Wikimedia Commons. Argentina, Seeking For New Tax Deferral Strategies
The new tax reform bill in Argentina will continue to be an issue throughout 2018, since, according to Marcelo Gutiérrez, Director at Invertax, it’s that country’s most significant change in regulations during the past 30 years. One of the income tax related modifications refers to the deferral of the tax payment due on offshore income.
Prior to the adoption of the new bill, many Argentineans held bank accounts in the name of an offshore company, and that allowed them to defer income tax until they decided to bring their money to Argentina. With which, the deferral could be eternal as long as the funds were not repatriated.
However, as pointed out by Invertax, the tax reform, under article 70, proposes that “the application of a new regime of international fiscal transparency, attributing the income to the holders of the intermediary structures (companies, trusts, etc.) from the moment of its generation, regardless of whether there is an effective distribution, provided that a series of requirements are met”.
According to Gutiérrez: “From now on, legislation takes a 180 degree turn, because due to the content of the reform, what will happen under international tax transparency standards is that that income will be directly attributed to the Argentinean, who will have to pay taxes. In this context, international tax planning does not offer a single solution which applies to everyone, so it usually has to be customized. What is clear is that now we have to look for a sophisticated strategy.”
The tax reform demonstrates the great knowledge on tax planning strategies of the law’s main author, Andrés Edelstein, Undersecretary of Public Revenues and former partner of International Taxation at Price Waterhouse Coopers. Amongst other issues the law analyzes in depth the definition of “control” in international structures and the ownership consequences for trusts constituted abroad, when they allow to defer taxes and when they do not.
“We are waiting for the regulation of the reform to come into effect because, among other things, those jurisdictions that are considered tax havens will be regulated. Offshore companies are not going to work anymore, and what they are asking for is companies from countries where taxes are levied, where companies have offices and have personnel that can carry out the activities they claim they carry out. And tax planning begins to be much more sophisticated and much more complex,” informs Marcelo Gutiérrez.
Pixabay CC0 Public DomainDevanath. What Were the Asset Management Industry’s Major Business Operations in 2017?
2017 was a good year for operations, acquisitions, mergers and expansion into new markets by leading international asset management companies; yet another example of the asset management industry trend towards higher concentration, while seeking higher efficiency and margin growth. Technology, regulatory changes, opening into new markets and strengthening their product supply capacity put these operations into context.
One of the major ones was the Aberdeen Asset Management and Standard Life merger, which together have become one of the largest investment companies in the world with 737 billion Euros in assets under management. The merger was closed in August, after the operation was announced in early March.
According to the firm, the merger leverages the complementary capabilities of both companies, leaders in the investment and savings market. The result is an investment group with strong brands, at the forefront of institutional and wholesale distribution franchises, market leading platforms and access to lasting strategic alliances globally.
Also, by combining the strong balance sheets of both companies, the resulting group has greater capacity for investing, as well as to grow and innovate. Together, Standard Life Aberdeen has offices in 50 cities around the world, serving clients in 80 countries. In addition, the firm maintains a market capitalization of more than 12.1 billion Euros (11 billion pounds).
The other two major operations in 2017 were the merger between Henderson and Janus Capital, and Amundi’s acquisition of Pioneer Investments. Regarding the first of those operations, it was carried out through a share exchange: each Janus share was exchanged for 4.719 new Henderson shares. With this exchange, Henderson shareholders took control of 57% of the capital and Janus shareholders of the remaining 43%. The resulting company, Janus Henderson Global Investors, has 320 billion dollars in assets under management and a market capitalization of around 6 billion.
The combination of both businesses has created an important global leader in asset management with a significant scale, as well as a great diversity of products and investment strategies, and great depth in global distribution of funds. In fact, Janus’ strength in the US market will combine with Henderson’s in the United Kingdom and Europe, creating a very global management company, with a very diverse and widespread geographic footprint.
The acquisition of Pioneer Investments, which was closed towards the end of 2016 for an amount of 3.545 billion Euros, is the third major operation that the sector saw last year. During the first six months, Amundi established the new group’s growth strategy, defined the priorities of its business lines, and established an integration plan; so that by July it was able to completely close the purchase.
Although with a little less dimension than the previous operations, another important transaction within the industry has been Schroder’s acquisition of Adveq, an asset manager specialized in private capital worldwide. As a result, of Adveq’s acquisition – which was renamed Schroder Adveq – Schroders’ private assets business rose to more than $ 7 billion in client commitments.
Other Operations
Other operations carried out by asset management companies with the aim of growing in markets where they already had a presence have perhaps been less striking. The clearest example was BlackRock’s purchase of Citi’s asset management business in Mexico in November 2017. With this operation, BlackRock in Mexico doubled its size.
In fact, BlackRock and Citibanamex, a member of Citigroup, signed an agreement for BlackRock to acquire Citibanamex’s asset management business. Impulsora de Fondos Banamex, has approximately 31 billion dollars in assets under management through fixed-income products, equities, and multiple asset products, mainly for consumer banking clients.
UBS also looked at growth possibilities in Latin America and bought CONSENSO, Brazil’s largest family office, in May. Both companies closed an agreement under which UBS acquired a majority stake in the Brazilian multi-family office that will result in the combination of its wealth management operations in Brazil. The resulting division is being directed by both, UBS executives and CONSENSUS’ founding partners.
With this operation, UBS consolidated its capabilities in Brazil, improving its offer for local clients and offering advice from a global player in the sector. The entity recognized after closing the agreement that this transaction allows them to accelerate their expansion in Brazil and to reaffirm their commitment to grow the wealth management business.
And for 2018?
These are just some of the most significant operations of 2017, which was a year when the industry showed some concentration and the search for synergies. The trend has continued during the first weeks of 2018, during which we have already witnessed First Eagle Investment Management’s acquisition of NewStar Financial, and the announcement of a merger agreement between Quaero Capital and Tiburon Partners. The big question now is what else will this year bring.
According to experts, it would not be unusual for this trend to continue as asset management firms face a change in their own industry marked by technological challenges, such as blockchain technology or bitcoin development, by new millennial consumers, by passive management’s strength, and by the pressure that all this is asserting on its margins.
Pixabay CC0 Public DomainPhoto: Mikewiz. Franklin Templeton Investments to Acquire Edinburgh Partners
The M&A market is off to a good start of the year with Franklin Templeton Investments announcing that it has entered into an agreement to acquire Edinburgh Partners Limited, which managed approximately US $10 billion as of December 31, 2017 in global and emerging markets equities. The transaction is subject to regulatory approvals and is expected to be completed in the first half of 2018. Terms of the transaction were not disclosed.
Jenny Johnson, president and chief operating officer of Franklin Resources said, “We’re pleased to announce the acquisition of Edinburgh Partners, an established global value investment manager, and to welcome back Dr. Sandy Nairn to our organization. Dr. Nairn worked alongside the late legendary global investor, Sir John Templeton, and was employed by Franklin Templeton for more than a decade. He brings a tremendous amount of leadership experience and expertise in managing global and international equities, an area that continues to be of strong interest to our clients around the world. This is the latest example of the firm continuing to make strategic investments in relatively small, yet highly experienced asset management teams that complement Franklin Templeton’s global offerings.”
Nairn will become chairman of Templeton Global Equity Group and remain investment partner and CEO of Edinburgh Partners. He will report to Stephen Dover, Franklin Templeton’s head of Equities.
Based in Edinburgh, with an office in London and two in the United States, Edinburgh Partners is an independent fund management company that invests globally with an emphasis on absolute returns over a long-term time horizon. Its team of 12 investment professionals are highly regarded within the international asset management industry, with a combined average tenure of 22 years managing four distinctive strategies.
Templeton Global Equity Group is a pioneer in global investing, with a storied investment philosophy that dates back to the 1940s. Templeton’s team of 39 experienced investment professionals, based in offices around the world, search for undervalued stocks across all sectors and regions globally. Templeton Global Equity Group manages over US $101 billion in assets as of December 31, 2017.
“Dr. Nairn and his experienced team will be an excellent addition to our global equity capabilities,” said Dover. “As chairman of Templeton Global Equity Group, Dr. Nairn will bring many new insights to share, having run his own firm for the last 15 years, while also drawing upon his in-depth knowledge of the Templeton investment philosophy and process from his many prior years with the group. We look forward to having Dr. Nairn and his team join our strong lineup of investment groups.”
Nairn said, “I am very excited to be coming back to Templeton, the company that gave me my great appreciation for global investing. My team and I are deeply familiar with the history and strong reputation of the broader Franklin Templeton organization, and we’re pleased to join such a well-regarded firm. I look forward to sharing my perspective and experience with the Franklin Templeton organization. The access to Franklin Templeton’s extensive global resources will allow me to focus my time on investment management, as we continually seek to bolster our investment process and enhance our clients’ experience.”
CC-BY-SA-2.0, FlickrPhoto: Javier Samaniego
. Mexican Pension Regulator Changes Investment Regime, Allowing for Investment in International Mutual Funds
Until now, Afores could invest abroad through three vehicles: ETFs, Indexed Mutual Funds and Investment Mandates, but, seeking to offer more investment alternatives, as well as granting them with greater flexibility and better defense tools against volatility cycles, the Mexican Pension Regulator, the CONSAR, decided, among other things, to include Mutual Funds with active strategies as an additional investment vehicle.
Afore Citibanamex, the Afore with most funded mandates, told Funds Society: “At Afore Citibanamex we see as positive any release of restrictions on the Afores investment process… We believe that the experience we have acquired over the years in active investments will be very useful to take advantage of the opportunities in mutual funds that this change in regulation represents. We will be looking forward to hearing about the specific details of this regulatory change in order to take advantage of them for the benefit of our affiliated workers.”
“At Afore SURA we will be attentive to the Consar details of the process to be followed as well as the eligibility and regulation criteria that will allow the Afores to invest in international mutual funds,” said Luis de la Cerda, director of Investments.
Gustavo Lozano, who leads Amundi Pioneer’s efforts in Mexico, Central America and the Caribbean, mentions that “international funds will give pension administrators access to active management strategies they did not have to before. This will be especially important the following years in which the timely selection of stocks and assets will be key, however, we do not see any of the options as excluding: Mandates, ETF or Funds, since these will give Afores the possibility to have different levels of exposure to international markets with different investment horizons and different strategic asset allocation profiles”.
Regarding the eligibility of strategies and managers, Lozano added: “What we have seen from the projects that are being proposed for the implementation of this, is that the selection criteria for managers and strategies that could be offered in Mexico, should be quite in line with what is currently being demanded of investment managers in Mexico, regarding mandates. We also believe that the reporting requirements will be strict but achievable, giving the regulator the visibility and timely follow-up that currently applies to the pension industry. “
According to Mauricio Giordano, Country Manager of Natixis IM Mexico, these changes are positive for the sector and allow the Afores smaller exposures that they did not get before. In addition, it allows all Afores to complement their diversification strategies and achieve tactical positions to take advantage of the global situation. However, he believes that the afores will continue to seek to implement mandates for their long-term positions: “Afores continue to see this partnership with a long-term manager in which knowledge transfer and reporting are key, as very important for strategic positions”. The executive points out that there are still pending “CAR guidelines in this regard, it should be at the end of February or March when we could have the final rules and restrictions,” he concludes.
Photo: wolfgang11. What Would 2018 Look Like for Private Equity Investors?
2018 is expected to have an increase in global growth and, according to William Charlton, Managing Director at Pavilion Alternatives Group, most institutional investors are maintaining or increasing their allocations to private equity.
While growing economies generally would be beneficial to most private equity fund managers, with the possible exception of distressed managers, Charlton believes that 2018 is shaping up to be a year of challenges as well as opportunities. “The capital deployment issue is one of the known knowns, but as Donald Rumsfeld has argued, the bigger risk may well be from the unknown unknowns.” He states.
In his opinion, the biggest challenge facing the U.S. venture capital market is the IPO environment. “While the IPO market showed some signs of recovery in early 2017, several IPOs were not well received and it remains very difficult to successfully navigate the intricacies of taking a company public.” On a more positive note, he expects the repatriation of large amounts of capital currently held by public companies in off-shore accounts due to the tax reform, a situation he considers could impact positively on an already robust acquisition market.
Meanwhile, in Europe, fundraising activity has increased recently while both deal flow and exits have been declining in the European buyout market, and EBITDA multiples “are up significantly over recent years and are approaching the lofty levels already seen in the United States. If prices remain high and expected economic growth remains bounded, European fund managers will be challenged in 2018 to generate historically attractive private equity returns commensurate with their risk profiles. Furthermore, the uncertainty induced by Brexit adds to the complexity of accurately assessing risk-return exposures across the region.”
In contrast to the mixed measures for both the U.S. and European markets, deal flow, exits, and fundraising are up in Asia-Pacific private equity markets. Given the region’s export-dependent nature, Charlton believes investors focused on it will face the continued challenge of investing in companies that can be successful even in the event of a decrease in global demand.
Regarding oil and considering its prices have enjoyed a steady recovery puting them at a level Charlton believes are attractive investment opportunities, he believes a challenge “is identifying quality private equity fund managers that can consistently generate attractive returns when the underlying value of their assets are highly dependent on a decidedly volatile commodity.” In infrastructure, he believes the biggest challenge will be identifying assets that have the potential to generate attractive returns despite the higher entry prices.
Private credit markets have seen rapid growth in recent years as many institutional investors seek a broader opportunity set to increase returns in their fixed income portfolios. Consequently, private credit is enjoying a strong fundraising market. However, it appears that some fundamentals in private credit markets may be weakening. The increased interest in private credit has led to a decrease in spreads as well as an increase in covenant-lite deals. “If the recent economic recovery does not sustain, we could be seeing the initial phases of a perfect storm in global credit markets. If so, distressed fund managers may be well-positioned to take advantage of current overly lenient terms. The challenge in credit markets for 2018 will be finding fund managers that are able to issue loans with terms that provide some protection in the event of an economic decline.” He concludes.
Pixabay CC0 Public DomainJackmac34. Institutional Investor Journals to Join Pageant Media
Pageant Media, the business information specialist, acquired the Institutional Investor Journals (II Journals), a business which produces in-depth, original and practical research in global investment and finance aimed at professional institutional investors. The portfolio consists of 12 titles, covering various disciplines in portfolio management and has an extensive online archive of almost 10,000 research articles. The Journal of Portfolio Management is the flagship title, recognised as the authoritative practitioner research title.
Pageant Media is one of the financial sector’s fastest growing providers of intelligence and insight. The company, founded in 1998, provides membership services offering senior professionals – across a range of industries, including hedge funds, mutual funds, private equity and real estate – exposure to market leading news and analysis, data and events.
This acquisition provides Pageant Media with synergy opportunities within its existing market-leading products, notably Fundmap, HFM Global and Fund Intelligence, and will increase the company’s reach in the institutional investment space.
Commenting on the announcement, Charlie Kerr, Chief Executive of Pageant Media, said: “The II Journals are recognised across the asset management sector for their excellence in providing senior professional investors and leading academics with informed and thought-provoking technical analysis. We look forward to investing further in these titles and are excited to begin thinking about the ways in which the specialist knowledge exhibited in these journals can bolster the growing information and networking services we provide to our hedge fund, private equity, real estate and mutual fund communities.”
Institutional Investor Journals were previously owned by Euromoney Institutional Investor, with the business located in New York. Staff will join Pageant Media’s New York offices.
CC-BY-SA-2.0, Flickr. Mexican Afores Will Be Able to Invest in International Mutual Funds Next Year
International managers have a new reason why to look into Latin America’s second largest economy. It is expected that next January, Mexican Afores will be allowed to invest in international mutual funds.
Carlos Ramirez, president of the National Commission of the Savings System for Retirement (Consar), told Funds Society that “when looking to invest with an international manager we are looking for better returns, which we have seen so far with the mandates… Mutual funds are a mirror of the mandates and what we are really opening is another option to invest abroad, especially for the small and medium afores.”
He considers that mutual funds are a cheaper and more used worldwide alternative than the mandates. “What we are doing here is expanding the range to allow for a greater diversification and allowing all the afores to use these new vehicles to gain greater diversification.”
Authorization process
According to Ramirez, the authorization process of the mutual funds in which to invest will not be, as in the Chilean case, with a regulator based Risk Assessment Committee, but rather, the responsibility of the interested afore to demonstrate that the vehicle they want to invest in is adequate, as is now the case with ETFs.
Previously, in order to invest in ETFs, they had to be reviewed and authorized by Consar. Nowadays however, the process is done by Allfunds and the Afore’s association, the Amafore. “An intermediate mechanism that Amafore has will be used to see if mutual funds comply with the investment rules, Ramirez said.
According to a market player who preferred to remain anonymous until more information is available, “the Consar should make the rules the firms need to comply with in order to have eligible funds very clear, otherwise the market might get overwhelmed with firms that are not going to commit with the development of the industry here in Mexico.”
Franklin Templeton’s Manuel Alvarez told Funds Society that this is something the Amafore has been working on for over a year. “Of course we believe this is a positive thing, given it makes it so all the afores can have access to these vehicles, whereas before, not all of them had the capabilities to hire a mandate. Eligibility requirements should be quite restrictive at the beginning but, it is a start.”
Juan Manuel Hernandez, Vanguard Mexico’s CEO said: “One of Vanguard’s core principles of investment success is balance. The idea of balance encompasses both a suitable asset allocation and diversified investments. This new policy – once approved – will further help Mexican afores seek balance in their portfolios and ultimately, achieve their investment goals.”
Photo: Pxhere CC0. Cooperation Between Fundinfo and UBS Fondcenter for Fund Data Management
UBS and its group company Fondcenter have commissioned fundinfo to procure and source fund data from fund providers and asset managers. In order to provide efficient, legally compliant investment advice, UBS Fondcenter’s external and internal partners require on-demand access to complete, accurate and up-to-date fund information, including MiFID II and PRIIPs data. They also rely on the openfunds standard for fund data that was launched and is being continuously enhanced by UBS Fondcenter, Credit Suisse and Julius Bär.
“Fundinfo has many years of experience in the procurement, validation and distribution of fund information and meets our high quality requirements”, says Christophe Hefti, head UBS Fondcenter at UBS Asset Management. “By partnering with fundinfo, we can concentrate on our core competencies and expand our range of services, including data preparation. At the same time, we are providing fund providers with an experienced partner for high-quality fund data and document management.”
“After working successfully with UBS Fondcenter for many years in the area of fund document management, we are pleased and proud that UBS Fondcenter has now placed their trust in fundinfo to perform their fund data management” says Jan Giller, Head of Sales & Marketing at fundinfo. “It is a privilege and a strong testament to our capabilities that the largest asset manager in Switzerland has chosen to work with fundinfo to procure their fund data”.
Wikimedia Commons. Citi Wealth Management Reorganizes its Model Based On its Clients' Residency
Latin America will be the pioneer region in the reorganization launched by Citi Wealth Management, which will go from having a model based on the offices to having a geography-based scheme, industry sources told Funds Society.
The Cluster market model will consist of designating specialized managers according to the clients’ residency. Thus, strategy, growth channels and business model, in addition to regulatory and market updates, will be borne by the SCE Market Heads, experts focused on each market.
Financial advisors at each office will continue to report on their daily tasks in each place.
Juan Guillermo Ramírez, current director of Citi Wealth Management Latin America, will be in charge of leading the changes in the region and launching this new model.
The South Cluster for residents of Argentina, Uruguay and Paraguay will be centered in Montevideo, adding to the efforts of the Miami and New York teams. Rodolfo Castilla, current director of Citi Wealth Management Southern Cone, will be in charge of the new structure.
Miguel Gross, will be in charge of the follow-up of customers residing in Chile. The countries of the Caribbean, Central America, Colombia, Ecuador and Venezuela will form the third Latin American Cluster of Citi and Brazil and Peru the fourth.
Photo: Michael Dejana and Adelfa Rosario . Bolton Adds New York City Team with USD 315 Million AUM
Bolton Global is pleased to announce the addition of a New York City based team with more than US$ 315 million in client assets. Adelfa Rosario and Michael Dejena, formerly with Safra Securities and Safra Asset Management, have formed AiM Fidelis Wealth Solutions located at 555 Madison Avenue. They each have over 35 years in the wealth management business serving clients in the US, Europe and Latin America.
Ms. Rosario began her career in 1980 at The Bank of New York in Manhattan. She then joined Citibank International Private Banking in 1983 where she managed high net worth and ultra high net worth clients. Adelfamoved to Barclays Bank International Private Banking in 1990 until it was acquired in 2002 by Royal Bank of Canada (RBC) where she remained for 13 years. The team joined Safra after RBC’s exit from the international wealth management business in 2015.
Mr. Dejena played a key role in establishing the discretionary investment business of Royal Bank of Canada (RBC) International Wealth Management where he was responsible for US$ 2.0 billion in client assets. He was Chief Investment Officer, Chairman of the Investment Committee and a member of the Executive Committee. He was Co-Chair of RBC’s International Wealth Diversity Council and played a key role in promoting a diverse workplace.
Adelfa has been recognized for achievements throughout her career including thirteen consecutive nominations to RBC Chairman and Executive Council’s awards. She is a graduate of New York University Stern School of Business and holds FINRA licenses Series 7 and 66. She resides in New York City with her two daughters and family. She is a member and donor of the Museum of Modern Art, Metropolitan Museum of Art and The Brooklyn Botanical Garden.
Michael is a graduate of Fairfield University and holds FINRA licenses Series 7 and 65. He speaks Spanish, Portuguese and Italian. He resides in New York City with his son and family where he is a member and supporter of the Museum of Modern Art and the Metropolitan Opera.
Clearing and custody for AiM Fidelis’ client accounts will be through BNY Mellon Pershing. The addition of the AiM Fidelis team continues a successful year in Bolton Global‘s growth. In 2017, the firm recruited wealth management teams in the US with over US$ 2.2 billion in client assets.
