Wealth & Finance International | January 2016
Exceptional Returns
Exception Capital is a boutique investment firm based in London and Los Angeles. We spoke to Adrian Fairbourn about the firm and their innovative flagship fund, The Family Fund.
CEO of the Month
We speak to Mr. Vinod Menezes, CEO of Atlantic Subsea, a premier marine infrastructure firm providing a broad spectrum of services to range of markets. We also speak to Paul Kehoe, CEO of Birmingham Airport, an international transport hub transporting around 10.2 million passengers per year.
Arbitrator of the Month
We speak to Jacques Werner, a senior arbitrator for Werner & AssociĂŠs in Geneva, Switzerland.
Asset Manager of the Month We invited Tim Carleton from the firm Auscap to provide us with a fascinating insight into its investment strategy.
Real Estate Fund Manager of the Month
Marc E. Cottino is the founder of M&A Property Investors, a Pan European Private Equity Investment Boutique.
2015’s Leading Fraud Investigators
W&f We speak to Violet Ho, a Senior Managing Director of the Greater China Investigations & Disputes practice of Kroll. We also invited Mishaal AbdulMohsen Al-Sulaiman at Whitetale Consulting Services DWC-LLC to provide us with a unique insight into the firm and the role he plays within it.
International
We also speak to David Debenham, lawyer, forensic accountant, and Partner at McMillan LLP.
Building a Platform for Success
We speak to Brian Bartaby, CEO & Founder of peer-to-peer lending platform Proplend, about Risk Adjusted Returns in Peer-to-Peer Investing.
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Welcome to the January Issue of Wealth & Finance. Welcome to the January Issue of Wealth & Finance International Magazine. In this month’s issue we provide a unique insight into Proplend, a peer-to-peer or marketplace lending platform specialising in sub £5m loans for income producing commercial properties, as told by the firm’s CEO and Founder Brian Bartaby. Alongside this Marc-Andre Pepin, CEO of Invescap, talks us through the firm’s unique suite of products. Fraud is an increasingly prevalent problem for businesses across the corporate landscape, and therefore firms are increasingly turning to investigators for support, whether they be in house or freelance. We profile a number of these individuals and explore their role and how they ensure they achieve the best possible results for their clients. Despite a current slowdown in investments, there is confidence in the Western Balkan region, as the managers of the BEF fund explain. High Net Worth individuals often forget about issues such as insurance, but as Ben Heffer explains, it can be crucial for the protection of assets. The New Year has provided many new challenges for UK businesses, and as Jeremy Cook, Chief Economist at World First outlines, volatility is only going to get worse. Despite this, the market for ethical products is increasing, as John Ditchfield outlines. In addition to all of these insightful articles we also have the 2015 Wealth & Finance Business Awards, showcasing the hard work and dedication of those working across a variety of industries around the world. We hope you enjoy the issue.
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Contents 4. News
10. Hedge Fund Manager of the Year 2015 - USA - Exception Capital 12. Building a Platform for Success 16. Invescap 18. Real Return Investment Manager of the Year -2015 - UK - Saltus 20. Hedge Fund Manager of the Year - Italy - Finlabo 22. 2015’s Leading Fraud Investigators - Kroll 24. Hedge Fund Manager of the Year 2015 - Germany - The TrendConcept Group 26. Asset Manager of the Month - Auscap 30. 2015’s Leading Fraud Investigators - Whitetale 32. Best Corporate Bank & Recognised Leader in Institutional Banking – Luxembourg - ING Group 34. Back to the past: Why commission must not return to the advice industry 38. Region with the largest upcoming growth in Europe! 42. CEO of the Month - Paul Kehoe 46. Best Emerging Manager 2016 - California - Gratia Capital 48. 2015 Leading Fraud Investigator - David Debenham 50. Investing in Classic Cars 52. CEO of the Month - Atlantic Subsea 54. Making Green Pay 58. Insurance, Look Again 60. Currency Volatility in 2016: The Outlook for the UK Business 62. Ethical Products: Aliening Consumer Interests with Investment Decisions 64. How the ‘Internet of Everything’ is Impacting Bank Segment Strategies: Ways to Respond to the Trend and FAQs with Answers 68. The History and Digital Future of Hedge Funds 72. What Will UK Retirees Do with Their New Found Pension Freedoms? 74. Best Financial Advisor - Canada - The William Douglas Group Inc. 76. Best for Ucits Fund Arbitrage - Laffitte Risk Arbitrage UCITS 78. Best Alternative Strategy - the Laureola Investment Fund 80. An Evidentialist Approach to Investment – Woodsford Capital 82. Real Estate Fund Manager of the Month - M&A Property Investors 86. Arbitrator of the Month - Werner & Associés
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Wealth & Finance International | January 2016 News
Corporation Tax Northern Ireland In Northern Ireland, the then Finance Minister Arlene Foster and current Enterprise Minister Jonathan Bell welcomed the agreement to set Northern Ireland’s corporation tax rate at 12.5% from April 2018. This was announced on 17 November 2015 as part of the Stormont Agreement.
“Belfast is already recognised as the number one destination globally for financial technology investments, and Northern Ireland is the most successful region in the UK for Inward Investment. We have a skilled workforce, strong universities and research centres, high-tech infrastructure and competitive cost structure.
The Corporation Tax (Northern Ireland) Bill was given Royal Assent on 26 March 2015. Subject to implementation of key measures to deliver sustainable finances, this enables the transfer of corporation tax rate setting powers to the Northern Ireland Assembly. Finance Minister Arlene Foster said: “Assuming responsibility for these powers will provide the Executive with the ability to take radical steps to transform the performance of the local economy and enhance the lives of all our people.
“We have already established an excellent reputation on the international stage and that reputation, now coupled with an attractive corporation tax rate, means we have even more to offer.” Arlene Foster then concluded: “Much hard work has been required to secure these powers. That effort must continue and be intensified as we seek to secure the maximum benefit for Northern Ireland that will flow from this momentous decision.”
“A lower corporation tax environment, supported by other key drivers of our Economic Strategy, holds the potential to propel Northern Ireland forward by encouraging local firms to grow, enhancing levels of Foreign Direct Investment and delivering more jobs at all levels.” The most recent estimates from the Ulster University’s Economic Policy Centre predict that, by around 2033, employment in Northern Ireland will be no less than 30,000 higher, and output around 9% higher assuming that a 12.5% corporation tax rate was applied, compared to a business as usual pathway.
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Arlene Foster revealed: “Investment decisions made now often take two to three years to be realised on the ground. We need to make investors, here and abroad, aware of our intentions now so they can factor this positive announcement into their investment planning. This pre-announcement of the April 2018 commencement date will give investors time to respond and ramp up investment.” Enterprise Minister Jonathan Bell added: “I have consistently said that a reduced rate of corporation tax would be a game changer for the Northern Ireland economy. “This is a once in a lifetime opportunity for us to secure a new economic era for Northern Ireland, which we will now grab with both hands. As well as tens of thousands of additional jobs, local economic output and productivity could be boosted over the medium to long term. “Now that we have a date and rate, my Department and Invest NI can begin to work towards securing the economic benefits and investment for Northern Ireland that a reduced rate of corporation tax will bring.
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Merger between a&dc and BBP Gives HR Access to Cutting Edge Assessment Portfolio Assessment and Development Consultants (a&dc), leaders in behavioural assessment and development, and Burnham Business Psychology (BBP), specialists in bespoke online assessment, are merging to combine their respective strengths. The newly formed alliance will help clients maintain their competitive edge through industry leading assessment and development methods, technology and talent metrics. As well as offering the world’s widest range of behavioural assessment tools, the market will also see some new developments, such as an exciting new approach to gathering talent metrics. This will provide powerful information about organisations’ talent, enabling them to make selection and development decisions with greater certainty.
“Together we’ll be working on new innovations in the software as a service (SaaS) assessment space, taking our clients’ competitive edge to the next level.” Peter Burnham, Director of BBP, has commented: “All of us at BBP are excited by this merger; we are pioneering an avenue of online assessment tools that will revolutionise the market.”
Nigel Povah, CEO of a&dc, has commented: “We are delighted to announce this merger with BBP. Their cutting edge portfolio of bespoke online products enhances our own ready-to-use offering, giving our clients a greater choice and flexibility. They’ll also be able to run their interviews and assessment centres entirely paperless – saving them time and money and supporting their corporate social responsibility.”
“A huge part of our vision is not only to ensure that we aid business decisions by providing accurate and relevant data, but that we immerse each and every candidate in an excellent experience which turns them into advocates of our clients, whatever the outcome of their application. We are looking forward to a successful 2016 with our new business partners.”
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Wealth & Finance International | January 2016 News
MSCI Reports Carbon Footprint of Indexes First index provider to offer investors tools to measure carbon exposure relative to their benchmark.
MSCI Inc. a leading provider of research-based indexes and analytics, has announced that it will report the carbon footprint of its flagship global indexes for institutional investors looking to understand, measure and manage carbon risk in their portfolios.
carbon footprint measure for our equity indexes can help clients better understand their carbon risk at the portfolio level and define precise targets for reduction.” For investors looking for further insight into the carbon profile of their portfolios, MSCI ESG Research offers integrated portfolio carbon risk assessments with a detailed analysis of carbon risk management and exposure metrics.
MSCI will publicly report he carbon footprint of its more than 160,000 global equity indexes beginning with 19 across its flagship MSCI ACWI, MSCI World and MSCI Emerging Markets Index families. Following input from an extensive market consultation, MSCI ESG Research measures the following three carbon emissions and intensity metrics, drawing on in-house carbon research and expertise via MSCI ESG CarbonMetrics, including: • Carbon Emissions: The normalized carbon footprint per $M invested of a portfolio tracking the index. • Carbon Intensity: Efficiency of a portfolio tracking the index in terms of total carbon emissions per unit of output. • Weighted Average Carbon Intensity: Exposure to carbon-intensive companies.
Baer Pettit, Managing Director and Global Head of Products, said, “We are seeing a growing number of investors demanding greater transparency into carbon emissions within their equities portfolios to help monitor, manage and mitigate their exposure to carbon risk”. As The announcement demonstrates, “MSCI is committed lifting the lid on emissions data to help our clients better understand the environmental and economic impact of their high carbon holdings” Pettit adds. MSCI recently announced a surge in demand for Environmental, Social and Governance (ESG) data and indexes. ETFs tracking the MSCI Low Carbon Indexes accounted for nearly 80% of the total equity ETF assets of carbon themed ETFs since their launch in September 2014, bringing low carbon ETF assets to more than $460 million as of July 2015.
Remy Briand, Managing Director and Global Head of Research, said, “Demand from institutional investors for the ability to analyze the carbon footprint of their portfolios relative to a benchmark will likely grow as they become more concerned about carbon risk. Having a standardized
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Rothschild & Co completes €306mn fund raising for its second Oberon Credit Investment Fund Rothschild Merchant Banking (“RMB”) has announced that it has completed the final closing of Oberon Credit Investment Fund II (“Oberon II”), a secured credit fund. Oberon II is an actively managed credit fund invested in a diversified portfolio of mainly senior secured credit within leading European and Global LBOs. The Fund targets a 6%+ net IRR, including quarterly cash distributions, offering low volatility of returns and superior access to assets via a proven and highly respected investment management team.
Globally, Rothschild & Co’s secured private credit product offerings are comprised of unlevered credit funds, managed accounts and CLO vehicles. Following the recent acquisition of Los Angeles based US credit manager West Gate Horizons Advisors, LLC, by Rothschild North America Inc., on a worldwide basis the Rothschild Group manages private debt funds totaling €3.3 billion.
The Oberon II portfolio presently consists of circa 45% 2014 and 2015 primary issuance, with the balance selected from a pool of seasoned secondary assets. Active management will ensure that relative value will be constantly assessed and the portfolio repositioned to take advantage of attractive market dynamics. To date the fund is circa 95% invested across 53 issuers and is expected to be fully invested by the end of October 2015.
Phil Yeates, Co-Head of Private Credit Management at Rothschild & Co said: “We are very pleased with the success of the Oberon II fundraising, which exceeded its fundraising target and attracted a diverse group of investors from European and UK pension funds, insurance companies, local authorities and family offices. The Oberon strategy marries Rothschild & Co’s outstanding track record with the attractive risk/reward characteristics available from this asset class. There is an increasing awareness amongst investors as to the merits of senior secured debt, notably the predictable levels of cash yield, the floating rate nature of the assets and the relative value European secured credit offers when compared to other sub-investment grade products.”
The Oberon strategy is managed across a series of funds and in managed account form by a dedicated team of investment professionals based in London with a long standing track record of investing in European senior secured credit spanning more than 20 years. RMB is well placed to access deal flow and allocations across its target markets. Combined with the high level of in-house experience, market knowledge and sector expertise this enables its teams to provide investors with an excellent medium through which to access the secured private credit asset class.
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THE ONE CONSTANT IS CHANGE
The Flexitallic Group is the international market leader in the manufacture and supply of high quality, high value industrial static sealing products, delivering industrial gaskets on a global scale.
enquiries @flexitallic.eu
www.flexitallic.eu
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New Ratings Service Launched for Financial Services Defaqto, an independent researcher of financial products, launched its 2015 Protection Service Ratings in October. These ratings provide an unbiased assessment of the quality of service provided by individual protection insurers.
Ben Heffer, Insight Analyst at Defaqto, commented on the new rating. “Whilst professional advisers will naturally have first-hand knowledge of the service they receive from the insurers they regularly deal with, our Service Ratings are a good sense check and can identify, at a glance, those insurers that have the approval of the adviser community as a whole.
Based on a comprehensive online survey, this new rating reflects the advisers’ experience of the service they receive from individual protection insurers. From the data gathered, providers have been rated Gold, Silver or Bronze – or left unrated if they do not qualify. Defaqto’s Service Ratings also cover pension, investment bond and platform service. Importantly, as with all Defaqto Ratings, they are completely independent.
“Defaqto not only gives a single rating per provider but, through the Defaqto Engage software, advisers can also conduct a more granular assessment of the service of their chosen providers via the satisfaction scores in ten service categories.”
All Service Ratings can be accessed in the Defaqto Engage software, enabling advisers to sift providers both by the overall Service Rating and by the individual category satisfaction scores that comprise the total result.
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Wealth & Finance International | January 2016
Hedge Fund Manager of the Year 2015 - USA Exception Capital is a boutique investment firm based in London and Los Angeles. We spoke to Adrian Fairbourn about the firm and their innovative flagship fund, The Family Fund.
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Exception Capital was born out of a family office structure, and as such our work revolves exclusively around the management of The Family Fund and ensuring we generate the best risk managed returns possible for investors.
thing we do, and ensure that we are always on the best possible terms with our investors and delivering strong returns. Moving forward we intend to continue with our current strategy. We have proved over a number of years that our repeatable process works and we will stick with that. The year ahead means more hard work finding and working on opportunities and turning those opportunities into hard performance numbers.
Launched in 2012, the Family Fund is a unique global multi-strategy portfolio that is designed to mimic the asset allocation of a classic Family Office. As such the fund invests globally in public equities, private securities, direct lending structures as well as external niche alternative managers.
From a business perspective we will be looking to grow the assets under management and, in tandem, the infrastructure of the firm. I have sat across from too many hedge fund managers over the years with say $50m under management but with an all encompassing infrastructure – numerous analysts, a good sized office in an expensive part of town and multiple Bloomberg screens etc. A few poor months of performance and it becomes impossible to raise the AUM and as result, with those overheads, they soon go out of business. We have flipped that model on it’s head and I have always said I would grow the infrastructure as we grow the AUM. I consider this to be prudent business practice and it considerably de-risks an investment in the Family Fund. We are excited about building out our business over the course of 2016 and also for the opportunities we are seeing in the markets.
Diversified by geography, asset class and positions it has, since inception in Q3 2012, outperformed all benchmarks and indices but with lower volatilities and reduced correlations. The fund seeks to uncover ‘below the radar’ investment opportunities which our competitors misprice, misunderstand, overlook, disregard or simply cannot access. Since inception the fund has appreciated over 51% and has average annualised returns of approximately 14%. In 2015 the fund returned an impressive 12.4% We consider this fund to be completely unique product in the marketplace, as no one else as of yet has developed such a hybrid structure.
Company: Exception Capital LLP Name: Adrian Fairbourn Email: adrian@exceptioncapital.com Web Address: www.exceptioncapital.com
Another means by which we differentiate our business from that of our competitors is our strong returns. This business is a performance business and the risk-adjusted returns are how we are all measured against our peers and, where applicable, benchmarks. As a company we stand out on all those measures, and our ability to consistently generate returns for our clients from multiple sources has been particularly satisfying over recent years. In Q4 of 2014 it was adding to oversold positions in the downturn that got us through a tough October; last summer we took one of our private positions public on the London market; in 2015 our basket of Argentinian ADR’s has produced excellent returns, as have our UK smaller company names and external managers. With regards to risk we take a view that you have to take some degree of risk in order to create returns. We don’t put ourselves forward as riskfree as we would not be able to generate the returns we have if we were. However, we do operate robust risk management controls, the main driver of which is diversification of the portfolio by strategy, geography, number and size of positions. This strategy has proved very effective and provided us with minimal correlation with the markets. The fund operates on a global basis and it is the team’s experience of living and working in Asia, Europe and the US and the networks developed that have come to bear on the portfolio. The opportunities available within these markets provide us with an exciting challenge. When you have a global universe as your opportunity set it is important to develop the skill to rapidly cut the wheat from the chaff. Developing and maintaining networks, finding and researching opportunities and realising the value in those opportunities is what drives us. This is reflected in our mission statement: “We aim to deliver consistent mid-teen returns with upside volatility supported by a corporate culture underpinned by integrity and trust.” These principals pervade every-
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Wealth & Finance International | January 2016
Building a Platform for Success Brian Bartaby CEO & Founder of Proplend admin@proplend.com 0203 397 8290 H1 Ascot Business Park, Lyndhurst Road, Ascot SL5 9FE See more at: www.proplend.com
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Having spent the past 13 years raising finance for property investors and developers, I saw from the coalface when the banks, building societies and financial institutions who actively serviced the sub £5m commercial mortgage sector from 2005-2007, drop from 60 or 70 to about 10. With approximately £50bn of outstanding sub £5m commercial real estate debt in the UK needing to be refinanced over the next 2-5 years, a large problem was created, or in my case a big opportunity. There was a clear dislocation between the quantum of funding required and the number of active lenders. Proplend was established in January 2014 in direct response to this opportunity. It took until October that year to launch our fully operational online Lending platform and by April 2015 we opened a secondary market. Proplend is a peer-to-peer or marketplace lending platform specialising in sub £5m loans for income producing commercial properties, connecting property owners who have a borrowing requirement with investors searching for higher yields. This is a simple and transparent concept where the tenant of a commercial property through the FRI Lease (Full Repairing & Insuring) pays their rental income to the property owner, and the property owner (borrower) through the loan contracts make interest payments to the investors. Risk Adjusted Returns in Peer-to-Peer Investing As Peer-to-Peer Lending moves from an alternative to a mainstream investment, investors must look deeper than simple headline returns. Peer-to-Peer Lending (P2P Lending) is the process of connecting investors directly to borrowers by circumventing traditional banks and financial institutions. Investors ranging from individuals to institutions are being offered returns of up to 15% pa. In 2015, the UK P2P Lending industry delivered record high volumes of £2.68bn in loans arranged, a near 100% increase on 2014. 2016 volumes are predicted to double again. The P2P industry is over 10 years old with Zopa, a consumer lending platform, being one of the first to the market. The sector can be broken down into three categories: Consumer loans, SME loans and Property loans. Each offers very different risk profiles with many platforms, mainly consumer and SME, providing little to no security over the loans originated.
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Wealth & Finance International | January 2016
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In the current long term low interest rate environment, new investors are being attracted by the headline interest rates. However, when investing in P2P Lending, we encourage investors to dig deeper not only at individual loan level but at platform level and to fully understand their risk-adjusted returns. There is a well known quote “Any fool can lend money, the trick is getting it back.” This has never rung truer as when investing in P2P loans. Investors need to understand how monthly interest will be paid and how the loan principal will be repaid. A smart way to invest in P2P loans is to ensure that the borrower offers security to support the loan. Security can take many forms, but the most traditional and reliable method is pledging an asset such as an income generating property because it provides a secondary source of repayment. The income (rental income) pays the monthly interest, but if the borrower is unable to pay the interest or the loan principle, the security can be sold and the proceeds used to repay the lenders. Investors in unsecured loans, whether P2P or otherwise, should be paid a premium to compensate them for the additional risks they take – risks that investors in a secured loan are protected from. However, there is a similarity of yields between secured and unsecured P2P lending, meaning that unsecured loans are not offering a premium rate for their increased risk. As such, investors in secured loans can benefit from the same or better returns but also take advantage of the added protections, both credit risk and interest rate risk, which secured loans provide. Not only does security at whole loan level increase risk adjusted returns, but the capital structure of the loan can be “broken down” into loan to value (LTV) based tranches which are ranked by priority. Priority is ranked by senior, junior and mezzanine tranches. The senior tranche, being the lowest loan to value has the first priority of repayment but offers a lower return than say the junior tranche which is paid after the senior. The return on the junior is higher than the senior. Therefore the risk adjusted return of a senior loan vs the risk adjusted return of a junior loan vs the risk adjusted return of an unsecured loan should not be the same. At Proplend, we quickly recognised that not all P2P investors have the same risk parameters and return requirements. This led us to pioneer the first Peer-to-Peer loan tranche model offering investors attractive fixed income returns across three loan to value based tranches. Our Tranche A, 0-50% LTV, to date has returned 6.28% pa*, similar to returns offered via unsecured P2P loans. Proplend Investors benefit from not only the security but also the 200% capital protection that Tranche A offers. We encourage investors looking for attractive rates on fixed income returns to investigate this asset class. It is rapidly growing and becoming recognised as a mainstream investment sector with a new Innovative Finance ISA being launched in April 2016. We encourage you to learn more, but caution you to perform research deeper than just the headline returns. *after fees but before bad debt & taxes. Proplend Ltd is authorised and regulated by the Financial Conduct Authority, and entered on the Financial Services Register under firm registration number 662661 Proplend Ltd is not covered by the Financial Services Compensation Scheme. Capital at Risk. 15
Wealth & Finance International | January 2016
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Invescap specialises in the design, engineering and distribution of structured investment products for qualified investors worldwide. We invited the firm’s CEO Marc-André Pepin to speak to us about his unique company and the services it provides.
Invescap is a key player in the financial industry and is renowned for designing, engineering and distributing investment products not otherwise available in the local market of its institutional clients.
This style of working is innovative within our industry and draws clients to our firm. Another distinctive feature is that we focus primarily on one segment of the market, which is the derivatives and structured products world. This is a field which offers, when worked out properly, a wide array of solutions to investors which are not answered by conventional investment vehicles, such as investments in bonds or equities either directly or via funds or many hedge funds strategies, for example.
The quality of our work has led us to work with a wide variety of clients, including banks, pension funds, insurance companies, third party managers, foundations and family offices. These clients come to us in order to get structured products or financial products which add significant value to their portfolios, and which have strong capital preservation features.
Moving forward there are a number of exciting changes happening within our company. Recently many of our clients have expressed a desire for Invescap to be involved in fund management, with underlying investments made of the products we created for many years now.
In order to achieve this, we always begin the product creation process by identifying areas in the market where risks are low and which have an appealing yield value or capital gain value, considering the needs of our clients at all times.
Therefore, we are currently putting together all the required infrastructure and processes in order to be able to offer best in class services which provide a high degree of diversification and value added by also displaying very convincing capital preservation capacity. We have three actual fund strategies which are to be launched in the coming months. One of them is a pure capital preservation fund that gives a significant positive participation to equities, the second fund strategy is a yield investment strategy which has a strong capital preservation feature and the third strategy is aiming at providing positive yield based on shortterm maturity sovereign risks of investment grade quality.
Risk is a key element to our work, as we always strive to ensure our investment products do not subject clients to unnecessary levels of volatility. We have sophisticated analysts with long market experience, as well as valuations models, both of which provide our investors with a high level of confidence that the markets they are about to invest in are manageable and that our products offer a strong upside potential. This strategy means that we need to have a high level of understanding with regards to our clients’ needs, and as such we take investor relations very seriously. We always try to understand the challenges faced by our clientele and we do not hesitate to involve experts. We need to understand the client’s requirements quickly and provide them with a solution within a short time span.
We have also noticed recently that we are moving into an investment environment which is increasingly uncertain, where markets moves are increasingly faster and sudden. Such an environment is very unsettling to most investors however sophisticated they may be, and many investors are increasingly searching for investment solutions where all risk and return characteristics of investments are known upfront and which also a capital preservation character.
Investors expect, rightfully, a high value added solution, but also a quick delivery, both of which we always aim to provide. Therefore when taking on a new client, the first thing we assess is whether we have a good chance of being able to serve them well. This is of particular relevance because in our business line, we only earn our fees if the client makes the investment at the very end of the process.
In other words, after years of strong equity markets, a change of regime will eventually occur, and when it does, it is likely to be rapid, sudden, unpredictable and unexpected, as it always is. 2016 may be such a year and only the most robust investment and well oriented strategies will strive. But then, the rewards may well be memorable.
In cases where the client decides not to invest in the proposed product, Invescap ends up with all associated expenses without any income. Therefore, we need to select serious clients and be sure that we have a robust and high value added solution for them. Despite this risk we enjoy this way of working because it drives us to make the extra effort and go the extra mile in order to make our work pay dividends.
Name: Marc-André Pepin MBA, CFA, CAIA, ING, ESQ. CEO - INVESCAP Email: mp@invescap.ch Web Address: www.invescap.ch Address: Grand-Rue 24, CH-1204 Geneva, Switzerland Telephone: +41-79-844-3954
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Wealth & Finance International | January 2016
Jon Macintosh one of the co-founders of Saltus
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Real Return Investment Manager of the Year 2016 - UK Saltus is an independently owned investment management and financial planning company. We invited the firm to provide us with an overview of their approach to investment management.
• Our investment process
Săl´tus (sal-) n. (L) a leap, step, jump - In 2004 Simon Armstrong and Jon Macintosh took a leap – to set up their own investment management company and to rethink some of the norms of the time resulting in these principles: • To bring investment management services to private clients that were then only available to very wealthy families and institutions • To work within pre-determined risk limits so that more clients’ money can be returned over time than they originally invested, whatever the market conditions • To invest globally, across many assets classes, unconstrained by industry benchmarks. And as importantly, to choose not to invest in an asset class or investment strategy, if analysis demonstrates there is no merit • To search the world to find whom they believe to be the best investment specialists to invest/work with, many of whom are not accessible to UK investors • To use plain English
Risk We measure investment risk principally (but not exclusively) by the volatility of portfolio returns over a rolling 36 month period. All our portfolios are managed with a choice of distinct “risk budgets”, set with reference to the UK equity market. For example the Saltus 33 portfolio targets to 33% of UK equity market volatility, the Saltus 50 targets 50% of UK equity market volatility and the Saltus 67 targets 67% of UK equity market volatility. Although identifying and controlling risk is at the heart of what we do, it is necessary to take some risk to capital to generate returns in excess of cash over time. It is important for clients to assess the level of risk they are comfortable with us taking, in order to achieve the returns they seek. Once this level of risk has been identified and agreed we will construct and manage an investment portfolio in accordance with this level of risk. We invest in broad variety of asset classes to generate returns.
Today, Saltus is an independently owned investment management company, currently managing assets of over £550m. Our clients are private clients and family groups investing their pensions, trusts, investments and NISAs. Our clients come to us direct, typically through referrals from other clients or are introduced to us through financial advisers, solicitors, accountants and trustees.
Asset Allocation At Saltus we do not believe we should be limited to investing solely in traditional markets such as equities and bonds which can result in volatile returns and loss of capital over prolonged periods. The experience we have within Saltus allows us to construct and manage an investment portfolio for you, based on your risk profile and your investment goals across the whole spectrum of asset classes as shown above.
We have a team of 30 people based in our offices in London, Manchester and Chichester. Our investment objective is to preserve and grow wealth for our clients over time, irrespective of investing conditions. We do this through risk based, multi-asset class investing which is described in our investment approach below.
Portfolio construction Once the Investment Committee has decided the asset allocation we select who we believe are the best managers in each asset class, as identified by our research process. This process uses both quantitative and qualitative analysis in order to identify real ‘skill’. We are able to access exceptional managers across the globe, which are frequently unavailable to retail investors, due to our personal contacts and experience. If we cannot identify exceptional managers we will use passive funds (sometimes known as index-trackers).
All portfolios are managed by the investment team. • Our investment approach As risk based, multi-asset investment managers we believe: • Investing should be unconstrained with no built-in bias to any asset class. We do not copy or track a fixed benchmark and we are free to choose any investments • The best talent is not all in one company, so we source and invest with specialists who are ‘best in class’. • Controlling risk is at the heart of generating consistent returns. We use explicit rather than subjective measures of risk in portfolios.
We use several Saltus managed funds, as “building blocks” to construct portfolios which consist of the underlying investments which we have selected as described above. The reason we do it this way - rather than owning the underlying investments directly in clients’ names - is because it is more tax-efficient and it avoids the need for unnecessary dealing charges. It also allows us access to institutional funds in certain cases which we otherwise cannot invest in.
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Wealth & Finance International | January 2016
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Hedge Fund Manager of the Year - Italy Finlabo Investments Sicav is a Luxembourg UCITS IV collective investment scheme, offering a set of alpha generation-focused alternative investment strategies. The flagship fund of Finlabo, the Finlabo Dynamic Equity, has been one of the best performing funds in the Long/Short Equity category. We spoke to Alessandro Guzzini, CEO of Finlabo, to find out why they are a unique player in the hedge fund industry.
Having this in mind, we keep an optimistic vision of our business future. An increasing part of our current assets under management now corresponds to international investors and consequently, we are planning to continue to expand our international presence through distribution partners in the most important European financial centres. Our recognition in the industry has increased significantly thanks to our performance, so we want to continue to walk through this path by keeping our alpha-generation commitment.
The crucial factors that differentiate us from our peers are experience, performance and methods. In terms of experience, Finlabo was one of the first firms in Europe to launch a long/ short equity strategy in a UCIT format in 2006 and therefore the track-record of our fund is longer than most of our competitors. Moreover, our investment team, composed of myself, Anselmo Pallotta and Maurizio Scataglini, has more than 50 years of cumulative experience on investments management. From a performance point of view, our results have been outstanding. Our flagship fund, the Finlabo Dynamic Equity, has systematically outperformed equity markets and hedge fund indexes with an approximate return of 7% per year and moderate volatility levels of about 8%. The fund invests in a selected portfolio of European equities while hedging dynamically market risks by selling short benchmark index futures.
Company: Finlabo Sicav Contact Name: Paolo Lo Grillo (Finlabo SICAV), Alessandro Guzzini (Finlabo SIM) Email: info@finlabo.com Web Address: www.finlabosicav.com, www.finlabo.com Address Finlabo Sicav: 42, Rue de la VallĂŠe, L-2661 Luxembourg R.C.S. Luxembourg: B 110 332 Telephone: +352 27 726 100 Addess Finlabo SIM: Corso Persiani, 45. 62019. Recanati. (MC). Italy. Telephone: +39 071 7575053
Our investment strategy relies on the quantitative models and software we have developed in-house through advance research competences. Our stock-picking model evaluates about 2.000 stocks daily based on fundamental and technical variables such as valuation multiples, earning momentum, price momentum, etc. At the same time, our trend following model assists the dynamic hedge decisions within a strong risk-management framework.
Finlabo Dynamic Equity vs. Market Benchmark (Eurostoxx50)
In the last years, high volatility in equity markets and unstable macroeconomic conditions have represented an important challenge for our industry. However, our non-discretional quantitative approach has proofed to be able to generate interesting returns in despite of market conditions. In this sense, we have been responsive to market circumstances and we have kept our alpha generation targets. *Retail Class Data
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2015’s Leading Fraud Investigators Kroll is the leading global provider of risk solutions. For more than 40 years, Kroll has helped clients make confident risk management decisions about people, assets, operations, and security through a wide range of investigations, cyber security, due diligence and compliance, physical and operational security, and data and information management services. Headquartered in New York with more than 50 offices across nearly 30 countries, Kroll has a multidisciplinary team of over 2,000 employees and serves a global clientele of law firms, financial institutions, corporations, non-profit institutions, government agencies, and individuals.
Violet Ho is a Senior Managing Director of the Greater China Investigations & Disputes practice of Kroll, a leading global investigations and risk advisory firm. With over 18 years of professional experience in investigations, and an in-depth understanding of China’s business and legal environment, Violet has successfully advised on numerous highly complex investigative projects in China and beyond.
various entities and individuals, thus allowing the client to claim assets that have been deliberately transferred to these alter egos. Even in the absence of direct access to books and records or discovery tools, Violet and her team are highly effective in uncovering tangible leads of asset location, tracing money flow and validating ownership links by utilizing diversified skillsets such as discreet intelligence gathering, field investigations, forensic accounting, data analytics and digital forensics while complying with relevant laws and regulations in each jurisdiction where investigations are being conducted.
Violet has led a wide range of risk consulting projects across Greater China, ranging from fraud prevention to fraud investigation, litigation support and asset recovery. She also manages investigative due diligence inquiries and assignments regarding business controls, intellectual property protection, employee risks, corporate security, and crisis management.
Name: Violet Ho Position: Senior Managing Director Address: 1701-02 Central Plaza, 18 Harbour Road Wanchai, Hong Kong Tel: +852 2884.7788 Email: vho@kroll.com Website: www.kroll.com
She is also a Certified Fraud Examiner (CFE) and member of the Association of Certified Fraud Examiners (ACFE), the world’s leading anti-fraud educator and association for anti-fraud professionals. She has published a number of articles on the topic of managing business risks in China and is frequently quoted by international and Chinese media on related issues. Through her role Violet has led a multijurisdictional asset tracing investigation with investigative activities taking place in regions such as North America, Japan, Southeast Asia and Greater China over a period of eight years to support the enforcement efforts of a civil judgment of more than US$2 billion. The evidence generated by Violet and her team helped the client to eventually recover a significant portion of the judgment. In another recent assignment, Violet worked under the instruction of the external counsel of a US healthcare company in its dispute with a Chinese company and its key principals. She and her team were able to pierce the corporate veil and prove the alter ego relationships amongst
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Hedge Fund Manager of the Year 2015 - Germany The TrendConcept Group offers both private clients and institutional clients a wide range of investment fund products and investment management services. We invited Caspar von Zitzewitz to talk us through the group and its investment approach.
TrendConcept as an asset management firm, which was established in 1994, while TrendConsult is a software and advisory firm established in 1989. The five founders and managing directors of the firm have worked together as a team from the outset.
There are a number of challenges inherent in this approach which lie in the trendless periods. In order to adapt around these we apply filter rules in order to minimise transactions.
Prior to founding TrendConcept together with my four partners Holger Fuchs, Joachim Hegny, Jürgen Reitz, and Werner von Buchholtz, I trained in ‘Global Financial Markets’ at JP Morgan in New York and worked on the institutional advisory side, serving central banks and pension funds.
When choosing clients we always look for those who have a sound understanding and feeling for mathematics. We work primarily with institutional clients such as pension funds, family offices, church institutions, banks, insurances, and asset managers. We report regularly to clients both in writing and through conference calls. Additionally, we install our software on their equipment to provide full transparency.
When the five of us met by chance in 1989, three of us had been working on the development of the present our robust systematic approach first at university and later at Commerzbank, while the other two had been working on the client side. We immediately recognised that this would be an excellent fit for a joint firm, and our success has proved this to be correct.
Our approach is similar when taking on new staff, and we also look for people to work with us who have a sound understanding and feeling for mathematics. We find it difficult to work with typical market participants who use economic forecasts. Processes and communication within the company are highly organised and are imbedding into the culture of our firm.
Together I and the other founders manage mutual funds for private clients, and segregated funds for pension funds, family offices, insurances, church institutions and banks. We use a systematic tactical asset management approach. Our overall aim is to make money for clients with controlled risk.
Alongside this the culture within our firm is also strongly influenced by our clear philosophy of how to manage money so it grows in good times yet is protected during more challenging periods. The ‘star’ in money management is not a person, but the clearly defined discipline of how to do it. In this way, emotion can be eliminated from investment decisions. This is a key element in our philosophy of avoiding major mistakes in the asset management process.
To achieve this we use an investment approach which is strictly systematic. Preserving capital is the top priority, with opportunities to make money with controlled risk incorporated to insure a return on investment for our clients. Our approach has been developed over the past 30 years, and its basis is very robust and has never changed. It centres on our philosophy of ‘letting profits run but cutting losses’, which may seem obvious but is not easy to implement in a disciplined manner. The main focus of our work to develop the methodology further has always been on getting better during trendless phases.
With regards to the future, we have a strong belief that given the world’s huge debts and other economic imbalances, our systematic, tactical asset management style is one of the few that will be able to avoid major mistakes in the future. Against the backdrop of low or even negative interest rates and the imbalances mentioned above, the statistical probability of making major mistakes will be even higher in the next 10 or 20 years than it has ever been in the past.
With this in mind, we believe the market and market movements are the best future indicator. As such we use mathematical and statistical indicators to determine trend directions early on. We then invest solely in top-quality, liquid equity, bond and currency markets in which there is a liquid future for taking positions-or hedging.
We therefore expect to see substantial growth in the management of funds for top-class asset managers applying a tactical asset management approach. Company: TrendConcept Vermögensverwaltung GmbH Name: Caspar von Zitzewitz Email: czitzewitz@trendconcept.com Web Address: trendconcept.com Address: Otto-von-Guericke-Ring 13-15, D-65205 Wiesbaden Telephone: +49-69-97142222
Our investments are made in top-quality liquid equity, bond, and currency markets with liquid futures contracts. We exploit major trends both on the upside and the downside with ‘long-‘ or ‘short-‘positions.
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Asse of
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et Manager f the Month
Auscap is a value-based long short manager, looking to invest in quality companies that generate substantial cash flows and have a sustainable comparative advantage when they are trading at attractive prices. We invited Tim Carleton from the firm to provide us with a fascinating insight into its investment strategy.
Auscap was founded by Matthew Parker and I in 2012. We had previously worked together managing proprietary capital for Goldman Sachs. The firm is focused on capital preservation before return generation. This approach is borne from both our backgrounds, experience and natural biases as portfolio managers. Auscap’s overall investment objective is to generate strong absolute returns with low correlation to equity markets. The firm manages one fund – the Auscap Long Short Australian Equities Fund. The fund uses a value based approach, searching for companies that exhibit certain characteristics, including strong Return On Invested Capital (ROIC), Return on Assets (ROA) and cash flows, a sensibly geared balance sheet and businesses with a competitive advantage. We invest in these businesses when they occasionally trade at what we believe to be attractive prices. Typically we do not invest in early stage emerging industries, or in fields where we have a clear knowledge and/ or information disadvantage compared to other industry experts or market participants. We focus on investing in businesses that we think we understand and have typically been around for some time. While not focused on short term market moves, we do try to keep abreast of news materially affecting the earnings of the stocks that we own given our analysis is quite data driven. Risk management is a critical part of the investment process. To some extent risk is controlled by retesting the hypotheses around poorly performing positions. We spend considerable time assessing positions that aren’t acting in accordance with our expectations. In this way we manage risk by managing where we might be wrong or where the market is telling us that we are incorrect in our analysis.
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Ultimately the fund will experience volatility given it is exposed to equity prices which can fluctuate significantly. However we would be disappointed if the fund did not have significantly less downside volatility than the market over time, both because of our value bias on the long investments and our ability to take short positions to protect the portfolio in the event of broad negative moves in the stock market. Ultimately a fund manager is judged by its performance. Since the fund’s inception in December 2012 to the end of December 2015, the fund has achieved strong returns for its investors, annualizing 35.94% per annum, with annualized volatility of 11.1%, a Sharpe ratio of 2.57 and a Sortino ratio of 5.36. While analysis of historical returns is important, we also focus on trying to find like-minded investors. We think of our clients as partners, and therefore we are keen to find investors who share a value based investment philosophy, so that we can build fruitful long term relationships. We try to treat our clients in the manner that we would want to be treated were the roles reversed. In order to achieve this we always try to clearly communicate our investment approach with all current and prospective investors. We do this through our monthly newsletter, which provides us with an opportunity to both report the performance of the fund and discuss a subject that we have found interesting in our research and analysis of the market. Through the newsletter and other investor communications we hope to attract the right long term partners. We also have a high focus on finding the right people to work in the business. Culture is critical within an organisation. When hiring staff we take the view that the type of person is more important than the resume. We look for people who share the firm’s values: personal and professional integrity; humility; an approach of treating everyone they meet with the same positive attitude and engagement; and a drive to maintain high standards of performance. To some extent building culture is about hiring the right people and leading by example. If you create the right role for the individual, give them appropriate responsibility and yourself act in accordance with the firm’s stated standards, these things foster the right behaviours. The organisation, employees, service providers and clients all benefit from a strong positive culture. Looking to the future, our vision is to create a leading funds management business that has a reputation for consistent outperformance, strong risk management, a positive culture and integrity. Ultimately Auscap’s objective is to generate long term wealth for our investors. In 2016 we will strive to continue to expand our investor base with the right people, grow the firm and deliver for our investors. Company: Auscap Asset Management Limited Name: Tim Carleton Email: info@auscapam.com Web Address: www.auscapam.com Address: Level 24, 9 Castlereagh St, Sydney, NSW 2000 Telephone: +61 2 9238 8298
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2015’s Leading Fraud Investigators Established in 2013, White Tale is a GCC based highly specialized consulting firm focused on fraud examination and financial forensics. We invited Mishaal AbdulMohsen Al-Sulaiman to provide us with a unique insight into the firm and the role he plays within it.
White Tale Consulting Services operates mainly out of Dubai, and has partner offices in Jeddah, London, Zurich, and San Francisco. Through our partner network, we assist local and global organisations find ways to manage financial risks, investigate financial misconducts, and measure the resulting implications of a variety of financial disputes.
To further enhance my knowledge and experience in the field, I obtained the Certified Fraud Examiner designation, and the UK Accredited Counter Fraud Specialist award in association with the City of London Police Economic Crime Directorate. I am also currently a Master of Public Administration candidate for the Inspector General Program at John Jay College of Criminal Justice in NY.
To achieve this we provide customised services with the required discretion and sensitivity. From monitoring and investigating unusual financial activity, to discovering electronic evidence and reviewing financial reports, and providing expert witness testimony as necessary to explain our findings.
The majority of our clients are family owned business with sensitive issues, and as such are in need of discretion and reliability. White Tale takes pride in its ability to resolve issues with the utmost professionalism, discretion, and competence. Whilst the Big Four also possess these qualities, the size of these organizations and rules and regulations applied to them, such as conflicts of interest, and audit versus advisory clashes, makes it more difficult for clients with sensitive issues to get them resolved swiftly and efficiently. Therefore, we are viewed as a boutique firm specializing in the field that can move very quickly to meet the needs of the client.
Whether facing fraud, theft, irregular transactions, corruption, money laundering, whistle-blower allegations, government enquiries, breach of contract claims or other major litigation, White Tale provides a full spectrum of financial services to address these problems. Over the past few years, the Saudi Government has taken many major steps towards becoming more proactive towards fighting fraud, waste, abuse, and corruption. Over the past year alone, many of those steps have materialized and proven to be successful. I believe transparency and accountability are key to being proactive, and the Saudi Government is pushing undeterred forward on those fronts.
We face a number of challenges as a business in the GCC market, which mainly revolve around the understanding of what we do and why we do it. Unfortunately, clients in the GCC still turn to auditors and lawyers to resolve there fraud related issues. In general, not all auditors are fraud experts, and not all lawyers are financial forensic investigators. They are both part of the solution but most of them do not possess the specific training and experience to do it on their own.
This is particularly vital as the financial impact of business conflict is critical in today’s world economy. As such we are adept at evaluating evidence and accurately calculating damages or lost profits due to contract disputes, business interruption, insolvency and other transactions.
Fraud investigators are known to be trained as part accountant, part lawyer, part investigator, and part criminologist. Together with the support of the clients’ external auditor and legal counsel, fraud investigators are the ones to turn to regarding sensitive fraud related issues.
I personally started my journey into fraud investigations with a BS in Accounting from Notre Dame de Namur University in the US. I then returned to Saudi Arabia to join a major audit firm, followed by two multinational corporate banks, and launched a 17-year professional career in audit, financial analysis, and credit risk analysis. I joined the advisory boards of several private small to mid-sized investment companies, where my role focused on financial analysis, due diligence, and compliance oversight.
Looking to the future, I predict that White Tale will be working more with clients to implement proactive anti-fraud policies and procedures. Companies are becoming more and more aware of the need to deter and prevent fraud rather than dealing with the mess it leaves behind. With regards to my personal career, I see myself bringing my gained knowledge and experience to companies in the region through independent board and committee memberships. Helping those companies to set the tone at the top, and support compliance and their continuity, are all areas I specialise in and I intend to use these skills moving forward.
In 2011, I worked with my father’s arbitration and dispute resolution office as the Lead Financial Dispute Consultant. I quickly realized the need for standalone fraud and forensic services in the region. My father retired in 2013, and with his blessings, we established White Tale Consulting Services to meet that specific need in the market.
Company: White Tale Consulting Services DWC-LLC Name: Mishaal AbdulMohsen Al-Sulaiman, CFE, ACFS Email: cs@whitetale-ffds.com Web Address: www.whitetale-ffds.com
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Best Corporate Bank & Recognised Leader in Institutional Banking – Luxembourg ING Group is a global financial institution that serves more than 33 million private, corporate and institutional clients in more than 40 countries in Europe, North America, Latin America, Asia and Australia. The Luxembourg office works in the areas of retail banking, private banking, commercial and institutional banking and financial markets. We got in touch with Damien Degros, Head of Commercial Banking at ING Luxembourg, to find out how they have doubled their results since he took over the reins of the department eight years ago.
ING Luxembourg has three core businesses which include retail banking and its branch network, private banking and commercial banking. Our clients are mainly composed of legal persons, companies, Luxembourg and international corporate groups, public and semi-public institutions and financial institutions.
services, we are one of the leading firms in these sectors. Therefore, we have different positions within our markets, and this allows us to increase our opportunities for development and growth while building on our strong segments. As a company working in a highly competitive industry, we are always looking to innovate and develop our services. We have been part of an advisory committee for five years, where we meet five times a year and this gives us the opportunity to present different projects and ideas to other professionals and peers. We find these meetings particularly informative as the members of the committee express their opinions and also share their strategy too.
As for our commercial banking department, our services are divided into four different areas. First, we work on financial investments or acquisitions in Luxembourg and beyond. We also look at payment transactions and the management of flows and deposits in terms of payment and cash management, which is perhaps the most important activity of ING Luxembourg. We also look at custodian types of securities products, which is also an important part of our job as Luxembourg is known globally for fund services. In this particular field, we specialise in hedge funds where we offer custodian and securities services.
Looking towards the future, we are looking to expand more on the customer experience aspect of our business, focusing particularly on the digital side of our services and reporting. In this respect, we want to provide a service that is more informative to our clients. Although we invest a lot in the digital side of our business, we are at the same time convinced that the banking business will still hugely rely on personal relationships.
Since our inception 8 years ago, we have more than doubled our results, in terms of our assets and all of our activities. As you can imagine, we are very pleased with these results, and are in line to our long term objectives. Furthermore, it is particularly rewarding that we are part of growing business despite the difficult number of years that the private banking sector has experienced. We believe that fundamental to our growth has been our diversification strategy. Our ambition is not to be the biggest, but rather to be developing segments to consolidate ING Luxembourg activities.
Additionally, the real estate market is equally important for us, especially since it will continue to grow in the next two to three years. We already have a great presence and we will continue to support developers, investors, building companies on their property projects in Luxembourg.
Nonetheless, we are one of the biggest in the SME market, where we have been ranked fourth. Furthermore, we aim to strengthen our presence there through a proactive approach to business. As with many of our services, we have become very competitive and strongly believe that we still have real scope for growth in the years ahead.
With all of these ambitions combined, we remain very optimistic about the future. As mentioned earlier, we have more than doubled our results since our inception and we want to maintain on this course in the next eight years. We are confident that we can achieve this thanks to our international reputation, strong banking brand and our position as an employer of choice in our sector.
As for the international corporate sector, we are strongly established locally and with the international network of ING, we can quickly and easily capture even more clients to do business with. With regards to the funds industry, private equity as well as corporate and insurance
Name: Damien Degros Web: www.ing.lu/business Tel: 00 352 44 99 2882
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Back to the Past: Why Commission Must Not Return to the Advice Industry The acting head of the Financial Conduct Authority sent a shockwave through the industry this month after revealing commission payments outlawed by the Retail Distribution Review (RDR) may be allowed to return in some guise as part of the review into savings.
Tracey McDermott, who took over the post last year after the sudden exit of Martin Wheatley, caused bemusement among many, particularly within the adviser community, after stating there might be “some element of commission� allowed as part of the provision of advice to consumers during a radio interview. While the FCA has subsequently denied the comments and McDermott herself rowed back from them before parliament, it nonetheless reveals the pressure being put on the regulator behind the scenes from within financial services. But why? Quite simply because the long-standing major players in the industry insurance companies, banks and fund management houses in the main - have grown their businesses very successfully through years of selling products to consumers via intermediaries, rewarding those that sold them through the use of commissions. However, since the RDR these products - which were never designed with structures that were meant to be transparent - are increasingly seen as expensive and complex, providing poor outcomes for customers. If this wasn’t the case then we would not have had the aforementioned review.
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These products enabled companies to become bloated behemoths rich on past successes, and happy with the status quo. In other words, these businesses have simply no incentive to innovate and create products that are low-cost and transparent, even though that is what they should be doing if they were really serious about meeting the demands of the modern investor in the modern world. You can see why the evolving market is unpalatable to them, of course. For an industry built on high fees and next to no accountability, the thought of having to modernise and yet maintain their current profit margins would be a challenge at any time. But when you consider the risk of cannibalisation of the legacy book, caused by the impending Sunset Clause, then it becomes a real problem, and is no doubt resulting in increasing pressure from shareholders. The apparent investment in technology to improve the customer experience is laudable but actually a far better investment would be to reduce the cost of products, making them better value for money for customers. Instead, we appear to be witnessing a defensive move to retain what is already there, with firms simply adding digital outlets while maintaining profits through efficiencies in the back-office. Obviously none of which are passed back to the customer. We were all shown just how damaging the end of this gravy train is to these organisations in 2014. A report by the Telegraph that there would be a probe into closed life books (which still generate huge chunks of revenue for life companies) sparked a sharp sell-off for providers, with double-digit losses for some of the biggest companies in the UK. Rather than facing up to this, CEOs at these organisations continue to welcome calls for transparency in public but seemingly make little effort to actually change their business models. Of course what they should be doing is putting their apparent capital advantage to good use by not only investing in quality, low-cost products, but also in distribution over the long-term. They need to re-think distribution. They need to re-think product. And they need to put consumers at the heart of what they do, rather than treating them as an after-thought. If they can’t, then the businesses that are at the cutting edge of financial services will win out. In order to ensure this happens, the regulator must now play its part and stay the course rather than allow the ground-breaking changes it made in 2012 to be watered down. The outcome of the fund management review will be interesting. This is an industry that is ripe for disruption given its comically anti-competitive behaviours. Profit margins of between 35-40%, in an industry widely accepted as being beyond saturated, suggest no competitive pressures on pricing. In the real world those margins are generally enjoyed by businesses that either have a unique offering or are one of only a few suppliers, not several hundred. So let us hope that when the joint Treasury FCA advice review publishes its proposals ahead of the Budget the FCA sticks to its denial of this whole debacle. Because a return of commission payments would not only be a staggering U-turn, but also a huge mistake which could hold the UK’s financial industry back for decades. Anthony Morrow is chief executive and founder of eVestor, a new online investment advice business, launching in 2016.
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Region with the Largest Upcoming Growth in Europe!
Zagreb, Croatia
The stock markets in the Western Balkans region in general still remain subdued and are lagging behind most of the world with stock indices still at only around 10-15% of their 2007 value! On the other side, large global stock markets have been advancing (though some with minor intermediate corrections) since March 2009, i.e. for more than 6 years already and have risen heavily since (comparison in the attached file)! We thus want stress that “success stories� of large stock exchanges already took place, while the strong growth in the former Yugoslavia region is just ahead. If you currently invest or intend to invest in stock shares of major global markets, it is perhaps reasonable to ask why you are doing it (only) now, when they are on record heights for some time now. Moreover, would it be better to invest in the region where growth is just outside the door?
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We firmly believe that very strong growth of stock prices is coming to Western Balkan region. Until recently, the general belief in the region was quite the opposite. Now the “shifts in people’s minds” have finally started. If anyone still doubts the fact that we are heading for a massive growth of Balkan stock exchanges, let us remind them of ubiquitous cries about the end of the world and the breakdown of the financial system six years ago. Quite a few stocks from the region of former Yugoslavia are currently quoted at prices similar or even lower (!) than at the beginning of privatisation. Once again, we now have a total sale at starting or even lower prices, and once again, only a small handful is investing. And when we will again achieve great earnings, many people will say that they missed their opportunity. But, at that point, it will be too late! One of the key factors of expected growth in the investment region of BEF fund is the global framework. Large global stock exchanges have been growing since March 2009 with intermediate corrections, despite all the panic and pessimism, i.e. for seventh year in a row now. And for some time now, stocks values have been showing significant growth on increasing number of smaller European stock exchanges. E.g. Baltic stock exchanges have grown by 120% from the bottom, while the Romanian grew by 285%! Even though regional investors can list differences between these in Balkan stock exchanges, from a global perspective, they are very similar (based on numerous personal discussions, we can reliably state that most financiers from e.g. London, Geneva or New York include all these under “Eastern Europe”). Due to exceptional and long growth of large markets, investors look for other investment opportunities, following the principle “what hasn’t yet increased in price” or “what is still cheap”. BEF Fund investment region is one of the very few in world that still fulfils both criteria. Even though these markets suffered the greatest declines in the world since 2007, in all this time they still have not experienced a major quotation recovery. There is thus increasing number of global stock indices that have increased above their former maximums, while some stock indices of former Yugoslavia countries are still at about 15% of their past maximums. Lately, there have been some fears due to reduced monetary incentives in the US (the end of so-called tapering). We think that these fears are unnecessary in BEF Fund investment region for multiple reasons: (1) Despite the end of the quantitative easing in the US, from the historical perspective, current levels of interest rates are still at record low levels. (2) Most developed markets react to monetary policy changes on average in 3 to 6 months, whereas smaller markets react much, much later. (3) Mentioned reactions on smaller so-called frontier markets, like BEF Fund investment region is, may be significantly delayed. In the region of former Yugoslavia, the effect of low interest rate or the flood of global liquidity has only been slightly felt so far. The last larger wave of stock value growth in the region also began significantly after large central banks had been enforcing a stricter monetary policy and the interest rates were significantly higher than now. (4) Expansionist monetary policy was launched just recently in Europe and other economic superpowers. Until now among larger central banks only US, Japanese, British and the Swiss Central Banks printed money with no restraint. Due to German influence, the European Central Bank long resisted this solution, but considering the economic circumstances ECB has started using this measure. Japan also implemented this measure last year, and after many years of deflation crisis, positive effects quickly became evident in the economy. Financial markets experienced even greater positive effects – funds investing in Japanese stocks were one of the most profitable in 2013 and 2014 and still have good returns this year.
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The Japanese stock market, after 22 years of crisis, represents the best evidence of monetary policy effects. Additionally, they adopted an even more important decision that will have a strong positive effect not only on the Tokyo but also on other global stock exchanges. The Japanese public sector pension fund, the largest pension fund in the world in regards to its assets, will purchase US 150 billion of Japanese and USD 195 billion of foreign stock.
framework for businesses and investments. All this will contribute to significantly higher values of companies and higher market quotations of securities. Considering the increasingly overt competition between the west and Russia, we can expect a significant speed up of EU accession process of southern Balkan states. Just remember how the EU quickened the accession of Romania and Bulgaria a few years ago, for similar reasons and with significantly more lenient criteria than for other new member states.
Monetary incentives in Europe were the main reason for the aforementioned growth of larger neighbouring stock exchanges, and will soon have a positive effect also on smaller Balkan stock exchanges, where growth will be even greater due to lower liquidity! It is very important that we can now finally expect huge fiscal incentives, both on global and European level. The latter will have an especially positive effect on Balkan countries due to their exceptionally high economic dependency on the EU (exports of products and services, credits, remittances from immigrants, investments, etc.).
For some time already, we have been forecasting beginning of sales of companies in Slovenia and the region. In Slovenia, it has been initiated very quickly, since the Slovenian government, as well as banks full of forfeited stocks, simply need the money. Sales are thus inevitable. The situation in other countries of the former Yugoslavia is similar. There were indeed not as many failed MBO loans in other countries of former Yugoslavia during the last stock market boom as in Slovenia; however these governments are in even greater need for additional resources than the Slovenian government. We are convinced that privatisation will continue. International Monetary Fund that helps most countries with loans, now demands reforms to take place and debts to be repaid (privatisation of government assets). The European Bank for Reconstruction and Development (EBRD), World Bank (WB) and the European Investment Bank (EIB) will support the economic recovery in the region, which will only increase the influence of international financial institutions compared to regional governments. We should not forget that a bit more than a decade ago, in 2001, takeover of pharmaceutical company Lek (part of Sandoz/Novartis group now) from Slovenia caused a high growth on Ljubljana Stock Exchange. Growth has also followed on other stock exchanges in the region, even though the world was facing a sever crisis (dot.com bubble). A similar scenario occurred after the acquisition of the Croatian company Pliva in 2006. We are certain that privatisation process will continue. has also started in other countries of former Yugoslavia. As the number of acquisitions on a global level is at its highest since the crisis year of 2007 – due to cheap financing and large cash amount on bank accounts of multinational companies – it is reasonable to expect increasing numbers of acquisitions of companies from Western Balkans
Recovery of Slovenian banks is also very important for future growth, since it significantly reduced the uncertainty and strengthened the financial stability of the Slovenian bank sector. This is reflected in decreasing deposit interest rates in banks. Considering the extraordinary effect of interest rate level and liquidity, explained in our previous newsletters, this has had a high positive effect on the Slovenian capital market, and will soon have an effect on all stock exchanges in the region. With low returns on savings in banks, increasing amount of money will flow into stock markets, either directly or through investment funds. The value of Slovenian stock has already increased significantly, and investors will therefore again look for opportunities elsewhere in the region, following the principle “what hasn’t yet increased in value?” As already explained, increases in southern countries will be much higher than in Slovenia and Croatia. Croatia already has highest valued stocks in the region for some years now due to the Croatian pension system, which, as the only one from the territory of the former Yugoslavia, provides an inflow of small but constant part of pension savings to the Zagreb Stock Exchange. At the same this provides an important longterm capital support to Croatian companies, that are also for this reason acquiring companies in Slovenia and elsewhere in the region.
Considering all above stated we are convinced there is start of high growth of Balkan stock markets ahead.
Countries south of Croatia are becoming extremely interesting investment locations for foreign investors. Labour costs and taxes are very favourable, and countries are offering high benefits and incentives to employers. We must also not forget the geographic vicinity of European and Near East markets, as well as markets of the former Soviet Union. In Bosnia and Herzegovina, Serbia and Macedonia, production costs are already lower than in, for example, China (where salaries and other expenses increase with each year). If we consider lower transportation costs, increased adaptability (smaller production batches and quicker delivery) and higher quality of production, the advantages of the Balkans become even more obvious. It is therefore not surprising that, all countries of the former Yugoslavia are no longer in recession and note positive economic growth.
Low regional stock indices and consequently undervaluation of stocks in the region is obvious and huge (comparison in the attached file)! When these indices increase from 15% to half of their former values, the growth will be 233%! And when they return to their peak values from 2007 that would represent 566% growth! According to our experience, it will soon be too late to catch this train. Due to low liquidity, markets will grow by more than 100% before most investors will take note, and probably even more before they can react. The longer the duration of market stagnation, the stronger the growth when it occurs. History of stock exchanges clearly shows numerous examples – the longer the market is depressed, the stronger its growth when the tide turns.
It is essential that the whole BEF fund investment region draw nearer to full EU membership. European integration will bring abundant European funds and foreign capital. This will stimulate not only numerous investments into infrastructure but also economic growth, mergers and acquisitions of companies, and increases of domestic and foreign investments into securities from the region. Harmonisation with the European legislation will also improve the legal certainty and institutional
Time for investing is quickly running out! When Balkan will be once again on newspapers’ headlines, it will be too late! Until then, we will already made you excellent profits! Web: www.bef-fund.com Email: INVESTMENT.MANAGER@BEF-FUND.COM
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CEO of the Month Paul Kehoe Birmingham Airport is an international transport hub in the centre of the UK, transporting around 10.2 million passengers per year. We invited CEO Paul Kehoe to provide us with an insight into this fascinating and dynamic airport.
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The airport, which is located in the constantly growing city of Birmingham, sees around 100,000 aircraft movements every year. Paul explains a little more about his role as CEO and how he ensures that each of these movements goes without incident. “My role as CEO is as chief plate spinner, keeping all of the metaphorical plates spinning, whether they be with regards to security, environment, passenger, local government, airlines and shareholders or even staff. There are many different aspects to my role, and it’s my overall job to make sure that these different sections of the airport are constantly in harmony. “No two days are ever the same, there are changes happening all the time within the airport and as such my role changes day by day. My diary is run by a very competent PA, and she feeds me with information and I work from that, managing the company through a series of meetings as the senior ambassador of the company, to get the message out to the world that Birmingham and the surrounding areas are a thriving manufacturing, banking and business region which is growing constantly, and supporting the expansion of the airport. “Therefore you could call me the principal salesman: selling not only the airport but also the region and its story.” In addition, one of Paul’s main tasks is leading his team, who are responsible for the day to day running of the airport. Paul explains his management style and how he endeavours to ensure the smooth running of the vast infrastructure over which he presides. “A large part of my role is managing the team and creating a vision for which they can aim towards, whilst recognising that I do not control all of the rules within the airport, as these are often down to policy makers and other public controlled organisations. “As such working within the airport can be challenging, but it is a challenge which I believe 90% of the staff working for us relish. As CEO I always look out for staff who will come along on the journey with me and are able to challenge management when they feel appropriate. Additionally, I like my staff to walk the walk: when they say something, they should do it. We have a programme called ‘Great People’, which allows staff to take on additional responsibilities and receive rewards, such as additional bonuses which recognise when they have undertaken tasks which are beyond their role.” At the airport there are over 8,000 staff, of which just 700 work directly for the airport. The remaining 7,300 are from other firms. Paul explains the role of airport staff and how they function to support these external firms. “Many of our staff are either in security or back office, and they act as the glue that binds the place together and the lubricant that makes it run smoothly. I find that our staff are highly motivated and ours is a very positive workspace, which ensures that our staff deliver and are able to support the outside firms working within the airport.” “In order to work with these firms we have to first persuade them to join us. To do this myself and the aviation development team visit Routes, the airport and airline convention, once a year, making a 20 minute pitch to airlines to encourage them to serve the airport. What we sell to them is not the fact that we have a runway or a control tower, because
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they already know that; what we sell is the fact that we are situated in a growing region, with a strong economy and easy accessibility to regions such as London and Manchester.”
As when this growth occurs new safety and security challenges emerge, but according to Paul this is the airport’s top priority. “These security and safety challenges mean we have to adapt constantly, putting in increased layers of security and constantly adapting to ensure that we don’t make mistakes and are vigilant at all times, as we want to make sure that passengers have the safest possible journey. We also work with government to ensure that we are always up to date with the latest security laws and regulations.
Working with so many firms and dealing with so many different rules and regulations could seem like a challenging task, but as Paul points out, the key is to make it as simple as possible. “Ultimately I always aim to make everything as simple as possible, because what we are is a transportation mode, we take passengers from one form of transportation and we put them onto another. Our aim is to do that as efficiently as possible with the least impact on our community, whilst making the most profit possible for our shareholders and asking for the least money from our investors so they get value for money.
“We were the first to improve our means of processing bags, for example, to ensure that it is as secure as possible. “Overall we have always been a very innovative firm, both in terms of security and other aspects of our work, and we aim to stay ahead of any emerging developments as much as possible.
“Keeping our message simple is key to running the business, because although the rules and regulations around running an airport can seem quiet challenging, as long as we use a simple approach we can deliver satisfaction for all our stakeholders, which is key. Whilst we aren’t always able to get it right every time we always learn from our mistakes and try and improve all the time.”
“For example, we have created a revolutionary exploratory area designed within our airport for younger passengers, which attracts younger children and has staff to look after them whilst their parents enjoy the airport. “The ultimate goal is to be at the forefront of emerging developments and always be as innovative as possible. Some ideas, such as our holographic assistants, have not worked for our passengers, but we have learned from these mistakes and moved on to try new ideas. This approach has kept our airport at the top of the Which? Airport survey, of which we usually come in the top three.”
Paul adds that the overall mission of the firm is as simple as their message. “We used to have a highly complicated mission statement, but thinking it over I realised that overall our mission is to deliver across each aspect, whether it is reducing noise, improving services or increasing profit. Most companies say they will deliver, but ultimately we ensure that we do deliver.
As an area, Paul believes that Birmingham is going through a renaissance as people realise the city’s proximity to London, which is leading to a revival in manufacturing and other industries.
“Many airports want to be the best of the best airport, however we aim just to ensure that we deliver on what we have promised, because this is the most important factor in securing long term satisfaction for all of our shareholders.”
All of this is bringing increased business to the airport. The region is at the centre of both the UK rail and motorway network, and the Government’s Midlands Powerhouse scheme will help reinvigorate the whole of the Midlands, bringing a number of exciting opportunities, including a HS2 station, as Paul highlights.
The biggest challenge in recent years, according to Paul, has been the poor performance of the UK and world economies, and it is one which airports such as his have had to work hard to overcome.
“These exciting changes will bring about an integration of road, rail and air, which we have never seen before, and which will provide numerous business opportunities for Birmingham Airport.
“The poor economic performance of many world economies has seen us going backwards between 2007 and 2010, to a point when we reached a trough in 2010. Now the challenge is to cope with the sudden influx of growth and to maintain that growth within a very uncertain future.
“The future looks positive for the airport. As long as GDP remains strong, which it seems to be, then we will see continued growth in air travel. So far we have seen 11 new airlines starting to make journeys from Birmingham in the past 12 months, and this looks set to grow in the future. There may be some challenges along the way but as long as we have the right attitude we will be perfectly positioned to take advantage of every growth opportunity that comes our way.”
“What we are seeing is significant issues with regards to rising customer service standards, where customers expect more but want to pay less. We are also seeing increasing legislation, mainly with regards to security, which can lead to increased expenditure.
Company: Birmingham Airport Name: Paul Kehoe Web: birminghamairport.co.uk Address: Birmingham, UK
“However, we are seeing a number of growth opportunities worldwide, which is phenomenal considering that many other countries are expanding into aviation development, including India, Indonesia, China and many others. These are generating passengers who want to come to the UK, offering us new opportunities for growth.”
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Best Emerging Manager 2016 - California Gratia Capital is an SEC-registered multi-strategy, value and event-oriented asset management firm based in Los Angeles, CA. Steve Pei talks us through the firm and the services it provides.
Gratia Capital’s investment approach seeks to maximize risk-adjusted returns through opportunistic investments across the capital structure in our focal sectors of Consumer, Industrials, and Real Estate.
Our investment approach tends to be value and event oriented in general. However, we believe in marrying specific expertise with flexibility. The fund is designed to be all-weather and to adapt to opportunities regardless of style (skew to value/event but not exclusively so), asset class (equity and credit), and sector (multiple sectors to invest in).
The firm’s fundamental strategy is to combine the advantages one typically gets in a sector specialist (a PM well-versed in the sector, strong context for relative value within the sector, and the ability to be forward-thinking) with the flexibility of a generalist (the two biggest drawbacks of a sector specialist are lack of relative value context and constraint of the investment mandate when opportunities arise outside the core expertise). By focusing on multiple sectors, we seek to harness the advantages of a sector specialist while retaining the opportunism of a generalist, capturing the best of both worlds.
Internally, Gratia adopts a partnership sharing model, with the explicit goal of aligning interests and cultivating a truly team-oriented philosophy in an industry which tends to skew towards individualism and fiefdoms. With this in mind, we seek top-tier talent but we also seek good firm citizens who can buy into a long-term “best for our investors, best for the firm” mentality. Compensation and promotion is intimately tied to individuals who espouse these traits.
The firm began operations in April 2012 and formally launched its commingled funds in January 2013. Typical clients that invest with our firm are endowments and foundations, family offices, consultants and fund of funds.
Looking to the future, we feel we are on a strong trajectory, and as such the goal is to maintain focus on the portfolio and gradually augment the organization. Gratia has been operating at a high level and it is important that focus be placed on gradual growth and thoughtful improvement across our processes and organizations. Therefore while we are open to creative change, we also want to acknowledge and continue what has worked well in the past.
Our flagship product is Gratia Capital Partners Master Fund Ltd. Unlike most funds of more recent vintage, Gratia has relied upon investing with a high hit rate in a moderately diversified portfolio (as opposed to making returns in just a few volatile, core positions like many funds started in recent years). As a result, while we are unlikely to be the single best performing hedge fund in any single year (because one winner or loser doesn’t really make or break our year), we have demonstrated through a large number of datapoints, that we consistently drive alpha and we have relatively low single name security risk.
Company: Gratia Capital LLC Name: Steve Pei Email: investor@gratiacapital.com Address: 2029 Century Park East, Suite 1180 Los Angeles, CA 90067 Telephone: 310-733-2500
In every individual period since inception (2012, 2013, 2014, and 2015), Gratia has driven alpha on both the long and short sides of our portfolio. In addition, the overall portfolio employs a reasonable gross (165-180%) and moderate net (20-45%) philosophy, providing strong staying power during market selloffs. Since our April 2012 inception, in aggregate during down months, the S&P has returned -34.99%. During those same periods, Gratia was only down -2.48% net in aggregate.
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2015 Leading Fraud Inv If life is a journey, David Debenham has certainly followed a strange and tortuous road to winning our exclusive “Leading Fraud Investigators Award for Canada. David began his career as a lawyer, and indeed is “Rated-Distinguished” by Martindale-Hubbell, North America’s pre-eminent lawyer peer review service. His 25 years as a trial lawyer, and his training as a management and forensic accountant, have given him a unique advantage in representing management, and their businesses, from inception to insolvency in all areas of commercial and corporate litigation involving fraud and corruption. Unique amongst Canadian lawyers, he is a certified fraud specialist, and President of the Association of Certified Forensic Investigators of Canada. He has been recognized as an expert in fraud by the Canadian Bar Association’s “The National” magazine, and such leading Canadian publications as the National Post and The Toronto Star, as well as CBC and CTV television news. He has written for LawPro, the lawyers’ malpractice insurer in Ontario, and led a training session for investigators for the Law Society of Upper Canada.
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vestigator
David’s journey as a fraud investigator began shortly after he was called to the Bar in 1988. Because he already had a Masters in Business Administration when he became a lawyer, he was retained to become involved in many of the leading real estate and mortgage broker fraud cases of the late 1980s and 1990s. He then went on to become a C.P.A, and the Valedictorian of this class at the University of Toronto’s Rotman School in Investigative and Forensic Accounting. David’s training as a forensic accountant, and a forensic investigator, has proved invaluable in several fraud investigations and asset recovery proceedings. His experiences led him to write his first book, “The Law of Fraud & the Forensic Investigator”, published by Carswell (now in its fourth edition). Because recovery often means pursuing insolvent corporations, he often asserts personal claims against corporate executives. He successfully argued the leading case on director’s liability in tort, and is the author on the leading text on the subject of personal liability arising from acts or omissions in the workplace, “Executive Liability and the Law” (also published by Carswell, in its second edition). It is hardly surprising that David has won this award. Forensic professionals describe him as “… one of the most knowledgeable lawyers I know with respect to the laws of fraud and forensic investigation. His knowledge is international in nature (not limited to Canadian law) and supported by an exceptional legal and strategic mind. David is also knowledgeable about privacy, security and related matters - an excellent combination. I wholeheartedly recommend David to prospective clients.”. Clients agree. As one client noted: “When our company found anomalies in their accounting records David Debenham was recommended to us as an expert fraud lawyer. The anomalies burgeoned into a complex million-dollar fraud fought simultaneously in multiple jurisdictions. The fraudster’s lawyers have filed every motion imaginable and then some in efforts to delay justice. David has given us solid advice and guidance every step of the way. His knowledge and dedication have only been surpassed by his teamwork and compassion for justice. Always available, approachable and patient with our endless questions and frustrations towards a justice system that seems to provide every conceivable advantage to the fraudster. David has been successful in obtaining a conviction and summary judgment on our behalf and is continuing to represent and guide us through the complex process of realizing on that judgment…” David is a member of the Canadian Bar Association’s Anti-Corruption Team (“CBA-ACT”). In addition in practicing in this area, he and has written and spoken on Canada’s Corruption of Foreign Public Officials Act (CFPOA).David’s training assists him in leading investigations and compliance audits, including audits related to compliance with anti-bribery and anti-corruption legislation. His training south of the border with respect to the American anti-corruption legislation has come in handy as a result of the relatively recent emergence of the CFPOA as a concern for Canadian corporations. David is a frequent traveler, and is always prepared to travel across North America. He has spoken at conferences in San Francisco, Las Vegas, Oklahoma City, Orlando, New York, and across Canada, for such organizations as the Canadian Institute of Chartered Accountants’ IFA Conferences, the Association of Certified Fraud Examiners’ Local, National, and Global Conferences, The Association of Certified Forensic Investigators of Canada’s National Conference, and the Civil Fraud Seminar at the national conference of the Canadian Bar Association conferences. David Debenham (Partner, McMillan LLP). B.A., J.D. ,LLM (Ottawa), LLM (York), MBA, D.I.F.A., M.Sc. (Fraud & Forensics), CPA, CMA, CFS, CFE, CFI, CFF. Office: Ottawa Email: david.debenham@mcmillan.ca Phone: 613.691.6109 Fax 613.231.3191
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Wealth & Finance International | January 2016
Investing in Classic Cars
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Investing in classic cars is becoming increasingly popular as wary investors seek diversification away from financial products. We invited SĂŠrgio Rodrigues from SSR Classic, to give us insight into this growing market.
SSR Classic was born from an old passion for Classic Cars and Supercars within our family. Our main objective is to search worldwide for rare Classic Cars, to restore and sell them to Classic Cars enthusiasts/ collectors, as well as investors. The classic car market has boomed over the last years after the financial crisis but now it begins to stabilize. The market have raised more than 400 %, in the last years, but this number does not reflect all the classic cars, and can be attributed to a limited number of exclusive models. One additional reason for this amazing statistic is the passion that most of the collectors have for the classic cars. For me this is the main reason to keep this market moving. Most of the buyers are extremely busy people but for classic cars they always find time. This market growth has led to increased opportunities for overseas investors which will continue into the future, as we believe that the classic car market will remain strong. In the last years we have also noticed a new category, supercars, as investors look towards more expensive models. These high performance cars, limited editions with very few miles are being viewed as a good investment. What separates us from our competitors is our car selection, in terms of both classic models and supercars. We try to see what is available in the market, sometimes travelling to other continents to look for rare or unique cars to restore. Our professionals and the partnerships we have developed so far allow us to have restorations of great quality, for example the 1958 Mercedes Benz 190 SL that we have presented in Amelia Island last year. Moving forward SSR Classic wants to continue to be present in special fairs, such as the Retromobile in Paris, and we are also planning to be in USA this year. Alongside this we are also planning to exhibit in some classic cars fairs and to have, in the near future, a classic car team not only for racing but mainly to let some clients, partners, investors, to try a new atmosphere, a new sport, a new adrenaline. We believe that the classic car racing is something unique and we are eager to expand into this market. Company: SSR Classic Name: SĂŠrgio Rodrigues Web Address: www.ssrclassic.com Address: Vale de Cambra Telephone: +351 256100136
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CEO of the Month Atlantic Subsea is a premier marine infrastructure firm providing a broad spectrum of services to range of markets. Historically the target market has been defense, energy, ports and waterways.
Mr. Vinod Menezes has led Atlantic Subsea with a steady hand at the helm for over 20 years. As the CEO, Mr. Menezes has maximized growth year after year, while maintaining exceptional value to clients. He has been instrumental in providing critical tools to key managers to build great teams within the company.
“Currently, the macroeconomic conditions in the US are favorable. The economy has improved and the market sentiment has been positive. Intermediate term GDP growth stability has been predicted through reliable economic predictors. This sentiment has triggered a positive disposition within the company management”.
The company’s success is a well balanced symphony of many parts. Long term relationships built through the years on trust, values and ethics have been key. The company has earned a reputation premium by rendering consistent delivery of honest and quality services to clients, while expecting the same from suppliers.
Through a span of 2 decades, the company has weathered quite a few storms. It has overcome 3 cycles of economic downturn, only to maintain a steady growth through the years. “If we manage to maintain a balance between all the key components of the business, we should be assured guaranteed success through the long term. There should be no compromise on rendering quality service and maintaining strong values”
The company serves a variety of markets ranging from defense, which relies on governmental spending to energy and ports. As some components of the revenue stream are driven by public equity market whims, there is a sense of self hedging between governmental spending and the market environment. Hence at any given time, opportunities for growth are very prevalent. Atlantic Subsea is currently in its 23rd year of business. Even though the company has matured, delivering constant and consistent growth does generate its own set of challenges. Success comes through synergies of corporate team members like key suppliers, bank executives, insurance and surety bond providers. It is critical that all key players are in equitable stride with the company to maintain the equilibrium. Mr. Menezes strives to maintain this balance. Mr. Menezes emphasizes - “Just as the external corporate team is critical to the growth challenges, talent building and people management is the core of our beliefs. Caring and trusting people are paramount qualities to a value driven company like ours. Well being of our employees, their safety and future are interwoven with our success goals. Every aspect of or service is driven through the psyche of quality, honesty and a quest for improvement. Only when there is a strong consensus within our people of the corporate vision, then only we see an easier path to long term success”.
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Making Green Pay How is sustainability regulation affecting the real estate industry? Basil Demeroutis talks us through how underperforming legislation can be revitalised to better benefit both the market and homeowners. By Basil Demeroutis
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We real estate investors are a funny lot. We thrive on regulation. Building regulation, financial regulation, health and safety regulation. Coming from all sides: local, national, international. Restrictions on how big and how small you can make a space. What it must and must not have inside it. How you can build it, buy it, lease it, operate and sell it. In fact, there is perhaps no more heavily-regulated, taxed and controlled asset class in the word than real estate.
So perhaps when it comes to sustainability, the natural reaction makes sense: more regulation, more compliance. Don’t get me wrong. I’m not advocating anarchy. Many of these regulations, especially when bold and ambitious, have delivered real benefits and have helped to modernise an industry. And organisations like the BRE that came up with the BREEAM standard and the US Green Building Counsel with its LEED program, have been positive game changers for sustainable property. But we need to move on. Sustainability in real estate is under-delivering. To date “Sustainability 1.0” has been focused on the environment – small “e”. Mostly in areas of energy, water and waste. And even then, in spite of the hype, this approach is only just starting to achieve meaningful penetration among mainstream commercial property investors. Many have done only the minimum required. Rather, they say that adding a few solar panels or a bit of greenery to a building has little real impact, are hardly changes the world. And they are not necessarily wrong. Much like the early days of the CSR/ESG movement in other asset classes like equities, the focus so far with property has been on regulatory-driven, compliance-based checklists that seek to compel us to eliminate the worst behaviours. Trying to make the world marginally less bad. Not surprisingly, these initiatives have not delivered overall the full impact they could, have been viewed by property owners as cumbersome and costly, and even have been responsible for some perverse outcomes. This is exacerbated by a deeply-entrenched ecosystem of consultants and, yes, even building engineers and suppliers, who, faced with sceptical landlords and sitting at the coal face of all the regulations, are risk averse and find it easier to just build the next building like the ten others they did the previous years, and allow for a wide margin for error. At the same time, to date there has been sadly little empirical evidence to suggest that “green buildings” deliver better financial returns. Taken together with tenants that care almost single-mindedly about costs, building owners and investors would rather not bother if they had the choice.
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And so there is no denying that Sustainability 1.0 has yet to achieve broad acceptance; there are only four BREEAM “Outstanding” office buildings in all of London for example. Four! It all sounds pretty negative. However, we can take a page out of the mainstream CSR/ESG sector and start to think how value-based, sustainable investment practices can help identify sector champions – indeed entirely new sectors – and, ultimately, enhance investment returns. First, of course we must fully embrace traditional sustainability goals (energy, water, waste) but we need to put them in the context of financial outcomes rather than thinking of them solely in terms of environmental goals. Double or triple bottom line investing is, ironically, not “sustainable.” What building owner can afford to implement well-intentioned green initiatives if the result is no increase in rents, lower profit and, ultimately, an uncompetitive business? As Jed Emerson, a recognised international leader in the field of strategic philanthropy and impact investing, puts it: “There is an idea that values are divided between the financial and the societal, but this is a fundamentally wrong way to view how we create value. Value is whole.” We live in a single bottom-line world. So we need to relate sustainability to financial impact. But second and more broadly, we also must adopt bolder thinking around community, the built environment, place-making, creative design, shifting business and occupation trends in the widest sense, and in general the important role property plays in our daily lives. We are told that buildings account for around 40% of the carbon we generate as a society. However, we need to see buildings as a something more than just bricks and mortar, more than carbon generators. We need to consider that real estate can play a part in social transformation and the influence it has on not just our health but our wellbeing. Without being too dramatic about it, we should think in terms of harmonious and inspiring spaces, spaces that resonate with the built environment. On the Environment with a big “E”. Creating coveted places. After all, buildings not only account for 40% of the carbon we generate, but also they are where we spend 99% of our time. They define the world in which we work and live. When we start to think in these terms – rather than simply green features, r-values and e-coefficients – we can really start to use these responsible real estate ideals as forces for value creation, to help unlock value in our investments and generate higher risk-adjusted returns. To identify real estate investments and create strategies that will make our buildings more appealing to end users and thus generate higher financial profit. With this, too, we can start to bring these strategies more mainstream, to integrate them into the building you are in right now as you read this, where you bought your coffee this morning, where you will go for your next meeting in an hour. To come up with strategies that are not just economically viable for special cases but for all cases. And so the critical questions as real estate investors must be: how do we use long-term secular trends to our advantage? How to we adopt a new paradigm and not just compete to reach the forefront of an out-dated one? How do we create opportunities for delivering more value, not less, through forward-thinking ideals? If we can do this, then I think we’re onto something.
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Insurance: Look Again In the world of the high net worth investor, insurance may often be overlooked, primarily because those involved are sufficiently wealthy to ‘self-insure’. However, life and protection products can really add value to the most complex of financial arrangements by helping both to preserve accumulated wealth and protect the source of the underlying income against life-changing events.
Protection income Income might be earned income or the proceeds from business interests as a shareholder or partner in one or more firms. Income protection is the foundation of any financial plan because if an individual were unable to work due to accident or sickness for any length time, wealth accumulation stops and the burden of living expenses starts to erode savings and investments. Individuals can protect their personal income by writing income protection insurance.
to encash their investments and the less wealthy might really struggle financially. Life assurance can be written to pay off mortgages and other debts and to provide money for lifestyle protection if the breadwinner dies; critical illness insurance or income protection insurance can be established to cover people against becoming incapacitated to the extent that they can no longer earn a living. For those closely associated with the businesses for which they work, relevant life is a tax efficient and cost effective means to provide personal protection.
Those with business interests will be aware of insurance because firms typically protect themselves against many eventualities buying cover for buildings, contents, cars and stock. But the majority fail to cover their single most important asset – their staff. A business might suffer financially if a key employee died or was unable to work, or it may even have to cease trading altogether. Again insurance can help mitigate these business continuity issues with a policy written on the life of the key employee. The pay out from a life and critical illness cover policy can be used by the employer to offset the lost profit due to the key employee’s absence; the benefit from a key person income protection policy can be used to employ a locum to maintain continuity.
One of the issues affecting people with large accumulated wealth is that of tax, and not least inheritance tax. Estates in excess of £325,000 are subject to inheritance tax and UK inheritance tax applies to the worldwide assets of individuals domiciled in the UK, an importance consideration for the international private investor. Specialist tax advice is recommended but insurance can help in mitigating the tax bill. The pay-out from a whole of life assurance written in trust pass to the beneficiaries outside the estate and can be used to pay the inheritance tax bill avoiding having to encash investments or sell property at an inopportune time.
Insurance can also help with business succession. On the death of a controlling shareholder, to avoid the direction and running of a business passing to people who may be at variance with the remaining executives, a legal agreement should be in place granting the remaining shareholders the right to purchase the shares. Life assurance policies written on the life of each shareholder in favour of the business provide the finance to execute that legal agreement.
Whole of life assurance can also be used to create wealth on death and is a good way for individuals to provide legacies for their loved ones. Also the issue of long term care is a vexed one. With care costs continuing to rise, many have to use significant amounts of their accumulated wealth to pay nursing home fees. Whole of life assurance can provide money on death to bring the value of the estate back to what it would have been before the expenditure on care costs.
Life assurance can also be written to protect corporate debt. The policy safeguards businesses against the premature death of a person who has guaranteed a business loan or who has made a loan to their own company. Also, banks sometimes make business loans on the basis of the involvement in the business of certain key employees. If such a key employee is no longer part of the business, the bank may want the loan to be repaid early.
These are just some of the ways in which the life insurance industry can help people protect and maintain their wealth. Tax advisers, solicitors and other professionals can help the international investor organise their established wealth but protecting and maintaining it may require an insurance-based solution, which can be explored through a conversation with a qualified financial adviser.
Preserving wealth Life assurance can be used to protect accumulated wealth. If an individual were to die, their dependants might suffer financially if, for example, there is a mortgage to repay or they have no income of their own to meet living expenses. In such circumstances the wealthy might not wish
For more information about protection, visit defaqto.com/advisers/resources/publications-list/relevant-life-case-study/ Ben Heffer Insight Analyst, Defaqto
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Currency Volatility in 2016: The Outlook for the UK Business If you thought markets in 2015 were volatile, then 2016 has already shown us that we can’t expect much respite in the coming 11 months either. If anything, with worries about Chinese growth – the great powerhouse of global growth over the last decade – the continued slide in oil prices and no end in sight for some of the most challenging geopolitical questions of our time, 2016 looks likely to be even more volatile.
Yet for UK businesses trading internationally who are looking to successfully chart a course through these choppy seas, they need to try and manage these risks and impending volatility as best they can.
better prepared for the impending currency volatility. Moreover, they are less likely to be able to stomach significant currency swings like a large company might, due to smaller balance sheets.
One area that is all too easily overlooked is their exposure to currency risk. Given that the Pound has had a wretched time so far this year, reaching its lowest rate against the US dollar for six years and a year low against the Euro, importers without a currency strategy are likely to have already been particularly hard hit in the opening weeks of this year. Any business with international currency needs – from SMEs importing goods from China, mini-multinationals selling items through international online marketplaces, through to FTSE100 monoliths – should consider how they will manage their currency exposure, if they haven’t already.
So what can a business do to protect itself against the likely volatility? In my view, there are three golden rules for any business when managing currency risk and implementing a currency strategy. Firstly, sort out the pricing of contracts that you wish to hedge and then set a budget by looking ahead at the known costs and ensure that these costs are covered. Products such as currency options or forward contracts can be useful in protecting budget levels by simply using them whilst setting budgets. Additionally, simple hedging products like this provide greater clarity, security and certainty, which given the aforementioned markets is particularly valuable.
As if the concoction wasn’t already spicy enough, as well as facing international pressures UK businesses also face the added ingredient of a looming EU Referendum. In a recent survey of over 1,000 senior decision makers at UK-based SMEs making cross-border payments we found that 75% fear that currency volatility from the upcoming EU Referendum will impact their business. One only has to look at the precedent set by the Scottish Referendum, which saw sterling lose around 6.5% against the USD in the two months before the vote, to realise how great a threat this could be to SMEs who don’t have the balance sheet strength to absorb such major shocks.
Secondly, as simple as it may sound any business using hedging needs to ask themselves what are their objectives, as well as their risk tolerance. Is the purpose of hedging simply to ensure greater certainty on margins, or are they willing to play the markets a bit more in the hope of currencies moving in their favour? Thirdly and finally, a business will need to consider how hedging with impact their cash flow. Different foreign exchange trades carry different levels of risk and you need to be clear on what implications rate moves will have. Remember that hedging is flexible, so a strategy can easily be designed to suit your business’ cash flow requirements.
Yet, despite a majority of SMEs identifying the risk of currency volatility caused by the EU Referendum to their business, there appears to be a worrying lack of preparedness. Half (47%) said that they are failing to take any notice of foreign exchange markets and over a third (35%) believe that having a currency strategy is not important. This is even more alarming when 45% said they had been caught out by a sudden movement in exchange rates in the last 12 months, and 1 in 4 (26%) saying that they had been ‘severely impacted by market volatility’.
Ultimately, with the die seemingly cast for 2016’s currency markets we can expect a turbulent year ahead. Additionally, with the EU Referendum hanging like an economic Sword of Damocles, UK businesses face a particularly uncertain year. Whilst an effective currency strategy alone won’t prove the panacea for all of a given business’ potential ills, implementing one might still buy them an extra lifeline.
With SMEs often heralded as the lifeblood of the UK economy, we’re running the risk of seeing these taps of growth turned off if they aren’t
By Jeremy Cook, Chief Economist at World First
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Ethical Products: Aligning Consumer Interests with Investment Decisions Ethical products in the investment market is a fairly new phenomenon, but as investor interest increases and new ethical products are introduced consumers are finding that their standard of ethics does not meet that of their fund. We speak to John Ditchfield, Partner with Castlefield Advice Partners, about how the industry needs greater transparency to insure its future.
The UK market for sustainable investments has only really occurred over the last 30 years, with private individual investors putting around £13.5bn into the sector following the setting up of the first stewardship investment fund. As such it is still a relatively new aspect of the investment landscape, but as it is gaining in popularity as public awareness of issues such as climate change, fair trade and responsible consumerism grows.
Transparency is the key issue here. There are many firms in the market who make it clear to their investors exactly what they are investing their money in, with many firms publishing annual reports on what each fund has interests in. However, there are also investment institutions in the industry which do not make this clear, which causes issues for investors, who need clear outlines of where their money is going, which is particularly important for ethical funds since the main reason for purchasing these is that they invest only in ethical companies, so knowing where the money is going provides the proof that their product is genuinely ethical.
In addition to this, the investment market has grown wary following the financial crisis, with investors keen to diversify their portfolios and move into more sustainable investments with long term potential. However, recent research has found that often the ethics of the investors does not correlate with the so ethically marketed products they are investing in. The study shows that 74% of investors would be shocked to find that a fund claiming to be ethical was investing in companies that contribute to social and environmental problems and 54% would move their money, with a further 56% of investors fearing that they could lose money by investing in companies which damage the environment such as oil and gas majors.
John was also keen to emphasise that transparency in ethical funds is doubly important because it “de-risks” products, something which is particularly important to wary customers keen to avoid the heavy losses such as those experienced during the 2008 financial crash. “Risk is a big issue for ethical investments. Ethical funds tend to be marketed towards customers looking for more long term investments, because the idea is that the investment will hold the money and do some good with it before they receive a dividend. The fund holds these companies in its portfolio for a period of time, so they must be sound companies for the long term.
These findings follow last month’s warning by Bank of England Governor Mark Carney that investors in fossil fuel companies face “potentially huge” losses from climate change action that could make vast reserves of oil, coal and gas “literally un-burnable”, highlighting the need for greater transparency in the ethical investment market, as many investors would not be aware that their money was invested in such firms.
“This is a different approach to investing, as you often do not find such high levels of portfolio turnover as you do in more traditional funds, which is what attracts a lot of private investors, because they are less likely to lose money because of a constant churning of the portfolio.
John Ditchfield explains how these results show a difference in opinion between the investors and the institutions they invest with.
“Therefore a lack of transparency is a significant risk issue. Some companies are unable to provide a full list of all the underlying holdings that a fund holds, often because they are in very large, tracker type products and therefore the holdings were vast and the firm has not collated them together, which introduces a significant amount of risk, whereas what I would class as ethical funds are able to disclose 100% of their holdings. In fact, most ethical funds publish that on a monthly basis, which means that in my opinion ethical funds are simply good business sense.”
“This situation is not as simple customers purchasing a product from an investment institution and expect it to match their ethical views. There is a serious risk that it will not do that, for example many major ethical funds avoid investing in tobacco and oil, but some do. “Ethics is a subjective concept, and therefore often the ethics of the individual investor will not match that of the institution investing on their behalf.”
As for the future of ethical funds, John believes that in the future more mainstream investors will be holding a proportion of their investment portfolio in ethical investments.
In order to ensure that consumers understand fully the ethics of the product they are purchasing, John believes that it is vital that a standard of ethics is implemented throughout the industry.
“In the future I feel that ethical investments will become a common place for investors to hold their money. At the moment it is not the norm, and if you look across the UK investment market there is a small percentage of investors who have money in ethical investments. I am hoping that in the future this will change and people will embrace ethical investments.”
“I believe that it is very important to ensure that when a customer buys an ethically invested product, they are not at risk of owning something which does not match their personal values. I have suggested this many times because I feel it is important, however I do understand that in practise this would be a very difficult standard to implement in practice.”
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How the ‘Internet of Everything’ is Impacting Bank Segment Strategies: Ways to Respond to the Trend and FAQs with Answers June Klein is CEO of Technology & Marketing Ventures, Inc; Creator of Electronic-BoardroomTMVi® Solutions and Tech Advisor to Bill & Melinda Gates Foundation.
Technology & Marketing Ventures, Inc. is the Wealth & Finance International 2015 and 2014 Award Winner for: • Best for Implementing Electronic-Business Applications - New York • Innovation in Corporate Technology: Electronic-BoardroomTMVi® Solutions - North America • Best Business Forum and Best for Implementing Digital Applications
residences and are renovating or maintaining or monitoring properties. ● The real estate service was also used by banks with empty foreclosure properties that were being looted and had insurance risks. ● The turnkey implementation service was also used by trustees and executors of empty properties of deceased relatives. ● High net worth club events are also held in unique settings. (3) We are speaking to strategic real estate and bank partners who have a NYC townhouse or mixed zone-use facility. This is necessary to implement the Mobile Integrated Architecture needed for evolving, blended work-live-travel-family productive lifestyle. We have implemented Electronic-BoardroomTMVi® Models in urban apartments, suburban houses and multi-family dwellings. This model location is what is needed for personalized banking to integrate digital and physical to supply personalized new banking on-demand. (4) One of my portfolio companies does mobile marketing and m-payments. We are exploring with card issuers about using our PIN authentication service with Masterpass through our payment gateway platform. Our solution is live in South Africa in collaboration with Standard Bank, Mastercard and Oltio.
Programs my firm is doing with banks to respond to the Internet of Things: Applying trends to strategies to increase US presence and wealth management. (1) Collaborative Team Management. Technology & Marketing Ventures, Inc. has been hired to help a few banks solicit external developers to suggest what to do next in digital. Banks are just as interested in getting digital banking ideas from someone in a college dorm as they are from an engineer working for a billion dollar corp. The idea is to speed up development for an industry getting disrupted, and help banks shed somewhat of a stodgy utility image. Banks are trying to keep up with digital demands in light of payment disruptions and diminished use of bank branches. Here’s what the process looks like. • TMV works with: a bank’s internal team who select coders, with a panel of judges who select the winners from 3 days of demos, a bank’s innovation lab, a bank’s ventures unit and contest partnering companies. • The bank makes available a set of Application Programming Interfaces to individuals worldwide who create apps for mobile devices. • There are cash prizes, potential contract with bank, face time with execs and mentorship. • Participants maintain intellectual property, but the bank has the option to license the software.
Specific answers to frequently asked questions. (1) What is an example of a North American bank that has adopted an IoT strategy? • Citigroup’s Mobile Challenge. (2) Are banks that are creating IoT strategies using only internal resources for software bank applications? • Clearly banks are using internal resources, but that is in combination with various external partners. • Gartner says, Innovation can no longer be just internal. (3) How are banks engaging external partners? • In Citi’s case, they partnered with companies including Intuit, Plug & Play, Wearable World, FinTech Innovation Lab, non-profit Endeavor Org, Latin America’s Yellow Pepper, Women 2.0, Gimbal, Empire Startups, UK Trade & Investment and FinTech Hackathon. • Citigroup and other banks are seeking help from outsiders to develop apps that will work with IOT & wearable technologies. The general feeling is that this will unleash a new era of banking through hardware.
(2) The TMVi Tech Concierge is geared to servicing Tech Moguls who have sold or IPOed their companies. TMV helps them find and negotiate their next tech venture. TMV has alliances with wealth management firms like Alliance Bernstein to solve entrepreneurial specific planning needs. Previously, TMV sold their integrated surveillance monitoring system to a private bank for them to offer to their clients who have multiple
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(4) Are vendors being engaged in strategy design? • Hedge Fund Manager Jim Simon invests in pioneers in IOT revolution of connecting everyday things to the internet. We are seeing that the evolution of smart phones will soon include smart car garage, smart heaters, smart dishwashers, home appliances connecting to internet & communicating with other devices. Billionaire Simon has resurrected the New Blackberry and integrated it with F5 and Sierra. o Blackberry Ltd’s Canadian secure, high reliability software and mobile device management is at the forefront of IOT conversation with Project Ion which will support any IOT ecosystem, support QNX software and pursue partnerships. I like Blackberry for my firm’s own mobile architecture because they have proven their expertise with Security in Financial Services. o F5 network’s American application delivery networking tech optimizes the delivery of network-based applications, security & performance. o Sierra Wireless is in the diverse and stable devices segment.
customer needs. o Key in Banking in the IoT era is Sensors. Sensors are invading home structures, home automation systems, trees, livestock, cars and even humans. (eg. pacemakers can communicate wirelessly with the Internet and pills can send a wireless signal when they have dissolved in one’s stomach). o I would like to see banks entering into an agreement with their customer that the bank would automatically issue a Home Equity Line of Credit to cover customer’s roof replacement costs and issue a work order to a crew of affiliated repairmen when the sensors indicate your roof has reached its end-of-life. o In Mobile payments, non-traditional players are providing authentication on credit cards. o We are seeing IOT disruptions in Social Media monitoring, enhancing experience and introducing new products. (6) Can I identify any process adjustments, service changes, product adoptions, etc. that North American banks have implemented to address IoT disruption? o In reimagining the digital bank, it is important to note that the big 4 banks in America actually invest more in R&D than Google, Facebook & Oracle. Yet we think of these as not only tech companies, but as organizations who are investing an incredible amount in R&D. Point is that banks have been investing in the wrong place. o Rather than a staid physical location that offers the same transactions that customers can self-service on their tablet or smartphone, the branch must enhance the overall customer experience. o Reimagining the role of the branch as a relevant complement to digital channels will strengthen the brand, deepen customer relationships and drive new business.
• Traditional Tech Firms like below are all vying to be your partner. o IBM is not a total solution for architecture because even with Apple as a partner, there is a weakness in mid-level enterprise execution. o Cisco who makes the key distinction between IoT and the “Internet of Everything”. IOE builds on the foundation of the “Internet of Things” by adding network intelligence that allows convergence, orchestration and visibility across previously disparate systems. IOE is a business opportunity that includes privacy, security, energy consumption and network congestion. Cisco has an integrated infrastructure platform that supports video, contact centers, data storage and analytics on multiple devices anytime, anywhere and is proven to scale across the enterprise so it is a good choice for future retail banking. o Intel focuses on strategy across Intel assets. This is important because most implementations are not scalable. Intel has an open, scalable, interoperable, platform, standards, testbeds approach for IoT that is specifically building an ecosystem. Intel’s Use Cases are based on where people want to spend big $s to solve big problems, where you make $, save $, and improve customer experience. o Google’s Brillo IOT software is working toward IOE. o Many other competitors in the mobile ecosystem space who get involved in one way or another including Microsoft, PWC, Accenture and Fiserv.
(7) Are North American banks generating value from IoT strategies? o Cisco predicts that $14.4 trillion of value (net profits) will be at stake globally for private-sector companies over the next decade, based on their ability to harness IoE. The expectation is that $3.7 trillion of this value will arise from improved customer experience. For retail banks, this will be mostly achieved by adding personalized interactions. o A unique value proposition arises from a banks’ deep understanding of each individual’s financial needs and the ability to offer a new dimension in services and convenience. Cisco shows an opportunity to capture a 5.6% upturn in profits when banks take the following steps: o Apply IoE-enabling technologies to better address behavior of new digitally driven customer segments. o Deliver more personalized and convenient services to meet “anytime, anywhere” demands of customers. o Integrate physical and digital channels to deliver services on-demand.
(5) Any specific North American banking segments that are preparing for IoT market disruption? • Wealth Management Segment (Canadian, US and international Wealth Management & Global Asset Management) o Value proposition is for a bank to offer a new dimension in services and conveniences to meet anytime anywhere demands of customers. o To integrate physical and digital channels to deliver services on-demand. o New digitally driven customer behaviors that want: video mortgage, video advisor, automated advisor, mobile payments, branch recognition.
Calls to Action: Contact jklein@tmv.com to: - Assess your solutions to offer more personalized services that translate into where your new investments will have the greatest impact. - Explore being a strategic FinTech partner with a NYC mixed use zoned location. This real estate foundation catapults TMV’s 2 programs: Tech Concierge for moguls who have sold or IPOed their businesses and Electronic-BoardroomTMVi® Work-Live-Travel-Family Model. - Apply the research findings above to your particular banking segment strategies.
• Personal and Commercial Banking consisting of personal and business banking operations, auto financing and retail investment businesses. o All embracing mobile technology & incorporating social media into their marketing strategies. Mobile banking is pushing work out to the customer, but needs to evolve toward understanding and filling
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The History and Digital Future of Hedge Funds By Mitch Ackles President, Hedge Fund Association
During the bull U.S. stock market in the 1920s there were already private investment vehicles available to the wealthy. According to Warren Buffett, during that period an investment partnership established by Benjamin Graham and Jerry Newman, the Graham-Newman Partnership, was an early hedge fund. However Alfred Winslow Jones is widely crediting with creating the first “hedged” fund structure back in 1949, and with coining that phrase. The name hedge fund refers to the technique of hedging, a method to decrease losses and reduce or transfer risk. The initial Jones’ model was a general partnership. In 1952 it was modified to become a limited partnership and include a 20% compensation fee based on profits, which was designed as an incentive to the investment manager. By 1968 there were at least 140 U.S. hedge funds, having gained popularity among high-networth individuals by significantly outperforming mutual funds. During the 1970s and 1980s most hedge funds followed a long/short equity model, and in the 1990s the number of these funds increases significantly and included credit arbitrage, distressed debt, fixed income, multi-strategy and quantitative strategies. One of the most famous hedge funds was formed in 1980 by Julian Robertson, Tiger Management, which was a top industry performer and grew to over $7 billion AUM by 1996. In the early 2000s there continued to be an increase in the number of funds and industry assets under management (AUM), which declined briefly during the financial crisis of 2008. Today there are estimated to be over 11,000 active hedge funds managing in excess of $3.1 trillion, and growing each year.
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Hedge funds are a pooled investment structures designed to deliver consistent returns, enhance diversification and manage risk. Hedge funds are well known for providing professional money management and many operate like financial institutions, with strong business infrastructures and regulatory oversight. A common fee structure known as “two and twenty” applies to many hedge funds and refers to managers’ charging a flat 2% on total asset value as a management fee and 20% on profits earned. There are several reasons for investors to allocate to hedge funds. The ability to reduce risk and increase diversification are the most cited reasons. Reducing risk is vital in any portfolio and several academic research studies have concluded that adding hedge funds to a portfolio provides meaningful downside protection. Hedge funds are also regulated in many countries around the world. Hedge funds domiciled in the U.S. are regulated by the Securities and Exchange Commission (SEC) and/or the Commodity Futures Trading Commission (CFTC). Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 all hedge fund advisers with $100 million or more in AUM are required to register with the SEC and/or CFTC. Under Regulation D of the Securities Act of 1933 hedge funds are only allowed to raise capital in non-public offerings from “accredited investors” which are individuals with a net worth of at least $1,000,000 or a minimum income of $200,000 in each of the last two years. Corporate entities like banks, pension funds, endowments, foundations, etc. must have a minimum of $5,000,000 in total assets. Investors in large hedge funds must meet “qualified purchaser” standards under the Investment Company Act of 1940, which requires individuals to have $5,000,000 in investments and requires pension plans and companies to have $25,000,000 in investments. In addition hedge funds are prohibited from making public offerings, and are subject to the anti-fraud provisions. In 2010 the European Union (EU) approved the Alternative Investment Fund Management Directive (AIFMD), which focused on alternative investment funds and requires registration and increased reporting, disclosure and capital requirements. Previously hedge funds and private equity funds were not subject to the same investor protection rules as those required by mutual funds. The Directive was designed to address this. The global hedge fund industry has embraced regulatory oversight, and over the past decade has made significant strides to build institutional infrastructures to address new regulations and simultaneously become more attractive to sophisticated investors. As more investors gain access to professional money management more assets will be allocated to hedge funds, and more jobs connected to the industry will be created. Hedge fund managers will also develop modern marketing techniques as their legal and compliance teams become more comfortable in the age of digital marketing. Hedge fund managers are already more actively managing their online reputations, including earned media via press interviews and via self-published content on their own websites. In the future I expect to see more U.S. hedge funds take advantage of advertising opportunities made possible thanks to the JOBS Act. This area in particular may expand significantly and hedge funds hire internally or seek external experts to help them capitalize on 21st century marketing techniques, including PR, video and social media. I believe the future of hedge funds looks very bright.
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What Will UK Retirees Do with Their New Found Pension Freedoms? Nigel Keohane, Research Director, Social Market Foundation Before 6 April 2015, retirees were effectively required to convert their Defined Contribution pension savings into an annuity. The tax and regulatory framework incentivised retirees to do so. All retirees were entitled to take 25% of their pension pot as a tax-free lump sum. After this, retirees faced a very high 55% tax rate if they chose to withdraw their savings rather than buy a guaranteed income. Exceptions were made for those with very large and very small pension savings, but the consequence was that three quarters of savers with Defined Contribution savings bought a guaranteed income for life. The wider population spend their pension savings at very different rates. The average (mean) behaviour in Australia is a cautious one, preserving capital by reducing wealth by less than 1 per cent a year. Alongside this, a significant minority – estimated at around one in four – spend their pension savings quickly, running out by age 75. In the USA, of those who draw down on their pension savings, the average rate of withdrawal is 8% per year.
The Government reforms implemented in April totally altered these incentives. The 55% tax rate has been abolished and individuals can now make withdrawals in whatever way they want taxed at the standard marginal income tax rate for that individual. Individuals can also still withdraw 25% tax free. Savers can now do entirely as they wish: buy an annuity, withdraw all their savings or use income drawdown. Such reforms may deliver advantages. In the first place, saving may become more attractive and people may take greater ownership of their pensions. It is too early to observe whether this gain is materialising or not. The Government’s decision on tax relief for pensions – due in March 2016 – may also affect the attractiveness of saving in different ways. A second gain may be that the market will develop to offer more innovative products. We know, for instance, that retirements are increasingly diverse. We know also that people’s consumption and income needs in later life are likely to vary significantly as some people work for longer, some work part-time and some face care costs in older age. We would hope that the market can offer a wider range of products to cover this range of behaviours.
Our modelling illustrates the range of outcomes for individuals were they to decumulate their DC pension savings in line with these behaviours. •
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But, we should also think about some of the risks associated with the reforms. Big unanswered questions include: how are UK retirees likely to spend their pension savings? And, what might be the consequences?
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The evidence from the first six months or so provided by the FCA is interesting. For instance, we know that 204,581 accessed their pension in the first three months of the reforms. However, such information at this early stage is of only limited value in answering these questions partly because there is a bulge of people who previously didn’t have this flexibility but now do. Their behaviour may be very different from that of future cohorts.
Retirees following the cautious Australian decumulation path face a very low risk of running out of savings, even if they live longer than average. But, the downside is lower incomes in retirement than would be possible through purchasing an annuity. Following one of the quicker-spending paths leads to lower replacement rates in later life and pension savings running out before life expectancy. Variable investment returns can result in considerable uncertainty of income in retirement and of the age at which pension savings run out for UK retirees choosing income drawdown. Finally, the state may be exposed to bigger claims on means-tested benefits if those with reasonable sized pensions spend their savings quickly.
These are outcomes to which the UK Government should be alert. At the very least, we argue that the Government should monitor closely behaviours in the UK. Our proposed ‘Early Warning System’ would help policymakers understand for instance whether pension balances are being reduced at a sustainable rate, whether people are insuring against longevity risk and whether people are shopping around for the best retirement income products.
For this reason, SMF research looked abroad to Australia and the USA to explore the range of behaviours from countries that have had similar pension freedoms to the UK. Understanding how consumers have behaved in these countries provides useful insights into the range of potential long-term consequences of the pension freedoms in the UK. This was the subject of a report, Golden Years?, published in November by the Social Market Foundation.
Beyond this remain important questions for the future. Many consumers do not make active decisions on providers and products when they reach retirement. This inertia may get worse as savers who have been auto-enrolled into the habit come through the system over the years ahead. Simplifying information and devising triggers and nudges for people to go to the market should be the first priority of here for policymakers and regulators. But, we will also have to worry about those who remain inert and ensure that they also receive a good deal.
Compared to the historical rate of annuitisation in the UK, levels of insurance take up are very low: approximately 5% purchase an annuity in Australia and 10% in the USA.
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Best Financial Advisor - Canada Bill McElroy is the President of The William Douglas Group Inc. and the Senior Investment Advisor for his Manulife Securities Incorporated Associate office located in Burlington, Ontario, Canada. We spoke to him to find out more about his boutique wealth management and insurance brokerage firm, and how they provide a comprehensive suite of investment products and services designed to address their clients’ financial needs alongside a uniquely personalised client experience.
I firmly believe that no client is the same, and they all have their specific needs and risk profiles that need to be taken into account. As a result, I do not define my clients by a single asset mix, risk profile, or investment policy; instead I work closely with them to determine an appropriate risk-adjusted investment strategy for their own individual situation.
clients that have been successful business operators. They have taught me the business philosophies that guide successful businesses, and I have incorporated those insights into my business practice. For example, my family wealth clients have made me appreciate the preservation of capital and wealth transference over generations. As such, a lot of my experience came from a deep curiosity in wanting to understand my clients. I care for each client and I think it shows in the amount of my business that is referral-based.
During this process, I spend a considerable amount of time analysing money movement trends and sector rotation that may positively impact my clients’ portfolios. Once I develop a macro-theme in which there is a higher probability for a better than average return, I start to search for leading investments in that sector.
Despite our business operating for a quarter of a century, the fundamental characteristics of my firm have not really changed much over time. However, the biggest change has been the interdependency of global markets, and the speed of which change impacts volatility. When I first started in this business, the internet was really just in its infancy. The internet has provided everyone access to a plethora of corporate research and market analysis which, without context, can seem very daunting. My experience has taught me that my clients expect me to understand these dynamics and be able use the information as a tool for making better decisions.
When it comes to my clients, access is extremely important to them. I return phone calls immediately, and if a client can’t come in during regular business hours, I will accommodate their schedule. Money is very personal and dynamic, and I want my clients to know I am there for them. My entire business is built around client satisfaction. In terms of my investment philosophy, this is centered on the preservation of capital. My clients are mainly successful entrepreneurs or affluent families that have already created significant wealth and, therefore, preservation of capital, risk mitigation and strong after-tax returns are the major priorities when developing their customized portfolios.
With the internet now omnipresent, we have used social media to our advantage and this has been one of the main drivers of our success, in attracting new clients, over the past 12 months. My social media profile has given prospects a chance to evaluate me in a non-threatening way. If potential clients are reviewing my site, they can develop a better sense of who I am, and that my investment philosophy aligns with theirs, which is a great way to start a new relationship.
Alongside my expertise, I also read a lot on human behaviour as a large part of my job is to really listen to what my clients are saying. I have also continued my professional education as my clients are very knowledgeable, and being able to provide better professional insights is expected of me. When dealing with clients, my key responsibilities are to provide cost transparency, clarity on my investment strategy, and above all, when there is higher volatility in the markets, I increase my level of communication to ensure that we are still aligned with the investment strategy we developed. From my experience, you truly earn your clients in the more volatile markets.
Looking further into 2016 and beyond, I will continue to execute on our current business practice. I am considering a few acquisition and merger opportunities which will bring in economies of scale and possible synergies between myself and other advisors. The fit will have to bring a dimension to my existing business that is currently missing, and my clients have expressed an interest in. The more sophisticated my client base becomes, the more I need to provide services that satisfy their needs. A proper acquisition, after careful research and client input, may be in our future.
Our highly personalised service is one of biggest attributes and it has allowed us to distinguish ourselves from a lot of our competitors. Furthermore, I am very transparent in the way I do business which builds confidence in our organization. As an independent firm, we have the ability to offer my clients access to the entire spectrum of investment and insurance options without bias – I work for my clients, not a corporate entity which dictates the products I must represent. This independence is extremely important to my clients’ peace of mind.
Last but not least, I want to thank Wealth & Finance for this prestigious award and I am honoured to be recognized as leader in my field. Name: William D. McElroy Email: bill@wdg.ca Web Address: www.wdg.ca Address:101-1005 Skyview Drive Burlington,ON L7P5B1 Telephone: 888-522-9494
Since starting this business shortly after I graduated from university, I have been amazed at how much I have learned over the years from my
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Best for Ucits Fund Arbitrage - Laffitte Risk Arbitrage UCITS Laffitte Capital Management is an asset management company specialised in regulated and liquid alternative funds. Lenfant David provided us with a unique insight into the firm and the various services it provides.
Laffitte Capital Management was founded by four ex-proprietary traders, all of whom have a strong experience in financial markets. They worked together for more than 15 years in a major French banking group.
These investment vehicles have an absolute performance objective, are liquid, have little correlation to the equity and bond markets and have a low historical volatility (below 3%).
They created and developed the proprietary trading desk investing in the following arbitrage strategies: merger arbitrage, dividend arbitrage and index arbitrage in Europe and in the United States.
Looking to the future we are confident that our funds are resilient and nimble enough to produce some robust alpha for our investors in these troubled market environments. The best might be yet to come.
In 2007, the team decided to offer their expertise to clients and to open their own alternative funds in regulated vehicles. Therefore in that year they developed Laffitte Risk Arbitrage Ucits which is focused on announced merger arbitrage in Europe and North America.
Moreover, since we launched Laffitte Capital many of our clients have noticed that the quality of service and advice in the wealth management business was sometimes very poor. As arbitrageurs, as we witness a long-lasting mismatch in the costs/ services offered in this business and as such we are planning to launch very soon an entity focused on wealth management, using talented and dedicated partners to ensure that our clients receive only the best service. Currently we always endeavour to be as transparent as possible with our investors so have a good understanding of their investments.
The fund posted a strong performance of +6.60% in 2015 (with historical volatility below 3%). The number and volume of announced deals exceeded 2007 record levels. Usually we have 40 to 70 deals we can invest in after applying our liquidity filters, however in 2015 we never had less than 90. Nevertheless the merger arbitrage strategy witnessed strong performance dispersion between funds.
This involves providing them with detailed reporting and making ourselves available at any time to discuss our positions, and we will be using this approach in our new venture to support our new clients.
We were very selective in the investments we made. We had almost no deals with wide spreads which were not rewarding the risks enough. And we had as well almost no premerger situations (limited by design at 10% maximum) which embed a larger beta to the equity market than pure merger arbitrage investment. Indeed, we had more than enough deals of great quality to invest in.
We are proud to have been awarded ‘Best for Ucits Fund Arbitrage Laffitte Risk Arbitrage Ucits’ as it is the recognition of our continuous hard work and commitment to better serve our investors, and in the future hope to continue and improve upon this success. Company: Laffitte Capital Management Name: Lenfant David Email: sales@laffittecapital.com Web Address: www.laffittecapital.com Address: 29-31 rue Saint Augustin 75002 Paris Telephone: +33 1 55 04 79 30
Then portfolio was very well diversified which decreased at the fund level any negative impact of a single bad trade. Ultimately our investment process which is based on our unique database permitted to take advantage of the increased levels of volatility and to trade a lot around the fair value of the merger spreads. In order to capitalise on the success of our approach a second Ucits fund, Laffitte Index Arbitrage, was launched in 2012 and is a market neutral multi-arbitrage.
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Best Alternative Strategy - the Laureola Investment Fund The Laureola Investment Fund is dedicated to providing life settlements for investors.
The fund has an investment minimum of $100,000, with a required follow-up investment of $25,000. Its liquidity is monthly, with 90 days’ notice and redemption fees for years 1-3. Working within the hedge fund market the fund managers have a strong overview of the market currently, which has seen market turmoil as the S&P 500 declined 1.7% in December and was down marginally for the year. The real excitement came in early January, when the S&P had the worst first week ever – down 6%. European shares dropped 7%, and Chinese equities fell 10%. Currency markets experienced exceptional volatility as well, and commodity prices were in free fall, led by oil. There was no shelter in Hedge Funds, which followed the markets down for the most part, failing once again to provide the promised absolute returns or non-correlation. Over 600 Hedge Funds closed in the first 9 months of 2015, more will undoubtedly follow in 2016. The signs of overvaluation have been obvious for some time, as asset prices world-wide have been corrupted by 7 years of 0% interest rates and repeated QE programs, instituted by governments world-wide for their own interests – to avoid deflation. In such an uncertain and risky environment, investors are appreciating more and more the value of investments which are non-correlated when markets decline, not just when markets go up. Life Settlements are one of the few proven alternative investment choices. This was proven by the fact that despite the market wide decline in December, The Laureola Fund was up 3.7% in that month and delivered over 30% to its investors in 2015. This builds on double digit gains in both 2013 and 2014, early investors the Fund have now nearly doubled their money, highlighting the durability of the fund and its ability to ride out even tough financial climates. The portfolio now holds over 36 policies, with a future value of $20 ml, which may be sold back into the market depending as the need arises.
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An Evidentialist Approach to Investment – Woodsford Capital Surrounding our core evidentialist philosophy we emphasize three key principles: extremely low cost, proven systematic methodology, and truly long term. What is an Evidentialist approach? Woodsford Capital follows a core philosophy of evidentialism across all of our investment approaches.
beyond the limit of a human brain. Much of this analysis is statistical in nature, a type of computation to which it has been shown the human mind is particularly ill-suited. Algorithms (rule-sets) and computer processing power can treat vast amounts of data and assist in making a higher quality decision, repeatedly.
The philosophy of Evidentialism can be traced back as early as 1877, when the then English philosopher William K Clifford published his master piece “The Ethics of Belief”. Clifford wrote that “it is wrong always, everywhere, and for anyone, to believe anything upon insufficient evidence”. Such a philosophy was later endorsed by other philosophers, such as David Hume (“wise man proportions his belief to the evidence, and he proceeds with this as his epistemic ideal”) and Bertrand Russell (“perfect rationality consists … in attaching to every proposition a degree of belief corresponding to its degree of credibility).
Sufficient empirical evidence supports the conclusion that humans are prone to common heuristics and biases. Notable examples include mental accounting, asymmetrical loss aversion, herding, and narrative fallacies. These and many more are the watchwords of the discipline of behavioural finance, which has grown tremendously in importance over the past 20 years. We are wholly aware of the frailty of the human decision-making process and we recognise in ourselves many of the behavioural inconsistencies so diligently catalogued by Daniel Kahneman and others. Our protection against our heuristic biases is to apply a data driven framework of rules from which our human emotions are absent.
At Woodsford Capital, we endeavour to put unemotional rationality at the heart of our decision-making. If a claim cannot be independently verified and replicated, we treat it with extreme caution. Years of observation, study and experience of financial markets have led us to the inescapable conclusion that an evidentialist approach is best-suited to defend investors against the two predominant threats to long-term returns: the predatory nature of the financial services industry; and an investor’s hard-wired behavioural biases.
Truly long term Warren Buffet once said that “Investing is simple, but not easy”. One of the basic requirements for any investor to reap the benefit from investing is that they have to be patient. Nevertheless this very simple truth has been ignored by a vast majority of investors and as a result the returns of such investors have been harmed to a great extent.
Surrounding our core evidentialist philosophy we emphasize three key principles: extremely low cost, proven systematic methodology, and truly long term.
A truly long term investment approach is critical to the financial success of our investors. All our strategies are built on solid research ground and have a horizon of a minimum of 10 years if not longer. Plenty of research suggested that short term focused investors lose out by trying to time the market with no discipline. We also emphasize sensible diversification across asset class and geography in all our strategies as a necessary condition for any truly long term investment strategies.
Extremely low cost For the financial services industry, this is an inconvenient truth – but a truth nonetheless. Numerous studies have shown that; a) cost is one of the biggest drags on investor returns, and b) low costs are one of the best predictors of long term fund returns. The low cost philosophy is immersed in our corporate culture at every level. We seek to access the global capital market and deploy our trading strategies in the most efficient and affordable manner available without compromising on the excellence of our strategy. Impressive offices in tall glass towers are not necessary – nor are expensive suits.
Who is Woodsford Capital? Woodsford Capital Management Pte Ltd was founded in 2010 and is a Registered Fund Management Company (RFMC) based in Singapore. Woodsford manages two quantitative strategies; the Woodsford Asset Allocator Fund and the Woodsford Foundation Strategy. Firm AUM is approximately USD $100m.
The alignment of interests between the manager and the investor must lie at the heart of the relationship if it is to benefit of the investor over the long term. Proven systematic methodology Capital markets are immensely complex. An investor making an asset allocation decision finds himself bombarded with information. Sifting through it all, screening out the irrelevant noise from the valid signals requires large amounts of processing capacity which is mostly likely
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Real Estate und Manager of the Month
M&A Property Investors is a Pan European Private Equity Investment Boutique with a current investment portfolio of over €350 million. Their Senior Management Team has extensive experience investing in high-yield investments throughout Europe and has advised and managed in excess of €10 billion of real estate, acquisition, capital markets and restructuring transactions throughout the world. With offices in Switzerland, Luxembourg and the Czech Republic, and local partners in over 20 locations throughout Europe, they are strategically positioned to utilize their global financial experience and local market expertise to source off-market deals and actively manage the entire investment process to provide solid returns for our investors and strong economic assets for the communities.
Marc E. Cottino is the founder of M&A Property Investors, established in late 2009 in London and Zurich, and his job is focused on developing relationships with financial partners with the view of implementing Club Deals to co-finance the firm’s pipeline deals. M&A Property Investors activities, visions or investment strategies they evolve quickly according to economic changes, so it is important to not lose the cap and make turn errors from the past into success. “Quick reactions and “Deja-vue” situations can be a strong driver to consolidate experience toward new successes” In 2016 he celebrates 18 years of industry experience and throughout professional life he has discovered that the elements needed to realise a good investment must not be complicated or hazardous. On his firm’s portfolio, he said that “we team up with European Real Estate promoters from Portugal to Czech Republic, people different for cultures and languages, we do require few important facets, Professionalism, Transparency and Will to share ventures with us. Money and profits come later” he says in an in-depth interview. Giving an insight into the work Cottino does behind the scenes, he outlines his main responsibilities and says that “at 62 I am the old stager with tremendous will and commitment as a teenager who rules the corporate strategy, who links relationships with investors, bankers, wealth managers, family offices or any other institutional investors partnering with M&A.” “I carry the responsibility of millions Euro invested in tangible assets thousands of kilometres away from each other, and I have passed unintentionally through the crisis’s peak without anguish or distress which I am proud of it. To avoid failure, I carefully listen to the market
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trends, including smiff off-market deals opportunities in niche markets to source unique investments for my partners.”
the right moment, in some growing market niches as Prague where the market is growing consistently, in Portugal where the country is recovering, in Luxembourg a crumb in the heart of Europe growing at two digits and in Switzerland before the country collapsed. Once more, big appraisers edit excellent intelligence reports but ‘smaller’ has still a great role and in M&A Property” Cottino reveals.
Career “I began my career in London at 24 in early 1977 as a junior commodities trader. Years later I moved to Paris evolving to a well-known financial firm who specialised in Capital Market Instruments, which really a great experience” enthuses Cottino when asked about his experience prior to his role in M&A Property Investors. “In 1990 an Anglo-French financial firm offered me to manage the Madrid branch, so I spent 4 years in that beautiful City. In 1995 I was asked to manage the Private Banking Division of a private bank in Switzerland, which was a really boring job for a guy like me” he adds.
Challenges working across the European market Concerning the challenges and opportunities M&A Property Investors face working across the European market, the response from Cottino is that it is less complex now as the firm mainly deal with a network of business lawyers established in all the main capitals. He goes on the say that their partners in Israel, Portugal, Russia and Germany share the same sentiments with his native country Luxembourg. “Is beautiful work all together among different cultures, in this old Europe with his values and contradictions. In M&A team we have 5 different nationalities including an American, probably the most integrated person everywhere” Cottino says which is frankly “a miracle”.
“In spring 1998 a Real-Estate promoter asked me to loan-finance a luxury residential building in downtown Lugano. I was seated over multi-millions portfolios of Swiss francs, but the question was how to finance the promoter instead of selling bank instruments? Due my experience, I quickly set-up an investment vehicle and subscribed my clients, so in one-week I raised 7 Million Swiss francs and I financed the promoter. The development was a nice trophy project, indeed all magazines wrote positively about it, the investment was great, the asset was sold in short time and return was excellent. At the end of the story I was fired by the bank because I was not on-line with the bank’s investment ‘policy” Cottino tells.
Company ethos and culture When asked about the ethos behind the firm and whether there is a certain culture that defines the company and how to do you ensure these values are maintained, Cottino responds by saying, “the question is profound and deserves attention, I have Jewish origins and culture. My ancestors have travelled centuries ago from Turkey to Thessaloniki, to Genoa via Istanbul or Alexandria to Rotterdam with perennial virtues on their heart, as well as modesty and respect for the world. With these values you can challenge the world for ever, that’s why I am impressed to teach to my team to transmit these values to our partners. The response is worth more than a greedy investment.” The future While Cottino does not consider M&A Property Investors to be unique, he does underline that he probably runs one of the leading-hedge firms who specialise in alternative investments as real-estate, but he still has a lot to learn from his numerous competitors. Developing this remark, he says, “each one has its own skill, the market is wide and great for everybody. Every year new competitors come-out, others die, but we survive and our partners make the difference among the crowd.”
Continuing the theme of his career, Cottino explains that he quickly set-up a structure in Luxembourg thanks to the investors who cashed excellent returns and supported him. He started his new venture in Real Estate by applying Private-Equity techniques. In 1999, he began doing investments in Baltics States, in Hungary in Italy and in Côte d Azur. He divorced from his partner in mid-2007 and took an extended period of sabbatical leave until 2010. “Meanwhile, the world went bankrupt, the RE bubble deflated and prices dropped. When the economic recovery shyly restarted in 2010, the banks had no money to finance RE investments, promoters were in search of Equity Partners, but I was ready and rested not stressed. It was the perfect timing for a second round. Since end 2010 up to today I have launched 21 investments across Europe, estimated at 340 Million Euro and I’m expecting to reach 1 Billion global Investment at the end of 2016” Cottino continues.
The last word must surely go to Cottino who outlines his future aspirations, “my team and I aspire to reach 1 Billion global “Capex” across Europe by the end of the year, which mean managing global investments for such a target by injecting one-third of equity. Beyond 2016 we will consider listing the company in the London AIM market.
How has the firm has changed? Since Cottino has worked at M&A Property Investors, “the industrial world has changed after the great turmoil. Many factors have contributed to complicate our daily life” says. Developing this point, he goes on to say bureaucracy has increased and “more heavy financial transactions are more complicated than ever, we may say we do live in a world of Compliance officers, legions of controllers, banks become policemen, there is less room for business or improvisation as there was preciously. Jumping on a good deal is now harder, and this makes Cottino really worry for future generations.
“Work with serenity, bet on the mid-long term targets, share values, abandon greedy methods, create tangible economy, we have assisted in the II° half 2000 at the wildest ravage of the greedy way-of-management, the world economy went partially destroyed. We have a long way ahead to regain, so let’s change the approach. “ Company: M&A PROPERTY INVESTORS Ltd Name: Marc E. Cottino Email: marc@mapropertyinvestors.com Web Address: www.mapropertyinvestors.com Address: M&A PROPERTY INVESTORS Ltd. Immeuble Liberté, 4,Place de Paris – 4th floor, L-1930 Luxembourg Telephone: +352 661 32 50 16
M&A Property Investors’ financial performance When asked about M&A Property Investors’ financial performance and the reasons behind its success, Cottino says we have seeded in 2011 and had a harvest in 2015 in Prague, the result being a compounded return of 21.3% yearly on equity-investment. “We at M&A Property are fast growing because we were able to invest in the right place at
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Arbitrator of the Month Jacques Werner is a senior arbitrator for Werner & Associés. Here he argues that arbitration is only as effective as the arbitrators that practice it, and provides a fascinating insight into his own experiences in this area.
One of the key components to arbitration in corporate cases is understanding the facts of business life. This is emphasised by famous English maritime arbitrator, Cedric Barclay, who used to say: “To be a really good maritime arbitrator, one must have gone through a £3mn loss in a shipping downturn, withstood the loss, and made £5mn in the following upturn.” It was a caricature, and if the test were to be applied not many of the international arbitrators most busy today would remain in business. But, as with all caricatures, it contained a core of truth: breadth of actual business experience is paramount to understanding the facts of a case.
immediately asked the parties to confirm in writing that they had no part in this, which they did. We advised the arbitral institution, but they had no clues. Calling the police was obviously not an option, as the witness had immediately left Paris and flown back home. The only weapon we had was drawing adverse inference from these events and we used it. The integrity of the arbitral process was endangered there, and it was our duty to protect it, which I feel we achieved. Contact Details Contact Name: Jacques Werner Company: Werner & Associés Address: rue du Rhône 13 Case postale 5134 Geneva CH-1211 Geneva Switzerland E-mail: werner@genevapost.ch Website, with detailed biography: www.ggaf.ch
Allow me to recount a memory which I believe proves that having business experience by proxy only may not be enough. It was the case of a joint venture for a large industrial project which had turned sour. My co-arbitrators and I were interrogating the claimant’s main witness, a flamboyant, tycoon-type executive. At issue was whether the defendant, one of the venture partners, had discharged its obligation to sell the output. One of my co-arbitrators, a reputable professor who was also senior partner of his law firm and sitting on boards of various companies, was insisting in his questions that the defendant had actually performed sales, the adequacy of the sales prices being for him a totally different issue. Looking at him in disbelief, the witness bent over and simply said: “Mr. Arbitrator, any fool can sell a dollar for ninety-nine cents.” Experiences such as this have shaped my careers as an arbitrator. I am also fortunate to have had direct business experience with two major multinational corporations, Nestlé of Switzerland and Cargill of the United States. These experiences have enabled me to become an efficient arbitrator, and I draw on my vast experience in every case I undertake. Monitoring the integrity of the arbitral process is another a key factor in arbitration, which can involve protecting witnesses. An example of this can be found in an arbitral tribunal I chaired last year in Paris which included two Middle Eastern firms and one German company. A Middle East witness was called by the German defendant, and although he had arrived in Paris for the hearing, refused to appear as he had received death threats for him and his family back home should he testify, delivered to his hotel in Paris. As soon as we were informed of this, we took a proactive approach to protecting the witness and ensuring the continuity of the trial. We
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Leading Corporate Adviser of the Year South East Europe
info@eurofast.eu | www.eurofast.eu
Eurofast:
Your Regional Business Advisory team Who we are
Eurofast is a regional business advisory organisation operating in South East Europe and East Mediterranean offering various services such as M&A and Transactional Advisory, Business Restructuring & Insolvency, Market Entry Services, Banking and Financial Services, Outsourced Payroll and Employment Solutions, Citizenship & Residency Services, Corporate Services, Transfer Pricing, International Tax, Tax Planning & Tax Compliance, and Accounting.
We Specialise in M&A & Transactional Advisory
We, take pride in our dedicated team of professionals, specialising in M&A and transactional work in our offices, throughout South East Europe and East Mediterranean. Eurofast has over 25 years of experience working with global businesses and leading institutions. Over the years we have performed successfully significant number of local and international M&A transactions in the region. We have a unique approach to support M&A transactions at international level through our professional network, providing assistance to our clients in all phases of M&A transactions from planning process to closure and post integration.
Our Network
We are uniquely positioned as one stop shop for investors looking to enter South East Europe and Eastern Mediterranean. We have office in South East Europe and East Mediterranean, with 21 fully fledge offices in Athens, Thessaloniki, Nicosia, Sofia, Bucharest, Belgrade, Podgorica, Tirana, Skopje, Zagreb, Pristina, Banja Luka, Sarajevo, Cairo, Alexandria, Tbilisi, Beirut, Erbil, Moscow, Kiev and Tehran.
Our competitive advantage
We seek to delight our clients, by being proactive. Our aim is to create client enthusiasm by giving even more value to our clients, whether measured by price, performance, quality or service. Our portfolio
includes a number of high net worth individuals and clients engaged in every sector of the economy , which proves the range of our abilities. Our competitive advantage stems from our ability to serve our clients promptly, efficiently and effectively. Every Eurofast office consists of teams ranging from 15-60 professionals with diverse backgrounds and experience including tax, legal, M&A, payroll, accounting, audit and consulting.
Our credentials
We have over 28 years of history, working with many global brands and leading Institutions, operating in the manufacturing, retail, airlines and professional services sector. Our clients are the vivid evidence that Eurofast is your trusted business advisor in South East Europe and East Mediterranean. We have achieved worldwide market recognition for our exceptional advice, capabilities and innovation. We have been acknowledged as a leader in Tax in Cyprus. Among others, we have been ranked top Tax Advisors and announced “Cyprus Tax firm of the Year” by International Tax Review which is a true recognition for the valued client work we deliver every day. For 2015 we were acknowledged by Acquisition International as ‘Corporate Adviser of the Year – South East Europe’ for our work done in the Region. In 2015, Eurofast has ranked Tier One Tax Planning Advisor by International Tax Review for the seventh time in a row. In 2014, Eurofast was also recognized for its expertise in M&A.
Eurofast is Taxand Cyprus.
For more information on Eurofast and its service portfolio, please visit www.eurofast.eu.