best in-house ideas. “Each specialist alpha strategy is deployed across a wide range of different Emerging Markets and High Yield Debt portfolios, with the aim of ensuring consistency and scalability in delivering performance”.
To strengthen the investment process, Pioneer Investments has been enhancing the use of Risk Budgeting across the Emerging Market & High Yield Fixed Income portfolios. By embedding propriety risk management systems fully into the heart of the investment process, “the objective is to increase the ability to deliver the goal of stable alpha generation to clients”.
Pioneer Investments conlcludes by saying that these enhancements and appointments “underline a high degree of continuity in the investment process. Further, we believe it will ensure the strengthening of a team based investment approach to portfolio construction across the Emerging Market & High Yield asset class and support the goal of investment excellence.”
Investors seem to need some time to get used to the new reality that monetary policy in the US and China has shifted to a less easy stance. Central banks try to support investors in this process by sending clear messages on their future policy intentions.
In our psychological market diagnosis it remains important to understand that more pessimistic moods often lead to underestimation of the possible good news to come. Therefore, it might be wise to start with the little discussed good news in the analysis of the balance of risks ahead of us.
European equities trade at a high discount vs. US stocks
Favourable economic indicators in developed economies In sharp contrast to recent market dynamics economic data in the developed markets have surprised on the upside. To put it more strongly, economic indicators have been on a solid upward trend since the middle of May. This was driven by broad based strength in Europe (including the UK), the US and Japan. Unless the reappearance of market shocks (for example, full-blow crisis in emerging markets, renewed intensification of Eurozone crisis), it is likely that cyclical strength in developed markets will lead the global economy to higher growth grounds and thereby support risky assets across the board.
Markets have misunderstood the Fed Various members in the Federal Open Market Committee (FMOC) made speeches last week in which they made it clear that markets had misunderstood the Fed. In particular, the pricing of the first rate hike in 2014 and a somewhat steeper profile of tightening after that was certainly not the message the Fed had wanted to send. On the contrary, quantitative easing and forward guidance should be seen as two completely separate policy instruments where the latter is the most clear and important expression of the Fed’s strategic game plan. As far as the latter is concerned, absolutely nothing has changed and the Fed itself still does not expect the first rate hike to occur before somewhere in 2015.
Guidance of level official interest rates by ECB In the Eurozone the biggest concern for the central bank is to safeguard the fragile recovery in the region. On 4 July Mario Draghi tried to reassure investors by dropping a longstanding policy of never ‘pre-committing’ to future interest rate decisions. Actually, he now rules out any increase for an extended period.
To view the complete story, click the document attached.
Wikimedia CommonsFoto: Pavel/ Sean Vivek Crasto. Brasil y México: comparativa de los gigantes de Latinoamérica
One year ahead of the Football World Cup, the focus is on Latin America. While Brazil might be the hottest bet on the football field, how does it compare with Mexico in economic terms? In this video, Credit Suisse Research Institute members take a closer look at Latin America’s heavy-weights.
Click the following link to read the article/transcript.
While we believe that the euro area is off ‘the critical list’, its health remains fragile. This has been evidenced in anaemic first quarter growth data (-0.2% qoq). Europe’s ‘core’ countries have also been showing signs of economic strain, France contracting 0.2%, and German growth very weak at 0.1%. Underlying structural issues and political discord within the region are also reasons for caution. The agonising negotiations over the Cypriot bailout mean that investors should not become complacent about the risks within Europe’s banking system. The voice of protest in the periphery continues to make itself heard; in Greece, the Democratic Left party has pulled out of the country’s fragile coalition following a row about the future of the state broadcaster. Although real money growth points to perhaps a slightly better outlook than consensus forecasts would have us believe, and valuation measures appear favourable, we are not entirely convinced that fundamentals will change enough in order for the region’s potential to be released. So, weighing the risks, we are underweight Europe.
We worry more that the EM have become popular investment areas over the past decade and may be a crowded trade
China and the EM are a complex area, one that we are not confident about buying into just yet. While we are not particularly concerned about their growth prospects – even with a moderation in China’s output they should continue to expand at a faster pace than the rest of the world – we worry more that these have become popular investment areas over the past decade and may be a crowded trade (chart 2). Investors who perhaps had 1-2% exposure to the EM in the early nineties, may have as much as 15-20% allocated to the area today. Notably, some of the advantages that made EM a compelling story back then – weak currencies and cheaper labour costs – have lost their sparkle. China has been losing economic competitiveness globally due to substantial wage growth and skills shortages. The Politburo’s measures to restrict property price appreciation and a clamp-down on the shadow banking sector have made for a bumpy ride. Investors will be looking for clearer announcements about fiscal policy and urbanisation plans in order to become more comfortable about the direction of Beijing’s reform agenda.
Chart 2: Post-crisis fund flows
Slowly but surely?
In the UK, there are, perhaps, more reasons to be cheerfulthan the press would have us believe. While growth has been lukewarm at best (first quarter GDP +0.3% qoq), investors could be underestimating the impact of some of the coalition government’s initiatives to kickstart the economy. Extra assistance for home buyers through the Funding for Lending and Help to Buy schemesappears to be feeding through to the housing market. According to the latest figures from the Council of Mortgage Lenders banks lent more to would-be homeowners in May than at any time since the autumn of 2008. At the same time, sterling weakness has been quite beneficial to Britain’s manufacturers, who have been enjoying a stronger-than-expected rebound in business. Lastly, the change of governorship at the Bank of England (BoE) as Mark Carney takes to the helm as governor is potentially very significant. Mr Carney is likely to be more tolerant of inflation given his comments regarding nominal GDP targeting.
Although the UK has experienced a long period of above-target inflation this has not destabilised medium-term inflation expectations, meaning that Mr Carney may have a little more scope than perhaps people think to adjust the bank’s mandate towards growth and reaching ‘escape velocity’.
Opinion column by Bill McQuaker, Deputy Head of Equities for Henderson Global Investors.
Wikimedia CommonsFoto: Tightrope walking, Wiros. Keeping Your Balance During Shaky Markets
While capital markets have had their ups and downs, it’s been at least 15 years since we’ve seen such a broad swathe of the global markets take a hit at the same time—risky and “risk-free” assets alike.
What’s most disconcerting for investors is that the part of their portfolio that likely has provided some stability historically—US Treasuries—appears to have been part of the volatility this time. Not many of today’s investors have had the experience of getting through a period of such instability, let alone using it to their advantage.
The catalysts for this volatility include recent US Federal Reserve comments regarding tapering its bond-purchasing program, indications of slower growth ahead for China’s economy, euro-area indecisiveness, political turmoil from Brazil to Turkey and slowing growth in many emerging markets. A lot of these catalysts boil down to fears about the future rather than a focus on present positives. After all, Fed Chairman Ben Bernanke’s vision for gradually weaning us off easy monetary policy was based on the growing consistency of upbeat economic data.
But no matter the underlying cause, the markets have reacted with alarm, which makes it difficult for investors to decide what to do.
In more typical markets, diversification has kept investors on a steady course, with US Treasury bonds serving as ballast for portfolio stability. Even within the bond market, diversification has typically been a wise approach. That’s because there are two major risks in the bond market: interest-rate risk and credit risk. When the economy is shaky, the highest-quality securities, such as US Treasuries, generally tend to perform well. In times of economic growth and rising interest rates, high-yielding credits often shine. If an investor combines high-quality and high-income bonds in a balanced, barbell approach, their bond portfolio has the potential to weather most markets.
The operative word, though, is “most.” That barbell approach hasn’t fared well in the past two months. Is it dead? Some investors may think so, but we don’t.
Yield spreads and interest rates have historically moved in opposite directions, so when rates have risen, spreads have tightened and credit has outperformed. Right now, they’re moving together—meaning that government and credit prices are falling at the same time. This is a relatively rare occurrence.
In any case, a credit barbell approach has fared rather well for the past 20 years, despite three other highly stressed macro-driven environments. The only time the barbell approach didn’t work was in 1994. The other major crisis periods were bad for this approach, as they were for almost every bond strategy, but that was primarily due to massive credit sell-offs.
Still, the barbell approach has additional strengths to call upon—even in the midst of a crisis.
Diversification of sectors, industries and securities is a must. Equally important is having the flexibility to alter sector allocations when warranted. Simply put, a barbell strategy should avoid sectors, industries and securities that are at higher risk of trouble, but remain alert and opportunistic to allocate into those sectors when prices are very depressed.
We’ve seen numerous interest-rate and credit cycles over the past 20 years—and even several global and systemic credit crises. But strong credit selection going into a crisis and opportunistic allocation into more distressed sectors during a crisis gives the barbell approach the capability to potentially rebound strongly.
Every new market gyration or crisis is different, but every one of them is also an echo of the past. We believe that the best response to any situation is having a strategy that lets you keep your balance.
Paul DeNoon is Director of Emerging-Market Debt at AllianceBernstein.
