Wealth & Finance January 2015 by AI Global Media

January 2015

www.wealthandfinance-intl.com

Wealth

& i

f i n a n c e

Greece and the Eurozone Are Syriza ready for the storm ahead?

Your New Strategy

Bridging the Gap How SMEs can succeed

in the global marketplace

Direct Lending Why it helps businesses grow

Business tech tips for the coming year

Plus... Ritz-Carltonâ&#x20AC;&#x2122;s irresistable villas and cottages

Hedge Funds:

What does 2015 have in store?

January 2015 | Contents

6-11 News & Appointments

Editor’s comment

Funds 14 Direct Lending Explained Brevet Capital’s Doug Monticciolo tells us how the firm’s “rentable private equity” is helping its clients achieve growth – without sacrificing ownership

20 Hedge Funds in 2015 Consulting and third party marketing firm, Agecroft Partners, take us through their hedge fund industry predictions for the coming year

Finance Focus 24

Tech: Your New Strategy William Buist, CEO of Abelard and Founder of xTEN Club suggests five tech resolutions for 2015 that will help every small business streamline operations, improve customer/client service -- and save money

The Credit Gap: Why SMEs Need Support Simon Featherstone, Global CEO of Bibby Financial Services, tells us how to small businesses can use the various types of finance available in order to stay competitive in the global marketplace

Banking Zone 28

Greece’s Election Result: Hope and Fear for Eurozone The Centre for Economics and Business Research asks: is Greece’s new ruling party prepared for the storm awaiting it?

Relax 32 Luxury for Every Palate There’s something for everyone at Ritz-Carlton’s exquisite global selection of villas and cottages

Hello, and welcome to the first Wealth & Finance of 2015. This month, our cover story sees Agecroft Partners get out their crystal ball to make some predictions about where hedge funds are headed over the next 12 months (p.20). Direct lending can be a fantastic way to help businesses achieve growth. Brevet Capital’s Doug Monticciolo tells us why (p.14). Tech is a vital part of any business, and this month, William Buist, CEO of Abelard, is on hand with some tips on how you can make it work for you(p.24). Also in this issue, Simon Featherstone, CEO of Bibby Financial Services, is back with a guide to how SMEs can best use the various types of finance available to stay competitive (p.26). Greece’s new ruling party are set to shake up the eurozone. But, asks the Centre for Economics and Business Research, are they ready for the storm ahead? (p.28). In our down-time section, Relax, we look at Ritz-Carlton’s fabulous holiday villas and cottages (p.32). And of course there’s our regular roundup of the news affecting the major regions and markets from around the world. I hope you enjoy the issue. Ollie John, Editor ollie.john@ai-globalmedia.com

January 2015 | News & Appointments

News & Appointments | January 2015

News in brief Employers, Employees, Brokers Show Increasing Interest in Non-Traditional Products Non-traditional voluntary products seem to be gaining traction in the marketplace. They are increasingly seen as a potential new revenue source for brokers, an innovative and easyto-offer benefit for employers, and a valued benefit addition for employees. Purchasing programs, pet insurance, legal coverage and identity protection are the most popular with all three groups. Employers are also interested in providing auto/homeowners’ insurance to their employees, and brokers are adding discount health programs to their product portfolios.

Nearly a Third of Lawyers Experiencing an Increase in Demand for Financial Advice The majority (66%) of respondents to a new Investec survey said their clients expected that they would be able to advise directly on a wide variety of topics The number of clients asking their lawyers for financial advice has surged in the past 12 months, according to research from Investec Wealth & Investment. The research found that nearly a third (29%) of lawyers had experienced an increase in demand for advice about finance during the previous year. More than two of thirds (68%) highlighted inheritance tax (IHT) planning as an area where clients were looking for advice. Investments in property and changes in liquid assets were also the focus of enquiries according to 50% and 46% of respondents, respectively. Significantly, the majority (66%) of respondents said that despite the fact most lawyers are unable to provide financial advice, their clients had an expectation that they would be able to advise directly on a wide variety of topics including estate planning, pensions and ‘how to invest a windfall’. With more than three-quarters (77%) of respondents saying they referred clients seeking financial

advice to a financial adviser, whether independent or otherwise, lawyers have to be confident that their clients will be given the highest quality advice. Only one in 10 (10%) said they provided the advice themselves and a further 10% said they referred them to someone other than a financial adviser. 3% declined to help their clients. Chris Aitken, Head of Financial Planning at Investec Wealth & Investment, said: “It is unsurprising that those in the legal profession are increasingly being asked questions about financial planning given the recent changes in pensions, high property prices and the complex nature of estate planning. “Given the high demand for advice in what is an increasingly complex market, it is very important for lawyers to have access to trusted partners particularly as regulators are very focused on the provision of financial advice in the wake of a number of mis-selling scandals.”

According to the Non-Traditional Voluntary Products Spotlight Report, by Eastbridge Consulting Group, the majority of providers use more than one channel to distribute their non-traditional products, but all are involved at some level in broker distribution. The report also finds that the most common enrolment methods for non-traditional voluntary products are online (direct or via broker or the employer) and via broker on-site enrolment, and most of the providers profiled currently offer their non-traditional products through at least one private exchange.

Citi Survey Forecasts 30% Decline in Hedge Fund Industry Profits Hedge fund industry profits in 2013 reached US$31.2bn but poor performance in 2014 cut that figure by 30% to only US$21.9bn, a loss of nearly US$10bn, Citi estimates in their 3rd Annual Hedge Fund Industry Operating Metrics Survey. Institutionalisation of the hedge fund investor base has shifted the profitability ratios of the industry, Citi notes. Profits derived from management fee revenues now equal profits from performance fee revenues in years like 2013 when managers meet institutional targets of 10% annual returns. Citi’s report, formerly known as the Hedge Fund Business Expense Benchmark Survey, is based on proprietary analysis and detailed responses from 149 hedge fund firms that collectively represent US$581bn in industry AUM - 19.8% of total industry assets. The title of the survey has been changed to reflect a broader focus on industry margins, profitability and valuations rather than on detailed expense benchmarks.

Draghi’s “QE battleship” sinks the Euro deVere Group comments after European Central Bank president announced that it will pump ¤1tn into the faltering eurozone economy Investors will welcome with caution the ECB’s “shock and awe” announcement and will look to buy eurozone equities – particularly exporters - and to a lesser degree the Danish Krona and gold, affirms a leading global analyst with one of the world’s largest independent financial advisory organisations. Tom Elliott, International Investment Strategist at deVere Group, which has US$10bn under advice, comments after European Central Bank (ECB) president Mario Draghi announced that it will pump ¤1tn into the faltering eurozone economy. The ECB is set to purchase government bonds worth up to ¤60bn per month until September 2016. This is a much higher figure than most experts predicted. Elliott observes: “The ECB has added its newest ¤60bn a month battleship to the currency wars, which only the US and Swiss stay aloof from. It is a larger-than-expected quantitative easing (QE) program, designed to inflict shock and awe on markets. “Its goal is to severely weaken the euro and so spur exports and boost imported inflation. Let’s not pretend it will boost eurozone lending, while the bank sector remains so weak. “But while this will boost eurozone stocks, by weak-

ening the euro, investors should regard QE with mixed feelings. Capital markets are in a curious and unstable mode thanks to QE from other central banks that has pushed up all asset prices in recent years with little discrimination over quality.” Elliott adds: “Many investors will pile into eurozone export-based stocks. But a broader stock market recovery may happen if, and when, stronger exports feed through into a broad-based recovery, which is the intention. “In addition, investors may look to buy the Danish Krona on the chance that the Danes break their peg with the Euro, preferring a revalued DKR and a recession to the risks caused by ultra-loose ECB monetary policy. The current peg has resulted in a large and destabilising current account surplus. This would echo the Swiss franc move last week, though in the case of Denmark the significance would be greater given the duration of the peg with the deutschmark and then the euro. “If the idea of the Danish National Bank breaking the euro peg is a step too far for investors, a small position in gold to hedge against the whole global QE experiment ending in inflationary tears must be a reasonable step for a long-term investor. If not, we can throw all monetary economics text books away.”

Appointments TES Global COO to become CEO TES Global, the global digital education business, has announced that Chief Operating Officer (COO) Rob Grimshaw is to become its new Chief Executive Officer (CEO) on 31 March 2015. At the same time, current CEO Louise Rogers will step up to take on the role of Chair. The new leadership team will bring together the best of European digital and content knowledge, supported by TPG Capital’s online and education expertise, as the company begins its next phase of accelerated global growth. TES Global is dedicated to supporting and enabling the world’s teachers with a portfolio of tailored services, tools and technology. The business has made a successful transition to digital and now hosts the world’s biggest single-profession online network of almost 7 million teachers, where users access over 800,000 resources developed for teachers by teachers. It is also the UK’s leader in education recruitment and the home of the THE and TES Magazine.

New CEO at Dentsu Aegis Network Northern Europe Swiss Re Corporate Solutions has named Marc Davis as Country Manager UK & Ireland. Davis will be based in London and drive the company’s growth strategy in those markets. Tony Buckle, Head of Europe, Middle East and Africa (EMEA) for Swiss Re Corporate Solutions, said: “Bringing on board an executive with Marc’s experience demonstrates our strong commitment to the UK and Irish markets. Our strategy is to bring our products and services closer to local clients and brokers. Marc’s knowledge and reputation will serve us well to strengthen our presence in the UK and Ireland.” With nearly 30 years of experience in the insurance industry, Davis has worked in a number of leadership roles in customer relationship, account management and sales, dealing with global accounts as well as with UK retail clients.

News & Appointments | January 2015

January 2015 | News & Appointments

Money Transfer/Remittance Market Growth Driven by Globally Escalating Migrant Population Growth of the remittance market driven by growing international migration as people migrate with focus of sending earnings back to families

Appointments BlackJet Announces New CMO BlackJet, the world’s largest private jet by-theseat booking company, has announced that recognised aviation and technology expert Joe Leader has joined the company as Chief Marketing Officer. In his new role, Leader will drive all marketing, sales, frequent flyer program creation, and business development strategies for BlackJet. “BlackJet selected Joe Leader as our Chief Marketing Officer because he provided the perfect blend of aviation and technology marketing knowledge,” BlackJet CEO Dean Rotchin stated. “When we engaged with Joe last year, we knew that he would be the perfect addition to accelerate BlackJet’s success.”

H.C. Starck GmbH Expands Executive Board

The growth of the remittance market is strongly driven by growing international migration as the people migrate chiefly with the focus of sending their earnings to their families back home. In 2013, international migrants comprised about 3.2% of the world population, compared to 2.9% in 1990. International migrants signify a huge customer base for the worldwide remittance industry. Over US$160 billion have reached rural families in developing countries. Driven to various socio-political and economic factors, the same is expected to steadily grow in the near future. This is further anticipated to prove instrumental in the growth of the global remittance market. As per the report Global Remittance Report: 2014 Edition, apart from unceasing increasing migrant population, other factors which are providing the immense growth opportunities for global remittance market include rising employed and urban population and ameliorating global economic development. Some of the noteworthy developments of this industry include unstable remittance cost, the impact of remittance on health, education and poverty, wide portfolio of remittance services and correlation between remittance and foreign exchange rates. Also, the number of electronic payment service providers that offer over-the-counter-

payments, mobile money payment and payment cards have increased rapidly. Remittance is defined as transfer of money by a person who resides in a foreign country to his or her home country. Remittance industry contributes to economic growth and livelihoods of people across the world. In most of the developing countries, money sent by foreign migrants to their home countries constitutes the second largest financial inflow to the respective nations. Furthermore, in the money receiving countries, remittance industry promotes further economic dependence on the global economy instead of building sustainable local economies. Remittance channel is collectively comprised of a sender, a recipient, intermediaries in both countries and the payment interface used by the intermediaries. The remittance system encompasses the following components: Remittance Service Providers (RSP), Remittance Corridors, Remittance Network and Money Transfer System. Remittance services are divided primarily on the basis of ways a network of access points is created and linked. There are broadly four categories: unilateral services, franchised services, negotiated services and open services.

H.C. Starck GmbH is expanding its Executive Board to include the new position of Chief Technology Officer (CTO). Effective 1 February 2015, Dr. Michael Reiß will take on this position, which was created in response to the rising importance of technological aspects to H.C. Starck’s successful further development particularly in view of the global strategic growth projects of the company. In his new position, Dr. Reiß will be part of the H.C. Starck Group Executive Board together with President and CEO Dr. Andreas Meier, CFO Dr. Matthias Schmitz, and Executive Board members Dr. Dmitry Shashkov and Edmar Allitsch. “H.C. Starck is a company driven by innovation and technology, so adding the position of Chief Technology Officer to the Executive Board is a logical step in strengthening the H.C. Starck Group in the best possible way through optimized technological and longterm alignment of the production sites,” said Dr. Engelbert Heimes, Chairman of the Supervisory Board. “We are pleased to have been able to bring Dr. Reiß on board for this challenging role,” he adds.

Forget the Billion Dollar Club, Let’s Create the Billion Pound Club, Says Powa CEO Following recent wave of US$1bn valuations, the founder of the US$2.7bn commerce specialist believes the global investment spotlight has fallen on the UK As the UK shows signs of establishing its own billion dollar start up club with a wave of new investments, one company that stands out is Powa Technologies, the mobile commerce specialist founded by veteran entrepreneur Dan Wagner. Powa Technologies was valued at £1.78bn (US$2.7bn) after a series of heavyweight international investors recognised the transformational potential of its mobile commerce platform PowaTag. The company has secured more than US$150m in institutional investment over the last two years, including a record-breaking US$90.7m Series A round, the largest ever secured by a technology start up. Dan Wagner, founder and CEO of Powa Technologies, said: “We should be confident in our ability as a nation to create our own world-class breed of technology leaders. Rather than following the Billion Dollar Club, we should all be focussing on the Billion Pound Club. There are many companies out there

with the potential to achieve this, and we must create an environment that can nurture and sustain their growth. He continued: “The increasing level of attention the UK technology scene has received in the last few years makes it clear the international investment community has begun to recognise our vast potential to innovate as a nation and build companies which can become international market leaders. “I believe it is very feasible for the UK to produce a global digital champion that will secure ubiquity comparable to Microsoft or Google within the next five years. Heavyweight investors from around the world are starting to recognise the powerful potential for British companies on the global business stage.” Powa Technologies is recognised by the Wall Street Journal’s prestigious Billion Dollar Startup Club, listing the world’s leading companies valued at

over US$1bn. Dan Wagner believes the investment attracted by the UK’s digital economy and the jobs created as a result plays a vital role in the country’s economic growth and movement away from recession. Job creation was a priority for Powa after the US$76m investment it received in 2013. The move even gained praise from Prime Minister David Cameron, who commented: “I am delighted that Powa is further contributing to the recovery of the economy with the creation of 250 jobs to expand their growing business. E-commerce is vital to our economic success.” Dan Wagner added: “The UK’s own developing billion pound club is largely centred around digital innovation, especially the use of mobile technology. PowaTag itself is built on the vision of using mobile to empower consumers with a new level of freedom and flexibility in the way they shop and interact with brands in their every day life.”

January 2015 | News & Appointments

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Regarding what respondents believed the priority for regulators would be in 2015, twice as many senior executives cited market abuse as those who named tax-related investigations, the next most commonly cited issue. The results of the survey, analysed in Kinetic Partners’ annual Global Regulatory Outlook report, show 37% of those surveyed (and 44% of C-suite executives) named market abuse as a key issue for regulators, ahead of tax-related issues which were mentioned by 24% of respondents (and 22% of C-suite respondents). The breakdown of responses by geography indicate that the industry envisions market abuse to be a key issue globally, with 52% in the US and 35% in Hong Kong anticipating that it will be a central area of regulatory focus.

Simon Appleton, a director at Kinetic Partners in London, explains: “Financial services professionals are right to expect regulators to continue to clamp down hard on market abuse, such as insider trading, market manipulation and financial fraud. These already account for many of the fines in key jurisdictions, and the past year has continued to see regulators impose large fines on firms.” Kinetic Partners’ survey also found that technology was core to firms’ responses. More than one in five (22%) said that their technology investment would concentrate on market and transaction monitoring systems in 2015, putting it behind only regulatory reporting (27%) and AML/knowing your customer systems (23%). Nick Matthews, Managing Director in the Duff & Phelps Dispute and Legal Management Consulting practice, comments: “More than ever, regulators are expecting not just compliance from firms but for them to play an active role in enforcement. The best defense firms have against punitive measures is to identify abuse and report it before it

comes to the regulator’s attention. Even banks with sophisticated market monitoring systems in place need to ensure their investment in technology not only meets regulators’ expectations, but also keeps pace with developments in the industry.” While issues such as bribery seem to be attracting less regulatory attention (with only five percent of survey respondents expecting regulators to prioritise it), others, such as high frequency trading (HFT), have risen rather rapidly up the agenda. HFT was fourth in the list of concerns regulators were expected to focus on, as noted by 17% of respondents overall (and 18% of senior executives), putting it ahead of AML. Appleton concludes: “Regulators are really only beginning to tackle HFT market abuse. The first enforcement action at the SEC was only in October 2014, but that trickle of cases is likely to increase fast. Regulators expect firms’ systems for preventing disorderly markets and identifying market abuse to keep up with changes in the marketplace.”

Funds | Direct Lending Explained

Direct Lending Explained | Funds

Direct Lending Explained We caught up with Brevet Capital’s Doug Monticciolo to find out how the firm’s “rentable private equity” is helping its clients achieve growth – without sacrificing ownership

Brevet Capital is an alternative lender to middle market companies. We specialise in sourcing and structuring loans to companies in need of growth capital to achieve increased earnings. Our clients view Brevet as “rentable private equity”; we help our borrowers accomplish the same type of growth as it would with equity, but instead of sacrificing ownership, they pay premium coupon. Can you explain how your career led to lending to middle market companies? Unlike most others, my career on Wall Street stemmed from my background as a mathematician. While working on my doctorate at Columbia, I was granted a fellowship by Goldman Sachs to work under Fischer Black developing embedded options in bonds. My career led me to direct lending where I eventually became head of the Proprietary Fixed Income/Merchant Banking Group at Deutsche Bank. In 1998 I founded a boutique investment bank that was the predecessor of Brevet Capital. The reason for leaving the large banks behind was to continue originating and structuring deals but with more control over the types of deals and a goal of creating win-win transactions. My vision for Brevet was to provide capital to businesses, to improve their bottom line, and to profit alongside them. Disintermediation has increased the use of alternative lending to small and middle market companies. Which alternative will be most disruptive in the space? I think that the peer-to-peer online platforms have the potential to be significant. The recent IPOs of Lending Club and OnDeck are likely the first of many. These platforms have originated billions of dollars of loans since inception. There are a number of risks that come with them, but they are real game changers and a step away from traditional lending. It will be interesting to watch the platforms over the next year to see how they perform.

An industry survey predicts that 72% of institutional investors plan to allocate funds to direct lending funds in the next 12 months¹. What is it that makes this asset class attractive? There are many things that make direct lending attractive to investors. The seniority in the capital structure and the diversity that the investment provides are important factors when considering an investment in direct lending. Brevet utilizes covenants, overcollateralization, and other enhancements to afford maximum protection for our investors. Regarding investment diversity, our Brevet Direct Lending - Short Duration Fund had a correlation of 0.07 and 0.13 to the S&P 500 and Barclay’s U.S. Aggregate Bond Index in December, respectively. The Short Duration Fund’s correlation to the bond and equity markets is valuable to a portfolio.

Do you think Direct Lending will be an attractive asset class for investors in the long term or a temporary phenomenon? Banks will adapt to how they can make money. New regulations that banks are facing, such as Dodd-Frank and AIFMD, limit the profitability of lending to middle market enterprises. For that reason, direct lending by funds, private equity, and business development companies will be prevalent in the near future. With regards to direct lending as an asset class, I don’t expect anything to change the surge in recent interest. The historically low interest rates in the current environment make the returns of direct lending particularly attractive, and 2015’s expectations are not as clear as once anticipated. Regardless of any increase in interest rates, most loans are structured with floating interest rates which affords investors some rate protection. As interest grows, how do you expect Brevet to set itself apart from the competition?

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My vision for Brevet was to provide capital to businesses, to improve their bottom line, and to profit alongside them

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How would you describe Brevet Capital?

Brevet’s asset origination is unique in that our deals are internally sourced through our own sales professionals. This creates a high barrier to entry for potential competitors. Additionally, the structuring and underwriting processes are handled internally, and there are few firms in the industry that combine the lifecycle of an investment in-house. Our core team has worked together for the past 15 years, and the combined 100 plus years of experience is reflected in our strategy. ¹ https://www.preqin.com/docs/press/Private-Debt-Nov-14.pdf

Brevet is an institutional investment manager dedicated to principal finance, investing in financial assets and originates private, middle market, senior-secured loans. For more information, please visit www.brevetcapital.com.

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Hedge Funds: What’s in Store in 2015? | Funds

Funds | Hedge Funds: What’s in Store in 2015?

Hedge Funds: What’s in Store in 2015? Consulting and third party marketing firm, Agecroft Partners, take us through their hedge fund industry predictions for the coming year

Each year, Agecroft Partners predicts the top hedge fund industry trends through their contact with more than two thousand institutional investors and hundreds of hedge fund organisations. Because the hedge fund industry is very dynamic and constantly changing, it is important for firms to anticipate what changes are likely to occur. Those who effectively evolve with the industry will succeed, while stagnant firms will be left behind. So read on to see Agecroft’s predictions for the biggest trends in the hedge fund industry 2015… Prediction 1: Greater Alpha Due to Higher Volatility. Since 2009 most hedge fund returns have been driven by market beta due to rising equity and fixed income valuations. This was enhanced by high correlations and lower volatility within the capital markets. Since September, there has been an increase in volatility in the capital markets and we expect this to continue as volatility levels move closer to historical averages. Larger price movements make it easier for skilled hedge fund managers to add value through security selection when security prices reach price targets more quickly, thus, enabling capital to be reinvested in other opportunities.

Prediction 2: Greater Demand for Hedge Fund Strategies That Benefit From Increased Volatility. These strategies include market neutral equity, arbitrage strategies, global macro, CTAs, long/ short equity and fixed income trading oriented strategies. Not only will these strategies be in demand because of their increasing ability to generate alpha, but also as a hedge to all time high equity and fixed income prices. Prediction 3: Smaller Managers Will Continue to Outperform. One of the biggest issues within the hedge fund industry has been the high concentration of flows to the largest managers with the strongest brands. This has caused many of these managers’ assets to swell well past the optimal asset level to maximise returns for their investors. As they become larger, it is increasingly difficult to add value through security selection. Large managers also have an incentive to reduce the risk in their portfolio in order to maintain assets and thereby increase the probability of continuing to collect large management fees from their client base. Finally, it becomes more difficult to stay motivated for some of the largest managers once their personal wealth reaches the stratosphere. For example, put yourself in their

shoes “Should I do research in my office all day Saturday to enhance returns for the fund or fly on my G6 to my ocean front house in the Caribbean, where I will be partying all weekend with super models and celebrities?” Prediction 4: More Hedge Funds Shutting Down. Hedge funds will shut down at an increased pace driven by four factors: 1) Agecroft estimates that the current number of hedge funds is near an all-time high of fifteen thousand. Given a consistent rate for hedge funds ceasing operations, hedge fund closures should also be at an all-time high. 2) This increase in hedge fund managers has reduced the average quality of hedge funds in the industry. Many of the lower quality managers will experience a higher rate of closing down, which is good for the industry. 3) Increased volatility in the capital markets increases the divergence in overall return between good and bad managers. This in turn increases the turnover of managers as bad managers get fired and money is reallocated to those who outperform. 4) The competitive landscape for small and mid-size managers is becoming increasingly difficult. They are being squeezed from both the expense and revenue side of their businesses. In addition,

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One of the biggest issues within the hedge fund industry has been the high concentration of flows to the largest managers with the strongest brands. This has caused many of these managers’ assets to swell well past the optimal asset level to maximise returns for their investors

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Funds | Hedge Funds: What’s in Store in 2015?

We believe sound tax advice is more important than ever. It requires not only professional expertise but above all insight into our clients’ wishes and goals. Our personalized commitment adds real value to our tax advice, which is reflected in the C&B More motto: ´Connect to add value´. We are specialized in advising the Shipping Industry with (re)financing and structuring challenges. We provide tax planning services to optimize financ-

having a superior quality product alone is not enough to generate inflows of capital. Hedge fund flows are being driven more and more by brand and distribution, which these hedge funds lack. As a result we expect the closure rate to rise for small and mid-sized hedge funds. Prediction 5: Hedge Fund Industry Assets to Reach All Time High in 2015. Despite all the negative stories recently about the industry, including: an increased level of fund closures, CalPERS pulling out of hedge funds and hedge funds underperforming the S&P 500, total hedge fund industry assets will reach a new all-time high in 2015. This will be fuelled by a combination of investors moving assets out of long only fixed income to enhance forward looking return assumptions and other investors shifting some assets out of the equities to hedge against a potential market sell-off. We expect hedge fund industry assets to rise by $210 billion or 7 percent which was derived from a forecast of 2% increase due to net flows and 5% from performance. Prediction 6: Founder’s Share Fee Structure Becomes Mainstream for Small Hedge Fund Managers. A Founders’ share class is a 25% to 50% discount on standard hedge fund fees that began as a way to incentivise investors to invest day one in a new fund. Over the past couple years, its use has been greatly expanded to include a significant percentage of hedge funds under one hundred million in assets. This assets ceiling is increasingly being raised to two hundred million and beyond for investors willing to either allocate a large dollar amount or accept a longer lock up. This trend adds downward pressure on hedge fund industry fees that are also being squeezed by large institutional investors.

Prediction 7: 40 Act Hedge Fund Marketplace Becoming Increasing More Competitive. The number of hedge fund 40 Act funds has ballooned over the past couple years which has made it increasing more difficult for new entrants or smaller managers to raise assets unless they are aligned with a strong distribution partner. Prediction 8: AIFMD Significantly Reducing Hedge Fund Marketing Activity in Europe. US marketing activity in the Euro-Zone has declined significantly due to AIFMD and we do not expect it will increase until hedge funds can register across the Euro-zone with a single registration. Europe has historically accounted for approximately 25% of hedge fund asset flows to US based managers. This legislation is hitting smaller managers disproportionally hard because they lack the resources to register in individual countries. In addition, European based investors tend to be more willing to invest in smaller managers due to their higher return potential. This legislation is also hurting European investors who are not seeing many of the top emerging managers. Prediction 9: Growth in Outsourced CIO. An increasing number of endowments and foundations are outsourcing the investment management of their funds to Outsourced Chief Investment Officer (OCIO) due to both the rising cost of staffing an investment office and poor returns from their portfolio. This is good news for the OCIO industry that has seen a flood of new competitors over the past 5 years; however this will also lead to significant fee pressure due to the increased competition. This is a major change from the environment a few years ago where there was little fee pressure and investors often felt lucky to be accepted as clients.

Prediction 10: Social Media. The use of social media by hedge fund managers, investors and service providers continues to expand at an accelerating rate. Social media is being used for research, to build stronger relationships and help promote a firm’s brands in the market place. Some managers are also using it to promote their investment ideas in order to create a catalyst for the security. The most commonly used social media is LinkedIn, which is broadly used throughout the industry. In 2014, Twitter was used by many people in the industry for the first time and this is expected to increase in 2015. Finally, we are beginning to see some use in YouTube where organisations are creating videos that can be posted on websites, distributed through social media or emailed to a distribution group. Many new firms are being created to address this need including Hedge Fund Social Media hedgefundsocialmedia.com, an organisation Agecroft Partners helped establish.

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CLIENT-CENTRIC. INNOVATIVE. TRANSFORMATIVE. At Pershing, a BNY Mellon company, we are passionate about the success of our clients. When you succeed, we succeed. As you look to drive growth, manage costs, stay ahead of regulations and attract the best people, Pershing stands ready as your advocate in today’s evolving marketplace. Power your business with our flexible technology and innovative financial business solutions. Take advantage of our industry expertise and dedication to maximize opportunities to transform your firm—and help you provide a secure financial future for your investors.

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At Smythe & Walter we provide high quality financial planning advice to our clients by delivering a clearly-defined service, transparent fee structure and effective investment proposition. Professionalism & Expertise • Transparency • Honesty & Integrity • Independence • Accountability These core values inspire us to act at all times with the utmost degree of integrity and professionalism and to be open and ethical in everything we do, putting our clients’ best interests at the heart of the business.

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Tech: Your New Strategy | Finance Focus

Finance Focus | Tech: Your New Strategy

It’s the start of a new year – and traditionally it’s the time to make some resolutions for the months ahead. This year make sure you also commit to some New Year’s resolutions for your businesses. 1: Implement a strategic content marketing plan. 2014 was the year major brands got serious about content marketing. Now it’s time for small business to do the same. Start with a content calendar that maps out the over-arching strategy. It keeps you consistently publishing original content, establishes clear deadlines for drafts and posts, organises your ideas for future content into a coherent plan, and keeps track of holidays/major events (e.g. industry awards), around which you may want to offer customised content. 2: Revamp your social media strategy. While Facebook, Twitter and LinkedIn continue to dominate it’s also worth considering Pinterest, Instagram and Tumblr and SlideShare. An effective strategy starts with a clear understanding of which networks are most relevant for your customers. Social media marketing requires a clear plan-of-action. Look beyond the number of Twitter followers and Facebook likes and focus on engagement and amplification metrics. What makes content “go viral” or generate leads? Social media marketing drives leads by building awareness, attracting interest, and cultivating relationships. Potential customers are more likely to favourite and re-tweet your posts when you share information that’s relevant and meaningful to their daily life.

3: Improve website call-to-action. SEO has been one of the hottest, must-do marketing tactics recently. However, great SEO won’t do your business any good if visitors don’t actually convert into customers. When it comes to improving your call-to-action (CTA), most businesses don’t need a dramatic overhaul; it could be as simple as tweaking the size, colour and location of your CTA button or slightly altering your messaging. Look at your click-through rates (CTR), bounce rates and page views to determine where in the sales process potential customers are leaving your website. Can customers find the information they need? Do they start to buy but not complete? Do you have subscribers but no conversations or engagement? Improving your calls to action is the first step to addressing these problems and converting more prospects into customers. 4: Use mobile payment for more secure (and affordable) transactions. With Apple finally introducing its long-awaited Apple Pay to the UK in 2015 it’s likely we’ll see a lot of changes, 2015 may even be the year of the digital wallet. Apple Pay, and other payment solutions that will follow, will disrupt the payment markets. Why? Because encrypted digital wallets are the solution. These authorise payments for a specific amount and are available anywhere, thanks to smartphones. Plus, mobile payments allow in-the-field employees to complete sales on the spot. 2015 means changing and expanding your customers’ payment options so that you can work their way.

5: Make your life easier with free apps and cloud collaboration tools. Starting and running a small business has never been cheap or easy, and these apps make the process a bit simpler and more affordable. Accounting (Xero, Freshbooks, Sage), CRM (Capsule, Nimble), Marketing automation (Mailchimp, Campaign Monitor, etc), Documents, Presentations etc. (Office365, Google Apps), Mobile video chats (Hangouts, Facetime, Skype). Planning what you use and why, who else needs access and when, are key strategic questions. 2015 is the year these tools really deliver directly to your bottom line. The new year can be a time when people make (and then break) resolutions. Often by Easter we look back with a tinge of regret for not having achieved what we committed to in January. So, find a group or an ally to hold you accountable, and be strategic, not reactive. Then 2015 could be your best year ever. It’s up to you.

About the author... William Buist is owner of Abelard Collaborative Consultancy, and founder of the exclusive xTEN Club - an annual programme of strategic activities for small, exclusive groups of business owners. xTEN helps accelerate growth, harness opportunity, build your business and develop ideas. William is also author of two books: ‘At your fingertips’ and ‘The little book of mentoring’. For more information, please visit www. Abelard-uk.com and www.Williambuist.com.

Bridging the Credit Gap | Finance Focus

Finance Focus | Bridging the Credit Gap

Bridging the Credit Gap: Why SMEs Need More Support

The value of small and medium-sized businesses to the global economy cannot be underestimated. Today’s biggest global companies, which create a vast amount of jobs and wealth across multiple territories, all had humble beginnings as fledgling start-ups. And many of tomorrow’s biggest brands have not yet been established or are in the early stages of growth. Whilst some multinational corporations will continue trading successfully for generations to come there will be others that will be usurped by budding entrepreneurs who are working hard to bring their ideas to fruition. Some SMEs bring forth entire new industries. Just 20 years ago Google and Facebook didn’t exist; in fact their founders were still at school. And in the meantime Apple, which had seen success in the 1980s, was in a period of decline. Today Facebook generates revenues of US$8bn and has over 7,000 staff. Google is now a US$60bn revenue company and employer of over 52,000 people across offices in Australia, Brazil, Canada, China, France, Germany, India, Ireland,

Israel, Japan, Kenya, and the UK. Apple has almost 100,000 employees and an annual turnover of US$170bn SMEs provide new technologies, products and services that meet the needs of our changing world; they ensure established companies continue to adapt and innovate; and they challenge convention. Simply put, SMEs are essential to a thriving and vibrant economy. The credit gap Unfortunately, despite their importance to our global economy, many entrepreneurs struggle to secure the finance they need to support their business. The International Finance Corporation (IFC) – a member of the World Bank Group - calculates that there are between 200 and 245 million enterprises across the world that either need an overdraft or loan but do not have one, or do have a loan but still find access to finance a constraint to their business. The IFC aptly labels the latter segment the ‘underserved’.

Of course the picture varies from country to country, with some financial markets more developed than others. The IFC estimates that around 60 per cent of micro, small and medium-sized businesses in developing economies – such as East Asia, the Middle East and North Africa - cannot access the credit they require, compared to 16 per cent in developed economies. Whilst 16 per cent may seem less significant when compared with the equivalent figure in developing nations, it shows that a mature financial market is not the only answer to ensuring every business has the support it requires to operate. In fact, the global economic recession produced a number of innovative new providers in the financial services sector in developed markets, for example crowd funding and peer-to-peer lending. Their arrival has reinvigorated the market and is really challenging the dominance of the established players. Cultural, legal and regulatory barriers play a major part in the battle to support SMEs. This is perhaps best demonstrated by the IFC’s analysis

SMEs are essential to a thriving and vibrant economy. Simon Featherstone, Global CEO of Bibby Financial Services, tells us how to small businesses can use the various types of finance available in order to stay competitive in the global marketplace

of the role gender plays in access to finance. Whilst the number of women-owned businesses is increasing, and accounts for around 30 per cent of enterprises, only 10 per cent can access the finance they require to grow their venture. How can we bridge the gap? Clearly this is a complex issue that will take time to improve. It is further complicated by the growing need for more specialist funding facilities for SMEs seeking to switch on to the power of international trade. The world is a much smaller place now, and business owners are no longer only connected with other businesses and customers in their own town, city or region. Therefore bridging the gap involves more than just the offer of a loan or overdraft to SMEs; it requires a competitive market and a range of tailored solutions. In order to make progress in this area the global financial services industry must work together. There are many initiatives in place by organisations such as the IFC, private sector finance providers and commercial banks, but the opportunity exists to achieve more by working together.

Certainly in the invoice finance industry, of which Bibby Financial Services belongs, there is a requirement for a more unified position to better influence policy makers and influence the flow of trade. Currently there are many disparate member organisations rather than one global association. If we can focus on a more unified approach then I am confident we can start to reach the hundreds of millions of businesses that need greater support. Awareness and education also plays a major part in bridging the credit gap in both developed and developing markets. Communicating the different financial products that are available is something the industry must do – ideally in partnership - and it needs to reach a wider audience than just current SME owners. For example, basic commercial acumen and an understanding of how to access finance and support is something that could be included in school curriculums. By working together and focusing on increasing awareness and engagement, we will begin to tackle the cultural, regulatory and legal barriers and ensure more entrepreneurs can realise their

ambitions. Doors will be opened for an increasing number of finance providers and more tailored options for businesses, so that options exist outside of commercial banks and standard products such as loans and overdrafts. As the global economy and international trading improves it is imperative that the financial industry focuses on supporting the smallest businesses. Their success is crucial for a healthy economy.

About the author... Simon Featherstone is Global CEO at Bibby Financial Services, the UK’s leading independent invoice finance specialist and a trusted provider of cashflow funding solutions to 7,000 businesses, handling annual client turnover of £4.9bn and advancing in the region of £388m. For more information, please visit www.bibbyfinancialservices.com.

Banking Zone | Greece: Hope and Fear for the Eurozone

Greece: Hope and Fear for the Eurozone | Banking Zone

Greece: Hope and Fear for Eurozone The Centre for Economics and Business Research gives us its thoughts on how Syriza’s victory and asks: is the party prepared for the storm awaiting it?

The anti-bailout leftist Syriza party achieved a stronger-than-expected victory with 36.3% of the vote at yesterday’s Greek general parliamentary elections, Greece’s Interior Ministry reported this morning. This translates into 149 seats, just short of the 151 needed for a majority. Party leader, Alexis Tsipras, met anti-bailout right-wing party Independent Greeks (ANEL) this morning where they agreed to form a coalition government. A core premise of the two parties is that the bailout programme negotiated between the troika and the previous ruling coalition has failed to address core structural issues such as tax evasion and social justice and has made short-term performance -especially in employment and earnings - worse. In response, they advocate a departure from the mantra of austerity, which they propose to support through fiscal stimulus made possible through debt reduction. In theory this is what many economists – including Cebr – are arguing for and even the IMF itself has admitted to too much austerity as a mistake on their part. In practice, the fear is that the Syriza is unprepared for the storm awaiting it. While there seems to be consensus between Syriza and Eurozone officials that Grexit should be avoided, there are important differences between the economic programmes of Syriza and the Troika. The last review of the Troika is still pending and the Eurogroup has extended the deadline to end-February. After that, the funding of Greek banks becomes a challenge given that the ECB has indicated that it could no longer accept Greek government bonds as collateral if there is no agreement. The IMF programme runs until Q1 2016. Greece’s new government therefore will either have to finish the review and move on to the Enhanced Conditions Credit Line (ECCL) discussions as suggested in the last Eurogroup, or make a radical move and open up new negotiations. The second scenario is more likely in our view. The

fact that Syriza has been able to find Coalition partners so quickly reduces the period of political uncertainty post-election that we had identified in an earlier note as a clear risk. It also maximises the time available for negotiations. The talks are expected to be structured around three key themes: The first is debt relief. The immediate reactions from Europe’s creditor countries – most notably Germany – have sent strong signals against the possibility for outright haircuts. Given this, Cebr thinks it more likely that a compromise on debt relief – if at all achieved – will take the form of extending maturities and lowering costs. The second theme relates to structural reforms: Syriza’s pre-election campaign involved promises to reverse some of these measures, but the Troika sees such reforms as a crucial precondition for growth. Finally, the question of easing austerity will also be on the table: our base case scenario is that the primary surplus targets will be eased somewhat from the current target which is set at 4.5% of GDP until 2022. The outcome of these talks will be crucial for Greece’s future and the future of the Eurozone. There are many who continue to believe that a Syriza-led government will make extremist demands to Greece’s creditors to the extent that these are not met and that Greece has to leave the Euro. We disagree. We continue to believe that there is plenty of room to reach an agreement and that the scenario of a Greek exit from the Eurozone carries a low probability. There are a number of arguments in support of this view. First and foremost, Syriza ran on a campaign that promised Greeks to stay in the euro and does not have the democratic mandate to force negotiations to an extreme. A recent opinion poll indicated that 76% of Greeks want to stay in the euro “at all costs” and Syriza is well aware of this. In fact, the party has moved far from its earlier radical positions and if history is a good guide

we expect it to become even more pragmatist once it assumes power. What is more, we think that Greece’s primary surplus is not as strong a bargaining chip for Syriza so as to back up tough talks with the troika. The argument runs that with a primary surplus (a positive difference between revenues and spending once the cost of servicing debt is excluded), Greece can threaten its creditors to default on debt since through enjoying higher tax revenues than are needed for its spending an economy does not need to borrow more. This is a fantasy. If cut from the Troika, the bank runs and elevated uncertainty that will result will make the primary surplus disappear through a contraction in credit and output. The creditors from their side are also in a weak bargaining position and will be working towards a compromise. While in the period between 2011 and now significant reforms have taken place in the Eurozone to lower contagion in the event of a Grexit, the risks are still very high. Crucially, Greece’s exit from the euro would be a game-changing event for the character of the currency bloc, transforming it from what was conceived to be a permanent monetary union into one where exit is a possibility. Even if Greece exits therefore, this would have serious repercussions on what happens to the rest of the periphery once they start to run into similar troubles. In summary, whilst we acknowledge that Syriza’s victory creates significant risks for Greece and the Eurozone as a whole, our central scenario is that the two sides (Greek government and the Troika) are more likely than not to reach a compromise. Ultimately, this will be a good thing for both Greece and the rest of the periphery. As Cebr has repeatedly argued, monetary expansion is insufficient to cure the problems of weak demand that the Eurozone currently suffers from. Setting the fiscal motors to work in the same direction is imperative. The new Greek government will have to convince its creditors that it can walk the delicate tight-rope of relaxing austerity without back-pedalling on structural reforms.

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Relax | Luxury for Every Palate

Luxury for Every Palate Whether you’re looking for the magic of Arabian nights, the pine-scented air of rural Georgia or the pristine beaches of southern Thailand, there’s something for everyone at Ritz-Carlton’s villas and cottages

Luxury for Every Palate | Relax

Relax | Luxury for Every Palate

Phulay Bay, a Ritz-Carlton Reserve

The Ritz-Carlton, Sanya

From the luxurious insouciance of 1930s South America to French Chateau sophistication, the villas and cottages are throwbacks to the golden age of hospitality and provide city-weary travellers a private hideaway to experience peace and quiet on their own terms. Along the shores of Southwest Thailand’s Andaman Sea, tiny, emerald-coloured islands rise and fall from turquoise waters with such splendour and symmetry that they appear like the tails of mythical, powerful beasts. At this place where the Krabi River empties into Phangnga Bay close to the island of Phuket, Krabi looms as a still undiscovered wonderland where nature and spirituality harmoniously blend into one. Rising above are Phulay Bay, a Ritz-Carlton Reserve’s Ocean Pavilions, which are perched above the rest of the resort to offer panoramic sea and garden views. The stand-alone hideaways are where low-rise architecture and precisely-positioned landscaping ensure discretion and privacy. Today’s time-conscious traveller can retreat and reconnect in a special selection of properties within the luxury tier. With China gaining in prominence as a top leisure destination globally, the villa life at The Ritz-Carlton, Sanya goes to the heart of the luxury experience with eight quaint abodes, featuring spectacular views of the oceanfront, gardens or mangroves. Expansive spaces,

a picturesque setting and a distinct local vibe make the villas an experience worth cherishing and returning for. From the island life of Sanya to the lush greens of Abama in Tenerife, the villas ooze personality as a cosy retreat for families, friends, couples or honeymooners to enjoy the grand Ritz-Carlton setting with the familiar comforts of a home. The secluded villas at The Ritz-Carlton, Abama are nestled in lush tropical gardens with private swimming pools. Along with an array of benefits which include complimentary buggies for the entire duration of a stay. For an authentic Middle East experience and winter sunshine, the Venetian-inspired villas of The Ritz-Carlton Abu Dhabi, Grand Canal, overlooking the spectacular Sheikh Zayed Mosque, respectfully reflect the proportions and design aesthetics of the mosque on the one hand and the quaint atmosphere of a Venetian village on the other. The villas present an indulgent experience for guests – from a traditional Arabian breakfast served on the spacious villa terrace or in the adjacent olive grove to elegant soirees hosted on the villa lawn.

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Spacious and abounding in character – be it in design, history or services – these exclusive accommodations offer a cosy getaway from the pack, with customary Ritz-Carlton services always at hand

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Private beaches, backyard barbeques, temperature-controlled outdoor pools, pine forest surrounds and magnificent views – the villas and cottages at The Ritz-Carlton hotels around the world tastefully bring together the exquisite and the personal. Spacious and abounding in character – be it in design, history or services – these exclusive accommodations offer a cosy getaway from the pack, with customary Ritz-Carlton services always at hand.

A landmark in Bahrain, known for its lush grounds and outstanding dining, The Ritz-Carlton, Bahrain has also scored points amongst regional travellers with its South American-style villas. With layout and aesthetics straight out of a Hunter S Thompson novel, the villas dotted across the shoreline of the hotel allow Middle Eastern travellers to step out of the desert into a tropical resort paradise. Lakeside cottages in the deep south of the United States are everything that you would expect from a rural retreat in Georgia. With views across the still Lake Oconee and the scent of fresh pine, the cottages at The Ritz-Carlton, Reynolds Plantation provide a quiet that is only disturbed by the crackling of wood-burning fireplaces. Down on the shores of the Caribbean, barefoot elegance is found at Dorado Beach, a Ritz-Carlton Reserve, located on the cherished island of Puerto Rico. The luxury resort is an intimate retreat offering a true sense of place, blending Laurance Rockefeller’s novel environmental design philosophies and modern yet minimal decor. Originally erected in the 1920’s, the villas of Su Casa, the storied building, now serve as an exclusive four-bedroom VIP accommodation overlooking the ocean. Paired with towering palm trees, expansive gardens, a private infinity edge pool and a spacious cigar veranda, the hacienda has been fully restored, preserving its legendary heritage and serene beauty.

For more info... www.ritzcarlton.com

The Ritz-Carlton, Reynolds Plantation

Dorado Beach, a Ritz-Carlton Reserve