Archive for March, 2012

Top Insurance Sector Picks Of The World’s Largest Money Managers

In this article, via an analysis based on the latest available Q4 institutional 13-F filings, we identify the insurance group companies that are being accumulated and those being distributed by the world’s largest fund managers, managing between $50 billion and over $700 billion in 13-F assets.

Taken together, these mega fund managers control over 35% of the assets invested in the U.S. equity markets, but number just over 30 out of the tens of thousands of funds that invest in the U.S. equity markets. Also, taken together, they are bearish on the insurance group, cutting a net $2.73 billion in Q4 from their $160.77 billion prior quarter position.

The following are the insurance companies that these mega fund managers are most bullish about (see table below):

Manulife Financial Corp. (MFC): MFC provides financial protection and wealth management products and services to individuals and group customers, primarily in Asia, Canada, and the U.S., including life insurance, group life and health insurance, long-term care services, pension products, annuities, mutual funds, and banking products.

Mega funds together added a net $244 million in Q4 to their $2.91 billion prior quarter position in the company, and taken together, mega funds hold 13.1% of the outstanding shares. The top buyer was Fidelity Investments ($237 million), and the top holder was Royal Bank of Canada ($1.83 billion). MFC has a dividend yield of 3.8% versus the 1.9% average for its peers, and it also trades at a discount 9.2 forward P/E and 1.1 P/B compared to averages of 10.0 and 0.6 for its peers in the life insurance group.

American International Group (AIG): AIG is a diversified insurance company that offers group and individual life insurance, annuities and general property and casualty insurance worldwide. Mega funds together added a net $12 million in Q4 to their $3.02 billion prior quarter position in the company, and taken together, mega funds hold 5.3% of the outstanding shares.

The top buyers were Wellington Management ($37 million) and JP Morgan Chase Co. ($32 million), and the top holders were Vanguard Group ($517 million), Franklin Resources ($497 million) and State Street Corp. ($494 million). AIG shares have rallied strongly this year, up about 25% YTD. They trade at 10.7 forward P/E and 0.5 P/B compared to averages of 10.2 and 0.8 for its peers in the multi-line insurance group.

MBI Inc. (MBI): MBI offers financial guarantee insurance and related reinsurance, advisory and portfolio services for the public and structured finance markets, and asset management advisory services in the U.S. and internationally. Mega funds together added a net $1 million in Q4 to their $198 million prior quarter position in the company, and taken together, mega funds hold 10.2% of the outstanding shares.

The top buyer was BNY Mellon Corp. ($6 million), and the top holder was Vanguard Group ($69 million). MBI shares currently trade at 16-17 forward P/E and 1.2 P/B compared to averages of 10.2 and 0.8 for its peers in the multi-line insurance group.

Besides these, mega funds based on their Q4 trading activity indicated that they are bearish on the following insurance stocks (see table below):

  • Prudential Financial Inc. (PRU), one of the largest financial services institutions in the U.S., offering life insurance, annuities, mutual funds and retirement products in the U.S., Europe, Asia and Latin America, in which mega funds together cut a net $685 million in Q4, from their $9.73 billion prior quarter position in the company;
  • MetLife Inc. (MET) offers life, non-medical health, auto and home-owners insurance, annuities and financial services, in which mega funds together cut a net $510 million in Q4, from their $13.63 billion prior quarter position in the company;
  • Hartford Financial Services Group (HIG) offers individual and group life, group disability and property and casualty insurance products, primarily in the U.S., in which mega funds together cut a net $389 million in Q4, from their $3.34 billion prior quarter position in the company;
  • Lincoln National Corp. (LNC), a diversified financial services company, offering life insurance and long-term care protection, annuities, individual and group retirement plans, and group benefits, in which mega funds together cut a net $353 million in Q4, from their $3.07 billion prior quarter position in the company;
  • AFLAC Inc. (AFL), a provider of health, accident, disability and life insurance in the U.S. and Japan, in which mega funds together cut a net $163 million in Q4 from their $6.19 billion prior quarter position in the company;
  • ING Group (ING), a Dutch financial services company that provides banking, investment, life insurance and retirement services worldwide to over 50 million private, corporate and institutional clients in 65 countries, in which mega funds together cut a net $54 million in Q4, from their $339 million prior quarter position in the company;
  • Allstate Corp. (ALL), a provider of personal property, casualty, life insurance and retirement and other investment products, mainly in the U.S., in which mega funds together cut a net $45 million in Q4, from their $4.73 billion prior quarter position in the company;
  • MGIC Investment Corp. (MTG), that offers private mortgage insurance for homeowners that put down less than 20% down payment when purchasing their homes, in which mega funds together cut a net $15 million in Q4, from their $226 million prior quarter position in the company;
  • Genworth Financial Inc. (GNW), a leading U.S.-based international insurance company offering life and long-term care insurance, annuities, asset management services and mortgage insurance worldwide, in which mega funds together cut a net $11 million in Q4 from their $1.65 billion prior quarter position in the company; and
  • Progressive Corp. Ohio (PGR), that offers private passenger automobile insurance policies in all 50 states and D.C., in which mega funds together cut a net $1 million in Q4 from their $3.73 billion prior quarter position in the company.


Click to enlarge

Note to Table: The companies selected to be included in both the Top Buys and Sells and Top Holdings categories in the table above were picked on both an absolute basis, i.e. the highest dollar amounts of buys and/or sells, as well as those amounts relative to their market-cap. That way, the list is not biased towards the largest companies in the group.

General Methodology and Background Information: The latest available institutional 13-F filings of over 30+ mega hedge fund and mutual fund managers were analyzed to determine their capital allocation among different industry groupings, and to determine their favorite picks and pans in each group. These mega fund managers number less than one percent of all funds and yet they control almost half of the U.S. equity discretionary fund assets. The argument is that mega institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When mega Institutional Investors invest and maybe even converge on a specific investment idea, the idea deserves consideration for further investigation. The savvy investor may then leverage this information either as a starting point to conduct his own due diligence.

This article is part of a series on institutional holdings in various industry groups and sectors, and other articles in the series for this and prior quarters can be accessed from our author page.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our ‘opinions’ and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.


Saturday, March 31st, 2012 EN No Comments

Four Palm Beach advisers make list of ‘Barron’s’ top 1000


Special to the Daily News

Posted: 6:02 p.m. Saturday, March 31, 2012

What do a man raised on a cattle ranch in Montana, another on a farm in western Pennsylvania and a third from a seacoast community near Cape Cod, Mass., have in common?

All are Palm Beach investment advisers whose names are on Barron’s list of the top 1,000 financial advisers for 2012.

Palm Beachers have acquired their wealth via many paths: entrepreneurial success, the corporate ladder, inheritance, investments — or any combination of ways. Regardless, managing a fortune takes discipline, patience, knowledge and confidence.

If they happen to be seeking professional money management, there is no shortage of advisers at banks, brokerage firms, trust companies and independent money managers here to select from.

But among the dozens of licensed registered representatives, Certified Financial Advisors, and well-educated and experienced money managers working in Palm Beach, only four have made Barron’s top 1,000 list for 2012.

No. 8 is Kurt Sylvia of UBS Financial Services. He is followed Anthony Rizzo of Deutsche Bank, No. 48, then Paul Luther and Christopher Andrews, both of Merrill Lynch, No. 54 and No. 56, respectively.

All four also made the Barron’s 2011 list of the top 1,000. Sylvia also made the Barron’s top 100 list in 2006 and 2008.

Rizzo was not permitted by Deutsche Bank to be interviewed for this story.

Making the list

You’ll find plenty of similarities in how Sylvia, Luther and Andrews manage money. Each is part of a team; each knows preserving wealth can be just as or more important than increasing it; and each knows how important relationships are in building and keeping his client base.

But it takes more than smiling faces, a team effort and respectable returns for your name to wind up on the Barron’s lists.

In the questionnaire sent to all advisers hoping to be included, Matthew Barthel, associate editor at Barron’s, said, “There are 102 data points that are calculated, under three broad headings — assets under management, revenue growth and quality of practice — with a number of sub-calculations under each.”

And, he said, though performance is important, other factors — such as the blend of an adviser’s client base — also matter in this top 1,000 list that Barron’s has been publishing since 2009.

But what you won’t find on the list, published each February, are tidbits about their personal backgrounds, what’s involved in managing wealth and what they’ve learned from their experience in the markets.

Right place, right time

Luther, for instance, is the senior member of Merrill Lynch’s Wealth Management group in both experience and age. With 50 years of financial industry experience, counting two years spent in the military, Luther, 69, who grew up on a farm in western Pennsylvania, began his career at the Securities and Exchange Commission.

He got his first job the old-fashioned way: walking into an employment office in Washington, D.C. After high school, his plan for the future was to go to college at night and work during the day. So he left Pennsylvania, headed to Washington and began job hunting.

Luck was on Luther’s side the day he got off a bus in Washington, noticed a sign with an eagle signifying the SEC and, underneath it, a brass “Employment Office” plaque. He walked into that office about 8 in the morning and found the only person there to be the director of personnel. After chatting with him, Luther was hired as a clerk and by noon that same day began working.

Luther recalls that at that time, there was a 15 percent government-wide reduction in hiring, and the SEC was the only government agency hiring. The year was 1962.

“The first week I was there, the market was down like 100 points from 339 to 239, or something like that,” said Luther, who has worked at Merrill Lynch for 35 years.

At first he thought he was fortunate to find a job so quickly, but after that initial week had second thoughts. “I figured I may have been one of the dumbest guys around coming into a job with a company that’s going out of business.”

Luther earned both his undergraduate and graduate degrees from George Washington University, with an MBA in econometrics. His title is that of Wealth Manager Advisor at Merrill Lynch Wealth Management.


Saturday, March 31st, 2012 EN No Comments

You’ve Just Won the Mega Millions Jackpot: What Next?

It’s likely that tonight someone’s life is going to change.

One lucky winner will become $640 million richer after he or she hits the Mega Millions jackpot.

But then what?

People (the 99% – kidding) have a difficult time managing “normal” finances. What is the winner going to do if they take the $462 million instant pay-out

Jonathan Murray, the senior vice president for UBS Financial Services, has a few ideas.

Murray, a Towson resident, has been named a top 1,000 nationally ranked financial advisor by Barron’s since 2009. He’s seen millionaires squander wealth, and doesn’t want to see it again.



PATCH: So say someone wins the jackpot tonight. What next?

“The first thing is to assemble a team. You need to quietly and discreetly assembly a team of trusted advisors. That team should include: an attorney with an expertise in trusts and estates, a CPA with an expertise in tax management, a financial advisors with an expertise in investments, a charitable expert—somebody who’s well-versed in charities in philanthropy.

The second thing is, with your team, is to construct a plan. This plan in my opinion should have as its objective No. 1 the preservation of capital. With this much money, this person is going to be the enviable position of not having to worry about growth. Therefore, they shouldn’t take any risk with this pot of money. It should all be invested with the objective of conserving what’s their for … generations to come.”

PATCH: A fairly high percentage of people who win the lottery wind up going bankrupt in a number of years…

“I’ve seen it. I have seen people squander tens of millions of dollars. I’ve seen it with professional athletes as well as lottery winners. The biggest mistake this person can make is to make hasty decisions that aren’t well thought out with their money—such as buying real estate, businesses, toys, jets, things like that.

This is an awful lot of money we’re talking about here—so they’ll have to work pretty hard to squander it. I think it’s $400 million net, after taxes. The way to do that is to make hasty decisions with it.

PATCH: Did you buy a ticket?

(Laughter) “I did. I bought a ticket for my sons, just for fun. But I have absolutely no expectations. I did it for fun.”

PATCH: Sudden extreme wealth can pose problems for people who already have poor spending and saving habits. How much responsibility for developing a financially secure future should the winner place on his or her team, versus his or herself?

“If you have what I call the Three T’s then you can do it yourself and not surround yourself with trusted advisors. If you have the time, the talent and the temperament to be able to manage this pool of money yourself then go for it. But most of us don’t have those.

PATCH: Lump sum or annuity?

“I would strongly suggest, for most people, that they take the lump sum. If properly managed, this pool of assets can benefit generations and generations of their family and numerous charitable organizations if properly managed with certain trusts, estate planning, legacy planning. If you just tell them to send you an annuity you lose control of that asset for later generations. It’s a true gift for not only yourself but it’s a real gift for people hundreds of years from now who could benefit from your generosity and planning.”

PATCH: What kind of financial advisory team should the winner look for?

“Fee based, as opposed to a stock broker who’s going to charge commissions and transactions. You want somebody who can serve as your financial quarterback, who for a flat, transparent fee can handle all of the comprehensive holistic wealth management.”

PATCH: What is the most difficult part of dealing with sudden, extreme wealth?

“Keeping others away from it. Relatives come pouring out of the woodwork. Friends, you never knew you had, appear. It’s amazing how, especially how professional athletes, get pestered by others once they perceive that you have unlimited means. Sadly, too many people fall victim to that and feel pressured to give it all away. That’s the biggest challenge and the biggest threat.

PATCH: So anonymity is the winner’s best friend?

Absolutely. One hundred percent. They should just sit tight, keep their mouth shut, resist the temptation to scream it from the rooftops and slowly and methodically and quietly assemble your team and construct your plan.

PATCH: I’m just saying, I’m a reporter living in an apartment in Mays Chapel. It’s going to be pretty hard to hide the three Ferarris I’m going to buy when I win. But that’s just me.

Just get a big enough garage for them. (Laughter)


What do you think or Murray’s advice? Are you playing the Mega Millions? What are you going to do when you win? Tell us in the comments section below.


Friday, March 30th, 2012 EN No Comments

Latest Citadel art price index: Cobus Venter – director, Econex

‘Art – you can look at it, but it doesn’t put money in your pocket,’ says Wayne McCurrie.


ALEC HOGG: Now for something completely different. Wealth management group Citadel has commissioned a new measure for South African art prices. I asked the compiler, Econex’s

Cobus Venter, whether the index can be used as a guide for the rest of us on when to buy or sell pieces of South Africa art.
COBUS VENTER: Art is very, very subjective. The South African art market is relatively small as well, so one must be very careful of using a mechanistic approach towards an investment decision, which is highly subjective in our case.

ALEC HOGG: Is it an investment? I ask that because trading in art is so expensive, and the galleries charge, well, certainly double-digit commissions.

COBUS VENTER: The galleries were not included in our sample. We only use auction results which are transparent and publicly available, simply because you don’t always know exactly what the final price was through the galleries – it’s not published.
    Art as an alternative asset class certainly seems to reflect a reasonable alternative to some of the other asset classes, and what was interesting is that the trend within the art index is very similar to that of something like the JSE, but with a significant lag. So it’s almost similar to the house prices in South Africa that showed very strong growth through the consumer boom times of 2004 to 2007, and lagged a little bit before correcting. So the JSE corrected very, very quickly in 2008 and into 2009 and the art prices are lagging that because they are closely correlated to disposable income and the wealth effect.

ALEC HOGG: Going through the detail of the research that you’ve done – and perhaps I was reading the numbers incorrectly – but it did suggest that art has been in a falling market, South African art anyway, for the last four years.

COBUS VENTER: Yes, but that is similar to what we were expecting. We would expect it to turn around now. One of the things that one mustn’t underestimate is the impact of the foreign sales; obviously we include Christie’s and Bonhams in London, and obviously the exchange rate conversion there has some impact on it as well.   

ALEC HOGG: But I remember seeing an Irma Stern somewhere that had sold for R24m, R25m recently. That would surely have helped the index a little?

COBUS VENTER: Not really, we allow for those kinds of [laughing] suborbital prices. In a way, where the index is weighted according to volume of transactions rather than absolute price levels, we don’t include absolute price levels anyway, really.

ALEC HOGG: Have you got any Irma Sterns hanging around in your…

WAYNE McCURRIE: No, no, I’ve got none of that. Look, with certain selected artists you can make a lot of money out it. But personally, I don’t know how to value anything that hasn’t got a cash flow.

ALEC HOGG: What does that mean?

WAYNE McCURRIE: Like gold – how do you value it, what is gold worth? It’s only worth what someone offers and is going to pay you for it.

ALEC HOGG: But you can fondle it, you can polish it…

WAYNE McCURRIE: It doesn’t put money in your pocket. Art – you can look at it, but it doesn’t put money in your pocket. So I don’t know how to value something that hasn’t got a cash flow or is like a start-up mine, potential cash flow at some stage into the future. So I just don’t know.

ALEC HOGG: I just mentioned that because Warren Buffett in his latest annual letter to shareholders is talking about how you can fondle gold, and polish it, and look at it – but if you took all the gold that has ever been mined and you translated that, you could have bought all the farmland in the United States, plus 10 Exxon Mobils and had quite a few billion of what he calls “walk-around” money. So, to get back to your point, if you are going to invest in something, you should be able to have also a positive underlying return.

WAYNE McCURRIE: You should have, ja. But I think it’s good that there’s an index – something that you can at least judge and make a decision on. But I don’t like investing in things that haven’t got a cash flow.

ALEC HOGG: Well, art is in the eye of the beholder. I met an artist once in Paris who sells his art for hundreds of thousands of dollars, each piece, and I asked him why people would want it. He’s quite a big man, and he said that once the guys who buy it have got their yachts and they’ve got their motor cars and their flats in London and Paris and New York, they want to have a piece of his art. And I guess that’s a lucky place to be.

• Subscribe to a daily email of transcripts from Moneyweb Radio – click here

The SAfm Market Update with Moneyweb is broadcast on SAfm 104-107fm, weekdays at 18:00 to 18:30.


Friday, March 30th, 2012 EN No Comments

Stocks rise, extending best start since 1998

The Dow Jones industrial average rose 66 points to 13,211. The Standard Poor’s 500 index rose six points to 1,409. The Nasdaq composite barely moved, down a point to 3,094.

Friday is the last day of trading for the quarter, and stocks were on track for their best first quarter in years. The Dow was headed toward an 8 percent gain, and the SP 500 was close to a 12 percent gain, for both the best in 14 years.

The Nasdaq was up almost 19 percent for the year, which would be its best first quarter since 1991.

The Commerce Department said consumer spending rose in February at the fastest rate in seven months. Strong hiring over the last three months has added up to the best jobs growth in two years, putting more people back to work.

Americans spent more even though their income has stagnated for two months after counting taxes and inflation. Some of the increased spending has gone to gasoline, which is the most expensive on record for this time of year. Oil prices rose again on Friday, up 23 cents in New York.

Nine out of 10 industry groups in the SP 500 rose. The biggest-gaining category was energy stocks, although refiners fell because of the higher oil prices. Health care stocks rose, too, with two of the biggest gainers being health insurers UnitedHealth Group Inc. and WellPoint Inc.

Technology stocks fell slightly.

Some of the buying could be driven by end-of-the-quarter efforts by fund managers to get into stocks now that they have become popular again, said Jim Russell, a regional investment director for US Bank Wealth Management. And individual investors who have been relying on bonds appear to be getting back into the market, too, he said.

“We are very heartened to see the retail investor stop playing one key on the piano — that is, all bonds, all the time,” he said.

Apple fell 1.5 percent after a company that makes its iPhones and iPads said it would effectively raise per-hour wages at its factories in China, suggesting that manufacturing prices could rise.

Shares of BlackBerry maker Research in Motion Ltd. rose 6.6 percent a day after the Canadian company said it would return to focusing on corporate customers and shake up its management to try to get profits growing again.

Corn prices surged 6.6 percent on news that suppliers are tighter than previously thought. Higher corn plus higher oil prices points toward higher food prices. Grocer stocks fell: Supervalu Inc. was down 2.2 percent, and Safeway Inc. fell 0.7 percent.

Best Buy was down 4.3 percent as investors continued to digest its plan to cut stores and staff as it shifts toward smaller stores in an effort to compete with online retailers. Best Buy stock lost almost 7 percent on Thursday.

Sports apparel maker Finish Line Inc. fell 16 percent after it predicted a lower-than-expected first-quarter profit.

European markets bounced back after a rocky week that included a national strike in Spain. On Friday, the country unveiled a draft 2012 budget that seeks to cut the deficit by $36 billion through spending cuts and a tax hike on large companies. But Spain also plans to cut government ministry spending by an average of nearly 17 percent.

Germany’s DAX was up 1 percent at 6,947, while the CAC-40 in France rose 1.3 percent to 3,424. The FTSE 100 index of leading British shares was up 0.5 percent to 5,768.

Asian markets took a hit after some poor factory production numbers from Japan.


Friday, March 30th, 2012 EN No Comments

Advisor Mark Balasa Worries Clients ‘Preoccupied’ With Politics

Mark Balasa has been an advisor for a long time. As CEO and CIO of the highly regarded wealth management firm Balasa Dinverno Foltz in suburban Chicago, and as a member of the Alpha Group of accomplished advisors and industry leaders, Balasa has counseled many clients through multiple market cycles. So when he says in a conversational but concerned tone that he’s never seen clients exhibit such a “preoccupation with politics” as they do now, you pay attention.

The dot-com crash of 2001-2002 and the financial crisis of 2008-2009 “left scars” among clients, he said in an interview in New York on Tuesday, while the European debt crisis which first arose last year and the SP downgrade of U.S. debt “brought that fear right back.”

Mark BalasaThe fear is far from being a partisan response, Balasa (left) is quick to say, pointing out that clients of both a Democratic and Republican persuasion were feeling that “the country’s lost its way,” particularly when it comes to “runaway spending” by the government, and that “politics is trumping economics” both in Europe and at home. They feel a “weight on their shoulders,” which Balasa in his conversations with clients seeks to allay by keeping the focus on the clients’ own plans and how well they’re doing despite their misgivings about the country.

With 17 CFPs on staff, including the six members of the management team, Balasa characterized Balasa Dinverno Foltz as being in a “virtuous” cycle in which the business has hired “six good people” in fall 2011 as more clients are being brought on board. He cautioned, however, that “it’s harder to find people than you might think.” He spoke approvingly of the graduates of financial planning programs such as at Texas Tech University and the University of Illinois, one of whose graduates the firm hired. Those young people have many skills that older advisors might lack, though he said he agrees with Mark Hurley that “it takes 10 years to acquire the proper bedside manner for being a wealth manager.”

Despite the concerns of many of his clients, Balasa remains optimistic about the future of the business, the industry and the country, though he cites his attendance at a PIMCO conference where former Fed Chairman Alan Greenspan fretted over the lack of a strong upsurge in employment, which usually accompanies a recovery.

Having decided 10 years ago to convert Balasa Dinverno Foltz, founded in 1986, “from a lifestyle to a business,” the company knew it needed more processes, “more of a structure” to accommodate and encourage growth, which included hiring a chief operating officer for the firm, which Balasa said now has more than $2 billion in assets under management. As for succession planning, Balasa says “we want to do it internally.”

The firm has two major niches—small business owners and women, the latter headed by management team member Heather Locus—and Balasa says that in 2011, half of the firm’s new clients came by way of referrals from existing clients, with the remainder coming from centers of influence and the firm’s participation in the referral programs it participates in with custodians Schwab Advisor Services and TD Ameritrade Institutional.


Thursday, March 29th, 2012 EN No Comments

Turchansky: Investment strategies when markets move sideways

EDMONTON – A period of sideways movement in stock market cycles, as we’ve been in since the year 2000, will be perilous or profitable depending on your approach.

David Burrows, president of Barometer Capital, explained to clients of Canaccord Wealth Management that there are three aspects to surviving a sideways market.

“In these choppy periods, on the equity side you’ve got to pick your spots, you invest at certain points, and two or three-year rallies can be very good to you,� Burrows said. “Secondly, income or dividend yield becomes a little more important. And thirdly, you have to have a really disciplined selling strategy.�

He showed how stock markets traditionally have moved like steps, with a 15-to-20 year growth period when a rising tide lifts all boats, alternating with a 15-to-20 year period of ups and downs but overall stagnation. After a great bull market from 1981 to 2000, the tech bubble and “irrational exuberance� shuffled us into a sideways period.

“In each case, it takes sideways or choppy markets to wash out that over-ownership in favour of other markets,� Burrows said.

“At some point we’re going to be through this difficult period and back in a nice bull market – I don’t know whether it’s a year from now, five years from now, or maybe we’re in it now. When we get there we’re all going to make lots of money, but you’ve got to get there intact.�

He said that Canadians want to focus on energy stocks, metal stocks and gold stocks, “but that’s not where the money’s being made.� He’s dropped stocks with large gas exposure.

The income portion of his portfolio is currently 30 per cent invested in mid-stream energy assets, 25 per cent in Real Estate Investment Trusts, and 13 per cent in financial companies. He owns InterPipeline Income Fund, he likes REITs because the Target department store is moving into Canada in a big way, and he holds financials as they passed recent stress tests, freeing up capital.

“A year ago we thought the banks would be dead for a while, because they were becoming like utilities. But it turns out utilities are what people want, low share growth rate with a little bit of dividend growth.�

The equity part of his portfolio holds more United States-based companies than it has in years, but most are large global multi-nationals in the consumer space. He’s added technology companies “because they’ve become mature businesses and they’re going to become growth companies.� And he’s added pharmaceutical firms.

Names include Estee Lauder, Yum Brands, Starbucks, Hugo Boss and IBM.

Historically, Burrows noted that 80 per cent of investment portfolio return comes from the market itself, and the industries you focus your portfolio on. The other 20 per cent comes from individual business characteristics of the companies you invest in.

He said the first step in a sideways period is “to understand the market we’re in to say ‘should we be making investments now?’ You find a great investment, but if it’s the wrong time, in a tough market you lose all kinds of money.�

If you decide it’s a good time to invest, target industries that stand to prosper.

“What we’re looking for are parts of the market that are seeing net inputs of capital; where is the money going? The way you make money investing is you hope that other people will come in behind you, and raise prices.�

In the income portion of his portfolio, he looks for investments that pay dividends, distributions or interest payments, and that grow their dividends.

“There hasn’t been a time when you had a better risk reward getting a dividend versus a government bond. There’s more cash sitting on balance sheets than any time since the 1950s. Companies are paying less to their shareholders than any time in the last century, only 26 per cent of earnings.�

He said firms are ripe to increase dividends, which in turn boosts share prices.

“Telus has had a great run; and a lot of the run has come from the moment it said ‘we will raise our dividend twice a year for the next three years.’�

The third part of Burrows’ strategy, which he feels is most important, is having a disciplined selling strategy. He uses stop losses, selling stocks at a certain set point. But he bases them not on percentage of fall, because some stocks are more volatile than others, and instead looks at when a security moves outside its historical normal price range.

“It’s not the first month of a decline that costs you a bunch of money, it’s month four, five, six or seven. But we’ve been 11 or 12 years in a sideways market, and not many people are willing to make big speculative bets. We’ve had a five-month great rally in the stock markets, and there’s still money coming out of equities each month.�

Ray Turchansky writes Fridays in the Journal.


Thursday, March 29th, 2012 EN No Comments

TCW Lands an International Partnership

Company Press Release

Jeddah, 24 March 2012: NCB Capital licensed by the Capital Market Authority and Saudi Arabia’s leading wealth manager and the Kingdom’s largest asset manager, today announces a global strategic alliance with the Trust Company of the West (TCW) and Amundi to manage its international equity funds and aid the expansion of its products and services internationally. This alliance will create one of the largest and most diversified Shariah fund platforms in the world.

NCB Capital’s award-winning asset management business is the market leader in Saudi Arabia with a strong range of funds, and a portfolio of SR44 billion (US$11.7 billion) of assets under management (as at 31st December 2011). From this solid base, NCB Capital wishes to grow its presence throughout the wider GCC region as well as providing an ever larger range of international investment products for its clients. It has chosen the combined expertise of TCW and Amundi to address this objective.

Announcing the alliance, Jawdat Al Halabi, Chief Executive of NCB Capital, said, “As the leading wealth management firm in the region our clients expect us to provide the best and widest range of services to them. This global alliance will substantially enhance our product offering and geographic reach by establishing an even broader platform. It will be a huge benefit to our clients.”

He continued, “By aligning with TCW and Amundi, we are enhancing our strong brand and will have access to highly complementary skills and expertise. Our funds, and therefore our clients, will gain from the proven international capabilities of our two partners.”

NCB Capital undertook a rigorous selection process with a number of the world’s leading asset managers, choosing TCW for its leadership in US markets and Amundi for its global reach, the combined platform providing access to award winning track records for its clients.

Founded in 1971 and based in Los Angeles, TCW develops and manages a broad range of US equity, US fixed income, alternative and international strategies and innovative investment products.  The firm has approximately US$124 billion in assets under management and has a long history of managing funds for institutional clients in the Middle East.

“TCW combines the focus of a specialty asset manager, through our style-specific equity teams, with the proprietary fundamental research and cutting-edge trading capabilities of a large investment firm,’’ said Stephen McDonald, President of the TCW Middle East Group. “The teams managing funds for NCB Capital have consistently generated strong results for their shareholders and we look forward to expanding our capabilities through our partnership with the leading asset manager in Saudi Arabia.”

Amundi is a leading global asset manager ranked 2nd in Europe and 9th worldwide in terms of assets with approximately US$852 billion under management. The firm provides and develops alpha-generating solutions for over 3000 of the world’s largest state entities, pension funds, institutions, corporate funds and distributors covering all asset classes and major currencies. Amundi also provides savings solutions for retail networks to meet the needs of more than 100 million customers worldwide. In the Middle East, Amundi has relationships spanning over three decades with all client segments and has over twenty years experience managing Shariah compliant portfolios.

Commenting on the strategic alliance Mr. Jean-Francois Pincon, Head of International Client Development at Amundi, stated, “We are proud to contribute to this partnership because it will represent a major force in Shariah compliant investment management. NCB Capital’s clients stand to benefit from the best disciplines that each of our three organizations has to offer. We see it as the perfect match. Our clients will be able to tap a deep reservoir of expertise in both Shariah and Conventional formats, in various asset classes ranging from developed to emerging markets.”

Following Saudi Arabia’s Capital Market Authority approvals, TCW and Amundi have begun managing seven of NCB Capital’s AlAhli range of international mutual funds with a combined total of US$550 million. TCW were assigned three funds – US, Small Cap and Healthcare equities – whilst Amundi now manage four funds – Global, Emerging Markets, Asia Pacific and European equities.

Initially, the combined platform will target Saudi investors and in due course its scope will be expanded to international clients.

With multiple projects in the pipeline, initially across equity and fixed income asset classes, NCB Capital will augment its range of Shariah-compliant investment products and will be able to call on the entire range of TCW and Amundi conventional strategies, to the benefit of investors throughout the Kingdom and internationally.

Mr Al Halabi concluded, “NCB Capital’s market position and the global reach of TCW and Amundi will together form a new global force in Shariah asset management. “

NCB Capital is Saudi Arabia’s leading wealth manager and the Kingdom’s largest asset manager. It provides the services and products that match the needs and aspirations of its clients – corporate, institutional and high net worth individuals – in the Kingdom and throughout the region, delivered by a professional workforce in Riyadh, Jeddah, Khobar and Bahrain.

The investment arm of The National Commercial Bank (NCB) of Saudi Arabia, one of the largest banks in the Middle East, in the last twelve months the firm has launched successful new funds, dramatically grown its discretionary portfolio management business and lead the market in brokerage innovations.

It is the largest wealth provider in the Kingdom in size, share and reach, with over one million clients, and SR44 billion (US$11.7 billions) of assets under management. NCB Capital is the market leader in mutual funds in Saudi Arabia and is also the world’s largest Shariah-compliant asset manager.

Through parent NCB’s extensive branch network and its online, retail, and private banking businesses, NCB Capital has an extensive geographic presence in Saudi Arabia. It also has MENA and international access through its subsidiaries Eastgate Capital Group based in Dubai, and through NCB’s subsidiary Turkiye Finans in Turkey.

In 2011, the firm won a record 17 awards for its products and businesses, including Best Asset Manager in Saudi Arabia and Best Fund Manager in the Kingdom, by Islamic Banking and Finance magazine; and Global Investor’s award for Shariah-compliant Fund of the Year in the Middle East. It has received Liper awards for its fund performance.

For more information, please refer to

NCB Capital Company is authorised by the Capital Market Authority under License No. 37 – 06046. The registered office of which is at Al Maather street in Riyadh, P.O. Box 22216, Riyadh 11495, Kingdom of Saudi Arabia.


Thursday, March 29th, 2012 EN No Comments

Top 8 Trends for Asset Managers to Watch in 2012: Cerulli

7) Advice an Anglo-Saxon Trend

As a global trend, advice remains confined to a handful of markets around the world, with the Anglo-Saxon world of the United States, Australia and the United Kingdom being islands of activity. In Asia, the rest of Europe and Latin America, advice remains a bank-driven transaction business, with the exception of the private banking channel. “This trend will not change in 2012,” Cerulli asserts.

In the United States, high-net-worth investors have become more involved in the oversight of their financial investments after being shaken up by the last three years. “These investors no longer implicitly trust their advisors’ recommendations,” Cerulli says.  “Accordingly, they are demanding more information, greater transparency, and greater involvement in investment decisions. Among high-net-worth investors, 86% verify their advisors’ recommendations through their own due diligence efforts.”

In the United Kingdom, RDR regulation, when implemented, has the potential to change the local independent financial advisor market by making advice and transaction charges transparent and forcing many advisors to change their business models, assuming the regulations are not watered down.

Client-facing advisors, meanwhile, are looking for ways to reinforce their value to investors. Faced with ongoing volatility, U.S. advisors are increasingly adding alternative, non-correlated, and tactical asset allocation elements to client portfolios in an effort to steer clients away from risk. Additionally, large broker/dealers continue to express interest in broadening their advisors’ relationships with investors by increasing the role of financial planning.


Wednesday, March 28th, 2012 EN No Comments

First West Credit Union Reports Strong 2011 Financial Results, Significant …

LANGLEY, BRITISH COLUMBIA–(Marketwire – March 28, 2012) – First West Credit Union –

  • Membership grew by more than 8%
  • Total assets increased $378 million, or 7.4% to $5.46 billion
  • Loans to members increased $289 million, or 6.5% to $4.74 billion
  • Deposits from members increased $164 million, or 3.7% to $4.60 billion
  • Net interest income was $126 million; First West’s margin is one of the best in the British Columbia credit union system
  • Net operating income was $40 million
  • Over $1.6 million was invested in building healthier communities

B.C.’s third-largest credit union today announced its financial results for the full fiscal year ending December 31, 2011. These results include the highest membership growth amongst all major credit unions in British Columbia on a percentage basis, demonstrating the strength and effectiveness of its unique multi-brand model.

“Over the past year, the First West team achieved some great successes. Notably, we increased our membership by more than eight per cent in 2011, which is a significant accomplishment – one that was only made possible through the concerted efforts of all our employees,” says First West CEO, Launi Skinner, who was recently named one of Canada’s Top 100™ Most Powerful Women by the Women’s Executive Network for a second consecutive year, and one of Business in Vancouver’s Influential Women in Business.

Skinner adds, “Our employees are known for providing exceptional service and financial solutions that are making a real difference in the financial lives of our members. Our membership growth, coupled with our strong financial results, is yet another example of how the First West model is working to serve the B.C. credit union system – enabling local credit unions to work big, by tapping into the strength and resources of a financially strong parent company, while still working local to serve the unique needs of their members and communities.”

First West formed in January 2010 when Penticton-based Valley First Credit Union merged with Langley-based Envision Financial. Unlike most newly-merged credit unions, First West chose to continue operating its two distinct Envision Financial and Valley First brands in their autonomous regions, which in total comprises a 37-branch network.

First West Credit Union 2011 operating highlights include:

Assets: Total assets increased $378 million or 7.4% to $5.46 billion.

Income: Net interest income was $126 million. Net interest income as a percentage of average assets was 2.39%.

Similar to other financial institutions, the low interest rate environment led to margin compression in 2011; however, First West’s margin is one of the best in the British Columbia credit union system.

Retail and Commercial Banking: Loans to members increased $289 million, or 6.5%. The increase occurred primarily in residential mortgages, which rose $203 million, or 9%, and commercial mortgages, which increased $53 million or 4.8%. Deposits from members increased $164 million, or 3.7% to $4.6 billion. This was primarily due to our focus on attracting term deposits, which increased 1.1% and short-term demand deposits, which increased 7.7%.

First West’s regional commercial banking teams drew on the strength of their local relationships and local knowledge of business conditions to gain a competitive advantage in 2011. Highlights include:

  • Valley First established banking relationships with eight municipalities and enhanced its existing relationship with the City of Penticton; and
  • Envision secured a new banking relationship with the District of Maple Ridge and renewed an existing one with the City of Abbotsford for another five years.

First West Capital: The First West Capital division, which provides subordinated and mezzanine financing solutions for small and mid-market companies in western Canada, exceeded targets in its first full year of operations, funding nine deals and approving three additional ones that closed earlier in 2012. This includes funding SydneyPLUS’s acquisition of Boston-based Inmagic and enabling Bardel Entertainment to expand into Kelowna.

Lines of Business: Optimizing our lines of business is a key initiative to help First West achieve its three-year strategic plan goals including member growth and profitability growth. 2011 highlights include:

  • Expanded our partnership with Qtrade Securities-named Canada’s #1 online broker for the sixth consecutive year in The Globe and Mail’s 13th annual ranking of online brokers-to grow our wealth management business. Through this partnership, beginning in 2012, our retail banking team is providing more advice, more often to a greater number of members.
  • Increased wealth management revenue by 4.6%.
  • Increased property, automobile and casualty insurance revenue by 5.6%.
  • Increased automotive financing revenue by 19.6%. Notably, First West is the only credit union in British Columbia that offers two financing products to automotive dealers, leasing and loans.
  • Increased leasing revenue by 15.2%.

Operations: Operating efficiency was 80.5% compared to 79.2% in 2010. However, with the increase in assets and reduction in expenses, First West’s expense ratio improved to 3.06% from 3.33%.

Dividends: First West paid dividends of $1.3 million to members, bringing total dividends paid over the last 10 years to $14.9 million.

“First West is outperforming the largest credit unions in British Columbia on the growth of our non-interest income due to the diversification of our revenue sources in our insurance, wealth management and automotive leasing lines of business,” says Tom Webster, First West CFO. “We are also realizing success through our newest division, First West Capital. Our continued focus on non-interest income diversification and growth will help our credit union offset margin compression and equally important as a way in which we are keeping it simple for our members by providing key financial services to our members.”

Expanding and investing in our branch network: First West is expanding its presence in the communities it serves. In 2012, construction is beginning on a new Valley First branch in Rutland, which will feature retail and commercial banking, as well as our insurance and wealth management services, enabling us to create employment opportunities and expand our corporate citizenship activities, thereby contributing back to the community.

In the Envision region, two branches are being moved to new locations. The Scottsdale branch will move to Sunshine Hills in Delta in 2012, and construction of the West Abbotsford branch will commence in 2012, in which the Minter Street branch will move to in 2013.

Webster adds, “First West Credit Union is expanding the presence of our local brands because we know that staying local is crucial to what it means to be a successful credit union. Our multi-brand model is giving Envision Financial and Valley First the economic advantages of collaboration, including a stronger branch network, better diversification of risk and improved efficiency while still empowering them to act local and maintain their individual brands within their own communities. Our solid financial results, significant membership growth and regional investments in our branch network and communities reinforce the strength of the First West model.”

Helping our communities: First West contributed more than $1.6 million of its operating profits to local communities through scholarships, sponsorships and donations in 2011; this also includes the credit union’s contributions to the First West Foundation. Key community giving highlights include:

  • Serving as title sponsor of Run for Water, where 150 Envision employees, their families and friends participated in this new Boston qualifier marathon, half-marathon, 10K and 5K runs; more than $203,000 was raised to build water well systems in Ethiopia.
  • Raising more than $100,000 and 3,000 kilograms of food for Valley First’s Feed the Valley program in 2011, bringing our total to more than $270,000 and 7,000 kilograms of food donated since the program’s inception in March 2010. Feed the Valley was recognized with the prestigious Central 1 InNOVAtion Award in 2011. This award showcases the spirit of ingenuity that exists within the credit union system by recognizing projects that have helped improve operations by member credit unions in B.C. and Ontario.
  • Collecting and distributing over 600 gifts to 11 charitable organizations across Metro Vancouver as part of Envision’s annual Angel Tree program, which provides children and seniors in need with gifts over the holiday season.
  • Bringing the inaugural Valley First Granfondo Axel Merckx Okanagan to Penticton. A non-competitive cycling event, the Granfondo attracted more than 2,000 riders and an estimated $2 million to the region. Valley First remains as the title sponsor for the event in 2012.

Note: First West Credit Union transitioned to International Finance Reporting Standards (IFRS) effective January 1, 2010. The 2011 financial results reflect this change and comparative numbers for 2010 have also been adjusted to meet IFRS.

Annual General Meeting

First West’s AGM will be held in the two regions that Envision Financial and Valley First serve:

About First West Credit Union

First West Credit Union offers members the financial strength, comprehensive product selection and extended branch network of a large financial institution while maintaining local brand identities and a unique grassroots approach to service. Led by Launi Skinner, First West is British Columbia’s third-largest credit union with $6.2 billion in assets under administration, 167,000 members and 1,300 employees. It operates 37 branches throughout the province under the Envision Financial and Valley First brands. For more information on First West Credit Union, visit


Wednesday, March 28th, 2012 EN No Comments