Category: Transactional and Investment Banking

FCA Speaks Out on Dealing Commission
BankingTransactional and Investment Banking

FCA Speaks Out on Dealing Commission

Investment managers should only use client dealing commission to pay for substantive research or costs related to executing trades, said the Financial Conduct Authority (FCA) as it published a policy statement on forthcoming changes to dealing commission rules.

The changes reinforce the current rules and provide greater clarity on what investment managers can pay for using client dealing commission – worth approximately £3 billion per year. Firms that already meet the rules will not need to make significant changes to the way they operate.

FCA chief executive, Martin Wheatley, said: “Investors should be confident that dealing commission is only used to buy execution or research services that deliver real value. These changes offer firms a real opportunity to show they put their clients first and strengthen the industry’s reputation for transparency.”

The UK is a global centre for investment management, and the sector is vital to the UK’s economy, investing over £5 trillion on behalf of clients across the world. The FCA’s work on dealing commission reflects its priorities for the sector – it expects firms to ensure:

• They are acting as good agents and taking proper account of investors’ interests;
• They spend their clients’ money as though it was their own, seeking to manage costs with as much tenacity as they pursue returns; and
• Clients are given easily understood information on the risks and costs of the service, and investment decisions reflect their stated objectives.

The changes on dealing commission come into force on 2nd June and are a result of extensive industry consultation. They will prevent investment managers using dealing commission to pay for access to senior staff at firms they invest in (corporate access).

The changes also clarify which costs investment managers can pass on to their clients through dealing commission, including specific guidance on mixed use assessments, where substantive research is bundled together with services that firms cannot pay for using dealing commission. Past reviews found that controls on how dealing commission is spent could be improved and in 2012 we asked firms to confirm their controls were effective.

The FCA has a statutory objective to secure appropriate protection for consumers and enhance market integrity.

River and Mercantile Group appoints Kevin Hayes as Chief Financial Officer
BankingTransactional and Investment Banking

River and Mercantile Group appoints Kevin Hayes as Chief Financial Officer

River and Mercantile Group (R&M) has announced the appointment of Kevin Hayes as Chief
Financial Officer to help lead its growth strategy.

His recruitment comes after investment consultancy P-Solve and asset manager River and
Mercantile merged last month.

Hayes has more than 20 years of financial services and asset management experience both in the UK
and US. He was previously Finance Director at Man Group plc, has held senior positions with
Lehman Brothers and was a partner in Ernst & Young’s financial services practice in New York.

“I am very pleased to be part of the leadership team and look forward to helping to
shape the future of the newly merged group,” said Hayes. “Both businesses have developed strong franchises in client-orientated investment solutions and the combination provides an exciting opportunity to be part of the ongoing success and growth of the company.”

R&M Chief Executive Mike Faulkner said: “Kevin’s background and deep experience is a great match
for what we aim to achieve and we are delighted he has joined us. His insight and skills will be
critical in taking the next steps for our new business.”

R&M Chairman Paul Bradshaw said: “I look forward to working with Kevin, who brings significant
public company knowledge to the board and will help us develop the robust governance to support
the growth of the business.”

Ukraine Crisis “to Impact on Investors”
BankingTransactional and Investment Banking

Ukraine Crisis “to Impact on Investors”

Latest developments in the Ukraine crisis are game-changers for investors, according to a leading global investment analyst.

The observations from Tom Elliott, International Investment Strategist at deVere Group, one of the world’s largest independent financial advisory organisations, come as European stock markets, including the FTSE which slid back from a seven-week high, tumbled as the tensions in Ukraine deepened on Friday.

“Six weeks ago, in market terms, the crisis looked like it might become little more than ‘a local issue’. But things have changed significantly in the last few days and they are continuing to evolve rapidly, and of course, this will impact investors,” said Elliott.

“It is becoming increasingly evident that the more success Putin has in ‘protecting’ ethnic Russians abroad, the greater the risk of trade sanctions by the west, and the weaker he will be at home. The Putin Paradox. Putin is gambling that the west remains divided and prefers to talk and trade rather than to act, an assumption that the US is actively challenging.

“Assuming direct evidence of Russian meddling in eastern Ukraine is found, reluctant Europeans – including the UK – will be shamefaced into tightening the existing sanctions on Russia. This, I believe, could trigger the end game for Putin.”

The Russian economy was already weakening before the Ukraine crisis unfolded, and it will be unable to withstand trade sanctions, said Elliott. “Russia is still, in essence, an exporter of commodities and arms, in return for which it buys western manufactured goods. “Putin’s popularity will almost certainly ebb with economic hardship. He will try to engineer a handover of power to someone in his ‘circle of trust’, but from all accounts that’s quite small,” he said.

As for the effect on already increasingly nervous investors, Elliott said that any sudden de-coupling of the Russian economy from the west—which is for the time being looking increasingly likely—will certainly hurt investors. “Retail investors have only a marginal direct exposure to Russia, while Ukraine is an even more exotic ‘frontier’ market that has attracted only professional investors,” he said.

“But the impact on the eurozone of trade sanctions could be severe in the near term, given that the region is only slowly emerging from its own economic crisis. Trade sanctions may involve limits on exports to Russia of European manufactured goods, and a cut-off of Russian gas imports, either self-imposed or because Moscow limits supply in retaliation.

“However, if sanctions are to remain in place over the long term, the West will inevitably and, I believe relatively quickly, readjust. For example the development of alternative sources of hydro-carbons such as fracking will be accelerated, and European consumer goods manufacturers will carry on as before but now re-priced to exclude growth prospects in Russia,” Elliott said.

State-Registered U.S. Banks “the Fastest Growing Bank Wealth Management Segment”
BankingTransactional and Investment Banking

State-Registered U.S. Banks “the Fastest Growing Bank Wealth Management Segment”

State-registered banks are the fastest growing bank wealth management segment in the U.S., according to new research from global analytics firm Cerulli Associates.

“Despite the post-crisis damage to the reputations of many major investment banks, investors continue to turn to bank trusts for long-term multigenerational wealth strategies,” said Donnie Ethier, associate director at Cerulli.

“While bank trust assets have consistently increased since 2008, state-chartered bank trusts have been buoying the overall growth,” said Ethier. “This is due to both new trust companies electing state charters, as well as many smaller, regional banks electing to sidestep federal regulation.”

In their report “High-Net-Worth and Ultra-High-Net-Worth Markets 2013: Understanding the Contradictory Demands of Multigenerational Wealth Management,” Cerulli analyzes the U.S. high-net-worth (HNW) (investable assets greater than $5 million) and ultra-high-net-worth (UHNW) (investable assets greater than $20 million) marketplaces.

“The bank trust channel is in the midst of a transition to open architecture, which potentially has huge implications for asset managers,” Ethier said. “Since bank trusts are becoming more receptive to third-party managers and products, asset managers have more latitude to target their services toward a larger asset base.”

Cerulli is now able to break out trust assets by national- and state-registered banks. This has become increasingly important to asset managers because in recent years numerous state-registered trust companies have formed due to states liberalizing their trust laws.

“By recognizing the subtleties of each segment, asset managers can better determine the true opportunity and position their wealth-preservation-oriented products,” said Bing Waldert, director at Cerulli.

Bank of America Reports First Quarter Net Loss
BankingTransactional and Investment Banking

Bank of America Reports First Quarter Net Loss

Bank of America Corporation today reported a net loss of $276m, or $0.05 per diluted share, for the first quarter of 2014, compared to net income of $1.5bn, or $0.10 per diluted share, in the year-ago period.

Revenue, net of interest expense, on an FTE basis declined three% from the first quarter of 2013 to $22.8bn. Excluding the impact of net debit valuation adjustments (DVA) in both periods, revenue was down four% from the year-ago quarter to $22.7bn.

The results for the first quarter of 2014 include $6.0bn in litigation expense related to the previously announced settlement with the Federal Housing Finance Agency (FHFA), and additional reserves primarily for previously disclosed legacy mortgage-related matters.

“The cost of resolving more of our mortgage issues hurt our earnings this quarter,” said Chief Executive Officer Brian Moynihan. “But the earnings power of our business and customer strategy generated solid results and we continued to return excess capital to our shareholders.”

“During the quarter, our Basel 3 standardised capital ratios and our liquidity improved to record levels and credit quality also improved,” said Chief Financial Officer Bruce Thompson. “In addition, expenses in our legacy mortgage servicing business, excluding litigation, declined by $1bn from the year-ago quarter.”

Nearly 40% of Investors Need Increased Advice
BankingTransactional and Investment Banking

Nearly 40% of Investors Need Increased Advice

Nearly 40% of investors indicate an increased need for investment advice, according to global analytics firm Cerulli Associates.

“One of the challenges facing the advisory industry is simply helping potential clients understand the value an advisor can provide,” comments Roger Stamper, senior analyst at Cerulli. “The good news for advisors is that investors are expressing increased interest in seeking advice regarding their portfolios. Overall, 37% of our survey respondents indicate an increased need for investment advice.”

Cerulli’s U.S. Retail Investor Advice Relationships 2013: Sorting Out the Winners and Losers report provides perspective on the relationship between financial providers and retail investors, covering the provider-client relationship from end to end, starting with client acquisition, progressing through advice delivery, investment management, pricing, and client retention strategies.

Rather than fighting over those investors who have already engaged with a provider, Cerulli believes the real opportunity for providers to substantially increase their marketshare is to address those in the middle segment who are unsure of the value of advice.

“Instead of trying to convince clients who are generally happy with the advice they receive, firms have the opportunity to address a new segment of clients,” Stamper explains. “Only by expanding the addressable client base overall does the industry benefit.”

Read the full report at https://external.cerulli.com/file.sv?Cerulli-RIAR-2013-Info-Pack

 

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Advisor Migration Projected to Grow Independent Channels
BankingTransactional and Investment Banking

Advisor Migration Projected to Grow Independent Channels

According to research from global analytics firm Cerulli Associates, advisor migration is projected to grow independent channels to 38% of asset marketshare through 2016.

“We anticipate the registered investment advisor and the dually registered channels are going to be the beneficiaries of advisor movement,” states Kenton Shirk, associate director at Cerulli.

Cerulli’s Intermediary Distribution 2013: Managing Sales Amid Industry Consolidation report examines the distribution of financial products within the U.S. The report includes advisor marketsizing, advisor product use, and asset manager sales organizations.

“Across the advisor industry, there is a strong desire for independent operation and ownership. The draw of autonomy, combined with the trend toward fee-only relationships, has enhanced the appeal of the independent channels,” Shirk explains.

To manage advisors transitioning between channels, Cerulli recommends that distributors clearly delineate ownership, empower divisional sales managers to track advisor transitions, and standardize transition hand-offs between wholesalers to ensure relationship continuity with the firm.

The Long-term Financing of the European Economy
BankingTransactional and Investment Banking

The Long-term Financing of the European Economy

 

European Private Equity & Venture Capital Association (EVCA) Chief Executive Dörte Höppner said: “European private equity, including venture capital, has a significant contribution to make to the long-term financing of Europe’s businesses and economy.

The EVCA welcomes today’s Communication, which recognises the industry’s role in supporting SMEs and helping investors such as pension funds meet their long-term liabilities.

“This is an encouraging step in the right direction but policymakers must encourage the best conditions for investment in long-term investment vehicles, such as private equity funds, whose engaged, patient capital boosts innovation, competitiveness, productivity and growth in the companies they back.”

The Commission today also adopted a proposal to revise the Institutions for Occupational Retirement Provision Directive (IORP Directive).

EVCA Director of Public Affairs Michael Collins said: “Internal Market Commissioner Michel Barnier was true to his word and did not propose Solvency II style capital requirements for pension funds. Long-term asset classes such as private equity do not now have to fear they will be priced out of the market for pension fund investment.

“Long-term investors such as pension funds or insurers must not be deterred from private equity by inappropriate capital requirements because this will only block much needed investment in European companies and make it harder for those investors to serve their customers.”

Widening the Investment Net
BankingTransactional and Investment Banking

Widening the Investment Net

 

Interest in so-called ‘alternative property assets’, such as healthcare, hotels, student accommodation, privately rented housing, and infrastructure has never been so pronounced. According to research by JLL, alternative assets account for 5% of institutional investors’ portfolios at present, but that number is set to rise to 15% by 2023.

Some investors are looking to diversify their portfolios; others are attracted by higher returns and yields; some by the availability of long, index-linked leases that match their requirements. At an event held by the British Property Federation and JLL today, key industry figures will talk about these drivers, and whether alternative assets will play a much greater role in property investment in the future.

As the UK demographic changes, and an ageing population, an international student base and Generation Rent emerge, the healthcare and private rented and student accommodation sectors are becoming attractive to a range of investors. The panel will today discuss what is driving this increased appetite, and whether these assets offer sustainable investment solutions.

Liz Peace, Chief Executive of the British Property Federation, said: “Having recently launched a student accommodation committee, we are aware of the growing demand for alternative assets and for new income streams. As new asset classes emerge it is important to identify and discuss potential problems areas so that we can understand them fully and ensure that they are brought onto a level pegging with more traditional outlets such as office and retail.”

Bill Hughes, Managing Director of Legal & General Property, commented: “We view the rise of alternative real estate sectors, ranging from residential, care homes and student accommodation through to leisure, as an important tool for fund managers looking to maintain the diversification benefits of property as an asset class and manage structural change as well as a conduit for injecting much needed investment into the UK’s social and economic infrastructure. As these emerging sectors in turn become mainstream, there are a number of important implications for how we define the property universe. As part of this, we should expect to see the up-skilling of fund managers to provide their clients with in-depth knowledge and understanding, as well as a full range of risk/return solutions.”

Kenneth Mackenzie, Managing Partner of Target Advisers, said: “The importance of specialist investment vehicles with diversified risk profiles and specialist managers is key to wise investment in some of these niche areas. While the background demographics in healthcare are persuasive, specialist and in depth knowledge is key if the mistakes of the past are to avoided in the future. The underlying client group are residents and families in distress, served by lowly paid staff, and moderate long term rents and returns are key to sustainability. Investors need longer memories.”

Jon Neale, Head of UK Research at JLL, said: “We estimate that today, institutional investors have circa 5% of their portfolio invested in alternatives. Based on a survey we carried out among fund managers during the middle of last year, we expect this to rise to around 15% by 2023. Our respondents suggested that this would be driven mainly by a greater need for diversity and the availabililty of the very long, index-linked leases that match pension fund requirements. However, it also identified some issues with the sectors – in particular the lack of data and information and the need for skills beyond those of the traditional property investor.”

DIV 50 Index Licensed to Deutsche Bank
BankingTransactional and Investment Banking

DIV 50 Index Licensed to Deutsche Bank

 

STOXX Limited, a leading provider of innovative, tradable and global index concepts, introduced that the newly launched STOXX Europe Low Beta High Div 50 Index has been licensed to Deutsche Bank to be used as the basis for structured products. The index selects the 50 stocks with the lowest beta out of the members of the STOXX Europe 600 Index with a dividend yield which is higher than the EURO STOXX 50 Index’s dividend yield. It is the first index of its kind, and is designed to act as an underlying to structured products and other investable products, such as exchange-traded funds.

“The STOXX Europe Low Beta High Div 50 Index creates a hybrid portfolio of high dividend and low risk investment strategies based on Europe’s two most favored benchmarks, “said Hartmut Graf, chief executive officer, STOXX Limited. “The innovative and transparent concept, combines screens based on the composition of the underlying STOXX Europe 600 Index with thresholds derived from the fundamental values of the EURO STOXX 50 Index.”

Giulio Alfinito, Head of Equity Investor Products Europe at Deutsche Bank, said: “STOXX Europe Low Beta High Div 50 Index is a significant development in the low volatility and low beta investment space. The intuitive selection mechanism provides access to stocks with low historic exposure to systematic risk. The index is an ideal candidate for investors seeking partial or full capital protection through options and other structured products”.

The STOXX Europe Low Beta High Div 50 Index is derived from the STOXX Europe 600 Index. To be eligible for inclusion in the new index, companies must have a net dividend yield for the past twelve months that is higher than the overall net dividend yield of the EURO STOXX 50 Index over the same time period. All those companies are then screened for their beta to the EURO STOXX 50 Index over the past twelve months, and only those 50 companies with the lowest beta are selected. A cap of eight companies per country is applied to ensure diversification in the index.

The STOXX Europe Low Beta High Div 50 Index is weighted by liquidity measured through components’ three month average daily trading volume (ADTV), with a single component’s weight cap of 5 percent. The index is reviewed annually in December, with the cutoff date for dividend yield and beta data being the last trading day of the previous month.

The STOXX Europe Low Beta High Div 50 Index is calculated in price, net and gross return versions and available in Euro and USD. Daily historical data is available back to December 23, 2002.

Embrace the Bull in the China Shop
BankingTransactional and Investment Banking

Embrace the Bull in the China Shop

 

A rise in negative investor sentiment towards China ignores a number of stronger positives and the long-term investment case remains firmly intact, believes Investec Wealth & Investment (“IW&I”).

The thrust of most negative reports centres around six key issues: that China has grown at an unprecedented rate; has a lot of debt; struggles with corruption; has unreliable statistics; is suffering a growth slowdown; and, because of its size, if it goes wrong could be a real problem for the global economy.

However, China is fully aware of its challenges, believes IW&I. The current slowdown is largely self-engineered by the new leadership, whose efforts to rein in lending and tackle corruption have imposed a significant austerity burden on growth – IW&I estimates over 3% of GDP. As China ‘cleans house’, bankruptcies and insolvencies will increasingly be part of the regular news-flow from China – but this is a sign that markets are being allowed to work, not a harbinger of imminent disaster.

John Haynes, Head of Research, Investec Wealth & Investment, said: “China has a lot of debt – the total burden of public and private sector debt has risen from around 150% of GDP to over 200% of GDP since 2008. But the country also has a lot of assets, even beyond the $3.8trn of foreign exchange reserves which amount to around one-third of GDP.

“Only a small fraction of investment over the past five years has been in ghost cities or corrupt projects; a good deal has been in productivity enhancing infrastructure, including housing and transportation. To the extent that it has been in ‘bad’ assets, these have largely been sponsored by regional/provincial governments whose credit will ultimately be supported by the remarkably solvent central government.”

Current concerns over the “shadow” banking system in China have a high profile because their products have been sold to consumers, but the sector is a small part of the overall debt burden, according to IW&I. The rise in China’s debt over the past five years has in fact predominantly come from the corporate sector – largely a function of loans to State Owned Industry. Once again, this is government debt by another name and the Chinese government is “good” for its debt, believes IW&I.

John Haynes continues: “For a crisis to develop either politics or the financial system must be unstable. Neither is the case in China. We know from our experience of the Eurozone crisis what to watch for – namely bankruptcies (or the possibility thereof) of key banks. This will not happen in China because the key institutions are state-owned and well funded: banks’ loan to deposit ratios are only around 70%, savings are all locally sourced, there is no risk of deposit flight and foreign funds in China are in illiquid investments.

“Many China watchers appear to be confusing the signals generated by a necessary tightening of control in the financial sector with an imminent crisis. We think this will prove to be overly pessimistic. We are not factoring-in a China ‘surge’ in our positive investment outlook for the year but simply a stabilisation. Since we think China is in control of its own destiny, to us this seems like a modest expectation.”

Fisch Asset Management AG joins GBAM
BankingTransactional and Investment Banking

Fisch Asset Management AG joins GBAM

Fisch Asset Management is an independent asset management boutique based in Zurich and is one of the leading convertible bond managers worldwide.

The Group of Boutique Asset Managers (GBAM) is a global network of like-minded, independent specialist asset managers who have come together to improve their presence in international marketplaces. Members do so by sharing information and promoting their presence both individually and collectively to potential investors.

The principle activities of GBAM are:-

• To foster cooperation among member firms.
• To identify best practice and share experiences in all aspects of asset management (research portfolio management, risk control, marketing etc).
• To improve understanding of operating in international markets.
• Improve recognition in the marketplace of the advantages offered by small, specialist businesses by providing a representative voice in the media.
• To support members by highlighting their expertise in their chosen fields.

The chairman of GBAM José Luis Jimenez said, “We are delighted that a boutique of the calibre of Fisch has joined our group. Since our inaugural meeting in Valladolid under a year ago the group has now grown to 16 members, representing asset managers from Europe, Latin America, Africa and Asia and managing over €100bn of asset under management.”

Dr. Pius Fisch, chairman and founding partner of Fisch Asset Management said, “I am very pleased to be working with a range of different specialist boutiques from around the world. I’m sure I will learn much from their expertise while making a useful contribution to the Group.”

Interest Rates to Rise Next Spring
BankingTransactional and Investment Banking

Interest Rates to Rise Next Spring

Mike Franklin, Chief Investment Strategist at Beaufort Securities says, “Given the significance of the timing of an interest rate rise after the prolonged period of no increase, it is unsurprising that much speculation surrounds any hints from the Bank of England’s Monetary Policy Committee or from any individual members of the Committee about when the next move would come.

The Bank of England has now decided to move from the level of unemployment as a sole threshold for reviewing interest rates to a much wider range of criteria. This is probably more realistic but complicates the situation for ‘rate twitchers’.”

Mike continues, “The perception of the timing of a rate change is a particularly important component of equity market sentiment. The current hot spot for estimates is spring 2015 and, more specifically, May 2015.

Of course, a lot can change in the world economy before then and the ramifications for the UK economy could be significant. Consequently, even the Central Bankers here and elsewhere, including the Federal Reserve, cannot know for certain when in the future they will decide to move rates.

It is axiomatic that, given the sacrifices that have been made already to nurture economic recovery around the world to a sustainable level – that is, without the need for long term Central Bank intervention – Central Bankers will not wish to jeopardise the recovery by raising rates too soon.

However, that does not mean that they will get their timing right and that is part of the risk facing equity and bond markets as well as the many companies attempting to formulate their plans for future investment.”

Mike concluded, “In a nutshell, if economies recover much more quickly to a level where they are deemed to be able to cope with a rise in interest rates, then interest rates will probably rise sooner. If Central Banks are right on this, then any rise in itself should not be a problem.

With question marks over the rate of growth in the Chinese economy and Latin America, some moderation of global growth in 2015 looks possible, in which case, interest rates would be unlikely to rise before the second half of 2015.”

Name Change for China Private Equity
BankingTransactional and Investment Banking

Name Change for China Private Equity

 

AIM-quoted China Private Equity Investment Holdings Ltd (CPE) has been renamed Adamas Finance Asia Limited (AFA). The Company’s new AIM ticker is ADAM.

The renaming follows the completion of an Agreement announced last December which sees control pass to the Hong Kong-based asset management group Adamas Asset Management (Adamas).

Adamas has approximately US$500 million under management, and was winner of the Acquisitions International Best Mezzanine Fund Award 2012. In recognition of its specialist expertise, it has also been nominated by Private Debt Investor alongside KKR and Oaktree for the forthcoming Best Asia Lender Award 2013.

Adamas’ investment professionals will provide AFA with investment management services, and with access to consistent deal flow. Their investment policy will target SME’s needing capital in Asia, with a focus on Greater China. Transactions will be structured as senior debt, bridge loans, mezzanine finance and other types of structured private financing, with a targeted internal rate of return of 20% per annum.

H.I.G. Capital Strengthens London Team
BankingTransactional and Investment Banking

H.I.G. Capital Strengthens London Team

Leading global investment firm, H.I.G. Capital has announced that two experienced private equity investors, Johannes Huttunen and Johan Pernvi, have joined the London team.

Johannes was formerly at Silverfleet Capital where he worked on the origination and execution of transactions as part of the team in London. Before that he was at European Capital, working on UK buyouts, and in the healthcare M&A team at Deutsche Bank in London. Johannes has a first class honours degree in Management Sciences from the London School
of Economics.

Johan was previously a Senior Investment Manager at publically listed Swedish private equity company, Ratos, where he worked on buyout transactions. Before that he was at Bain & Co. Johan has an MSc from Stockholm School of Economics and a BSc from Lund University, School of Economics and Management.

Commenting on the appointments Paul Canning, H.I.G. London Managing Director said: “We are delighted to welcome Johannes and Johan. These appointments will further strengthen our team’s in-house operational, financial and strategic expertise as we continue to seek opportunities to drive value creation working with businesses in the mid-market.”

Spain’s Largest SICAV Doubles Assets
BankingTransactional and Investment Banking

Spain’s Largest SICAV Doubles Assets

The inflows into Torrenova confirms March Gestión’s position as Spain’s most successful home grown asset management business with assets trebling over the past five years in a local market which has
largely stagnated.

With an aggressively customer focused mind-set, simple, transparent products based on its global equity skill-set and backed by Europe’s best capitalised bank, Banca March, the asset manager has UK and European expansion firmly in mind.

Using Torrenova to enhance and protect Spanish investor’s assets over the past 25 years (including those of the March family whose policy is to co-invest in March Gestión funds)* March Gestión now has its eyes firmly fixed on those UK investors who seek long term growth with lower average volatility in a highly transparent investment vehicle.

March Gestión CEO José Luis Jimenez said today that by targeting European CPI plus 2% Torrenova’s simple transparent bond/equity mix had shown all the hallmarks of a total return fund – one which had seen consistent growth while demonstrating defensive qualities. During the last 10 years average return has been 4.7% while volatility has been reduced to 2.56%. In 2013 the fund returned 6.2%,.

José Luis said, “For those who seek greater certainty in a simply uncomplicated fund Torrenova is a straight forward, transparent global equities plus bond fund whose success has been driven by the stock picking and asset allocation skills of Juan Berberana – a manager with over 20 years’ experience – and the rest of the team at March Gestión.

The fund also avoids the lack of clarity surrounding some well-known total return funds by avoiding complex financial instruments to manage returns and that, we believe, is valued by many investors.

“With a proven track record over 25 and more years the fund has been the investment of choice for many investors who are keen to protect and supplement their wealth without taking the sort of significant risks which severely impact their investments.

Even during the financial crisis of 2009 when markets plummeted, Torrenova proved itself with a modest fall of just -5.4% compared with far more significant equity market falls (see illustrative chart in notes to editors). Now, within a UCITS structure, it has become available in the UK market to those wealth managers who seek this style of investment for their customers,” said Jimenez.

Genii Capital Appoints Andrew Ruhan
BankingTransactional and Investment Banking

Genii Capital Appoints Andrew Ruhan

Genii Capital SA has appointed Andrew Ruhan as Partner. This appointment will enable Genii to strengthen and broaden its reach in the real estate, oil and gas, automotive and financial services sectors.

Having worked with Andrew on a number of projects in the past, this appointment is part of Genii’s strategy to further enhance its credentials in these core areas. In real estate, this will mean access and implementation of major global projects, including in Central Europe, the United Kingdom and major cities in the United States.

There are also a number of synergies in the oil & gas sectors, particularly in supply and distribution, initially focusing on distribution in Africa. Genii automotive division, which will be managed by Patrick Louis, will also benefit from Genii’s stronger position.

On the appointment Gerard Lopez, Chairman of Genii Capital, said: “having teamed up with Andy on a variety of projects in recent years, we know that we work well together and share the same values and ambition to pursue exciting business opportunities across a variety of different industries.

In addition to being a savvy investor and a fine strategist with an impressive proprietary deals track record, Andy shares our passion for excellence and is results oriented. Outside our business relationship, we share a strong friendship and have several interests in common, such as racing.”

Andrew Ruhan said: “I am delighted to be joining the Genii team at this exciting time for the business, when it is continuing to focus on major new projects. Genii Capital has an excellent reputation around the world for its work, in particular in investing and financial transactions.

We have already identified a number of projects to pursue, which will enable us to leverage our investment management capabilities and global network. I am confident this will be a very successful long term partnership.”

Loans: A Tactical  Investment Opportunity
BankingTransactional and Investment Banking

Loans: A Tactical Investment Opportunity

“At Insight we believe that senior loans in Europe will return 5% in 2014 despite tightening spreads across most credit markets, with the benefit that loans are typically senior in the capital structure with a higher implicit
credit rating.

“This is an investment opportunity that has arisen due to the hunt for yield across asset classes and many investors lacking the specialist expertise to access the loan market. Five years on from setting up the fund, the asset class remains as relevant as ever,” says Singh Lakhpuri.

The appeal of loans is likely to increase as investors anticipate the normalisation of monetary policy. Loans are floating rate products, meaning that the interest they pay intermittently resets with market rates, thus offering some protection against rising interest rates. The Insight Loan Fund is benchmarked against three-month Libor and targets absolute returns.

The Fund has returned an annualised 6.0% in the last three years compared to 0.7% for three-month sterling Libor, with a one year return of 6.3% vs. 0.5% for three-month sterling Libor. These returns have been produced with exceptionally low volatility with a Sharpe ratio of 2.4 vs. 1.6 for the Credit Suisse Institutional Western European Leveraged Loan Index (“CS Loan Index”) over the three-years to 31 December 2013 proving the strong risk-adjusted performance of the fund.

Ride a White Swan
BankingTransactional and Investment Banking

Ride a White Swan

Kevin Lilley from Old Mutual European Equities argues that equity markets reaching new highs should be considered a normal event.

Instead of obsessing on the unpredictable, investors should look to the positive environment they see in front of them.

In 1970 Marc Bolan wrote the lyrics to Ride a White Swan, the song that would become the first hit for his glam rock band, T. Rex. It might be pertinent to today’s equity markets.

Today, we live in an environment where investors are constantly looking for ‘black swans’, the name famously given by Nassim Nicholas Taleb to events that could not possibly have been foreseen. But such events are by definition extremely rare. It is normal to be in a white swan environment and, while not ignoring the risk of setback, this is surely the path for which we should plan.

Market commentators are also fixated on the term ‘bubble’, using it to describe equity indices hitting new highs. I would argue that equity markets reaching new highs is a fairly normal event. It is the last 13 years that has not been normal, with markets remaining below peak due to the extreme overvaluation at the beginning of the millennium, the height of the dot-com boom.

If markets traded on a constant fair multiple of profits or cash-flow, the norm would be for new market highs more often than not. Profits and cash-flows will normally follow the direction of nominal economic growth, which incidentally has risen in most of the past 13 years.

Due to the specific impact of the successive eurozone crises since 2010, there appears to be substantial potential for European equities to catch up with other equity markets. Not only is the European economy emerging from recession, the impact of self-imposed austerity measures is diminishing, removing a significant economic drag.

Unlike their global peers, European company profits and stock markets remain well below peak. With attractive multiples, a recovering economy, a return of international investors and an unlimited European Central Bank (ECB) backstop in place, Europe would appear to have significant potential for 2014. We don’t expect plain sailing, but in my experience of over 20 years, this has never been the case, even in the big up years.

There remains a strong political will for the eurozone to keep together, supported both by the ECB and Germany, so long as measures continue to be taken to make peripheral Europe more competitive. This appears to be slowly working, with many of these nations returning to current account surplus and having achieved lower and more flexible unit labour costs, which is leading to some examples of inward investment.

The threat of a Eurozone breakup now seems unlikely, apart from in the eyes of the loudest Europhobes, and the euro has returned to trend versus the US dollar. Political resolve remains strong, as the alternative of a fragmented Europe would mean a significantly reduced influence in global political affairs, encompassing both trade and security and defence issues, particularly as the Chinese and other faster growing economies demand more influence.

With market multiples of current year profits not looking stretched, and nominal economic growth forecast to rise over the next two years at least, surely we should be embracing these markets and ‘riding the white swan’, anticipating returns at least in line with profit growth plus dividends?

Tristan Nagler Joins Aurelius Investments
BankingTransactional and Investment Banking

Tristan Nagler Joins Aurelius Investments

Tristan Nagler joined Aurelius Investments, London, on 2 January 2014 as Managing Director.

He will lead Aurelius’ London office and be responsible for sourcing, identifying and executing equity investments across the UK and Ireland. Aurelius´ focus remains on companies and corporate spin-offs with development potential generating revenues of between 30 – 750 million euros across all industries.

Tristan started his career with KPMG in 1998, transferring into KPMG Corporate Finance in 2001 where he became a director in the London-based M&A team. In 2010 he joined Investec Growth & Acquisition Finance as a senior banker originating and executing a number of UK mid-market debt facilities including company refinances, MBOs and acquisition finance transactions.

Dr. Dirk Markus, CEO of Aurelius AG says: “We’re delighted to welcome Tristan to Aurelius. We have ambitious plans for targeting investment opportunities in the UK market and expect this appointment to be followed by further new hires to our London based team in 2014, augmenting our presence and enhancing our position in London”

Tristan Nagler, Managing Director of Aurelius Investments comments: “The Aurelius Group’s financial strength coupled with its investment and operational track record means now is an exciting time to be joining Aurelius in London. There is already strong momentum in the business and with the benefit of improving market conditions, I am confident Aurelius’ offering will be increasingly sought after in the UK market”