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.”
Pixabay CC0 Public DomainPhoto: Family Wealth Report Awards 2017. The Family Wealth Report Awards 2018 are Approaching
Like every year, the Family Wealth Report Awards 2018 created by ClearView Financial Media, look to showcase ‘best of breed’ providers in the global private banking, wealth management and trusted advisor communities, the awards were designed to recognize companies, teams and individuals which the judges deemed to have ‘demonstrated innovation and excellence during 2017’.
This year finnalists include firms like Forbes Family Trust, BNY Mellon Wealth Management, Citi Private Bank, Aberdeen Asset Management, RBC Wealth Management, Columbia Threadneedle Investments, and Amundi Pioneer, amongst others.
Michael Zeuner from WE Family Offices, which has been shortlisted in three categories, said: “Our focus is always first and foremost on providing independent, genuine advice that puts our clients and their interests first. It’s an honor to be recognized by Family Wealth Report for the ways in which we conduct our business and for the client experience we deliver.”
Winners will be announced at a gala awards dinner which will be held in New York on March 8, 2018 at the Mandarin Oriental.
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.
Foto cedida. It’s That Time of Year…For Tax Loss Harvesting
December has historically been a very favorable month for the US equity markets. Whether this is due to the big institutional money managers being strongly incentivized to help the market end the year on a positive note, or just from the psychological boost that comes from the holidays, we may never truly know. What we do know is that the last couple of weeks of the year can bring some additional selling pressure on stocks that have had sharp declines during the year. Very simply, this is caused by tax-loss selling, a process where investors that are subject to U.S. tax laws will “harvest” (i.e. sell) positions that have a loss in order to reap a tax benefit. For those holding positions prone to tax loss selling, it can be like rubbing salt in your wounds as your positions that have not fared well this year get dumped right around Christmas time.
This year we may experience an exaggerated version of this effect for several reasons. The main one is that investors are expecting tax reform to be signed, sealed and delivered for 2018. All else being equal, investors would rather sell a losing position now in December where it gives them the most benefit rather than selling a few months later for a lesser reward. The most obvious impact from tax reform is the reduction of the rate for the highest tax bracket. This incentivizes investors to harvest their losses in 2017 while the highest marginal tax rate is still 39.6%. Short term capital gains (those of less than 1 year) in the US are taxed at your personal rate and not the 20% used for long tern gains. The Senate version of tax reform will give the wealthy a bit of a bonus by shaving that maximum personal rate to 38.5%.
Furthermore, one of the features of the proposed tax reform is the elimination of an investor’s ability to select which lot to sell. Currently, if an investor has purchased a stock at several different points in time (creating multiple “lots”), and he wants to then sell a portion of his position he can select which lot is most advantageous from a tax perspective. This usually means selling the lot with the largest loss. The proposed tax reform includes a provision that would disallow that practice and force investors to sell the oldest lot first in a FIFO manner (First In First Out) regardless of the gain or loss which amounts to a backdoor capital gains tax increase. Although we do not yet know if this will make it to the final version of tax reform, investors are very likely to be taking action and selling affected positions before 2018.
With the S&P 500 up 18% this year, most investors are sitting on some hefty gains and to the extent that profits are being taken, the pressure to offset the tax impact increases. However, the selling may not be limited to this year’s losers either. The tech sector has had a massive gain this year and could cause some institutional funds to do a bit of portfolio rebalancing before yearend. This may even lead to a bit of a vicious cycle as investors trying to align their portfolios to benefit from tax reform (specifically the lowering of the corporate tax rate), which would entail selling off stocks within sectors that have low tax rates such as technology and rotating to sectors that typically pay high tax rates (financials, consumer and telecom). The more technology stocks with large gains that are sold, the more demand there will be to harvest some of those losers.
Many of the big losers that can see additional selling are clustered within the consumer discretionary and the energy sectors. Within consumer discretionary, the traditional brick and mortar department stores have been one of the worst groups in the market as their businesses struggle against the move towards ecommerce. Even with the recent rally these stocks have had in November, many of them remain far below their 2016 levels. For example, JC Penney is down 61%, Sears Holding is down 54% and Signet Jewelers is down 43%. Even bellwether retailer, Macy’s, is down 27% this year. Outside of direct brick and mortar retail, athletic apparel distributor Under Armour is down 53%. In the energy sector, quite a few service companies were bid up after President Trump’s election in the last 2 months of 2016. However, 2017 has been a different story as US Silica is down 41% and Hi-Crush Partners has been well crushed for 46%. Retail and energy are not only groups where potential tax loss selling candidates can be found, as generic drug maker Teva Pharmaceuticals is down 55%.
