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?
Marianne Hay has joined the Advisory Board of RiverPeak Wealth, the newly launched wealth management firm.
Hay, who has headed global wealth and asset management groups including roles as CEO of Europe, Middle East and Africa Wealth Management at Morgan Stanley, Citi and Standard Chartered, will offer advice on the growth and development of the business.
Launched in December, RiverPeak Wealth provides portfolio management, investment analysis and financial planning advice.
Nick Parker, RiverPeak Managing Director, commented “We are delighted that Marianne is joining us in an advisory capacity. Her past experience and skills will prove invaluable to us, and our clients, as we grow the business.”.
Hay added “The wealth management market in the UK continues to be fragmented with no clear market leader. RDR has given RiverPeak Wealth an opportunity to develop new ways of providing wealth advice. I am looking forward to helping RiverPeak’s directors meet their ambitious goals over the months ahead.”
UFXMarkets is proud to be among the only Forex trading platforms facilitating investment in Bitcoin alongside more traditional national currencies. Bitcoin, the growing peer-to-peer digital currency, is gaining traction as a trading instrument as much as for use in business and retail.
“Forex traders don’t need to care how economies are doing or whether something new will catch on,” said Chris Judd, Chief Analyst at UFXMarkets. “Volatility creates great opportunities for Traders. That means that no matter what you think about the future of Bitcoin, it’s an ideal trading asset.”
Due to Bitcoin’s dramatic price fluctuations, even relatively low leverage allows each Trade to have remarkable results. The currency will have 24-hour-a-day trading hours and is available with leverage of 1:10.
Following the recent significant final close of Apollo Investment Fund VIII, the largest buyout vehicle to have reached a final close since the global financial crisis in 2008, Preqin has taken a closer look at the private equity buyout fundraising market.
In the factsheet below are key figures including an updated table of the top 10 buyout funds closed ever and the largest buyout funds currently in market, as well as charts examining historical fundraising, the changing average size of final closes, and a breakdown of buyout fundraising by fund size.
The $18.4bn raised by Apollo – including $17.5bn in LP commitments – has pushed the average size of buyout funds closed in 2013 to over $1.2bn, the largest average size seen in any year since the onset of the global financial crisis.
The majority (50%) of UK independent financial advisers (IFAs) believe sophisticated investors are underweight in the venture capital sector according to new research commissioned by leading venture capital investor Albion Ventures.
IFAs estimate that less than a fifth (17%) of their clients’ currently have direct exposure to venture capital, with most of those surveyed (48%) believing that their clients’ exposure to venture capital will increase in the next five years. Just 3% expect a decrease. Only a handful of IFAs (2.2%) believe their clients are overweight in the sector.
Sophisticated investors can access the venture capital sector through venture capital trusts (VCTs), investment companies listed on the London Stock Exchange. VCTs provide investment for smaller companies and offer investors a range of incentives including: 30% income tax relief, tax free dividends and no tax on capital gains. VCTs have continued to grow in popularity in recent years. In 2012-13 £370m of funds were raised by VCTs, £45m more than 2011-12.3
Patrick Reeve, Managing Partner of Albion Ventures said, “IFAs recognise there is currently an investment gap in the UK venture capital sector. Most investors are not realising the potential benefits of investing through VCTs. “Financial advisers need to explore alternative tax efficient methods to help their clients build up a suitably sized nest egg. VCTs are a great option offering investors significant tax incentives and long-term capital growth.
Investors in VCTs also benefit in the knowledge they are helping small firms grow and are supporting the wider UK economy.”
The research follows the launch of Albion VCTs Top Up Offers, which are seeking to raise up to £15 million across its six venture capital trusts. The Offers are targeting a monthly tax-free income of 5% (should investors choose to invest equally across all Offers), equivalent to 7.1% on the net cost of investment after up-front tax relief at 30%. Investors in the Offers also have the option to boost their capital growth by participating in the dividend reinvestment scheme (“DRIS”), under which dividends are reinvested in the form of new shares in Albion VCTs.
Guernsey’s financial services regulator approved 33 new investment funds during the third quarter of 2013.
Figures released today by the Guernsey Financial Services Commission (GFSC) show that it approved five open-ended funds, 19 closed-ended funds and nine non-Guernsey schemes* between the start of June and the end of September this year.
Taking into account licences rescinded, there was net growth of 17 funds during the period.
However, the net asset value of funds under management and administration fell by £19 billion (6.6%) to £267 billion at the end of September. That represents a decline of £7.4 billion (2.7%) year on year.
This was partly due to the pound strengthening against the US Dollar and Euro, which had a large negative effect on fund values when expressed in Sterling terms, but also a result of general financial conditions, where concerns around emerging economies impacted both equity and bond markets in the third quarter.
Fiona Le Poidevin, Chief Executive of Guernsey Finance – the promotional agency for the Island’s finance industry, said: “It is disappointing to see the value of our funds business decline during the third quarter, but it is of some comfort to know that this was largely a result of external factors including exchange rates and general market sentiment.
“Indeed, the fact that we have seen 33 new funds approved during the third quarter – and net growth of 17 funds – shows that managers and investors remain attracted to what Guernsey has to offer. This is a major vote of confidence at a time when there is so much uncertainty, not least as a result of the Alternative Investment Fund Managers Directive (AIFMD).”
At the start of this month, Guernsey revealed its opt-in AIFMD equivalent regime which will come into effect from 2 January 2014. This is the second strand of a ‘dual regime’ where the other parallel regime is the existing regulatory framework for managers and investors not requiring an AIFMD fund, including those using EU national private placement regimes and those marketing to non-EU investors.
Miss Le Poidevin said: “Guernsey has clearly and consistently articulated its plans to adopt a ‘dual regime’ in response to AIFMD so that we can best serve the needs of our global client base. We have worked hard to ensure that we have put the right pieces of the jigsaw in place at the right time and while it is still very much early days in terms of the implementation of AIFMD, it is very pleasing to see such strong growth in the number of funds being licensed in Guernsey.
“We can see that Guernsey closed-ended funds remain very popular and especially for alternative investments, such as renewable energy, where there were two notable London listings in the third quarter. This also corroborates anecdotal evidence from industry practitioners who are reporting a busy end to the year. This bodes very well for the Guernsey funds industry in 2014.”
Other figures from the GFSC show that the value of deposits held by banks in Guernsey fell by £5.6 billion (6.3%) during the third quarter to reach £84.1 billion at the end of September, representing a decline of £12.8 billion (13.3%) year on year.
The total number of international insurance entities licensed in Guernsey reached 778 at the end of September, which is a rise of 12 during the quarter and up 32 year on year. The GFSC approved 79 new licences during the twelve months to the end of September 2013.
Insight are pleased to announce that Doug Smith has joined their rapidly growing Corporate Insurance consultancy business.
Doug has held previous senior positions as Chairman of Marsh’s Private Equity practice and latterly as Non-Exec Deputy Chairman of Willis M&A practice, and is widely regarded as one of the leading UK insurance advisors on transactional insurance issues to the private equity industry and major/mid size corporates.
Doug will team up again with former Corporate Risk plc colleague Colin Paterson, Managing Director and founder of Insight, and will focus on broadening and strengthening relationships with the private equity community.
He will also provide strategic advice on growing Insight’s unique concept of introducing client-side (in house) corporate insurance expertise, free from any commercial conflicts, directly to the PE community and their portfolio companies, and to corporate insurance buyers of medium/large corporates.
Commenting on the appointment, Colin Paterson said: “We are delighted to have been able to attract the services of Doug Smith in an advisory non-executive role. Doug is recognised as being one of the UK’s most experienced insurance professionals and has a long-standing track record in advising private equity firms and corporate business from both operational and strategic perspectives on Insurance matters.
We look forward to working together again and I am sure Insight will greatly benefit from his participation and professional input, which will further assist us in rolling out our unique client-side corporate insurance offering and attaining our expansion plans.”
Doug, whose previous roles include Chairman and Founder of insurance broker Corporate Risk plc, Director and Chairman of Heart of Midlothian from 1997 – 2004 together with a number of Public & Private companies, commented: “Insight is providing a valuable service, increasingly recognised by corporate insurance buyers. It allows the key process of insurance renewal and risk issues to be dealt with using the in-house services of experienced insurance professionals from Insight. I am very much looking forward to the challenge of developing Insight in the UK and European markets.”
James Powell, former director of private banking at Banque Havilland, is joining newly launched wealth management firm RiverPeak Wealth as Managing Director.
Launched in December, RiverPeak Wealth provides portfolio management, investment analysis and financial planning across London and the South East.
Powell, a private banking and financial planning veteran of 20 years, will be joining former colleague and founder Nick Parker at the helm of the business.
At Banque Havilland, Powell was responsible for establishing and growing the bank’s London branch. Previously, he was a wealth structuring specialist and then a private banker at Citi Private Bank.
Commenting on his new role, Powell said: “RiverPeak is filling the gap in the market for a wealth management and financial planning firm which goes beyond the usual product sell to provide a highly personalised private banking style service that is usually only experienced by the very wealthiest individuals and families. I’m excited about our offering plus the support and interest RiverPeak is already generating amongst UK financial influencers and business leaders, and importantly prospective clients. “
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”
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