Investment Life Issue 2 by Panashco Media Pte Ltd

INVESTMENT & LIFESTYLE GUIDE • ISSUE 02

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Interview

We talk New World wine investment with

GUILLIANNO MATA,

CEO of The Bottled Wealth.

LUCKY EIGHT I

Eight of the best investment sectors ISSN 2251-3949

9 772251 394009

Worldwatch

Movers and shakers speak

Most Wanted

Investments of passion

Technology

Back to the living room

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Health & Biotech, Automotive, Real Estate, Leisure, Art, Precious Metals, Agriculture, Water and more…

WIN WITH INVESTMENT LIFE AND THE BOTTLED WEALTH Start your wine investment journey with The Bottled Wealth Collectors Case. Kick start your wine investment with a case of specially picked New World Wines from The Bottled Wealth, Singapore’s most respected wine investment advisors. One lucky reader will be presented with a full case of Australian collector grade estate wine. Simply fill in this entry form scan and mail to competition@investmentlife.com or visit investmentlife.com to fill in an online competition entry form. The winner will receive a case of investment grade wine to either enjoy at home or to store for 12 months free of charge. The winner will have the opportunity to store their wine in the new Singapore Wine Vault – a state of the art temperature controlled 750,000 sq ft wine storage facility opened by CWT Logistics, designed specifically for wine investors.

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OPENING BELL As we head toward the last quarter of 2014, the investment front shows a mixed set of options for the savvy personal portfolio manager. The global investment environment has been unsettled by continuing conflict across the globe, affecting traditional investment choices such as oil and precious metals. Yet, the upward value trajectory for many non-traditional investments such as wine and collectible automobiles continue to impress both investors and collectors.

THE TEAM MANAGING EDITOR

STEVEN MALLACH steve@panashcomedia.com MANAGING DIRECTOR

TREVOR WATLING trevor@panashcomedia.com DIRECTOR, KEY ACCOUNTS

MIRIAM RAHAMAN miriam@panashcomedia.com ART DIRECTOR, EUROPE

Of course, the tried and proven traditional investments are still recommended by almost every expert as the most important components of any portfolio – the key to success being patience. For investments like property (which is still the most popular investment choice in Asia) a long-term view is certainly the most logical approach to growing value. There is a traditional Chinese saying that ‘property may get sick, but it never dies’ – rather than applying this rationale to property investment alone, many investors might be well served by using this approach as a mantra when dealing with other investments. Precious metal, for instance, may not shine as brightly as it has done in the past, however if history is any indicator, this asset class will recover its value. What has disrupted the markets is the meteoric rise of companies that trade in the knowledge economy. Shares of many of these companies have reached stratospheric levels – however, some middle-aged investors will still remember the boulevard of broken dreams that was the Internet bubble of the 80s. In this edition of Investment Life, we’re going to take a look at some of the hottest sectors for investment – however, please consult with a professional financial advisor prior to acting on the information contained in this edition. Our writers supply information that could be the foundation for further exploration of investment opportunities – what you do with that information is entirely up to you. At the very least, we are certain you will find the information contained in this issue extremely interesting. Enjoy the read.

ANTONIO VILARES antonio@panashcomedia.com ART DIRECTOR, ASIA

PAULINE DYCOCO production@panashcomedia.com SENIOR EDITOR

VITTORIO HERNANDEZ editorial@panashcomedia.com BUSINESS DEVELOPMENT MANAGER, PHILIPPINES

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MARK MARTIN mark@panashcomedia.com OFFICE MANAGER

NORIANTY ASMAT norianty@panashcomedia.com CONTRIBUTORS

PIERRE JORDAN ALBERT FONTENANT CIRCULATION AND DISTRIBUTION

SASHA RITZER circulation@panashcomedia.com

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IMPORTANT NOTE Any content of Investment Life may only be reproduced, in any shape or format, with the expressed permission of Panashco Media Pte Ltd. For reprints please consult the advertising department. While every care has been taken in the production of this publication, the publishers take no responsibility for any views expressed, errors, loss, or omissions that may occur. Currencies quoted are for information purposes only – and are accurate as we went to press. The articles in Investment Life are not intended as financial or investment advice. Always consult a professional investment or financial advisor prior to making any investment decision. Neither Panashco Media nor Investment Life are responsible for any loss whatsoever that may result from the contents of Investment Life magazine or its online components. Printed at Times Printers, Singapore. MICA: 165/04/2012 • ISSN 2251-3949

Contents ISSUE 02

8 of the Best In this Issue, Investment Life takes a look at some of the most interesting investment opportunities in a rapidly changing world. From the ongoing evolution of automotive technology to biotech, aquaculture, leisure and desalination, we find that the fastpaced nature of change provides both opportunity and potential hazard for the investor.

ON THE COVER – CEO of The Bottled Wealth, Guillianno Mata is providing a growing number of high net worth individuals across Southeast Asia with another option for wine investment – New World wines. These wines are growing in popularity as an alternative to traditional Old World investment wines such as those sourced from French vineyards.

16 Hot Wheels

37 Keeping it clean

23 Hot Property

40 Healthy Returns

30 Under the Hammer

44 Leveraging Scarcity

34 Digging Deep

50 Leisure Investment

As the number of cars on the road increases geometrically and disruptive new technologies become available, investors may be faced with a number of new possibilities. We take a closer look at the rapidly evolving automotive sector.

An evergreen favourite – property – remains high on the list of investment choices for most savvy investors. In this section of ‘8 of the Best,’ we take a look at some of the hottest property destinations in Southeast Asia – and why they remain so popular.

Alternative investments are more than just instruments for diversifying a portfolio – they are reflections of the personality of the collector. In this section, we look at some of the news coming out of the world of collectables and the results of some recent auctions.

We’re going underground in this section of ‘8 of the Best.’ In a rapidly changing word, commodities are king. As the global economies recover from recession, the wheels of industry are speeding up and demand for commodities is increasing. We look at some of the more unusual operations.

Green technology is here to stay. Increasing government sanctioned (and funded) use of technology such as solar and wind makes this sector a very attractive option for those in search of healthy returns. However, the technology is still maturing - can the sector deliver on its sometimes overhyped promise?

As the Baby Boomers reach retirement age and developing nations see changes in levels of disposable income, the biotech industry will become increasingly important. In this section, Investment Life takes a look at how biotech is changing the world around us and how our quest for longevity is providing some investors with opportunity for profit.

A growing human population and dwindling natural resources has put both food supply and access to potable water in the spotlight. As these natural resources come under increasing pressure, some companies are harnessing the power of technology to provide solutions to scarcity – does this provide investors with an opportunity?

Aging Baby Boomers and the increasing wanderlust of Chinese tourists are powering a boom in leisure companies. As these companies reveal more and better services and attractions geared to these growing markets, investors are becoming increasingly interested in new opportunities.

Contents

ISSUE 02

12 ALSO IN THIS ISSUE:

06 OPPORTUNITY KNOCKS

News, views and opinion on a changing world – it’s all in Opportunity Knocks, one of our regular features.

10 WORLDWATCH

What’s done is done and what’s said can’t be unsaid. In our regular Worldwatch feature, we take a look at who is commenting on the world around us.

12 MOST WANTED

If your investments have paid off, you’re going to want to invest in yourself. If you’re on the lookout for something to reward your hard work and foresight then Investment Life may have the solution. Check out ‘Most Wanted’ for a glimpse of the good life.

58 TECH TRENDS

How are the latest tech trends changing both our home and business lives? Are we seeing a revolution in the making – or has it already happened? Investment Life takes a look at the rapidly changing face of technology.

66 NEW WORLD

Investment in New World wines is increasing in popularity. In this issue, Investment Life talks to Guillianno Mata, CEO of The Bottled Wealth – a Singapore-based company that is providing investors with easy access to a new market.

69 FRENCH WINE ESTATES

Who among us has not dreamed of living the good life on a French wine estate – where we would present our own vintage creations to an admiring world? Investment Life spoke to VIN ET ART Managing Director, Miss Claire Victoria Pan, who makes those dreams come true for investors all over Asia.

NEWS

China is a good investment bet for wine exporters, importers

Superpower China’s insatiable thirst for wine has caused a worldwide shortfall and the country dominates the super-premium and collectible segments of the global market.

to one. However 58% of those surveyed believe that Chinese wine will become an 'export success', while 23% of 115 wine professionals surveyed said they would invest in China-bound wines. Demand has also outstripped supply in the global market and part of the reason is that despite massive local production, Chinese consumption of wine has doubled twice in the last five years as the country’s middle class expands. At such rate of expansion, it has outstripped the US demand and by 2016, China is forecast to be the world’s largest wine consumer, according to the International Organization of Vine and Wine. China is already the world’s biggest importer of Bordeaux wine, with France exporting a record-high USD $7.7 billion worth of the commodity to the Asian giant in 2013.

CNY 200

Chinese interested in investing in physical gold would need only a minimum investment of CNY 200 (USD $32.18) to open a gold accumulation plan account with the Industrial and Commercial Bank of China. Under the plan, investors are given the option to withdraw physical metal or cash at the end of the contract – usually more than 12 months. The bank introduced the plan in December 2010 in conjunction with the World Gold Council. Within one year, the bank had 1 million clients, which rose to 5 million by the end of 2012, and it accumulated 64 tonnes of gold. Barclays forecast that Chinese investment in physical gold will continue to go up in 2014 but at a slower pace compared to 2013. However, the CPM Group of New York predicts that net Chinese gold demand, which includes both investment and consumer demand, would reach 44 million ounces this year compared to 41 million ounces in 2013.

20%

Market experts project a 20% or higher cut in wine prices for the Bordeaux 2013 vintage due to the over 30% decline in yields and pressure from merchants and investment consultants in the UK and US to reduce prices. Since peaking in 2011, prices for top-rated wines from the region have been going down. For first-growth left-bank wines, the drop was by 3% since December, according to the Liv-ex Fine 50 index, following 10% drops in 2012 and 17% in 2011. Wine prices for the Bordeaux 2013 vintage are set to be underpinned by declining yields amid pressure from merchants and investment consultants in the U.K. and U.S. for price cuts of 20% or more. Yields fell in excess of 30% in many vineyards because of cold, wet weather during the flowering season, which damaged Merlot grapes in particular, so overall production levels were reduced by as much as half, according to winemakers interviewed in Bordeaux earlier in 2014. However, producers of super seconds (almost, but not quite top echelon wines) said they are not under the same pressure to cut prices since their price tags had always been reasonable.

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Along with the US and Canada, China is a top investment target for importers and exporters for the next 20 years, said a new report, citing a study by Wine Intelligence. Prowein commissioned the report titled “The International Wine Industry: Global Experts Vision 2034.” Wine Intelligence Chief Operating Officer Richard Halstead pointed out that current domestic wine consumption dominates the Chinese market by six bottles

NEWS

Gold investment wins over Bitcoin A new survey of about 2,000 adults conducted by Harris Interactive discovered that while 55% of people in the West are familiar with Bitcoins, only 13% picked investing in the virtual currency over physical gold investments. In contrast, 6% picked Bitcoin over gold, while 52% didn’t have an idea what a Bitcoin is. By gender, 14% of males and 10% of females picked Bitcoins over gold. Explaining the survey results, Tim O’Brien, senior vice president of Operations at Yodlee, a financial management company and Harris Interactive’s partner for the survey, said, “Bitcoin will be hard for consumers to understand and trust on a large scale until secure, userfriendly tools and services emerge to make it as convenient and safe as possible to use.” Investment guru Warren Buffett has called the currency a ‘mirage’ and advised investors to stay away from it. Due to recent incidents of Bitcoin thefts, the value of the currency has been cut in half. The Bitcoin has become hackers’ preferred payment method, mounting large-scale denial-ofservice attacks of tech start-ups such as Meetup, Vimeo and Basecamp and demanding payments through Bitcoin as ransom to stop their activities. The FBI has also seized about 144,000 coins worth USD $66 million from Silk Road, a defunct digital market that US prosecutors said helped fund drug deals and other illegal transactions.

Starting them young U.S. teachers are introducing the concept of stock trading as a personal investment tool to their high school students as part of their classes. One such teacher is Susan Bailey of the Archbishop Moeller High School who uses the Portfolios Investment Simulation game as tool. The hands-on investment game allows students to apply what they

Playing the Market In the game, players can buy, sell, short sell and short cover – providing them with a basis for understanding real world markets.

learn in the classroom to an actual investment situation. “Every semester, this is the highlight of my personal finance course. The students love how this learning experience is so interactive,” Bailey said. At Bald Eagle Area High School, they use the Stock Market Game run by the nonprofit organisation Economics Pennsylvania. The game sees four students who are members of a team managing USD $100,000 in virtual cash. Besides Bald Eagle, other school districts such as Bellefonte, Penns Valley, State College and St Joseph’s Catholic Academy are participating in the Centre County Stock Market Game programme.

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NEWS

Financial advisor cautions against gold savings schemes in India Despite the relatively hard times in India, residents’ love for jewellery, particularly gold, has resulted in jewellery shops offering a gold savings scheme designed for locals who want the yellow metal but often don’t have enough financial resources to buy it when needed. However, Katik Jhaveri, a certified financial advisor, cautions Indians against the schemes because they don’t actually make sense as an investment but are more like sales promotion strategies. “The idea is to exploit people’s basic need to buy jewellery,” Jhaveri said. The scheme works by collecting installment payments credited to the investor’s account until the end of the agreed period when he or she can buy jewellery equal to the gold accumulated. For example, under Swaminidhi by Tanishq’s flexible option scheme, the investor makes an initial minimum payment of Rs 2,000 (USD $33.19) per month, followed by monthly payments of Rs 1,000 (USD $16.59). It works well if gold prices are going up. However, those who paid installments in 2013 when gold prices fell were not so lucky. If they paid RS 5,000 (USD $82.95)

in monthly installments, after one year, they would have accumulated RS 60,000 (USD $994.97), but could only buy jewellery worth RS 59,963 (USD $994.36) on the basis of the gold price in the market. However, the simple price of the metal itself is not the true cost of the scheme. The scheme only ensures confirmed sales for the jeweller, on top of which he can charge a production fee ranging from 9% to 30%, depending on the design and brand. Besides being dependent on gold prices going up, there is no option of taking cash and the investor must buy jewellery even if he does not want to. Moreover, if the investor stops paying mid-way or at some point before the end of the agreed term, his cash won’t be returned. Jhaveri said the scheme helps investors who are not organised with their finances. But for those who are disciplined, he suggested tapping gold exchange traded funds (ETFs) offered by mutual funds because these are more cost effective and offered more flexibility since they allows investment of any amount at various stages.

An Appetite for Gold It is estimated that 75% of gold demand in India is driven by jewellery purchases. © WALTERS ART MUSEUM / WIKIMEDIA COMMONS

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183%

Brazil topped the list of three countries that logged significant increases in visitors to Hallmark Coins, a website for serious coin collectors. Brazil based visits increased by 183%, followed by Japan at 166% and Canada at 148%. The higher number of hits was due to a resurgence of the gold industry in Brazil and the five-year record-high gold sales by Japan’s largest bullion retailer in the first few months of 2014. These three nations are not traditionally considered major players in numismatic (coin) trading. The more traditional players are the US and European nations. However, Elliot Basker, online business manager of Hallmark Coins, said that in the past five years, interest in coin collection has surged and the website has seen business grow from other nations such as Australia and South Africa. Coin collection became a popular hobby in the US in the late 1850s, but recently the hobby has become even more popular due to the increase in opportunities presented by online brokerages.

4,000 to 7,000

GOLD BARS

The Korea Securities Depository (KSD) opened on March 19, 2014 in Gyeonggi Province with an initial two gold bars deposited. Upon receipt, the gold bars – with a purity of 99.99% and weighing 1 kg each – had a security label attached at its bottom with the mark of the Korean Mint. Once South Korea’s gold commodities market takes off, it is expected to handle an average of 4,000 to 7,000 gold bars a day, said Seong Bo-kyung, head of KSD’s gold storage payment team for the depository. Besides physical gold, South Koreans will also be offered the opportunity to trade gold stocks with the opening of the KRX gold market on March 24, 2014 with 9 brokerages and 49 gold dealers as registered members on the launch date. It is expected to handle about 20% of the actual gold deals. Yoon Seok-yoon, executive director of the KRX derivative market, said that it is part of the South Korean government’s initiatives to bring gold trading out of the underground economy. To encourage hidden dealers to transact in the open market, the KRX plans to exempt member companies from transaction fees until March 2015.

NEWS

Fashionable Investment Clothing in now being viewed by many women as an investment, similar to art or classic car collection, particularly ball gowns and couture dresses. In fact, Christie’s auction house has an entire department dedicated to vintage couture and luxury handbags, and that business is said to be booming. Elizabeth Taylor’s 1968 Christian Dior evening gown with matching handbag, for instance, sold for over USD $360,000 during a 2011 auction. An Audrey Hepburn black satin Givenchy gown the actress wore in the film Breakfast at Tiffany’s sold for almost USD $800,000 in 2006. For those who want to invest in these celebrity gowns, Christie’s London Director of Fashion and Textiles Patricia Frost advises them

to buy items that they love. “If you are looking to buy for an investment piece however, condition is crucial and buyers should look for garments that are perfect or nearperfect and have not been altered,” she explained. Besides high-end fashion found in elite auction houses, there is also a boost in vintage clothing sold online. Julia Duncan-Roitman, owner of Black Bear Brooklyn Vintage, stressed that every little flaw in the garment reduces an items value, “so the best you can hope for is to find dead stock that still has the tags.” In an article on the Irish Examiner, Liz Dunphy said that vintage clothes “are the way to go for truly on-trend fashionistas. Further extolling the virtues of vintage attire, she wrote, “Vintage stores offer guilt-fee shopping, as you can be 100% certain that you are not funding sweat-shop labour or poisoning the environment. Vintage pieces are often exquisitely crafted, in good-quality fabrics that have already proven their stamina. Vintage, and vintageinspired designs, also reach back to an era when designers celebrated a woman’s curves, offering styles to suit all body shapes that transcend the whims of fickle fast fashion.”

Classic Beauty Famous for her beauty and many marriages Elizabeth Taylor died on 23 March 2011. She was 79. © WIKIMEDIA COMMONS

1.5%

In 2013, the Standard & Poor’s 500 Index increased by an impressive 29.6%, but the Mei Moses All Art World Index grew by a measly 1.5%. The latter measures repeat sales of artworks at auctions. The numbers are an indication that investing in art is different from other investment classes such as gold or property or even coins. Ron Vinder, a USB financial adviser, said that since artwork may take years to sell, art should be considered part of a highly illiquid market. Capital gains taxes for art can also be high. So as not to frustrate investors in art, experts said the first consideration when buying art is to seek something the owner would enjoy seeing on his house wall. “You buy something because you love it, and after you love it, you learn what makes quality,” Newsmax quoted Frank Robinson, the former director of Cornell University’s Johnson Art Museum as saying. The Wall Street Journal also cautioned art lovers that artists and styles gain and lose popularity quickly.

42,675,000

In 2013, the above number of American Eagle silver coins were sold, breaking the US mint record. The figure is 26% higher compared to the 2012 sales figure. The upward trend continued in 2014 as March sales hit 5,354,000, which is 30% higher compared to February sales and 59.5% more compared to March 2013 sales. It is the fourth highest sales month in history. Sprott Money Blog attributed the increasing number of sales to low silver prices caused by the statement of the US Federal Reserve that the central bank “may consider raising interest rates sooner than previously expected” and the ongoing slowdown in China.

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worldwatch Heard Recently

British Columbia “The grape and wine sector is an important part of our economy. Improving wine grape quality as well as controlling pests will boost the sector’s competitiveness and exporter profitability.” - Ron Cannan, Member of Parliament, representing Kelowa-Lake County, on the USD $2 million investment from Agriculture and Agri-Food Canada to improve irrigation and nutrient management

Washington “With housing prices improving across the country, Americans are regaining faith that real estate is the best choice for long-term investments. But home ownership is also associated with views of real estate as an attractive investment opportunity. This leaves groups with lower home ownership rates, like lower-income and younger Americans, still looking elsewhere for investment options.” -Gallup Poll, on the results of its April 3-6 Economy and Personal Finances survey that asked Americans to choose the best option from real estate, stock and mutual funds, gold, savings accounts and CDs, or bonds, as the best option for long-term investment

Las Condes

North Carolina “The best chance for the average investor is to put money in an index fund." - Bernie Madoff, mastermind of largest Ponzi scheme in history, 2013 interview with MarketWatch (from “Good Advice from Bad People” by Zac Bissonnette)

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“Worldwide demand for lithium has been growing at a very rapid pace as can be clearly seen by looking at prices for the element. Prices for lithium have tripled since 2000, making this a $1 billion per year market. The reason why we know that the market is growing is because it is demand for the element that is pushing up prices. The supply of lithium has certainly not decreased.” - Daniel Gibbs, writer at The Motley Fool, in recommending investment in stocks of Sociedad Quimica y Minera (NYSE: SQM), a company in Chile that is the biggest global producer of lithium, used as raw materials to make electric car batteries

New York “Gold’s only real use is as jewellery. Otherwise, it serves the ups and downs of investment demand and the requirements of banks buying it for reserve purposes. It is used a little bit in dentistry and a little bit in high-end technology, but those applications are not enough to be determining factors for gold.” - Investment Adviser Joe Reagor of the Jutia Group on the balance between industrial uses and retail uses for gold

Nebraska

"Games are won by players who focus on the playing field – not by those whose eyes are glued to the scoreboard… If you instead focus on the prospective price change of a contemplated purchase, you are speculating."

Sunderland

- Warren Buffett, 2014 letter to Berkshire Hathaway (BRK-A) shareholders

“If you leave your money in cash you will lose out to inflation. If I hadn’t exposed the majority of my savings to the stock market I don’t think I would have been able to build up a large enough pension pot.” - Enid Melville, 71, who started saving for retirement in her 20s through stocks picked by stock market professionals

“My instructions to the team are to spend money as fast as they can spend it without wasting it. In dollar terms I think over time we’ll probably end up investing hundreds of millions of dollars in charging infrastructure in China.”

Beijing

- Tesla CEO Elon Musk on the company’s plan to invest millions of dollars to build charging outlets in China, which could be the electric carmaker’s biggest global market by 2015

"It’s a very significant threshold, so it’s not a fund for widows, orphans or retail investors. It’s purely for high net worth and institutional type investors."

Hong Kong

-Philip Hoffman, CEO of Fine Art Fund Group of London, which requires a minimum investment of USD $500,000 to $1 million per investor. (Art funds invest in fine art and then seek returns by buying and selling high-end pieces for profit.)

Melbourne

“The auction process can take several months but selling an item too quickly can decimate its value. An asset based loan gives investors the best of both worlds: they can access money instantly while waiting for the very best price.” - Paul Sumner, Managing Director of Mossgreen, an auction house in Australia, which entered into a partnership with Assetline, the leading personal asset lender in the country. (The partnership allows art, antiques, jewellery, sports memorabilia and stamps investors to have access to money fast and easily when buying or selling their collection through loans from Assetline, which offers up to 40% of the estimated price on each item, while Mossgreen stores the item securely until the balance is paid.)

Dublin

Antwerp

“Irish pension funds have been slow to embrace gold and this imbalance has cost pension holders dearly… Small allocations to gold balance and stabilise pensions in the long term and gold should be an essential part of every Irish pension fund.”

“Synthetics have a place in the market and it’s a completely legitimate market. There is a need for flawless, clean, synthetic diamonds especially for the semi-conductor industry.”

- Dr. Brian Lucey, Professor of Finance at Trinity College Dublin, on the stability that the yellow metal could provide to a pension fund

-Ya'akov Almor, representative of the International Diamond Council, addressing concerns raised that man-made diamonds will not fetch the same premium, prestige and recognition as natural diamonds

(GoldCore, a gold broker, said that Irish investors own over USD $95 million [EUR €69 million] worth of gold in Zurich, Hong Kong, Singapore and Perth vaults.)

(In 2013, the US imported USD $23 billion worth of polished diamonds, up by almost 16% from 2012. For the same year, the average price of diamonds increased by 14% to USD $1,855 per carat.) www.investmentlife.com

MOST WANTED

PRE-SELFIE BEAUTY RITUAL

Selfies are not necessarily just for faces. They can also show other body parts. For women in their 30s or 40s (or even older) who accept a marriage proposal the latest advice is to avoid that selfie of your diamondstudded engagement ring. Cosmetologists suggest that you undergo a hand lift technique first. The technique makes use of an injectable anti-ageing ‘Juvaderm treatment’ to achieve the youthful look worthy of a photo posted on Facebook, Twitter, Instagram or Tumblr. The treatment gives ageing hands, often characterised by visible tendons and veins, a plumper and more youthful appearance. The USD $1,200 treatment is available in New York and lasts for nine months.

NOW IS THE TIME TO BUY A CELEBRITY HOME

BLING CHEERS We’ve all seen “marry me” proposals in movies where the ring is artfully placed in a glass of bubbly served to the soon to be swooning lady. In a new twist, Pangaea, one of Singapore’s most exclusive clubs, offers deep-pocketed club habitues the opportunity to order the ‘The Jewel of Pangaea’ cocktail, priced at a cool SGD $32,000 (USD $26,000). The cocktail includes a Triple X 1-carat diamond by Switzerland-based jeweler Mouawad. Master bartender Ethan Leslie Leong crafts the cocktail by using a mixture of gold-flecked Hennessey brandy, 1985 vintage Krug champagne and sugar. Leong’s cocktail price, however, is just half the cost of the GBP £35,000 (USD $56,700) ‘Flawless’ cocktail served during Christmas 2007 at the exclusive Club Movida in London. It used Louis XII cognac, Cristal Rose champagne, brown sugar, angostura bitters, a few flakes of 24-carat edible gold leaf and an 11-carat white diamond ring at the bottom. It’s more than three times the ‘Diamond is Forever’ Martini served in The RitzCarlton, Tokyo, listed by The Huffington Post as the previous record holder as the most expensive cocktail in the world at JPY ¥1.8 billion (USD $17,600).

ETIHAD LUXURY RESIDENCE AT 30,000 FEET 12

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Even celebrities have been hit by hard times, so some of them are selling their homes. But of course, these homes come with stellar price tags. For people who want to say that they have slept in the same bed or taken a shower in the same bathroom as their favourite stars, here are some choices available in the market. The New England style house of Honesty singer Billy Joel in Sagaponack Village is priced at USD $16.8 million. Mad Max star Mel Gibson is selling his 6-bedroom Spanish-style mansion called Lavender Hill Farm in Malibu for USD $14.5 million. Another Spanish-style house for sale is Goodbye Girl Diane Keaton’s Beverly Hills 7-bedroom and 9-bathroom mansion, priced at USD $10.5 million. For those with more modest budgets, the 6-bedroom, 10-bathroom European-style Beverly Hills home of top model Heidi Klum and husband Seal has a price tag of USD $6.9 million. A USD $12 million 4-bedroom house in Chatsworth, California is also on the market. 1960’s Crooner Frank Sinatra rented the property for almost a decade, and sublet a detached guest house to Marilyn Monroe where the actress reportedly had trysts with President John F. Kennedy.

High-net worth individuals who want to travel in style should try Middle Eastern air carrier Etihad’s newly launched service in Abu Dhabi, the aptly named ‘First Apartment’, which offers an 11.6-square metre 3-room upper deck cabin on its Etihad A380 jet. The luxury airborne accommodation has a living room, separate double bedroom, ensuite shower room and even an academytrained personal butler, travel concierge and chef. Compared to other Etihad private suites, the First Apartment is 74% larger and features leather reclining armchairs, swivel TV, mini bar, a personal vanity unit and wardrobe hidden behind a sliding door. Initially, The Residence will be available only on the Abu Dhabi-London route for USD $20,000. However, by June 2015, wealthy Australian passengers may be able to take advantage of the service, beginning with Sydney departures and followed by Melbourne. Based on the USD $20,000 ticket price for the Abu Dhabi-London route, Etihad said it would likely cost USD $40,000 for the Sydney/Melbourne-London leg.

MOST WANTED

SHOP FOR BRANDED BAGS, CHOCOLATES & WATCHES AT BASEL Although the city of Basel is more known for being one of the most important cultural centres of Switzerland, the country’s third-largest city is also a haven for luxury shoppers. After visiting Art Basel and Baselworld – the world famous watch and jewellery show, as well as the city’s famous art museums, the natural next stop would be the luxury shopping district located to the left of Rhine River, north of the art museum and east of the university. The main street is Freie Strasse where both Louis Vuitton and Bally can be found at #88, while Hermes is at #107. Still on the same road are high-end jewellery and watch outlets such as Bucherer at #40 and Gubelin at #27. Gubelin, a Swiss family-owned company established in 1854 in Luzern, is known for its coloured diamonds jewellery. For watches, the store to visit is Mezger Uhren und Juwelen at #101. Tourists in search of Swiss chocolates must stop at Confiserie Graf at Gerbergasse 3 and Charming Xocolati at Blumengasse 3, while the cake lover’s paradise is at Lackerli Huus at Gerberstrasse 57. For fine wine, stop by Basel Hotel Teufelhof’s Falstaff.

THE ULTIMATE SYMBOL OF LUXURY

Mansions and luxury cars are standard among the wealthy. But what distinguishes the plain rich from the uber rich is often ownership of a yacht. Today even yacht ownership reveals as strict hierarchy. Those on top of the yacht-owning totem pole would likely have custom-built vessels. For those in the market for luxury yachts, the company of choice is often UK-based Hunton Powerboats - known as the builders of luxury boats that have been called the “Aston Martin of the Seas.” The 3-decade old company’s latest model is the XRS43, which features a race-inspired deep V hull. Owners would enjoy a “good head height, a spacious salon, separate heads and shower, a well-appointed galley and a double berth, with teak decking, leather upholstery and bespoke design finished as standard.” Throw in a flat screen TV and DVD player, plus an integrated sound system with waterproof speakers and you’re set for the high seas. Just write a cheque for USD $587,000 when the bill arrives.

A HOT TIME IN THE DESERT

7-STAR PRICES IN ICONIC DUBAI HOTEL The Burj Al Arab Hotel holds the distinction not only of being the fourth highest building in the world but also an iconic and unique 7-star draw card for tourists. The mother of all 7-star hotels, this Dubai-based luxury destination shaped like a ship’s sail boasts rain showers and Jacuzzis in every suite - the smallest of which measures 1,820 square feet. The largest, measuring 8,400 square feet, is the Royal Suite, which features a private elevator, elaborate dining area and a private cinema. The cost for a night in the suite is a staggering USD $18,716. Not surprising for an establishment that has USD $7,250 ashtrays made of borosilicate glass highlighted by three high quality diamond studs. The hotel, designed by Atkins, a New Zealand-based architectural firm, is UAE’s iconic landmark much in the same way that the Sydney Opera House is to Australia, the Eiffel Tower to France, Big Ben to the United Kingdom and the Statue of Liberty to the US.

People normally associated the desert with cacti, sand, hot temperatures and deprivation. However, for those in search of luxury off the beaten track the Sonora Desert in Scottsdale U.S.A. may change their minds. The area boasts luxury hotels and a variety of other rest and recreation opportunities for visitors. Scottsdale is only 30 minutes drive from the Phoenix Airport. Upon arrival, visitors are offered various choices such as spas, golf courses, shopping centres, extreme nature adventures and touches of the Wild West. The choice of hotels includes a Four Seasons allowing guests to experience an adventurous desert romance or The Boulders, Waldorf Astoria’s luxury hotel. For the adventurous soul, activities include a balloon ride across the 20,000 acre McDowell Sonoran Preserve, champagne breakfasts in the desert and horseback riding. The horseback rides cost USD $50 for 1 hour with guide, USD $75 for 2 hours and USD $125 for a half day.

DRIVE HOME THIS ASTON MARTIN AND BREAK BRITAIN’S PUBLIC LIGHT ON THE SALE RECORD TUMMY, HEAVY ON BY 400% THE POCKET Hotels.com has conducted global research on the price of a club sandwich at different hotels. They even developed a Club Sandwich Index (CSI) that computed the real price of this favourite room service item – consisting of egg, lettuce, mayonnaise, chicken and bacon – in 26 capital cities, covering 750 five-, four- and three-star hotels. The most expensive is in France where a club sandwich in a five-star hotel costs an average of GBP £33.44 (USD $56.30), followed by Oslo at GBP £18.83 (USD $31.70). In contrast, the same late night treat costs only GBP £5.91 (USD $9.95) in New Delhi. However, the newly released 2014 CSI said that Geneva has displaced Paris, however the good news is that prices have come down – a Club now costs USD $32.60 in the Swiss capital and USD $29.36 in the French capital.

To mark the 100th anniversary of British carmaker Aston Martin, the company is selling via public sale the green Aston Martin DBR 1 /2, famous for winning the 1959 Le Mans 24-hour race. It holds the distinction of being the first and only British vehicle to achieve that honour. The asking price is GBP £20 million (USD $33.68 million), and if buyers agree to that price, they would trump the previous record by 400%. That record is held by a 1929 Bentley, which was sold at an auction in June for GBP £5 million (USD $8.42 million). For people with deep pockets, the purchase would be worth it because it is recognised as one of the five most valuable cars in the world. Models like it are rarely sold in the open market. For speed freaks, the other selling point of the two-seater is its record in the 1959 Le Mans race when Carroll Shelby and Roy Salvador drove it at over 160mph. www.investmentlife.com

8 OF THE BEST

he number 8 is the luckiest of all numbers. In Mandarin, it sounds similar to the word for “wealth”, while in Cantonese, it is similar to the sound of the word “fortune.” The number 8 is associated with the Earth element, combining the ideas of stability, determination and goals with the concept of monetary success. In Chinese numerology and popular culture, it is said that those who have an 8 associated with their name or birthday have strong intuition and insight, so they have the potential to uncover that which is hidden. In general, they are bestowed with a special gift of being born businessmen and are renowned for reaching their goals in a structured and logical manner.

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In western numerology, the number 8 represents balance above all. Like Chinese numerology, in the west the number 8 also represents success and prosperity - but not free. One must give generously in order to receive the benefits of the 8. From a positive angle, the 8 represents efficiency, power, strength and respect. In recognition of the role that the number eight plays in auspicious investment and business dealings. In the following pages Investment Life has identified eight sectors for investment that hold the promise of reward, the forward thinking investor. If you are considering investing in any of these sectors then please consult your financial advisor prior to making any investment decisions.

8 OF THE BEST

The number 8 is associated with the Earth element, combining the ideas of stability, determination and goals with the concept of monetary success.

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8 OF THE BEST

No. 1

Hot Wheels

for collectors, any appreciation in price is secondary – their collections are investments of the heart. The modern era also provides other focus areas for those interested in leveraging automotive investment. The growing number of cars on the road is also a source of potential investment. Companies that manufacture components, or even further upstream, those companies that provide raw materials for the manufacture of automobiles may be fertile ground for investment. In this section of Investment Life’s ‘8 of the best’, we look at the state of some of the most interesting opportunities for leveraging mankind’s fascination for all things automotive.

or many, there is no greater joy than the sight of showroom condition cars. From the ranks of those who appreciate the impeccable pedigree of some of the world’s most beautiful cars come the legions of investors in one of the most popular alternative investment categories - classic and collectible automobiles. These investments are a reflection of the lifestyle of the individual collector, and for many, they are both a joy to own and also to drive – a very visible reflection of the state of their investment portfolios and their bank accounts. The rarer and most sought after of these automobiles have been steadily growing in value over the last decade. However,

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8 OF THE BEST

Classic cars take pole position

Motoring investments shine BY ST E VE N M AL L A C H

“Investment was not the prime driver for their clients. Over 60% reported personal pleasure as the main motive.” The Knight Frank Wealth Report 2014

f the recent bout of economic unpleasantness has taught us anything, it’s that people will always be attracted to a sales pitch that promises ‘recession proof ’ investment. Of course, there’s no such thing – the vagaries of human emotion can sometimes trump even the rock hard rules governing supply and demand. Even the rarest of collectables can go in and out of fashion. For instance, elephant foot umbrella stands have not stood the test of time. However, there are certain ‘investments of passion’ that continue to show strong growth and market value, beating average returns for other investments, at least for those who can bear to part with their cherished possessions. One of these is classic cars. Investment potential has always been a secondary motivation for those buying classic automobiles. However, rare the automobile, those purchasing it will more often than not be buying the asset for reasons of the heart, rather than as a route to portfolio diversification. A recent study by global real estate advisor Knight Frank discovered that cars like Ferraris, Bugattis and Bentleys increased their value by 21% over the six months to June 2013.

Above: A 1967 Toyota 2000 GT – estimates are around USD $1,000,000 – USD $1,300,000 at auction. Below: The Mercedes Benz, once driven by racing legend Juan Manuel Fangio, fetched USD $29.7m in July 2013, a new record for any car sold at public auction.

Classic cars led the investment pack with a staggering 430% rise in value over the 10year period covered by the report, outpacing even gold, which was by far the best-performing mainstream asset with a 273% increase in value since 2003. However, warns Andrew Shirley, the Wealth Report editor “we are only talking about the very best, most desirable cars. It’s a very rarefied market.” Historic Automobile Group’s (HAGI) Top Index, which tracks “exceptional historic automobiles” also showed gains across the board. HAGI’s Dietrich Hatlapa says it isn’t just the most famous marques that have performed strongly. “One of the biggest movers in our index last year was Japan’s first supercar, a Toyota 2000 GT from the late 1960s.” Outside the world of supercars, there is also

growing interest from collectors in Group B rally cars like early model Audi Quattros, especially those with a race pedigree, Mr Hatlapa points out. Although price growth might not be in the collectible supercar league, the outlook is also positive for the wider classic car market. The above numbers may give some insight into why Mr Hatlapa’s recent book on collectible autos is called Better Than Gold: Investing In Historic Cars. “Perhaps it is better than gold,” he says, “but how do you define better? We’re not always talking about financial performance - we’re talking about something that you can drive, that puts a smile on your face. Car people would say that that’s worth rather a lot, perhaps more than a piece of gold sitting in a bank vault.” www.investmentlife.com

RENTAL RETURN

GUARANTEED BY PESTANA

SECURE • HASSLE-FREE • ENJOYABLE • PROFITABLE

PANORAMIC SEA VIEWS • On the ‘”Praia dos 3 irmãos” with golden sands reaching the Ria de Alvor. • Along the pitoresque fishing village of Alvor. • Studios and one bed apartments totally furnished. • Luxury penthouse apartments with unbeatable views. • Indoor heated pool, gym and spa facilities. • Hospitality services with quality guaranteed by Pestana group. • Less than 10 km from 4 of the 6 Pestana golf courses in Portugal.

A GREAT INVESTMENT OR AN OPPORTUNITY TO OWN A BEACHSIDE APARTMENT FOR MORE INFORMATION CONTACT US: Tel No: (+65) 6534 9390 Email: info@investmentlife.com

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8 OF THE BEST

Tesla’s Triumph BY S T E VE MAL L A C H

n a counter intuitive move that left many traditional automakers stunned, Tesla’s founder and CEO Elon Musk announced in mid-June that the company would no longer be enforcing the patents on its zero emission motor vehicles. According to the billionaire-founder, “Tesla Motors was created to accelerate the advent

of sustainable transport. If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal. Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.” He also stated that Tesla’s true competi-

Tesla moves from premium / niche to volume player 600,000 500,000

Roaster Model S Model X Gen 3

400,000

Powertrain

300,000 200,000 100,000

2013 SOURCE

Company data, Morgan Stanley Research

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2015

2020

2025

tion was not the “the small trickle of non-Tesla electric cars being produced but rather the enormous flood of gasoline cars pouring out of the world’s factories every day.” Musk pointed out that annual new vehicle production is approaching 100 million per year, and that the global fleet is approximately 2 billion cars. With these numbers, it is impossible for Tesla to build electric cars fast enough to address the carbon crisis. According to Musk, “By the same token, it means the market is enormous.” Tesla Motors aims to create a transportation product that would not need regular scheduled maintenance and is causing a rising tide of disquiet among car dealers and oil companies. Car dealer associations have lobbied against the electric car manufacturer and its direct-sales model, ending with New Jersey banning Tesla stores in the State. But the story does not end there for potential New Jersey Tesla buyers. In mid-June 2014, the New Jersey Assembly voted seventy-seven to zero, with one abstention: Tesla should be allowed to bypass the dealer system in the state. Sales in New Jersey of Tesla’s USD $70,000 Model S were in the hundreds prior to this vote. However, economists believe that it is

8 OF THE BEST

Classic Style Will cars like the electric Tesla Roadster (modelled after the Lotus Elise) become the collectables of the future?

not the sales themselves that are striking fear into the hearts of oil executives and car dealers, but rather the fact that if Musk achieves his stated aims, turnover from regularly scheduled maintenance would plummet. At the core of the fear is the fact that Tesla’s vehicles are basically ‘an app on four wheels.' The core of the technology in Tesla’s is computer software. The internet-connected cars are designed to self-diagnose any issues with the vehicles, and when possible, fix them on their own. The electric vehicles can also download updates and software fixes. Add to this the fact that without an internal combustion engine; there’s not much that can

go wrong or would need to be fixed in the first place. Tesla Motors has stated that these features will make visits to an auto mechanic a rarity. In fact, the professional who would be most likely to perform maintenance would be a software engineer, not a man with a wrench. A very significant portion of the income for oil companies and car dealers are repairs. It’s apparent that car dealers and big oil are worried by Elon Musk’s company, after all it’s difficult to charge for an oil change when there is no oil to be changed. Oil companies are expected to lose a lot of business and possibly become obsolete if the

1Q14e vs Last Year ($ mm)

Unit Deliveries

1Q14e

1Q13

% Change

28.9% -100.0% 00% 32.0%

6,918 0 450 6,468

5,365 15 450 4,900

653 0 16 627 10

562 3 14 538 7

474

465

179 27.5%

96 17.1%

110

4 0.7%

(6) (1.0%)

Adjusted OP Margin

31 4.7%

9 1.7%

Interest Expense

1763.2%

Net Interest Income

17006.7%

Other Income (Expense), Net Pre-tax Income

4 0.0%

1 21.6%

459.5% -100.0%

626.5%

Roadster Powertrain Model S

Group Revenue Roadster Powertrain Model S Development Services

Cost of Sales Gross Profit Gross Margin

SG&A R&D Operating Profit Operating Margin

Stock Based Compensation Adj. Operating Profit

Effective Tax Rate

Net Income Net Income (excl. Stock Comp)

16.3% -100.0% 10.0% 16.6% 51.8% 1.8% 86.3% 10.3% 133.8% 18.5% 0.0% 1.7% 76.6% 230.9% 3.0%

-100.0%

147.7%

ModelWare EPS

0.03

0.00

544.0%

EPS (excl. Stock Comp)

0.22

0.12

SOURCE

Company data, Morgan Stanley Research estimates

73.9%

batteries that power vehicles become as efficient as petroleum-powered engines. In fact, this may already be happening. According to breitbart.com an Israeli company, Phinergy, in conjunction with the aluminum manufacturer, Alcoa Canada, has introduced an electric car that is capable of traveling over 1,000 miles on one fully charged of the battery. The vehicle accomplishes this by utilising a combination of lithium-ion and aluminum-air storage technologies. Phinergy’s aluminum-air battery weighs 100 kilogrammes (220 pounds), and can power a car to travel up to 3,000 kilometres (over 1,860 miles). Reviews for the vehicles made by Tesla Motors are not helping the developing uneasiness on car dealer shop floors and in oil company boardrooms. Car and Driver magazine stated that “our few miles in the Model S revealed a vehicle that would meet a BMW owner’s definition of a sports sedan.” And it’s not just motoring journalists who are bullish - Morgan Stanley analysts Adam Jonas, Ravi Shanker and Paresh Jain—who are among the most bullish of all when it comes to Tesla—say the automaker is “the most important car company in the world.” Consumer Reports named the Tesla Model S the country’s best overall car. Musk argued in a press conference that no matter how hard car dealers and oil companies lobby their governments, the consumers’ desire for a simpler, cheaper, and more efficient vehicle will inevitably win out. He went on to state that the goal of Tesla Motors is to not make a profit on service, as opposed to traditional car dealers. But Tesla’s not resting on its eco-friendly laurels. The company sold 22,477 vehicles last year – a figure which is likely to rise by 50% in 2014 as Tesla has targeted 35,000 sales and a production run rate of 800 per week by year end. If partners Panasonic can get the batteries to Tesla, it’s possible that next year will see even further growth. There are already more than 10,000 reservations for the upcoming Model X crossover vehicle. It’s almost a given that the excitement around a second Tesla vehicle will bring in new customers. Tesla NASDAQ: TSLA

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Inside track

Automotive trends to watch

iven that the number of cars on the road today exceeds 1 billion by a considerable number and is growing exponentially, it stands to reason that there is an enormous opportunity for investment in automotive technology. The key to investing in this sector may be the identification of the trends that will be shaping the cars of today (and tomorrow). According to a recent Mckinsey Report, “The road to 2020 and beyond,” the global automotive industry is about to enter a period of wide-ranging and transformative change, driven by new technologies and ever greater demands in environmental legislation. The report also states that by 2020, global profits for automotive OEMs are expected to rise by almost 50%. The new profits will come mainly from growth in emerging markets and, to a lesser extent, the US. Europe, Japan, and South Korea will be stagnant in terms of profit growth. At a press conference hosted by the World Car Awards (WCA) at the New York International Auto Show on the 17th of April 2014, an expert panel comprising 69 of the world’s top automotive journalists, weighed in on today’s top global trends in the automotive industry. The key findings included the fact that efficiency, lightweight materials, design, connectivity and new energy cars are the most important media trends of 2014.

Aluminum Alert Lightweight materials were under the radar two years ago, however in 2014, the materials 22

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moved into the spotlight driven by interest in engine downsizing and the use of aluminium. The Ford F150 and BMW i3 have helped in bringing materials such as aluminium and carbon fibre to the mass market as affordable solutions for weight-saving. According to the world's largest aluminum producers, the long-term outlook for aluminum is positive. The main growth markets for the metal are the BRIC (Brazil, Russia, India and China) countries, but demand from Western economies is expected to rise as well. The automotive and aerospace industries are seen as the main catalysts for new growth as manufacturers seek to reduce fuel consumption by creating lighter weight vehicles. Companies like Alcoa Inc. (NYSE:AA) may see increasing investor attention in the coming years on the back of increased aluminium component demand.

Battery Power Plug-in hybrids are currently seen as the most promising electric drivetrain option moving forward, but the onset of premium electric vehicles – driven by the BMW i3 and Tesla Model S – are bringing electric vehicles back into the spotlight. Stories written about these two models account for over 40% of all media coverage on electric vehicles. The world’s biggest chemical maker BASF SE (Xetra: BAS) sees the potential of investing in the battery space. The German company is betting customers will flock to electric cars, using its chemical products to create a battery that will enable vehicles to run longer. BASF, with an annual 1.7 billioneuro (USD $2.3 billion) research budget, has made battery materials one of 10 areas it’s targeting for growth.

8 OF THE BEST

No. 2

Hot Property

detail, however, in this edition of Investment Life, we take a closer look at some of the region's hottest property markets. These markets are in countries from Southeast Asia to Mongolia, where changing demographics and racing economies are driving renewed investor interest. For those with deep pockets and a yearning for adventure, investing in landed or condo property might not meet their very specific requirements. For those investors in search of something quite different, we examine the ultimate beach front property – a villa on one of the last unspoiled island archipelagos in the world.

f there is a single investment class that continues to perform over the long term and captivate millions of investors across the globe, it is property. In Southeast Asia and in fact the wider Asian region, new investors from the fast-growing regional economies and the cashflush Chinese middle and upper classes are driving property prices ever higher. Aside from the traditional European investment destinations of London and other capital cities, investors are also looking at opportunities closer to home. Investment Life’s sister publication – Property Life looks at global and regional property in great

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8 OF THE BEST

Property Investment

Southeast Asia Hotspots BY S H I VAM G O Y A L

any Asian property markets are seeing tremendous growth, most notably Southeast Asian countries, which have seen an influx of investors seeking high returns on affordable property purchases. While Singapore investors keep a wary eye on the market due to pressures on rental returns, other countries are experiencing their strongest markets in several years, including Malaysia, Indonesia, Thailand and the Philippines.

residents may not own land but may purchase apartments. The minimum buying price is around 1.5 billion Rupiah, or SGD $158,000 (USD $127,324) which might only be enough for a 50-sqm apartment, while transaction costs in Jakarta are higher than any other Southeast Asian hotspot. In 2014, the MINT countries (Mexico, Indonesia, Nigeria, Turkey) will surpass the BRICSs (Brazil, Russia, India, China) in the world race for millionaires, according to a new study by SPEAR’s magazine and WealthInsight, a London-based research service. In the list of countries set to create the most millionaires this year, the MINTs are posed to rank within the top eight, WealthInsight said. The list is topped by Indonesia, which is expected to see a 22% increase in the number of millionaires this year, a development which bodes well for property investors.

Indonesia: “The outstanding performer however continues to be Jakarta, which has seen prices rise by 27.2% year-on-year.” (Knight Frank Asia Pacific Residential Review November 2013)

The two most sought-after markets in Indonesia are Jakarta and Bali, both of which have exceeded market expectations in the last year. According to Knight Frank’s 2014 Wealth Report, both Indonesian hotspots occupy two of the top three slots of the Prime International Residential Index (PIRI), a comprehensive measurement of performance of the world’s top markets. Jakarta finished first in the world with an annual growth of 38% in prime residential property values, while Bali sits third with a growth of 22%. Currently, Indonesian hotspots show strong rental returns with a 9.6% rental yield for one-bedroom apartments and 7% for larger apartments in Jakarta, while Bali shows returns of about 5%, according to the Global Property Guide. Restrictions on foreign investors may be a barrier to entry for some in Indonesia. Non-

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Malaysia: “The Johor Bahru property market is expected to remain firm in the medium term with more Malaysian and Singaporeanbased developers expected to venture into the Iskandar region.” (Knight Frank Malaysia Real Estate Highlights H2 2013) Penang Johor and Malaysia’s capital city of Kuala Lumpur remain popular investment hotspots. Investors remain bullish on Malaysia, in part due to the economic efficiency of the country which boasts a 5.5% GDP growth forecast for the upcoming year, as well as the growing yields that provide higher cash-on-cash returns for investors. The financing options for expat investors are also favourable as, according to property consultancy Knight Frank, mortgage terms are flexible, allowing non-residents to borrow up to 70% of the property’s value. This is very attractive to many investors – especially when compared to the country’s Southeast Asian counterparts, for instance Singapore which typically only allows 40% to 60%. One development that was anticipated to cool investor interest in Malaysia was the increase in the minimum price foreigners must spend on property from RM500,000 to RM1million, along with the 2% levy on foreign investors in Johor. However, these cooling measures haven’t swayed foreigners intent to invest. A prime example of the type of property that is attracting attention is the 624-unit EcoBotanic development just west of Johor, priced between RM900,000 and RM2million, which sold out in six hours during H2 2013. The Malaysia, “My Second Home” (MMh2), programme also attracts widespread interest from non-residents. The programme, which offers a 10-year renewable visa to expat investors who purchase property at a minimum of RM1million, has made Malaysia one of the most popular retirement destinations in the world.

Thailand: “Statistics indicate that the Pattaya condominium market is set to continue growing in 2014 and in the years ahead.” (Raimon Land PLC) Thailand’s recent political unrest may have unsettled potential Bangkok property investors, but the situation has had little to no effect on the stable property markets of Phuket and Pattaya. Both locations are seeing soaring investment due to a high number of current and future projects. Examples include Centrio Condominium Phuket, which has a 7% Guaranteed Rental Return (GRR) for two years and is on track to be completed in 2015, Meanwhile, Pattaya is attracting attention due to several luxury beachfront developments such as the Zire Wongamat project, which is comprised of 450 units along Wongamat beach, selling for 125,000 to 150,000 baht per square metre, according to Raimond Land. Pattaya is also developing other urban areas within the city, with approximately 25,000 new units in non-beachfront areas expected in the next three years. Under Thai law, foreigners are not allowed to own land. However, foreign nationals do have the right to the ownership of buildings distinct from the land such as condominiums. Foreign nationals may own a unit in a registered condominium or a registered leasehold of up to 30 years for all types of titled land or buildings. Foreign nationals may not own either freehold land or more than 49% of the shares in a Thai company that owns freehold land.

Philippines: “The Philippine property market remains vibrant, with strong economic growth boosted by robust domestic consumption and increases in government spending.” (Global Property Guide September 2013) With strong capital inflows from citizens working overseas, a young demographic and increasing levels of disposable income, along with a quality selection of the most affordable property in all of Asia, it is no wonder that investors have deemed the Philippines one of Southeast Asia’s most sought-after regions. Manila, the capital city, was also rated as one of the top five investment markets in the Asia-Pacific region, according to Emerging Trends in Real Estate® Asia Pacific 2014. This was largely due to the high rental returns in Manila, where investors benefit from a 10% yield on 80 sqm. units and 7.9% on larger condominiums, according to Global Property Guide. In addition, The Gross Domestic Product (GDP) of the Philippines has been on a constant incline since 2002, growing 7.2% in 2013 alone, giving foreigners the economic stability they require when investing their money. Non-residents may not own property in a condominium that is over 40% foreignowned in the Philippines. In addition, many taxes, including the 1.5% document tax, 0.5% transfer tax and 10% Value Added Tax (VAT) are levied on non-residents. www.investmentlife.com

8 OF THE BEST

Inve sti n g i n t he

Conflict Islands

he paradise of the Conflict Islands is attracting interest from investors across Southeast Asia and even further afield as owner Ian Gowrie-Smith markets the island group to investors interested in being in a select group who will be part of the development of a luxury eco retreat, consisting of private villas in this unspoiled paradise. The island Group, located at 10° 46’ 0’ S, 151° 47’ 0’ E, is situated on the Coral Sea, east of Alotau in the Milne Bay province of Papua New Guinea (PNG), is literally wonderful! Each visitor is immediately filled with a sense of wonder at the pristine white sands, unspoilt natural vistas as well as unique flora and fauna. The tropical atoll is within the band either side of the equator that rarely experiences cyclones

and is in an area recognised for its exceptional beauty and marine biodiversity - truly one of the last remaining unspoilt and untouched regions in the world. The Conflicts are currently privately owned and used for personal and private holiday experiences. Now investors are being offered a unique investment opportunity to own part of, and participate in the development of a complete freehold atoll of 21 pristine islands. Investors are being sought to secure their own piece of paradise by investing in one of only three known complete freehold atolls available in the region. The Conflict Islands’ atoll consists of numerous natural lagoons and coral reefs forming a unique chain of 21 islands. The area features world class diving, a wealth of fishing

locations and pristine beaches. However, this bland statement does not convey the joy of exploring what must be one of the most untouched and tropical islands and ocean environments in the world. Currently, the main island, Panasesa, has a boutique resort, including club house facilities and accommodation for up to 12 guests in beachfront bungalows. An airstrip is located on the island and can be used for charter flights from Port Moresby PNG. Guests can also travel by private boat from the nearest city, Alotau. International entrepreneur Ian GowrieSmith owns the Conflict Islands Group under freehold and plans to open up the islands to investors who are passionate about protecting the environment of the idyllic location. Plans include expanding the infrastructure on Panasesa and neighbouring islands, including the addition of a new airstrip capable of accommodating private jets, as well as new marina berths and further expansion of the surrounding islands - which are currently uninhabited. “My vision is to establish an exclusive community of like-minded individuals who wish to preserve and enjoy the islands for future generations, as part of their legacy. Potential investors or purchasers are invited to participate in the conservation and protection and enjoyment of these magnificent islands,” said Ian Gowrie-Smith. “Environmental con-

PANASESA

IRAI

PANARAKUUM

AROROA

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Beach Basic Although the accommodation on Panasesa is currently basic, that is set to change when the first of the private villas are built.

sciousness in regard to the design and operation is a must, as will be the conservation of the islands natural beauty and protection of species.” Conservation and protection will guide the development of the atoll, as they must. A Rapid Biodiversity Assessment that was conducted during 1997 showed that the reefs surrounding the islands have extensive areas of coral coverage and a very high species diversity with an average of 220 species of fish per site (many new to science). Although the writer is no biodiversity expert, research indicates that this number compares very favourably (and often far exceeds) the number of species found during a recent visual census of the Great Barrier Reef. The Conflict Islands also play host to Green, Loggerhead and Hawksbill Turtles nesting and breeding sites and provide the ideal nesting habitat for migratory marine and shore birds, as well as for all giant clam species. It is anticipated that investment opportunities will include the shared ownership and development of the atoll as a whole, or

Natures, Playground World-class diving and an abundance of water sport opportunities make the Conflict Islands a paradise for nature lovers.

in purchasing individual islands or plots for private luxury residences. Ian Gowrie-Smith hopes that investors who share a passion for nature and ecology can come together to create their own unique island sanctuary, while at the same time contributing to the protection and understanding of the environment of this unique private atoll. The exclusive private residence community will be similar to that created at Mustique Island, where private luxury villas are owned by the likes of Mick Jagger, David Bowie, US designer Tommy Hilfiger and a host of others. Stuart Huggett, managing director of Architects Pacific who is tasked with exploring initial concepts for the eco sensitive development of the atoll, was excited by the possibilities of the island chain, saying, “We believe that the Conflict Islands present a unique opportunity. Freehold ownership has protected the pristine marine environment for nearly 100 years. This same freehold ownership, shared by a limited number of individuals may well hold the key to ensuring this outstanding environment remains protected into the future.”

During this writer's time on the Conflict Islands, he missed out on diving with one of the numerous Whale Sharks that frequent the area. However, leaping into an azure Coral Sea from the deck of a gently rocking boat to experience curiously circling Manta Rays somewhat made up for that lack, as did the numerous reef fish within easy reach of both diver and snorkeler. The fishing possibilities defy description. About 25 years ago, Douglas Adams and Mark Carwardine penned and published a book titled Last Chance to See which was a sobering look at how fast some of the world’s most impressive wildlife is disappearing. The threats many species face include the degradation of the natural habitats that are found in some of the most beautiful places on Earth. In the Conflict Islands, investors have a chance to enjoy an environment and lifestyle that is quickly becoming rare. Under the stewardship of Ian Gowrie-Smith and his team, it is a certainty that this environment will be protected and nurtured. Savvy investors have a unique opportunity in the Conflicts; this is an investment well worth looking at for nature lovers and those in search of a lifestyle that is fast becoming itself endangered.

Investing in the Asian Wolf Economy

Mongolia

nvestors familiar with the extremely competitive and developed economies of the “Four Asian Tigers” of Hong Kong, Singapore, South Korea and Taiwan understand the singular investment opportunities that abounded during the rapid growth periods in the latter third of the 20th century. Recent developments have shown that many other developing countries have used these examples as a role model in their quest to become advanced, high income economies.

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BY A LBERT FON T EN OT

Many industry experts have forecast that the country of Mongolia will have one of the world’s fastest-growing economies over the next five to ten years. Because of a favourable legal system and a highly attractive tax regime, Mongolia seems uniquely positioned as an “Asian Wolf ” economy. Foreign investors are both welcomed and encouraged, and there are a number of suitable sectors that should provide an excellent return on any initial capital investment.

In 2011, Mongolia had a growth rate of an astounding 17.5%. In 2013, that rate slowed to a more modest 11.7%, and foreign investment fell sharply – 54% in 2013 and 28% in the first two months of 2014. However, at the end of April of this year, Mongolian Prime Minister Altankhuyag Norov unveiled an aggressive and innovative 50-point, 100-day “action plan” designed to provide stimulus to his country’s flagged economy. According to the Ministry of Economic Development,

8 OF THE BEST

Explosive Growth Mongolia is forecast to have one of the fastest growing economies in the world over the next 5 – 10 years.

economic growth in Mongolia 2013-2016 is expected to rebound to around 16.2%.

Mining Mongolia is a very mineral-rich country, and the successful exploitation of those resources is key to the nation’s economic growth and future success. In April of this year, an agreement was signed between the state-owned Chinese mining group Shenhua and a number of Mongolian firms, both private and government-owned, that will build and expand a cross-border rail link to serve the Tavan Tolgoi coalfield. Tavan Tolgoi is one of the largest untapped coal deposits in the world, containing an estimated resource of almost 6 1/2 billion tonnes. This joint venture only further serves to support an agreement signed last October, when Shenhua committed to buying 1 billion tonnes of coal from Mongolia over the next 20 years. In May of 2013, a contract worth USD $483 million was awarded to the South Korean firm Samsung C & T to build a railway to move coal from the Ukhaa Khudag coking coal mine. In addition to coal, Mongolia has significant deposits of copper, molybdenum, silver and gold. Production is expected to skyrocket because in 2013, the Oyu Tolgoi gold and copper mine opened. Some industry experts expect that when the mine becomes fully operational in 2019, it may generate one-third of the entire economy of Mongolia. In April of this year, Prime Minister Altankhuyag publicly expressed his support of project financing to restart construction on the second phase of the mine, and consequently, shares of Turquoise Hill Resources Ltd., the Vancouver-based mining company that holds a majority share in the venture, hit a recent high.

Real Estate The double-digit economic growth in Mongolia is expected to last for at least the medium-term, and overall real income increased by 20% from 2008 to 2012. This means that a large percentage of Mongolian society will move from low-to middle-class income status,

and it creates an emergent class of wealthy to extremely wealthy Mongolians. Furthermore, greatly increased urbanisation is expected to occur. Currently, the capital city of Ulaanbaatar contains roughly 46% of the Mongolian population. Within the next 5 to 6 years, that number is expected to grow to 54%. The geographic layout of the city greatly restricts where those additional inhabitants might live. These combined factors – economic growth, increased income, a burgeoning population and limited availability - are expected to drive an increased demand for property within the capital specifically, and in the country overall. This increased demand, in an essentially captive situation, creates an exciting and attractive investment opportunity, because of high potential rental yields and extremely strong capital appreciation. Land values, rental growth, and sale prices are projected to increase significantly over at least the next half decade. Currently, residential properties in the mid-range to luxury sector rent for approximately USD $14 per square metre (about MNT 20,000 Mongolian tugrugs), but that amount is expected to rapidly appreciate by next year. By 2018, expectations are high that those same properties will rent for at least quadruple that price, or USD $56. Very significantly, the Mongolian government has recently implemented a subsidised mortgage policy which will grant qualified buyers apartment loans with only an approximate 8% interest rate with a down payment of 10% to 30%. This combination, in effect, cuts the cost of financing in half from what it was in the not-too-distant past.

Construction The increased demand for suitable residential accommodations and business properties will inevitably lead to increased demand for new construction and materials. Certain materials, such as glass and paint, are entirely imported, while other materials, such as roofing materials, cement, water pipe, and plumbing fixtures are majority-imported. For example, up to 80% of Mongolia’s cement needs are met by imports from China. Increased demand during the peak building months, June through September, can create logistical logjams that can cyclically push pricing upwards across the market. Because the need is imminent and the supply is short during those periods, large construction companies and mining corporations can and will

Increase in rental income by 2018

REAL ESTATE

6.5

billion

Tonnes of Coal in the Tavan Tolgoi deposit

MINING

80% Of Mongolia’s cement comes from China

CONSTRUCTION pay premium prices for building materials. For example, in the summer of 2012, the price for the most common construction materials rose by an average of over 70%. Some, such as roofing paper and lime imported from the Russian Federation experienced an increase of almost 300%. The government of Mongolia has publicly recognised the fact that its economic emergence and expected rise as an “Asian Wolf ” economy is tied to foreign investment and what it calls Public Private Partnerships and Concessions. Projected over the next several decades are a number of large-scale infrastructure projects such as roads, railways, power plant, and airports. The overall environment is one of an imminent economic boom in which rapid and perhaps stratospheric growth is not only possible, but likely. www.investmentlife.com

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No. 3

Under the Hammer

These purchases are not only a welcome addition to the balance sheet but are also a reflection of the individual’s tastes, particular interests and emotional attachment to a particular form of asset, aside from their undoubted monetary value. In this section of Investment Life’s ‘8 of the best', we take a look at some of the most recent auctions that have taken place across the world, including a recent Hong Kong auction which saw some contemporary art pieces reach record prices – testament to the increasing Asian interest in alternative investments.

or many investors, looking for alternative assets to diversify their portfolios means keeping track of investments that are regularly offered by auction houses across the world. These investments of the heart as they are known, can range from fine art, to watches and other collectables. Many of these investments have shown sharp increases in value over the past decade – even in the face of a global recession. However, the motivation behind these purchases remains their rarity and in many cases their beauty.

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Clockwise from top left: Kazuo Shiraga, Jikkai-zu Gaki Chikushokai, circa 1976, alkyd colour on paper laid on board, Allora & Calzadilla, Solar Catastrophe, 2011, broken solar cells on canvas, Zeng Fanzhi, Portrait No.1, 2004, oil on canvas, Georges Mathieu, L’Exil du Ciel, 1975, oil on canvas. © IMAGES COURTESY SOTHEBY’S FRANCE / ART DIGITAL STUDIO

Auction Action

A roundup of the latest action on alternative investments offered by some of the world’s leading auction houses.

hristie’s took top honours in 2013, becoming the leading global auction house for the second year running, selling USD $800m more at auction than Sotheby’s. In almost simultaneous Q1 2014 announcements, Christie’s revealed that its 2013 auction revenue for the year was USD $5.9bn, while Sotheby’s announced an equivalent USD $5.1bn total. Sales in Asia—where most of the two

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houses’ revenues are made in Hong Kong, but where both also held their first mainland China auctions in 2013—improved throughout, after falling during 2012. Christie’s reported a total USD $977.5m sales in Asia in 2013, up from USD $705.4m in 2012; Sotheby’s made a total of USD $931.4m, up more than a third from 2012 (USD $592.9m). China’s leading auction houses, Poly Auction and China Guardian, also reported improved sales for 2013, after auction revenue had halved in the previous year. At

Beijing Poly Auction, revenues from auction were up from RMB 6.1bn (USD $965m) in 2012 to RMB 7.9bn (USD $1.3bn) in 2013, while at China Guardian these were up from RMB 5.2bn (USD $820m) to RMB 6.6bn (USD $1bn).

Record set for Egyptian Antiquities The Christie’s Exceptional Sale evening auction in London on July 10 realised GBP £31,048,500 (USD $53,186,081), mark-

8 OF THE BEST

Georges Mathieu and Vik Muniz, among others. Western works made up six of the top ten works sold, which includes Magnetron Series: Pancho by James Turrell, the first light installation by the artist to be auctioned in Asia. Special themed sections of contemporary Asian art also performed strongly, among which every work from the Japanese Gutai group found a buyer. The market responded well to art pieces in diverse media, ranging from installation, sculpture, painting to an electronic guitar, and the enthusiasm further testifies to the broadening tastes of Asian collectors.”

ing the highest total for any various-owner sale of classical decorative arts and breaking the previous record established by Christie’s Exceptional Sale in 2011 at GBP £28.7million. The top price was paid for Sekhemka, an exceptional Egyptian painted limestone statue dating to the Old Kingdom, Late Dynasty 5, circa 2400-2300 B.C., probably from Saqqara in Lower Egypt, which realised GBP £15,762,500 (USD $27,001,163) (estimate: GBP £4,000,000-6,000,000) setting a world record price at auction for an ancient Egyptian work of art.

Asian Interest in Contemporary Art on the Rise Asia has seen an exponential growth in art collecting over the past decade. In recent years, increasingly sophisticated collectors have looked beyond art from their home countries and begun collecting internationally. Just as contemporary art practice today transcends national borders, so does collecting. The success of Boundless: Contemporary Art, Sotheby’s unique auction in Asia, was testimony to this increase in the scope of collector interest. The third installment of Boundless, held during June in Hong Kong, offered a diverse group of 82 works in a carefully curated sale. Isaure de Viel Castel, head of Mid-Season Sales, Contemporary and Modern, for Sotheby’s, said, “the Boundless sale brings the latest trends in Contemporary Art directly to both the new generation of Asian collectors who follow those trends, as well as established collectors to whom these categories are new. With each Boundless sale there has been an emphasis on a featured section. In the past it has been design furniture; this year, it is photography and installation art.” On the Asian art slate, the most anticipated lots were masterpieces by Zhang Xiaogang and Zeng Fanzhi, the top two names in the Chinese contemporary art world. Zhang’s Portrait (1999) has been in a French private collection for more than a decade; Boundless marked the painting’s first public appearance back in Asia. The cover lot, Allora & Calzadilla’s Solar Catastrophe, was a major highlight of the auction. Through a wide-ranging body of work in various media, the artistic duo, who represented the United States at the 2011 Venice Bi-

Interest in Tribal Art Growing

Fang Mabea figure Sotheby’s Paris African and Oceanic Art Height. 67 cm; 26 1/3 in Estimation: EUR €2,500,000 – 3,500,000 / USD $3,450,000 – 4,830,000 SOLD: EUR €4,353,500 © IMAGE COURTESY SOTHEBY’S HONG KONG

ennale, expose and scrutinise areas of political tension in the public sphere. In the lot offered during the auction, solar cells – a seemingly ubiquitous symbol of environmental progress today – are broken into mere decorative elements on canvas. Commenting on the auction, Isaure de Viel Castel, head of Mid-Season Sales, Contemporary & Modern, Fine Art Department, said, “We saw strong interests from collectors across Asia for meticulously selected Western contemporary works by Allora & Calzadilla,

In June 2014, Sotheby’s in Paris achieved a world record auction price of a little under GBP £3.5million for a carved wooden Fang Mabea figure. This is the latest and most notable instance of a growing investor interest in tribal art. Collectors have a wide range of objects to choose from. Ceremonial masks and stylised figural (human and animal) carvings are the most sought-after, but there are also shields, spears and drums, pots, bowls and spoons, chairs, stools, tables and even doors sourced from as far afield as Mali and Zanzibar in Africa. Tribal Art from Asia, Oceania and the Americas is also becoming highly collectable. But the golden rule for collecting art of this type remains Caveat Emptor (‘let the buyer beware’), there is a significant difference in desirability and value between real Tribal Art and that made for the tourist trade. Genuine tribal artefacts were originally made and used for specific tribal functions, whether everyday or ceremonial. For the layman, differentiating tourist art from genuine artefacts can be exceptionally difficult. As with all collectables, it is extremely important that the collector or investor deal with a reputable dealer or auction house. As with most collectables, the value of tribal art is determined by provenance, rarity and condition. Provenance, as demonstrated at the Sotheby’s auction, is probably the most important factor influencing value. Some experts calculate that the difference in price between a piece attributable to a specific people, and/or from a well-known collector or collection, and a non-attributable/anonymous equivalent can be as much as 1,000%. www.investmentlife.com

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No. 4

Digging Deep

s the world continues to grow in both numbers of human beings and levels of industrialisation, it is inevitable that the demand for natural resources and commodities will increase. Although the global recession curbed the industrialised world’s appetite for energy, the easing of the financial crisis and China’s continued growth has seen demand steadily increasing. For investors, both commodities and energy are worthy of attention. The trends that affect these sectors are not only interesting but are also potentially lucrative. Elsewhere in this issue, we will examine the impact of clean energy and how both maturing and emergent technology has the potential to disrupt the energy sector. However, in this section of Investment Life’s ‘8 of the Best’, we’re going underground to take a look at some of the alternative commodity sectors that are a little off the beaten track, as well as presenting guest comment on an old favourite – gold.

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8 OF THE BEST

Going Underground

nergy is one of the fastest growing global investment sectors, and those who might wish to take advantage of this growth may have to think a little laterally. In this article, Investment Life takes a look at some of the most exciting technologies, mining and extraction companies in the world.

ers and explosives. Its larger chemical portfolios include polymers and solvents, and their intermediates, waxes, phenolics and nitrogenous products.

Oil from Coal

A different Coal

Every day, 120,000 metric tonnes of coal are transported to a plant at Secunda, near Johannesburg, South Africa where they are converted into 150,000 barrels of oil a day. The plant belongs to one of South Africa’s success stories, Sasol, the parastatal company that invented and perfected the technology for making petrol and diesel from coal. Coal-to-liquid (CTL) technology makes economic sense only in a world of high oil prices: synthetic fuels become economically viable when oil prices reach USD $50 a barrel. Today, oil prices hover at USD $70-a barrel, so the demand for CTL technology is booming. Nowadays - amid soaring oil prices and instability in the Middle East - the Sasol petrochemicals group is being courted by countries across the globe. Sasol is now the world’s biggest producer of synthetic fuel, having branched out to gas-to-liquid technology too. Its end products include plastics, fertilis-

With steel production ramping up due to the recovering global economy investment in metallurgical or steel-making coal industry may be worth looking at. Producers of this type of coal are not affected by green legislation or restrictions on the thermal or electricity-producing coal industry. Europe seems set to further reduce a steel-making decline during 2014 which may have a positive effect on the profits of companies active in producing steel-making coal. In the United States, companies like Alpha Natural Resources (NYSE: ANR) are active in this area.

SASOL is listed in the Johannesburg Stock Exchange (JSE: SOL) and the New York Stock Exchange (NYSE: SSL).

Shale Oil The global impact of shale oil could revolutionise the world’s energy markets over the next couple of decades, resulting in significantly lower oil prices, higher global GDP, changing geopolitics and shifting business models for oil and gas companies, according to new analysis from PwC.

The oil from shale boom is driving riches from Texas to North Dakota and Montana. It is widely understood that the key to U.S. energy independence will be the ability to drive shale oil production higher. Even the “cartel” OPEC realises the impact of shale oil on its operations. In a report undertaken by OPEC in 2013, the cartel estimates a decline in its market share as shale oil production rises. (Source: Lawler, A., “OPEC to lose market share to shale oil in 2014,” Yahoo! Finance web site, July 10, 2013.) However, the optimism around U.S. shale oil should be tempered by the latest findings of the International Energy Agency which recently released a report saying “... output from North America plateaus [from around 2020] and then falls back from the mid2020s onwards.” This is in direct contradiction from the message from many industry pundits who had been talking about a ‘100 year supply’ of oil from shale. The largest shale oil producer in the Bakken oil fields is Continental Resources, Inc. (NYSE:CLR). Another player is Kodiak Oil & Gas Corp. (NYSE:KOG). The company has about 154,000 net acres of land in North Dakota. Disclaimer: The views expressed in this article should not be taken as investment advice. Always consult an investment professional before making investment decisions. www.investmentlife.com

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Gold…

now what do you do?

indsight is 20/20, as they say. If you were savvy enough to buy gold back in 2005, when all the naysayers said there was no reason to buy gold at USD $325/ ounce, I commend you. It was easy to buy at that price, as all you really had was “opportunity cost.” At worst, you had an asset that would reward patience and a longterm view. At USD $1,250 an ounce, you have a different challenge: buy, sell or hold.

Let’s Look at the Factors Affecting the Price: Inflation: The classic argument to buy gold is as an inflation hedge. With official numbers at an average of 2% across the globe (of course there are outliers, the developing world springs to mind), there’s not a lot of ammunition there to justify a buy decision. Unemployment is still a global challenge, with correspondingly low wage growth. So the argument will not get a lot of support from fans of a bullish gold mindset. I will argue that once inflation figures begin to trend upwards (and they inevitably will), gold prices would have already built in the inflation trend. In addition, if you look at the historic highs of gold on an inflation-adjusted basis, many will argue for much higher prices – some pundits believe that the precious metal should

be priced as high as USD $5,000 an ounce or more. Again, there are many ways to manipulate data. I don’t really buy the dramatic upside argument.

the average AISC cost of mines today ranges from USD $1,000 to USD $1200 an ounce. Personally, I believe the real cost is much lower.

Production Cost: Back in 1975-1980 during the “bull market,” the stated production cost was an average of USD $350/ounce. In fact, some mines had a marginal cost as they produced gold as a by-product of other mining activities. Conveniently, after much debate, a new standard measure called the AISC (all in sustaining cost) was adopted. There are many participants who benefit from a higher cost basis, including “tax-happy” governments, producers and re-sellers. It stands to reason a higher cost of production puts a floor under the market. This floor is both psychological and a reality, as it only stands to common sense that a finite amount of gold can be mined at an economic loss. Again, I will argue that the real cost of production isn’t the AISC price in most mines. This is especially important when we realise that while gold is primarily used for jewellery and as an asset class, (and there are other uses for gold like medical and electronic circuitry), most investors embrace it not as an industrial metal like silver or copper, but as a store-house of value. Again, I don’t count gold flakes in liquor as a need. The result is that

Geo-Political Risk: I think the proverbial kitchen sink has been thrown at the market in the last five years. The situation was caused in part by the 2008 financial disaster, a Japanese nuclear meltdown, Asian Tsunamis, North Korean sabre rattling and now the threat of possible Russian expansion. Short of a true international financial meltdown (which we came close to), I don’t give much weight here either. Don’t get me wrong, gold will react during these times, however, it is almost always in anticipation and very short lived. For example, the first shot fired during the Gulf War, we saw gold plummet USD $100 down in price that day. It was a classic “buy the rumour - sell the fact." As these threats happen more and more in frequently, the metal’s price reaction becomes less and less. It’s as if it had desensitisation.

Inflation Adjusted Annual Average Gold Prices (1914-current) IN SEPTEMBER 2013 DOLLARS 2500

1980 Peak $2415 in 2013 Dollars

2000

1980 Average $1911 in 2013 Dollars

1500 Nominal Peak $850 in 1980

1000

Peak 2011 Gold Price $1895 Average 2012 Gold Price $1669 Average 2013 Gold Price $1441

So am I a “gold bear”? On the contrary - I am the original “Gold-Bug”. I also know that timing is everything. Every balanced portfolio should own some gold. Whether it is owned physically, in derivatives like futures, or an ETF, you should have some. Experts recommend 10% of your portfolio. If you own it now (purchased at lower prices), it may be time to take some profit. With that being said, if you don’t own it, I probably wouldn’t recommend buying it, your risk is as equal to your potential gain. I think from this standpoint there are as many reasons to buy it as there is to sell it. That’s not a market that would reward pumping up a portfolio with gold, if you are not already an owner.

1980 Annual Average Gold Price $672

500 Nominal Gold Price

1913 1916 1919 1922 1925 1928 1931 1934 1937 1940 1943 1946 1949 1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015

BY SCOT T A . WOLF

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Scott Wolf is the Director of Research for Grace Century FZ, LLC, an international private equity consultant in the U.A.E. His experience includes being a Chicago Mercantile Exchange Floor Trader in the S&P 500, Gold and Currency Arbitrage, and involved in the commodity sector for twenty years prior to private equity. His views are solely his opinions and no action should be taken prior to consulting with your own advisor.

8 OF THE BEST

No. 5

Keeping it Clean

he rising wave of environmental consciousness that is sweeping the world has its origins in the ‘green’ movement of the 60s. Today, the longing for environmentally friendly alternatives to fossil or even nuclear energy has finally been translated into a groundswell of adoption – thanks to rapidly developing and cost-effective technologies. Solar and wind power are increasingly being adopted by governments around the world, and emerging technologies such as tidal and wave power are attracting interest from private enterprise and the investment community. In this section of Investment Life’s ‘8 of the Best’, we’ll be taking a look at the growing popularity of alternative energy production and which technologies are revolutionising the energy sector and will also stand the test of time. It’s these maturing technologies that will continue to attract the attention of savvy and forward thinking ‘green’ investors.

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8 OF THE BEST

An Ill Wind

Investment in Renewables Tumbles

opular opinion surrounding renewable energy is divided amongst the general public. There are those who (probably rightly) see renewables as an essential component in the war against climate change, while there are others who oppose what they see as a blinkered focus on wind and solar energy. These opponents favour other approaches, such as nuclear, in order to address both climate change and the growing energy requirements of both the developed and developing world. What is unquestionable is that renewable energy is here to stay. For the private investor, are there signs that investment in renewables has a place in a diversified portfolio? Globally, investment in renewables is down. The cutting of incentives in Europe is weighing heavily on worldwide investment in both existing and new technology, while uncertainty about U.S. policy in the wind sector has slowed the establishment of new wind farms. In a study of contrasts, investment in the larger and more established markets of G-20 countries declined by 16% as investment in non-G-20 markets grew by 15%, with promising sectors emerging in countries such as Chile and Uruguay. Only three G-20 countries—Japan, Canada and the United Kingdom—saw an increase in clean energy investment in 2013. However, several trends emerged to offset this seemingly gloomy news. One was the sharply reduced cost of solar photovoltaic sys-

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tems, which meant that a record amount of PV capacity (some 39GW) was constructed in 2013, and for less money than the smaller 2012 total of 31GW. 2013 also brought a 54% recovery in clean energy share prices, stimulating equity raising by specialist companies on the public markets. 2013 also saw cost reductions and efficiency improvements which enabled onshore wind and PV projects to be built in a growing number of locations around the world without subsidy support. Wind and PV may be able to out-compete fossil-fuel options as long as there are plentiful local sunshine or wind resources, low capital costs, and no cheap, indigenous coal or gas feedstocks.

Another reason for hope was that renewable energy, excluding large hydro, made up 43.6% of the new power capacity added in all technologies in 2013 (and raised its share of total generation worldwide to 8.5% from 7.8%).

Asia An annual Pew Charitable Trusts report, “Who’s Winning the Clean Energy Race?”, shows that China is the world leader in clean energy investment, with USD $54 billion in investments in renewables in 2013, well above total U.S. investment of USD $36.7 billion. Whereas China installed 14 gigawatts of electricity generation capacity from wind farms

NYSE BLOOMBERG GLOBAL CLEAN ENERGY SECTOR INDEXES EST:IND

WIND:IND

SOLAR:IND 60 50 40 30 20 10 0

Jul

Aug

Sep

Oct

Nov

Dec

Feb

Mar

Apr

May

Jun

-10

The sector specific indices include companies active in the wind, solar and energy smart technologies (EST) sectors which cover companies active in energy efficiency, smart grid energy storage. Each individual index includes between 70 and 200 companies with a moderate or greater exposure to respective renewable or energy smart technology sectors. The indices are weighted according to the individual company’s exposure rating as determined by Bloomberg New Energy Finance’s proprietary clean energy exposure ratings system.

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Top 10 Countries in Investment (in USD $ billions)

United Kingdom, Canada and Japan move up in clean energy investment rankings 2013 RANK

COUNTRY

2013

2012

2012 RANK

China

$54.2

$57.9

United States

$36.7

$40.3

Japan

$28.6

$15.9

United Kingdom

$12.4

$11.0

Rest of EU-28

$11.5

$22.0

Germany

$10.1

$4.5

Canada

$6.5

$4.5

8 9

India

$6.0

$7.1

South Africa

$4.9

$5.7

Australia

$4.4

SOURCE

New investment in renewable energy by country and asset class, and growth on 2012 USD $bn

China

54.2

-10%

33.9

United States

80%

28.6

Japan United Kingdom Germany

Growth: -6%

12.1

14%

9.9

-56%

Canada

6.4

44%

India

6.0

-15%

South Africa

4.9

Australia

4.4

Italy

3.6

Asset Finance* SDC Public Markets VC/PE

-14% -0.1% -75%

Top 10 countries. *Asset finance volume adjusts for re-invested equity. Excludes corporate and government R&D UNEP, Bloomberg New Energy Finance

FOOTNOTE SOURCE

and 12 gigawatts of solar power generating capacity last year, the U.S. installed less than 1 gigawatt of wind power after a tax incentive for the wind industry expired. Last year was the first ever that China invested more in renewable energy than the whole of Europe. When referring to China, Phyllis Cuttino, director of Pew’s clean energy program commented, “No other clean energy market in the world is operating at that scale.” Other nations are also developing a homegrown solar generation capacity as a measure to solve their electricity crisis. The latest country to back a solar solution to growing energy requirements is Asia’s third largest economy - India. The country recently planned for a USD $4.4 billion solar plant, which could

perhaps be the world’s largest. In Japan, companies like U.S. group First Solar, are investing substantially to install emission-free renewable set-ups. The country is expected to become the second-largest market for solar products after China.

The United States The United States saw a decline in investments in 2013 of 9% to USD $36.7 billion. Although wind finance was steady, installations collapsed with the expiration of the production tax credit. Still, a record 4.3 GW of solar was installed. It also remains the dominant recipient for public market and venture capital/private equity investments, attracting USD $6.8 billion and USD $2.2 billion, respectively.

The U.S. Energy Information Administration (EIA) estimates that US solar demand increased more than 32% in 2013. For 2014, the EIA projects that U.S. solar energy consumption will boom by roughly 35%. The expected increase in demand is likely to fuel top-line growth at the solar manufacturers. The average cost of a completed PV system in the United States continues to drop with prices declining by 60% since the beginning of 2011. These price drops will encourage more solar uptake by consumers.

Europe Clean energy finance in the European region slid sharply for the second consecutive year, falling 42% to USD $55 billion. Investment plunged in once-vibrant markets, with levels in Germany down 55% and Italy down 75%. However, the United Kingdom experienced 13% growth, to USD $12.4 billion, in 2013, bringing it to fourth among G-20 countries. Investments in the wind sector increased by nearly 50% to USD $5.9 billion on the strength of offshore projects and increased activity in public market financing.

Solar Shines For the first time, more solar than wind energy was installed globally. Forty GW of solar generating capacity were added, an increase of 29%, raising the total to 144 GW. Wind capacity additions declined by more than 40%; the United States accounted for more than half of that drop. With an additional 27 GW installed, wind power capacity reached 307 GW globally. Current projections indicate that solar will be the leading clean energy technology in both investment and capacity for the next several years. Energy efficient/low-carbon technologies, which include smart meters and energy storage devices, grew 15% to USD $3.9 billion. The star performer among investment types was public market equity raising by renewable energy companies. This jumped 201% to USD $11 billion, the highest since 2010, spurred on by the rally in clean energy share prices and by institutional investors’ increased appetite for funds offering solid yields on portfolios of operating projects. NASDAQ listed companies, active in renewable energy include, SunPower Corp. (SPWR ), First Solar (FSLR), Trina Solar Ltd. (TSL), Ascent Solar Technologies, Inc. (ASTI), JinkoSolar Holding Co. Ltd. (JKS ) and SolarCity Corp. (SCTY ) and Gevo, Inc. (GEVO). www.investmentlife.com

8 OF THE BEST

No. 6

Healthy Returns

f there is a mantra repeated over and over by investment advisors regarding biotech stocks, it can be summed up as ‘only the brave need apply’. There’s a siren call for investors when the company they’re considering could be the custodian of the next big drug breakthrough – a cancer-busting treatment could net billions and a reliable treatment for Alzheimer’s could be the key to undreamed of investment returns for the investor that had the foresight and courage to get in on the ground floor. There can be no doubt that biotech is hot – it’s been hot for some time – breakthroughs are promised on an almost daily basis by biotech research firms, both small and large. For small biotech firms, the road to profit is long and fraught with danger. Many consist of a great idea and a mountain of debt – and most don’t make it. But still every would-be Warren Buffet has a favourite biotech firm. The truth of the matter is that these firms promise all, but only some deliver. What has many advisors scared, is the combination of public hype, huge potential and sadly, a lack of profit – this is widely seen as the recipe for a Biotech Bubble. This section of ‘8 of the Best’ Investment Life covers some of the trends that are shaping the Biotech companies of today.

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Investing in

Biotech F

BY ALB E R T F O N T E N O T

or the past three years, biotechnology stocks have been exploding, up 100% to 46% compared to the average stock fund. After such a good run, skittish investors are wondering if the industry is due for a dry spell, envisioning comparisons to the earlier deflations of the biotech and dot-com bubbles of the 1990s and 2000s. Some experts are of the opinion that biotech valuations have skyrocketed out of control, making most acquisition deals fiscally unsound. They point to how the NASDAQ biotech index has lost double-digit percentage points since its peak in February. The phrase being repeatedly whispered is “bubble burst.” On the other hand, the biotechnology sector can also reach dizzying heights and produce spectacular returns. Looking at the 172 US biotechs with a 12-month performance return, 42 of those stocks returned over 100%, with a few reaching a stratospheric 700% return. After positive drug trials, it is not unheard of for share prices to double or triple overnight. The takeaway is that biotech is a volatile sector capable of generating both massive returns and crushing losses. One biotech stock that perfectly exemplifies this dichotomy is Amarin (AMRN). In early 2010, Amarin was trading for just pennies, but by mid-2011, the stock hit an all-time high of approximately USD $20 a share. In late 2013, an FDA panel voted 9-2 against recommending an expanded drug label for their only product, Vacepa, a prescription-grade omega-3 fatty acid drug that is beneficial for the treatment of cardiovascular disease. Shares dropped precipitously, falling over 60% literally, overnight. As of mid-June 2014, the share price was USD $1.54. Despite what the pundits say, however, the idea that the biotech “bubble” has burst is not entirely accurate. The biotech sector has

unique fundamentals; small companies can produce patented products that can create blockbuster opportunities. When a privatelyfunded biotech is developed enough for an IPO, the potential payoff can be enormous. Any small decreases in the biotech sector as a whole should first be properly assumed to be normal corrections, because if you look at the five-year period from 2009 until now, although the path has not been a steady one, returns are currently at a 300% high. Looking at the sector from a medium-term perspective, the pattern shows that it is very unlikely that interest in the sector has crumbled across the board. Gilead Sciences (NASDAQ: GILD) offers 14 commercially-available therapeutic products, designed to treat HIV, Hepatitis B, influenza and pulmonary diseases. In 2011, when the company purchased Pharmasset for USD $11 billion, it was hailed as “one of the best pharma acquisitions every” by Forbes Magazine, which ranked Gilead sciences as the #4 drug company of 2013. Sovaldi, their drug to treat Hepatitis C, has been called potentially revolutionary. In the fourth quarter of 2013, Deutsche Bank estimated the company’s sales to be USD $53 million. Gilead had a 296% market cap increase in 2013, compared to the previous year. In terms of market cap, Danish company Norvo Nordisk (NYSX: NVO, OSX: NOVO B) is the largest independent biotechnology company listed on any stock exchange, with USD $85.335 billion. The company is most active in the production of medications and equipment for diabetes care, although it is also involved with growth hormones and hormone replacement therapies. In 2010, Fortune Magazine ranked the company as among the 100 best companies to work for, and in 2012, Novo Nordisk was named as the most sustainable company in the world by Corporate Knights. www.investmentlife.com

8 OF THE BEST

Electronic Medical Records

The Cloudbased U.S. opportunity

lectronic Medical Records (the ability for doctors, hospitals, and patients to access all patient records online in real-time through cloud-based systems) are a mandated and required element of the U.S. health-care reform. It has long been proven that EMR not only improves the level of health-care but also reduces costs. The Electronic Medical Records (EMR) market in the U.S. is currently underdeveloped, with some estimates stating that a huge majority of the U.S. records are still paper-based. This represents an opportunity for those wishing to invest in EMR technology and solution providers. One company - Quantum Innovations Inc - has attracted the interest of the international marketing and private equity consultancy firm Grace Century FZ LLC . Quantum Innovations develops patient-centric management support services for the healthcare industry. This technology platform includes systems, tools and processes designed to be seamless and eliminate the need for substantial paper record creation and storage, reduction in administrative burdens and back office costs, and significantly reduce redundancy, communication errors, and improve the quality of patient care.

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Cutting-edge providers have been migrating to Electronic Medical Record keeping in the United States for some time, however, it wasn’t until this year (2014) that it became a mandated requirement. The federal government in the U.S. has made EMR a priority as part of its stimulus package, and the authorities have demanded that healthcare providers roll out 100% developed systems by year-end to avoid large penalties. It has already allocated USD $26 billion in incentives to doctors and hospitals to facilitate this transformation of the record-keeping environment. Quantum through its EMR platform - PWeR 3/0 - is a direct beneficiary of these developments. Up to this point, Quantum feels the marketplace is unhappy with the solutions available. Scott Wolf, CEO of Grace century, states “Quantum’s marketing model is to go after the providers that already have an EMR system in place and who are not happy with their present platform.” Quantum holds 7 U.S. Patents with 15 U.S. Patents Pending, providing one of the only “true” low-cost ‘turn-key’ cloud-based systems available in the U.S. The system boasts security and reliability parameters that exceed the strict guidelines set out in the Health Insurance Portability and Accountability Act of 1996 (HIPAA), which protects the privacy of in-

dividually identifiable health information. The solution includes eliminating most outside billing to doctors and hospitals. It also allows patients to track their doctors' directions, simplifying the roll out of wellness programs. PWeR also allows health care providers access to information in critical situations in order to properly provide appropriate treatment. While Quantum voluntarily de-listed from the American Stock Exchange in 2011, top-line earnings of over USD $150 million are still projected by 2016. A Nasdaq re-listing is being carefully considered. “With Quantum’s turnkey platform, experienced management, and the looming mandated change deadline, Grace Century feels that the firm represents an unprecedented opportunity for the forward thinking investor,” said Grace Century CEO Scott Wolf. Wolf also mentions that the attractiveness of the investment is reinforced by the structuring as both an income project as well as growth, with an annual 7%* interest (if held for 5 years) paid quarterly. Quantum, through Grace Century, also has access to both Latin America and Chinese markets. More information on Grace Century can be found at their home page: www. gracecentury.com

8 OF THE BEST

No. 7

Leveraging Scarcity

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he world is less than 40 years away from a food shortage that will have serious implications for people and governments, according to a top scientist at the U.S. Agency for International Development. “For the first time in human history, food production will be limited on a global scale by the availability of land, water and energy,” said Dr. Fred Davies, senior science advisor for the agency’s bureau of food security. “Food issues could become as politically destabilising by 2050 as energy issues are today.” He said the world population will increase 30% to 9 billion people by mid-century. That would call for a 70% increase in food to meet demand. Just how the world will meet these demand is becoming clearer as investment in agricultural technology and alternative farming methods such as aquaculture increases. However, there may be an even more pressing need. As climate change affects fresh water supplies across the globe, the looming threat of water scarcity has many governments investing record sums in desalination and related technology. In this section of Investment Life’s ‘8 of the Best’ feature, we will be taking a look at some of technologies and the companies that are supplying solutions to a looming global crisis around what we eat and drink.

8 OF THE BEST

Investing in

Agriculture

t is time to position your portfolio based on population projections. It’s simple— the more people there are, the more food that will need to be produced, and by 2050, even the most conservative estimates say that the world will be home to over 9 billion people. Actually, when all factors are considered, that increase means that worldwide food demand will double, according to a panel discussion held during the United Nations 64th General Assembly in 2009. Some of those factors include increased population, more urbanisation, rising incomes in developing countries and the consequential change in eating habits. Investors with their eyes on the future would be well advised to look at projected patterns of increasing future needs, rather than individual company stocks.

In addition, urbanisation is forecast to increase at a rapid pace. Currently, 49% of the world’s population resides in urban areas, but that number is expected to grow to 70% by 2050. With urbanisation comes a corresponding increase in per capita income, and increased income means that people begin to move away from a diet comprised of “staple” foods such as rice, wheat, corn, and legumes, and instead including more proteins – fish, meat, dairy products and eggs. This increased protein consumption means that more cereal grains will need to be produced to feed the livestock. It takes 10 pounds of grain to produce 1 pound of meat. To accommodate the increased demand to feed both humans and livestock, net cereal grain imports into developing countries would need to increase threefold by 2050.

Lower Grain Inventories

According to the International Grains Council, world grain stocks in 2012-13 were at their lowest level in the years since 2007-08. The stocks-to-use ratio is currently at 19.2%, the third straight year of decline. Although the ratio started to move up again in 2013-14, many industry experts believe that without an increase in both efficiency and production, lowered inventories may become the norm, rather than the exception.

Increased Grain Demand

Demand for grains is expected to reach 3 billion tonnes by 2050, a dramatic increase from current levels of approximately 2.1 billion tonnes. This is due to several interdependent factors. Amongst the most important factors is that almost all of the population growth is forecast to take place in so-called “developing” countries. For example, sub-Saharan Africa’s population is supposed to swell by 114%. Even the slowest regions, East and South East Asia, are expected to realise population increases in the double digits.

BY PIERRE JORDA N

This would mean that developing countries would consume approximately 14% of cereal grain, up from less than the current 10% of total global stock. One study has suggested that if China met just an additional 5% of its grain needs with imports, that 5% would swallow up all of the world's exports. The problem with swelling production needs is the fact that useful arable land, is as necessary a resource as it is finite, and in fact may be dwindling, because of topsoil losses due to erosion, development and decertification. Globally, the rate of topsoil loss in some areas is 100 times faster than replacement, according to the United Nations. Forward-thinking investors would be wise to follow the example set by savvy nations that are likewise looking toward the future. China, for example, feeds one-fifth of the world’s population with only a tenth of its arable land, and even less of its water. Part of the reason that China is able to do this is because it invests heavily in its agricultural future, regularly increasing its annual agricultural budget by between 20 and 30 % every year. This is why it can be very wise over the long term for investors to target research, development and infrastructure projects that support any measures to increase growth or yield rates, land reclamation, biodiversity among plant strains, usable water supplies or soil replenishment. Any development that furthers one of these is a strong and sound investment in agriculture, and therefore, a strong and sound investment in the future. www.investmentlife.com

8 OF THE BEST

Investing in

Aquaculture

lobal wild fisheries are declining. The U.N. Food and Agriculture Organisation estimates that three-fourths of the worldwide fish stocks are completely exploited, overexploited, or depleted. Because of pollution and overfishing, many significant capture fisheries have collapsed, or may collapse without a major paradigm shift. Meanwhile, the population of the planet continues to grow, and the demand for and the importance of seafood is expected to increase dramatically. Currently, fish or other seafood is the only wild food source of any significant growth potential – barring a sudden appetite and tolerance in the Western World for insect-based foodstuffs. Combatting the decline and rising demand, the aquaculture industry, in the form of "fish farms," has become the fastest-growing sector of food production. According to the Fisheries and Aquaculture Department of the

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U.N., aquaculture now produces over half of the world’s food fish.

ture companies already practice sustainable methods.

Direct Comparison: Captured Fish Versus Farmed Fish

Current Situation and Growth Potential

A good analogy would be to compare capture fishing to hunting and gathering, while fish farming can be compared to traditional agriculture – reaping and sowing. In the former, results can vary wildly. Overfishing and human intrusion (pollution) can decimate wild populations. In contrast, fish farms can provide consistent cost-effective results.

According to a 2010 Washington Post article, aquaculture is an almost USD $100 billion per year industry, and for 30 years has enjoyed a growth rate of almost 8% per year. Numbers released by the Chinese Bureau of Fisheries show that their harvests from aquaculture expanded annually by an average rate of almost 17%. For nearly a decade now, China has produced 60% of the world’s food fish. As stated earlier, over 60% of the world’s food fish is farmed, and by 2040, estimates say that number could increase to 85%, and almost to 100% ten years later.

Sustainability As the technology and science behind aquaculture develops, the practical sustainability will likewise develop. Like their land-based agricultural counterparts, fish farmers seek new ways to increase production, promote sustainability, and maximise cost-effectiveness. Significantly, many profitable aquacul-

Aquaculture as an Investment There are approximately 60 publicly traded aquaculture companies, but aquaculture is

BY ALBERT FONTENOT

considered a nontraditional investment. From a diversification standpoint, aquaculture stocks have a very low beta correlation to other publicly traded bonds and stocks, because performance is unrelated to macroeconomic cycles. Unlike some other investments, aquaculture suffers very little impact from grain, oilseed or crude oil prices. As technologies, strategies and procedures develop, there will be an improvement in genetics, feed formulas and eventually, economy of scale, until these developments serve to reduce the cost curve. New strategies may emerge, perhaps the increased utilisation of coastal areas, or the feasibility of nontraditional habitats, such as the open ocean or the desert. Compared to other sources of animal protein, certain sectors of the aquaculture industry can have a much higher profit margin, when factors such as entry barriers, technology, and projected demand are considered. For example, farmers of bass, bream and salmon generate profits of 15-17%, compared to 10% for poultry producers and 7% for producers of red meat. Currently, the majority of investments in the aquaculture industry come from the wild catch sector. Private equity has played a negligible role, but there exists a unique opportunity to achieve consolidation within the sec-

Fish Food Fish accounts for 16% of the world’s animal protein intake, increasing to 20% in low-income food-deficit nations, most of which are in the tropics.

tor by creating synergistic relationships with existing investments. It is commonplace for private equity to be invested in the seafood processing industry, and aquaculture as a natural, logical extension. An illustration of this model is the private equity firm Paine & Partners, which invests in the processor, Icicle Seafoods, and salmon farming in Chile. This is a natural fit because marketing, storage and distribution already exist in this chain and can easily be expanded to encompass the addition. As a valued benefit, this vertical integration can mitigate the volatile spot pricing for both the farmer and the processor.

Venture Capital Investment Opportunities Venture capital investors have prospective choices in several sectors of the aquaculture industry. These sectors offer innovative opportunities through rapid and frequent tech-

Aquaculture, not the Internet, is the investment opportunity of the 21st century. - Peter Drucker, American management consultant / author

nological advances. Each link in the value chain has its own unique possibility: Juveniles and Feed

Breeding technology, diversification with new marine species, fish meal replacement solutions

Farming Technology

Recirculation systems, open ocean environments, water treatment systems

Farming Auxiliary

Vaccines for disease Processing: alternate uses for byproducts such as skin and bones, preservation and storage technology and materials

Examples of Performance The potential growth of aquaculture stocks can be astronomical. Examples include:

Avanti Feeds

This is an Indian manufacturer of shrimp and fish feeds, as well as a shrimp processor and exporter. As of the writing of this article, shares were trading at USD $566, up from USD $104.10 one year ago.

Shantanu Sheo

A Mumbai-based aquaculture company, Shantanu Sheo is closing at USD $15.10, up from a low of USD $2.67.

Grieg Seafood

Listed on the Oslo Stock Exchange, this company produces 80,000 tonnes of salmon and trout a year. At present, the stock is up over 55% from a year ago.

Starting at the level of fish farmer and travelling up the value chain all the way to the top, there is a high degree of professionalism within the aquaculture industry. There is no such thing as a “mom and pop” fish farmer. Startup and operating costs are significant, because this is an asset-based industry. However, with proper research and judicial due diligence, there is no reason to believe that savvy qualified investors cannot realise double-digit returns on their investments over the medium to long term. www.investmentlife.com

8 OF THE BEST

Tajikistan is planning the Rogun hydroelectric dam on a tributary of the Amu Dayra river. The dam would be the tallest in the world and help alleviate the country's energy shortages. Uzbekistan, fearing irrigation shortfalls, has imposed tariffs and travel restrictions on its neighbor to the east.

The electricity generating Ilısu Dam is expected to reduce the flow of the Tigris into Syria and Iraq, possibly exacerbating a six-year drought that has crippled agriculture in southern Iraq. Upstream, the reservoir will inundate 300 historical sites and displace more than 25,000 people in Turkish towns along the Tigris. Germany, Austria and Switzerland withdrew their funding for the dam in 2009.

In 2011, Ethiopia began building the Grand Renaissance Dam on the Blue Nile, a tributary that provides about 60% of the Nile's water. Egypt and Sudan are concerned about the dam's effect on water flow downriver. Ethiopia says it will finish the project in 2017.

In a channel of the Mekong two miles north of the Cambodian border, Laos intends to construct the Don Sahong Dam. The power project could affect fishing in Cambodia, Vietnam, and Thailand, so those countries are demanding a say in the plan.

A Liquid Investment Strategy

Investing in Desalination BY S T E VE M AL L A C H

Water, water, everywhere, nor any drop to drink The Rime of the Ancient Mariner Samuel Taylor Coleridge – 1798

t has been said by the more pessimistic students of history that the next war will not be for land, glory or riches but rather a struggle for resources. One resource in particular is fast becoming a catalyst for conflict– water. Without water, modern society grinds to a halt. It is needed to produce electricity and it is one of the base ingredients for any type of agricultural production. On a more personal level, both you and I will grind to a very terminal halt if we do not get our absolute minimum of between two to four litres of fresh water a day. Fresh water is, unfortunately, not as plentiful as it should be and where it is abundant wastage can be an enormous problem. The average North American uses 1,280 cubic metres of fresh water per year, while in

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Africa, personal use is around 186 cubic metres per year. The global challenge around access to fresh water is enormous and it is rapidly reaching crisis proportions. The World Bank-sponsored 2030 Water Resources Group forecasts that fresh water demand may exceed supply by a staggering 40% by 2030. It’s clear that water poor countries are going to have to think very carefully about their options, and the list of countries that are investing in potable water production the technology is growing. Severe drought and climate change have prompted many of Australia’s major cities to construct large-scale desalination plants to provide a rainfall-independent source of drinking water. The dry conditions have recently eased and many of the Australian plants have scaled down operations, but they remain in a state of readiness. Both Ghana and South Africa have desalination operations. Tunisia and Qatar are launching ‘desal’ plants and China is ramping up its desalination activities. On the 5th of May, 2014, Masdar (a wholly-owned subsidiary of the Abu

Dhabi government-owned Mubadala Development Company) awarded four companies – Abengoa, Degrémont, Sidem/Veolia and Trevi Systems – with contracts to start the construction of a desalination plant in Abu Dhabi. The list goes on and on. At present, there are more than 11,000 desalination facilities worldwide. Those 11,000 desalination facilities have a cumulative capacity of around 4 billion gallons daily (around 15.1 billion litres). This may sound like a lot, but in reality it is less than a quarter of a percent of world demand. The emerging technology required for fresh water production technology is improving. However, there is scope for future innovation and growth, making investment in desalination technology an attractive prospect for investors with foresight and the patience for a long-term investment strategy. The current leaders in desalination include companies such as GE (NYSE:GE) and Veolia Environnement (NYSE:VE). Korean heavyweight Doosan Heavy Industries & Construction is also a major player in the desalination market.

8 OF THE BEST

Lab-Grown and Printed Meat –

Is There an Investment Opportunity Within the Solution to a Potential Food Crisis? BY ALB E R T F O N T E N O T

he need for new methods in the technology of meat production has led to potentially cutting-edge innovations such as lab-grown in vitro meat and ‘printed’ meat, which uses the same technology as 3-D printing. Each solution has its own merits, and forward-thinking investors may find opportunities that are both attractive and altruistic. In vitro meat is grown from the muscle cells of an animal, and in theory, it is possible to grow meat from these original cells indefinitely. Some researchers have stated that if they could start with the right conditions and materials, as few as 10 pork muscle cells might be capable of producing up to 50,000 tonnes of meat. Printed meat teases a tantalising promise. Using a process called bioprinting, which uses cell aggregates as a medium (as opposed to plastics in traditional 3-D printing), multiple layers could be laid out bit by bit, until the final product would be virtually indistinguishable from the meat from a slaughtered animal.

Stumbling Blocks

before any efforts come to true fruition. At the first In Vitro Meat Symposium, a few key needs were identified: Processing technology, such as engineering plants, allowing for efficient large-scale production A larger, less expensive source of growth medium Identification of which stem cells are right for use on a large scale

At this point, investment opportunities, if any, seem to be in preliminary research and development. When solutions begin to be discovered as to how realistic larger-scale production can be accomplished, then discussions can begin about when it might become reality.

Miles to Go before We Eat Any investors hoping to position themselves to capitalise on this potential opportunity need to do so with great patience. The technology needed to make in vitro or printed meat a commercially-viable reality does not exist yet. Considerable research is needed

One chief concern over the medium term at

the very least is the cost. Currently, genetically engineered “artificial” meat is prodigiously expensive. In August of 2013, a first-of-itskind demonstration was held in London, where a hamburger made from lab-grown meat was eaten by three people during a live Web broadcast. Professor Mark Post, chair of Physiology and vice dean of Biomedical Technology at Maastricht University, created the hamburger, and he thinks that it will take at least 10 years before the process becomes commercially viable. Case in point? The study conducted by Dr. Post cost approximately USD $325,000, and was funded by Sergey Brin, cofounder of Google. Dr. Post stated that, today, even if he could increase production, his hamburgers would cost approximately USD $30 per pound. It was estimated in 2008 that the cost of 250 grammes of laboratory-grown beef was USD $1 million.

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8 OF THE BEST

No. 8

Leisure Investment Growth

increase in leisure investment. Global leisure destinations are changing their approach to lure these two very different groups to their attractions. Where once, scenery was enough to satisfy the wanderlust of tourists, today the market demands much more. The rise of integrated resorts is only one of the trends that is changing the leisure landscape – another is a hunger for more exotic destinations, often enjoyed in the lap of five-star luxury. In this section of Investment Life’s ‘8 of the Best’ feature, we look at some of the forces that are changing the leisure landscape and how some operators are harnessing a growing appetite for adventure.

igher levels of disposable income and the changing demographics of the Chinese and wider Asian markets are starting to make their presence felt in leisure markets across the globe. At the same time, an aging baby boomer generation (those born in the years following the Second World War, when there was a temporary marked increase in the birth rate) is looking to leverage savings and complete bucket lists. For many, this includes exploring travel and leisure opportunities. So a combination of Eastern and Western changes in disposable income and a hunger for lifestyle travel is driving an

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8 OF THE BEST

Investing in Sri Lanka’s Growth

ith emerging Asia stocks on a rollercoaster ride over the last six months, some of the really interesting stories in this region have been largely overlooked as investors have either sought returns in developed markets, or to a lesser extent, parked money in cash fearing a sell-off. This is understandable. However, the recent Indian election, an event with ramifications in Asia and beyond, has forced a marked change in sentiment in some quarters, and once again investors are paying attention to the fact that South Asia continues to be a place where genuine opportunities based on strong economic fundamentals can still be found. One such market is Sri Lanka. More of a frontier economy in the years leading up to the end of its civil war in May 2009, for a while now private equity investors, always ahead of the game, have been taking note of and acting on some of the more attractive aspects of this dynamic country. A very literate and capable population of working age; a strong focus on education and social advancement; a common law system inherited from her colonial past; short distances between population centres augment-

ed by some of the best infrastructure on the subcontinent together with widespread use of English are a few of the factors that make Sri Lanka stand out amongst her peers. While the large-scale foreign direct investment that was expected after the war is proceeding gradually, some of the stronger and less well advertised investment opportunities in this small country of 323 square kilometres are ones that have been part of Sri Lanka’s promise for decades. A vibrant leisure and hospitality sector and an emerging cash-rich domestic middle class are the unsung themes of asset growth here. These forces, always part of the Sri Lanka story, have been given an immense boost from a stable government that has a mandate to concentrate on advancing the interests of an economy with huge potential. It is a little known fact that as recently as the fifties, and much like Singapore today, Sri Lanka was a model for Asian economic development. That was then. The medium to long-term opportunities today can be found in the momentum of diverse industries and businesses such as restaurant groups, coffee chains, resorts and hotels, banks and property developers cashing in on the purchasing power of a domestic population keen to get going and make up for lost time. These are reinforced

by a steady flow of overseas visitors who have helped make Sri Lanka the ‘en vogue’ destination for the sophisticated traveller. These areas in particular herald the start of a very exciting journey for a country that many feel has been out of the limelight for far too long. It’s not for everyone, and of course not without its risks, but a focused and considered Sri Lanka exposure can add real firepower to a portfolio. The Guardian Acuity Equity Fund (GACUEQI: SL) is an open-ended unit trust focusing on well-managed stocks exposed to key sectors of the economy. The fund has delivered a 7.25% return to date in 2014. John Keells Holdings PLC (JKH), a diversified conglomerate in the Jardine Matheson mould, is the king of the blue chips in this market, whilst Singapore-based Calamander Group offers direct investment exposure and advisory services for private capital in many of the key growth sectors on the island.

Anil Scott

Senior Investment Adviser Meyado Private Wealth Management anilscott@meyado.com.sg www.investmentlife.com

8 OF THE BEST

Rise of the

Baby Boomers T B Y P IE R R E JO RD A N

he oldest of the Baby Boomers, the post-World War II generation that was born between the years of 1946 and 1964, are reaching retirement age, and they figure to redefine what it means to be a “senior.” With advances and increased public awareness in nutrition, medication and medicine, people are not only living longer, they’re

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living more active lifestyles. There is even a book titled “70 Is the New 40.” Many recent or soon-to-be retirees are empty-nesters – they’ve raised their children, worked hard, and invested well, and the average baby boomer has both a significant disposable income and a desire to use it. For example, in 2009, Americans over the age of the Baby Boomer generation spent USD $3.5 trillion on

consumer goods and services, while the two subsequent generations, Generation X’ers and Millennials, spent USD $2.3 trillion combined. So what does this mean to the savvy investor – where are the opportunities that are being created specifically by the lifestyles and tendencies of the generation born after World War II? There seem to be four key areas:

8 OF THE BEST

EMPLOYMENT SERVICES Most Baby Boomers plan to continue working past the traditional retirement age, with nearly half of them saying that they never intend to stop working. The reality of today’s job market is that a person can realistically expect to change jobs or careers half a dozen times within their lifetime. Monster (NYSE: MWW) is the largest job search engine in the world, with over 1 million job postings at any given time. Its website, monster.com, is among the most visited websites on the Internet. In 2013, LinkedIn (NYSE: LNKD) claimed to have over a quarter of a billion acquired users from 200 countries or territories worldwide.

TRAVEL Inspired by the 2007 movie, The Bucket List, starring Jack Nicholson and Morgan Freeman, many Baby Boomers are contemplating their own lists. #1 on those lists is almost invariably a desire to travel. According to the US Department of Labor Bureau of Labor Statistics, US residents aged 55 to 64 years spent an average of USD $1897 on traveling for vacation or pleasure, approximately 34% more than the national average. Those households in the top 20% income bracket spent more on travel than the other 80% combined. This means that there are potentially lucrative opportunities in the travel industry, including the Las Vegas Sands, (NYSE: LVS) the largest publicly traded travel company in the world by market cap, United Continental (NYSE: UAL), which is the largest publicly traded travel company in the world by travel revenue, or Priceline.com (NASDAQ: PCLN), the ubiquitous travel website.

With advances and increased public awareness in nutrition, medication and medicine, people are not only living longer, they’re living more active lifestyles.

PHARMACEUTICALS According to US News, the average 70-year-old takes approximately 3 times as many prescription drugs as the average 40-year-old. There are around 80 million baby boomers over the age of 65, and the need for medication is obvious. However, drug shortages have increased by almost 300% since 2005, as reported by the Food and Drug Administration, and more than half of those drugs are considered critical. Baby Boomers account for 77% of prescription drugs and 61% of over-thecounter drugs. Mylan Inc. (NASDAQ: MYL) is the third-largest generic and specialty pharmaceutical company in the world, and produces over 1,000 different products. The company has customers in over 150 countries and manufactures more than 45 million doses worldwide. Actavis plc (NYSE: ACT) focuses on the development, manufacture and distribution of generic, branded generic, legacy and over-the-counter products. Actavis maintains its global headquarters in Dublin, Ireland, but produces products in over 60 countries. The company is one of the world’s largest generic prescription drug manufacturers, ranking in the top three in 12 separate global markets, the top five in 16 global markets and ranking in the top 10 in an astonishing 33 different global markets.

RETIREMENT HOMES As the population ages, the need for senior care will likewise grow. In 2003, there were less than 11,000 retirement homes in the United States, but by 2010, that number had grown to over 12,000. In 2005, the market share for retirement homes was approximately USD $13.5 billion, but by 2010, that number had grown to over USD $17 billion. Healthcare Property Investors Incorporated (NYSE: HCP) is a real estate investment trust (REIT) that purchases, develops, rents, sells and manages real estate within the healthcare industry, even providing financing and mortgages to healthcare providers. One of the segments within its portfolio is senior housing. Senior Housing Properties Trust (NYSE: SNH) is a REIT, that owns approximately 370 properties in Washington DC and 38 other states. The company is managed by REIT Management and Research, LLC, a multilateral real estate management company. As of March 2014, RMR has over 1,200 properties, located in 47 states, Puerto Rico, Canada and Australia. The properties, managed by RMR and its affiliates, have a combined gross assets value of USD $23 billion. www.investmentlife.com

8 OF THE BEST

Investment property providers can make outlandish claims and advisors cannot rely upon statements made in the marketing literature.

Hotel and Resort Property

Risks and Reasons to Invest BY L U K E JAC K S O N ( I NV E S T M E NT A N A L Y S T, IN T ELLIGEN T PA RT N ERSH IP)

Returns, Diversification and Speculation The success of a hotel or resort property is dependent upon high occupancy. A particular property achieving high levels of occupancy can be something that is entirely 54

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divorced from the wider economy or the mainstream markets. If investors can find these types of properties, they can provide returns that are uncorrelated from the rest of a more mainstream investment portfolio, providing diversification and reducing overall portfolio volatility. Returns from these investments generally range from 7-10% per year. There are also secure leaseback investments as low as 3.5% per year, and high risk/speculative properties offering 25% per year. Property has the potential for high, longterm returns from capital growth. Investing in off-plan properties or more speculative developments in unproven locations is risky, but investors are often enticed by the promise of much higher returns when these investments are successful. Whether investors are always appropriately rewarded for the risk that they take on,

or whether the risks are fully identified, is unfortunately questionable.

Options for Investment The hotel and resort property market is dominated by directly held investments (freehold, leasehold and fractional), accounting for over 70% of investment opportunities in the sector. Investors can also invest through collective investment schemes and structures with a corporate element (bonds, loan notes or special purpose vehicles). Hotel and resort property investments can be split into seven categories: Beach Resorts Luxury Hotels Ski Resort Chalet

ÂŠ VADIM GEORGIEV / SHUTTERSTOCK.COM

he hotel and resort property sector includes such a wide range of opportunities, locations, investment structures and risk/return profiles that while many property investments do indeed qualify as mainstream, hotel and resort property should still be considered â&#x20AC;&#x153;alternative.â&#x20AC;? This sector has seen its fair share of failures that have resulted in intense scrutiny and tighter controls over the last year. It has also fallen in and out of favour with investors, but there is now a large amount of optimism as to what the future may hold for the sector.

8 OF THE BEST

Budget Hotels City Centre Hotels Business / Conference Hotels Holiday Parks

Each type of hotel operates in a slightly different part of the sector, with differing types of clients, levels of occupancy, prices and potential returns. Properties are spread across a wide range of locations in developed and undeveloped countries.

Risks, Research and Due Diligence Big upfront financial commitments, low liquidity and delays are common issues with the sector. These risks can be mitigated by researching the right opportunities, or increased by using leverage, buying off-plan and investing in unproven locations. Marketing materials are generally full of benefits but do not always explain the risks. Unfortunately, they cannot always be relied upon. Common sense investment criteria can be used to screen for suitable investments, but there are so many considerations with purchasing hotel and resort property that it can be hard to know exactly where to start. Initial questions to ask of any investment include: ▶ What is the underlying asset? ▶ How does the investor own the asset? ▶ Where is it located? ▶ When did the project launch? ▶ Have units been built or when should they be built by? ▶ How many units are available? ▶ What are the returns on offer? ▶ Are returns guaranteed? ▶ Is there a track record of returns / buy-backs / capital growth? ▶ What is the exit strategy?

Once these questions have been answered, investors can take their due diligence a step further. Areas to look at in detail include: Occupancy This is key to the success of the investment and achieving returns. Can the property hit its occupancy targets, where does demand come from? Legal & Tax Advice Purchase documents should be verified by a lawyer who should also undertake their own due diligence. What are the tax laws for the country where the investment is based? Costs Property is an expensive purchase and costs can be high and vary widely by country. There are likely to be upfront and on-going costs. Deposit This is usually payable to secure the property and can be up to 10% of the purchase price. Is this held securely by a third party? What rights does the investor have should they choose not to invest? Currency Risk This will affect all investments made in a foreign currency. Costs, returns and the value of the property will all fluctuate with the exchange rate, which can be a benefit, but can also result in high costs or poor returns. Product / Investment Provider Know exactly who is ultimately responsible for providing the investment. Research their previous investments/properties to see how successful they have been. Developer Check their track record. Have they met build targets and standards? Any responsible developer will have strict deadlines and milestones. Ask to see a copy of the project plan. Agent Property agents work for the product provider, they are usually paid a commission based on the sale price of the property. Agents are NOT advisers, they are salesmen. Management Company They are essential to the success of the investment, in charge of the day to day running of the property, room rates and occupancy. Check

the track record and performance of other properties they manage. Exit Some investments offer a defined exit strategy, usually through a developer buy-back. This will only be honored if the developer has the capital to re-buy the property when the time comes. Check the secondary market, do properties like this change hands? Are there property agents who can assist with this? Location Location can be a defining factor for a property. Local attractions, beaches, transport links etc. are important. The more accessible the property, the more attractive it is likely to be for tourists as well as future buyers. These points are just the start. The due diligence process is likely to take a long time and require a large amount of effort, but it can be essential to ensure that the investment is suitable and secure.

Suitability within a Portfolio Due to the relatively high capital requirement and risks, hotel and resort property is only likely to be suitable for investors with a medium to high tolerance for risk and capacity for loss, with a large amount of capital to invest.

Conclusions ▶ Hotel and resort property should be considered an “alternative” asset ▶ Annual returns of 7-10% are commonly offered by product providers ▶ There are opportunities out there – but thorough research and due diligence is required ▶ There are many high risk, speculative investments ▶ Only likely to be suitable for medium to high risk investors For more information please contact:

reports@intelligent-partnership.com

HOTEL OPERATING AND OWNERSHIP MODELS BRAND MARKETING AND OWNERSHIP DISTRIBUTION

(2013) STAFF

HOTEL OWNERSHIP

CAPITAL INPUT

INCOME

Franchised

Franchise

Third-party

None

Fee % of rooms revenue

Managed

Franchise

General Manager as a minimun

Third-party

Low income

Fee % of total revenue plus % profit

Owned & Operated

Franchise

High

All revenues and profits

Leased

Franchise

Third-party

Low

All revenues and profits

SOURCE

Intelligent Partnership

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8 OF THE BEST

Mekong Dreams

The launch of Aqua Expeditions Indochina.

A Aqua Expeditions was the first adventure travel company to introduce five-star luxury cruises to the Amazon River in Peru and in doing so fulfilled a lifelong dream for founder and CEO, Francesco Galli Zugaro.

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qua Expeditions caters to discerning, adventure travellers looking to explore the more remote and beautiful areas of the Pacaya-Samiria Reserve and its tributaries in the upper Amazon River. Aqua Expeditions’ flagship vessel, the Aqua Amazon, is 140ft long with 12 luxurious suites and was joined in April 2011 by the 16-suite Aqua Aria - both the creations of Peruvian designer Jordi Puig. The flagships of the Aqua Expedition fleet, both vessels feature floor-to-ceiling windows, a Jacuzzi, a gym, sundeck and Pedro Miguel Schiaffino-designed menus. Following the success of Aqua Expeditions’ boutique river cruises in the Peruvian Amazon, Francesco Galli Zugaro, founder and CEO of Aqua Expeditions announced that the operation will be launching its third luxury vessel in September 2014, on the Mekong River in Cambodia and Vietnam. Striving to provide a new standard of luxury and sophistication on the river, the new Aqua Mekong will match the style and allure of the Peruvian vessels; Aqua Amazon and Aqua Aria - small enough to be intimate but equally spacious and luxurious. The attention to detail for which Aqua Expeditions is renowned will be reflected throughout; from the design and décor to the cuisine and service. The Aqua Mekong

will have 20 outward-facing suites with floor-to-ceiling windows, enabling guests to relax and watch Asia float by. Each will be decorated in an authentic Asian style using locally sourced fabrics and materials and there will also be a generous-sized spa and fitness centre, dining room, library, screening room and an observation deck with a swimming pool and lounge bar. Construction will take place in Vietnam where the boat has been designed by renowned local architects Noor, based in Ho Chi Minh City. Drawing inspiration from local cultures and traditions, designers David Hodkinson and Luc Lejeune have created an elegant floating boutique hotel that will be unlike any other to the destination. Aqua Mekong will operate 3-, 4- and 7-night itineraries that will run from Siem Riep down river to My Tho, near Saigon (now Ho Chi Minh City), stopping in Phnom Penh along the way, and vice versa. Modelling the water safari experience, there will be daily river and shore excursions - which the Peruvian vessels have perfected. Galli Zugaro comments, “We are thrilled to be venturing into another exotic frontier and offering the experienced traveller an authentic and world-class way of exploring the Mekong.” The Aqua Mekong is scheduled to launch in September 2014.

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FEATURE

Tech Trends –

Opportunity in Complexity

street. Never before has the democratisation of technology been so readily apparent. Mobile technology is reshaping access to information as never before – smart and feature phones give us access to almost limitless amounts of data for use in our business and private lives. Commerce is being reshaped by the growing popularity of virtual currency. At the same

time technology is reshaping our cities and reaching into our homes in ways that are transforming the fabric of our everyday lives. Amidst all this change, the investor is presented with opportunity amidst complexity. In this section of Investment Life we will take a look at some of the technology that provides investment opportunity.

he world is changing at a pace that would not even have been conceivable only a few generations ago. Even those who were giddy with excitement over moon landings and breaking sound barriers are today faced with an ever-increasing pace of technological adoption by the man on the

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FEATURE

The

Bitcoin Bonanza BY ALB E R T F O N T E N O T

n October of 2013, the world’s first bitcoin ATM was installed in Vancouver, British Columbia, and the world was changed forever. By the following month, more than 1,000 real-world brick-and-mortar establishments accepted bitcoins as payment, to go along with over 35,000 online merchants. After starting the year valued at around USD $13, by the end of 2013, bitcoins were an amazing USD $1135 apiece. Not too bad for a virtual currency that was only introduced in 2009. However, earlier in 2013, Mt. Gox, the largest bitcoin exchange in the world, began experiencing problems, more than once suspending operations and even stopping withdrawals. The United States Department of Homeland Security became involved, and seized millions of dollars of assets from Mt. Gox. By November, customers began suffering delays that could take months when attempting to with-

draw funds from their accounts. The US banking system “froze out” the exchange because of concerns and problems with Mt. Gox’s regulatory practices. By February 2014, the company once again suspended trading, but this time, also shut down its website and exchange service, and shortly thereafter filed for bankruptcy. In April, liquidation proceedings for Mt. Gox began. More than USD $450 million worth of bitcoins, belonging both to customers and to the company were subsequently reported missing. Whether it was due to fraud or theft, investors were left with little recourse. In 2014, bitcoins are down to roughly a third of their highest 2013 value. And that, in a nutshell, is both the attraction of and the deterrent to ownership of bitcoins as an investment. Barry Silbert, founder and CEO of the online liquid asset market-

place, SecondMarket, recently said, “It is pretty much the highest-risk, highest-return investment you can make.” Silbert is also the founder of Bitcoin Investment Trust. Proponents say that bitcoins are the solution to creating a true virtual currency, while critics counter that the bitcoin can never be a currency until it solves the issue of volatility. Currently, there is an extreme dearth of international regulations that could offer any real protection. Bitcoin speculation is fifteen times riskier than other currencies. Whatever its eventual position, Bitcoin has paved the way for virtual currencies, and after the volatile dust has settled, it just may find itself displaced by the Next Big Thing. Secondmovers often find a way to succeed far beyond the original market entrants, such as when Facebook took the place of Friendster.

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FEATURE

Back to the Living Room How Multimedia and Video Game companies are changing the rules. B Y A L B E R T FON T EN OT 60

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FEATURE

ow, more than ever, we live in an instant gratification world. Technology has advanced to the point that people no longer have the need – or the patience – to wait on any form of media or communication. For virtually the entire developed world, the way we work, play, communicate and access information has changed forever. Think about it – if you meet someone who has a mobile phone that is not a smart phone, who plays video games, but not online, who routinely goes to the library to check out actual books, who sets aside time to watch a favourite TV show once a week, who purchases physical copies of music, who takes pictures with a camera, and who doesn’t constantly post, tweet, or Instagram, it feels like you have just met some kind of caveman. Media technology today has changed patience from a virtue into an anachronism, but that societal loss does come with a silver lining. Any form of entertainment imaginable is now only seconds away, more accessible and convenient than ever before. There is literally something for everyone regardless of taste or generation.

disinclined to adhere to traditional network programming schedules. Rather than set aside dedicated blocks of time once a week to watch a program and then have to wait for the next episode, viewers choose to watch large blocks of programmes all in one sitting. According to Nielsen statistics from 2013, over 60% of viewers in the United States say that they binge-watch shows and even more telling, nearly 80% of Americans use some sort of technology to watch television on their own personal schedules. Currently, Netflix has approximately 33 million subscribers in the United States and

Family Time Consoles have made a comeback and many are now the core of increasingly sophisticated entertainment offerings from companies like Microsoft.

Vudu, Amazon instant Video and Quickflix in Australia (ASX: QFX). The rise of streaming video content is doing more than changing how the world watches television because it is changing the way everything is watched. According to industry experts, by 2016, streaming revenue will surpass DVD and Blu-ray sales, and by 2017, it will surpass the revenue from theatrical films. The current revenue of USD $8.5 billion is expected to double in that timeframe. Part of the reason that on-demand streaming content has become so popular is the widespread design of inclusive technology such as Blu-ray players, video game consoles, smart televisions and digital media boxes, in combination with the increase in both size and picture quality of ultra-high-definition televisions. In January of this year, for example, Samsung (OOTC: SSNLF) unveiled the world’s

Video Nowhere is the shift in public taste and habits more glaringly apparent than in the entertainment sector, including movies, television and videos. Within just the past few years, the proliferation of ways to watch video on-demand and the explosion of available content has reshaped the industry. Blockbuster, LLC, used to be the unquestionable leader of video rental shops worldwide, and at its peak in 2004, the company had 9,000 stores and 60,000 employees. Due to the impact of various forms of video-on-demand, the company’s fortunes rapidly declined as it was forced into bankruptcy. The last corporate store closed in January of 2014. What many people do not realise is that at one point, Blockbuster had the opportunity to purchase the fledgling company that would later become the chief architect of their downfall - Netflix. Netflix (NASDAQ: NFLX) has definitely affected the way in which consumers view televised programming. Many experts believe that Netflix can be considered a model for what television will look like in 10 years. The Internet frees audiences by allowing them to watch programming on their own schedule. The term “binge-watching” has been coined to describe the recent societal phenomenon where audiences are for the most part

approximately 10 million additional subscribers in a number of countries across the globe, including Canada, Mexico, Central and South America, the United Kingdom, Ireland, Norway, Denmark, Sweden, Finland and The Netherlands. This growth has allowed the company to realise total revenue of USD $4.37 billion in fiscal year 2013. This is more than double Netflix’s revenue in 2010. In late May of 2014, Netflix announced that their next stage of expansion will be in the European countries Austria, Belgium, France, Germany and Luxembourg. Although Netflix is the global leader, there are a number of other streaming services that offer movies, television shows and original programming. Chief among these are Hulu,

largest 4K ultra-HD TV, the U9000, which measures 105 inches and has a curved screen for added depth. To ensure that there is plenty of 4K content, Samsung has contracted support with Netflix, Amazon Prime and Comcast. With such audacious size and clarity, the viewer experience is actually superior to the average movie theater.

Video Game Consoles Less than a year ago, pundits were sounding the death knell of home video game consoles because of the rise of mobile phone gaming applications such as Angry Birds and Candy Crush Saga and the resurgence of PC gaming, primarily due to massively multiplayer online role-playing games (MMORPG’s) such www.investmentlife.com

FEATURE

It is this fusion that seems to be the future of gaming consoles – a single piece of equipment that interacts with, controls and enhances the other devices in your home. Already, systems can act as a hub that manages your cable/satellite box, the television itself, communications (via Skype), social media (via Facebook or Twitter) and video streaming (via Netflix or Hulu Plus). Best of all, systems can perform all of these functions via the controller, by hand gesture, or by appearance/voice recognition.

Welcome Home

as World of Warcraft, SecondLife and DC Universe Online. World of Warcraft, for example, controls approximately 62% of the global MMORPG market and has almost 8 million active subscribers throughout the world, more than half of them in Asia. It has been estimated that if the game was ever discontinued in China, the loss would immediately cause the value of Activision Blizzard’s stock (NASDAQ: ATVI) to drop approximately 7% overnight. It seems as though prognosticators of doing were premature in their burial of home video gaming. In November of 2013, the PlayStation 4, the Wii U and the Xbox One consoles were released by Sony (NYSE: SNE), Nintendo (NASDAQ: NTDOY) and Microsoft (NASDAQGS: MSFT), respectively. Sales of the consoles have been very encouraging – thanks in part to a lower price point, the PS4 has sold 7 million units since release, while the Xbox One has sold 5 million units. To put those numbers into proper perspective, the figures are more than double the sales of recent predecessors, the PS3 and the Xbox 360. As of March 2014, Nintendo reports that 6.17 million consoles have been shipped. Each of these consoles belongs to the eighth generation of videogame systems, and as such, are equipped with the fastest processors and highest-resolution graphics yet devised, because of the integration of Advanced Micro Devices. Sony is playing to its strengths by placing the focus squarely upon the available games, offering a large library of titles across a wide spectrum of game genres. Perhaps the most innovative feature of the PS4 is its ability to interact with smart phones and tablets, using those devices as second screens. Emphasising 62

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the social aspects of gaming, the console grants players the ability to broadcast screenshots or video clips of their gameplay to other network members, or to social networking sites. The Nintendo Wii U believes that their controller, the Gamepad, is revolutionary because it utilises touchscreen operation like the majority of smartphones and tablets. Not only can it be used for play, it can act as a supplemental media controller, and the Gamepad itself can be used for off-TV play. Nintendo allows users to surf the web through the console, watch television and movies and download apps. Microsoft, on the other hand, is trying to establish a different identity as an all-encompassing entertainment console, and with its voice controls and TV integration, it may be revolutionising the marriage of game systems and entertainment. It is a combination media hub, program guide, universal remote, Blu-ray player, and yes, powerful gaming system.

Based on the releases and the blurring of lines between devices, it seems clear that home technology is already beginning to both shape and respond to how consumers integrate their entertainment the rest of their lives. Smart phones, because of their versatility, are almost omnipresent these days, with users customising their phones' functionality to fit their lifestyles, via downloadable apps and specific desired features on individual models. This is the road being taken by home entertainment technology – smart TVs, streaming media devices and videogame consoles. Some experts have stated that this may be the last generation of “pure” gaming consoles, because the next step is an amalgamated device where gaming is just one function among many. People can now come home and enjoy a better entertainment experience than is likely to be found in public. Best of all for their purposes, they can do it on their own personal timetable. With the continued inclusion of social media platforms, people can enjoy their favorite form of entertainment – music, movies, television and gaming – in private without being isolated from others.

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FEATURE

Reshaping the World –

How Google is Investing in the Future

s of June, 2014 more than two out of every three Internet users prefer Google, making it the most popular search engine in the entire world. According to Alexa, a company that specialises in data about web traffic, google.com is the most visited website on the planet. Furthermore, several companies that are owned by Google, such as YouTube and Blogger, are also ranked in the top hundred. Indeed, Google is so ubiquitous that the name of the company is now a verb that has entered the English language – “to google” means to look something up on the Internet. This is in perfect keeping with the company’s mission statement – “to organise the world’s information and make it universally accessible and useful.” With the revenue generated from this

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lofty position, Google has become one of the most powerful companies on the planet, ranking #5 on Forbes magazine’s inaugural “Most Powerful Global Brands” list. According to a September 2013 report titled, “The Best Global Brands,” released by Interbrand, a brand consulting/corporate identity company, Google is now also the second-most valuable company in the world, moving up from the #4 position it held in 2012. One of the reasons that Google has grown so large and so powerful is this continued commitment to innovation. For example, Google has a corporate policy called Innovation Time Off, where the company encourages its engineers to spend 20% of their paid work time on any projects that personally interest them. During certain periods, these personal projects have resulted in 50% of the new products launched.

Google maintains a facility called Google X, which serves as their division for advanced technological projects. Astro Teller, the scientist who is in charge of the facility’s day-to-day operations, has stated that the goal of Google X is to improve existing technologies by a factor of 10. As evidenced by its acquisitions, investments and announced research projects, Google is keenly interested in how technology may be used in the future to solve both current and expected problems. This altruistic corporate mentality is a logical extension of the company’s second, unofficial mission statement, “Don’t Be Evil.” This idea was even included in the prospectus of Google’s IPO in 2004, where the founders stated “we will be better served… by a company that does good things for the world, even if we forgo some short-term gains.”

FEATURE

BIOTECHNOLOGY / PHARMACEUTICALS

GREEN ENERGY To date, Google has committed over USD $1 billion in solar and wind projects, representing 16 projects spread across three continents. Some of the more large-scale investments include: (April 2014) USD $100 million to SunPower Corporation (NASDAQ: SPWR) to support residential solar lease projects, (December 2013) USD $75 million to the Panhandle 2 wind farm, outside of Amarillo, (November 2013) USD $80 million to utility-scale solar projects by Recurrent Energy, LLC, a subsidiary of Sharp Corporation (6753: Tokyo), and USD $280 million in SolarCity (NASDAQ: SCTY). One of the more ambitious investments by Google was their 2013 acquisition of Makani Power, the world leader in the development of airborne wind power extraction systems. Some estimates predict that when the technology is perfected, energy will be produced 10 times cheaper than conventional wind turbines. Currently, Makani Power will be folded into Google X.

SMART THERMOSTATS Google acquired Nest Labs in January 2014 four USD $3.2 billion. Nest makes self-learning, programmable “smart” thermostats. What this means for the future is an increased opportunity for Google to offer salable demand response, which is a service that is provided to homeowners and businesses that helps them save money by reducing their energy consumption. Already, Nest has demand response programmes in place with several major utility companies, including Southern California Edison. According to some statistics, these types of programs could reduce energy consumption in the United States by up to 10% by the year 2030, creating an annual market of USD $3.5 billion.

ROBOTICS / ARTIFICIAL INTELLIGENCE Even though it is the world’s leading search engine, Google understands that it could further refine its capabilities if it could help computers think, learn, and operate like humans. To that end, Google acquired Boston Dynamics in December, 2013. Boston Dynamics is an engineering and robotics company that specialises in mobile robots that mimic the movement of animals and humans, such as RISE, a robot that can climb vertical surfaces, LS3, an autonomous-legged robot that could serve as a sort of pack mule for military units, and Atlas, an anthropomorphic humanoid robot designed for search-andrescue missions. Although Google has yet to officially comment, in January 2014, several news outlets reported that Google had purchased DeepMind Technologies in a deal that may be as high as USD $840 million. Deepmind is an artificial intelligence company based in London that has heretofore specialised in games and e-commerce applications. Beefing up its artificial intelligence department will help Google with two of its goals – firstly, to mine even more information from the data it gathers, and secondly, to eventually change the Internet from a place one goes for information and things to an actual Companion capable of simulating human interaction. The combination of robotics and artificial intelligence is the driving force behind many other Google projects, such as the autonomous self-driving car directed by the proprietary software, Google Chauffeur, Hand Gesture Recognition technology, and an artificial neural network that could direct advanced speech recognition and computer vision.

In September 2013, co-founder Larry Page announced that Google was launching a new company, Calico, that will “focus on health and well-being, in particular the challenge of aging and associated diseases.” It is fortuitous that the company will be led by Arthur D. Levinson, who is currently the chairman of both Apple Inc. and Genentec. Levinson is uniquely recognised in the industry. In 2003, he was inducted into the Biotech Hall Of Fame. In 2004 and 2005, BusinessWeek rated him as one of the “Best Managers of the Year,” and between 2004 – 2007, the magazine Institutional Investor called him “America’s Best CEO” in the Biotech division four times. In 2006, he was honored by Princeton University for his career in scientific research and biotechnology, and that same year, Barron’s financial newspaper proclaimed him to be among “the World’s Most Respected CEO’s.” 2010 was another banner year, because he received the Heritage Award from the Biotechnology Industry Organization for “significant contributions… through discovery, innovation, and public understanding,” and he won the Director’s Award from the San Francisco Exploratorium, a museum that the New York Times hails as “the most important scientific museum opened since the mid-20th century.” That Google is investing in the future via Calico is evidenced by the very name of the company and by the words of Larry Page. “Calico” stands for “California Life Company,” and, according to Page, “Maybe we should shoot for the things that are really, really important, so 10 or 20 years from now, we have those things done.” As impressive as all of these innovations and acquisitions and areas of research sound, the most important and exciting take away from all of this is the corporate culture and mindset that is promoted by Google. As important as revenue and profits are – and Google has plenty of both – it is more important that it is an open-door company for all of its workers where innovation, creativity and the use of information and technology to improve the world as a whole creates an enviable model that few companies can hope to emulate. www.investmentlife.com

FEATURE

New World

Investment Horizons Investment Life recently spoke to Guillianno Mata, CEO of The Bottled Wealth Holdings (TBW), a Singapore-based wine investment company that is offering wine investment based on the growing popularity of New World wines. We share some of Mr Mata’s insights in this article.

here can be no doubt that the ever higher prices being achieved at auction by selected wines from prestigious European estates are being driven by an Asian thirst for this alternative investment. Traditionally, Old World investment wine has been limited to a highpriced clique of Clarets from the Bordeaux region of France known as the five First Growths - or Premier Crus - of Haut-Brion, Lafite, Latour, Margaux and Mouton. Due to the stratospheric rise in prices, many investors are beginning to consider wines from other regions as alternative assets. Wines that are attracting interest include those from Burgundy, Champagne,

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the Rhone, Italy and the New World. New World wines are those wines produced outside the traditional wine-growing areas of Europe, in particular from Argentina, Australia, Canada, Chile, New Zealand, South Africa and the United States. According to TBW statistics, total returns from investments over the past five years for wine investment bundles that include New World wines have been 37%. More traditional investment wines have risen 24%. According to the CEO of TBW, Guillianno Mata, there is increasing interest from investors on the island in New World wines – primarily those from Australia which has a growing reputation for produc-

ing some of the world’s best wines. Some of the world’s oldest shiraz vineyards can be found in South Australia’s Barossa Valley and McLaren Vale, award-winning sauvignon blanc vineyards are centred around Western Australia’s Margaret River. The Yarra Valley near Melbourne produces flagship chardonnay, pinot noir and sparkling wines. When asked about why TBW focused on Australian wines Mr Mata cited the increasing interest from Asian investors in the products of New World wineries. “When we conceived of the investment model behind The Bottled Wealth Holdings we did so on the strength of the enormous and growing interest in New World wines from

FEATURE

TOP 3 MOST EXPENSIVE WINES IN AUSTRALIA According to the recent analysis in Jan 2014 by Wine Searcher, here are some of the most expensive wines in Australia.

CHRIS RINGLAND SHIRAZ, BAROSSA VALLEY The fruit for this wine is sourced from 100-year-old, low-yielding, dry-grown vines, and the wine represents the once-ubiquitous blockbuster model that garnered cult status during the heady years of the late 1990s. The wine commands an average price of USD $752 on WineSearcher, and with reputedly fewer than 100 dozen bottles produced each year, it is one of Australia’s hardest wines to procure. As a result, secondary-market prices push well above USD $1,000 when bottles do surface.

PENFOLDS GRANGE BIN 95, SOUTH AUSTRALIA In 1951, longtime Penfolds winemaker Max Schubert worked in secret on a couple of barrels of an experimental wine. When first released it received a disappointing response but gradually the wine turned into a must-have for collectors. It’s now an official Australian icon, certified as a heritage-listed national treasure. across the Asian region. We noticed that wine lovers from China, Hong Kong and Singapore were buying and enjoying these wines in ever increasing quantities.” According to Mata, TBW has long recognised the potential of Australian wines. With their limited supply, improving reputation and recognised quality, some have been setting records at auction. At a 2001 wine auction, a single bottle of 1951 Penfolds Grange went under the hammer for USD $30,000. “We believed that a new generation of drinkers, collectors and investors would welcome the opportunity to invest in a market with quality products they so clearly enjoy both collecting and drinking. The current regional interest in these wines and in the investment potential of fine New World wines from well known estates is testament to the quality of the investment opportunity. TBW now has over 3,500 investors in the region and interest in wine from the New World continues to grow.” TBW follows a model of identifying, acquiring and trading in investment grade wines on behalf of its investors and share-

The latest release from 2008 saw a price jump of approximately 25%, with fevered global demand driven by a 100-point score from The Wine Advocate’s Lisa Perotti-Brown MW. Across all vintages, Grange has an average price of USD $566 on Wine-Searcher. The wine is created from the cream of Penfolds’ vineyards across South Australia. Predominately composed of shiraz, it sometimes includes a dollop of cabernet sauvignon for further structural detail.

HENSCHKE HILL OF GRACE SHIRAZ, EDEN VALLEY There are few vineyards in Australia that can raise the emotions quite like Hill of Grace. Noteworthy because of its beauty and its history, the site has 160-year-old shiraz vines spread gnarled and proud across the gently undulating land. With an average price of USD $553 a bottle, Hill of Grace Shiraz currently sits USD $10 behind Penfolds’ Grange. However, pricing of the two wines sees continual movement, creating a balletic dance to boost collector interest. Hill of Grace Shiraz is a wine of quiet purity, elegance and restraint compared with the more ripe-fruit-meets-fine-oak complexity of the highpowered Grange. The longevity of both is notable.

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Uncorked Potential Singapore is muscling in on Hong Kong’s status as Asia’s hottest collectable wine market. The island nation is seeing record sales and investment in quality wines – fuelled by increasing numbers of millionaires who call the Little Red Dot home.

TBW now has over 3,500 investors in the region and interest in wine from the New World continues to grow.

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holders. These wines are then held in bond in a temperature-controlled warehousing facility until they reach an optimum age for resale – the profits of these sales are then passed on to investors. According to Mata, TBW provides an end-to-end wine investment solution to investors, including sourcing high-quality wines at the lowest prices, temperaturecontrolled storage and extremely close ties to the consumer market through wholesale, retail, investment and auctions. This allows the company to ensure liquidity and provide a structured exit strategy and ROI for investors. Recently, CWT Logistics announced that it was opening the Singapore Wine Vault, a stylish SGD $200m state-of-theart 750,000 sq ft storage facility which has the capacity to house over 10 million bottles of investment grade wines. Singapore Wine Vault will be the largest such facility in Southeast Asia and TBW will be working in close co-operation with CWT Logistics to provide better allround service for their clients. “There have been wine investment companies in Singapore previously that have left a bad taste in investors’ mouths both literally and figuratively. By investing in this facility we will give our investors a tangible link to their investments as well as demonstrating that we are committed to

providing a world class service and a long term relationship with wine lovers on the island and in the wider region. Our investors can view their investment on request and can even remove some of the wines for personal consumption if they so wish. We are not dealing with intangibles – we are dealing with an investment that has value in the long term and can be enjoyed in a very real way here and now,” says Guillianno Mata. Mr Mata is also confident that TBW offers more than just superior returns – there are other important aspects to the investment in New World wines. “A large part of the process of understanding the opportunities presented by New World wines is education. We’re committed to not only providing the expertise to allow investors to enjoy a superior return on investment, but also to provide them with opportunities to learn more about the wines and the estates that produce them. We hold regular wine tasting and education evenings where we explore the products of the older, more established wineries and some of the exciting new wines that are coming out of Australia. We know that people also enjoy socialising and discussing their investments and these evenings also provide a fantastic way to network and share some quality time with others who share the same passion for great wines.”

Growing interest in

French Vineyards Investor appetite for fine wines is on the rise, with many enjoying spectacular returns for rare wines that go on auction on a regular basis. The market for fine wines is volatile and many experts recommend that wine form part of a portfolio as an ‘investment of passion’ where volatility caused by emotional buying decisions and the fickle nature of sentiment can be

offset by other traditional investments – like property. Once in a while, a company emerges that offers an investment opportunity that claims to merge passion and prudence. One such company is VIN ET ART. VIN ET ART provides Fine Wine Investment, Wine Property Investment, and Châteaux Investment in France to Asian investors. According to Managing Director Miss

Claire Victoria Pan, the company works with industry experts based in France to provide a unique investor experience tailored to the individual personal goals and requirements of the investor. Investment Life chatted to Miss Pan about what sets VIN ET ART apart from other investment advisory companies.

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FEATURE

Vintage French Investment With more than 123,000 hectares, the Bordeaux vineyards are the largest vine region in the world.

Many thanks for the opportunity to explore the market for wine property in France, firstly could you give us some insight into what differentiates your company from other property investment companies? We invest in a range of products, since the name of our company means wine and art in French, the majority of our items are fine wines and arts, and we also offer property investment which compliments this offering. Why would an Asian investor consider a vineyard or castle or any other investable items in France. Asian investors choose these kinds of investment for several reasons, many of the investors have their business involving wine and art, and they usually invest in these products as a wine production base or sometimes even art galleries. This helps them better develop their business in Europe as well as their global brand image. Some of our clients choose to invest for further development, as some convert these properties into a tourist sites, hotels, or a private club. There are of course a few clients who invest this for their passion and appreciation of wine and art. What in your opinion are the most important factors in the decision to purchase an estate property or any other investable items? As each client has different needs and purposes for investing, it is hard to define the most important factors, so we believe it is always important to know our clientsâ&#x20AC;&#x2122; needs, and to effectively guide them toward reaching their goals from the investment.

Who is buying? Can you give our readers an example of the types of buyer that you deal with and what attracts them to the types of property investments you handle? A good example from our many successful cases would be assisting one of our clients to find the perfect vineyard for her in Bordeaux. Owning a logistics company, she has made some investments in apartments in Germany where she found that the returns she enjoyed 70

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did not meet her expectations. She became interested in vineyards in Bordeaux as the returns can be very attractive. We recommended a small vineyard in Medoc, although its wine production is quite small at the moment there is the potential for a steady increase in value in coming years. We also handle other types of property. Another case study would be purchasing an apartment in Paris for personal use. In one case, a clientâ&#x20AC;&#x2122;s daughter recently decided to go to Paris for higher education, and it actually was more cost effective to purchase and live in an apartment than to pay for a dormitory room.

What influences prices? Can you give Investment Life readers an indication of the sorts of prices that the wine estates fetch and what determines the selling price? The price of French vineyards varies depending on the regions, for example classifications for the particular region, the size and production of the vineyard; also the terroir (the complete natural environment in which a particular wine is produced, including factors such as the soil, topography and climate) and the age of the vines, every little detail has a positive influence on the price. There are also various factors that influence the attractiveness and price of the properties within the vineyard - what we call chateau in Bordeaux. These factors can include the age and condition of the chateaux, the interior (number of rooms), the exterior (pool, garden) and the chateaux wine cellars, these all have a very important influence on the price of the property. Do you have any information on the sorts of returns that vineyard property investors can expect? Since we have very limited supply of chateau, and most the sale prices are private, we cannot give any exact figures, but in our experience, the value of these properties doubles in two decades. The return of these in-

vestments also include the yearly sales profit of the wine production, this varies from 8 20% P/A on average.

Where are investors buying? How do you help your clients to select from the various regions such as Bordeaux, Burgundy, Anjou, Loire or the RhĂ´ne River Valleys? For international buyers especially Asian buyers, we strongly recommend the properties in the Bordeaux region, since there have been international buyers in the region for centuries. The international wine business environment in Bordeaux actually helps the Asian buyers efficiently develop their wine business. The other regions in France can be challenging for international investors. Unless the client is familiar with French language and culture, the more traditional and conservative regions outside of Bordeaux can be intimidating. What are the additional costs involved in buying a typical estate or any other investable products such as wine, including costs like taxes and legal fees?

FEATURE

The legal and the notary fees range from 3 – 20% depending on the product. There is also a tax wavier if the investor makes the purchase as a foreign (non–French) company, which makes these estates more attractive. Are the majority of the buyers buying to take an active part in wine production? Wine property investment is the most popular of the investment handled by VIN ET ART, and most of the buyers are either professionals at vineyard management or have a strong passion for wine. Usually, they purchase the properties for wine production and business or holiday retreats. Do Asian buyers stay on the estate full time once they purchase? Most of my clients occasionally stay in the vineyards themselves, perhaps once or twice a year, while some of the investors in castle property tend to stay in the properties for full time once they have made the purchase.

Growing Asian interest. Are you seeing increased numbers of Asian buyers of estate property, and could you give us your opinion why investment in

these types of property has increased so dramatically? If we look at Chinese investors in particular, it’s clear that what we are seeing China moving towards into a new era of overseas investments - these investors show a growing interest in Europe. This interest is reflected in a growing trend by certain Chinese corporates and high-net worth individuals in collecting fine wine and arts. In addition, they are also drawn to the limited supplies of French wine properties and castles, guided by (and I’m paraphrasing) a saying in Chinese that “the greater the rarity, the better the investment.” Do these buyers show any interest in other sorts of investable items that VIN ET ART offers? Our company helps clients invest in properties and other financial products, but recently we have seen an increasing demand for acquiring certain other well-established brands of luxury collectable items, and the current levels of interest seem set for even further growth. Many thanks for your time and these in-

For more information on VIN ET ART please contact Investment Life at info@investmentlife.com

sights into what is clearly a growing market for Asian investors and may we wish you the best of luck with your future endeavors. Ms Claire Victoria Pan is a young entrepreneur from Hong Kong, the founder and Director of VIN ET ART, a guest hostess of CBN, a member of APEC women leadership forum and a representative of French Returnees. Born in 1985, Claire holds a masters degree in Management from IAE Lille, University of Lille I, France. Claire started her career in Paris, and has been working in France, Hong Kong and China for more than 6 years.

About VIN ET ART VIN ET ART is a company which provides cultural and investment solutions in France, to Asian investors. The services include cultural events, fine wine Investment, wine property investment, and fine art & castle investment. Working with industry experts based in France VIN ET ART ensures a unique experience tailored individually to each investor based on their personal goals and requirements. www.investmentlife.com

CLOSING BELL Well, another issue of Investment Life has been put to bed and chances are that you’re reading this publication either online or via the traditional issue made out of dead trees. Our Managing Editor is deeply in love with print. He likes the way it smells and the weight of a physical publication in his hands. He appreciates a glossy front cover and the look of a double page spread. But at the same time our entire team has no doubt that print is today only a small part of the communication and marketing mix. The rise of mobile devices and the increasing reliance on smart phones means that we have to be aware of the possibilities of the online environment. In this edition we’ve covered some tech trends and in future editions that class of investment – in companies that specialise in devices or in software and services will be part of our regular editorial mix, it’ simply too much a part of our everyday lives to ignore. In this vein, Panashco Media will be launching a variety of new applications tailor-made for mobile devices. These applications will allow our loyal readers the opportunity to enjoy up to date news on investments, as well as a regular diet of in-depth articles. We’ll also be issuing invitations to some exciting events via these applications. If you’d like to keep up to date with the latest investment trends and enjoy our unique brand of insight then visit www.investmentlife.com or go to our Facebook page www. Facebook/investmentlife.com. We appreciate all your feedback and your comments on our sites will help us keep Investment Life relevant, interesting and informative.

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Trevor Watling

MANAGING DIRECTOR & PUBLISHER Panashco Media

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