Archive for May, 2013

In government we trust

It took a crisis for Beijing to shine a light on the shadow hanging over its financial sector.

Shadowy Chinese lending reached a point that Chinese regulators could no longer ignore last year: A US$22.5 million wealth management product (WMP) originated by a major bank went bust in December, leaving investors not knowing for months whether they’d get their money back. The Huaxia Bank incident drew a quick pledge from the government to issue new regulations on the high-risk, high-return products that allow banks to circumvent official restrictions on lending and saving rates. Beijing delivered on that promise in late March.

But also late last year, Citic Trust declared that it would not pay out interest on time to investors in trust investment products. The company later said some investors in its trust products – similar to WMPs but issued by non-bank trust companies with larger minimum investments – would not be paid back at all. Yet this incident has failed to draw the same regulatory response from Beijing.

By failing to take action, regulators are allowing the shadow of informal lending to continue to grow through trusts. Shady unofficial lending, predominantly done through WMPs and trusts, more than tripling between 2009 and 2012 and equates to roughly one-quarter of the country’s GDP, according to statistics compiled by brokerage CLSA. Shadow lending is often funneled to some of the riskiest borrowers in the country, presenting a major threat to the whole financial system if they default on those loans.

The lack of regulation on trusts to match that on WMPs leaves a gaping hole in shadow banking regulation.

Trust companies account for nearly half of institutionalized shadow banking with the industry holding US$1.2 trillion (RMB7.47 trillion) in assets under management at the end of 2012, according to CLSA. That trails traditional banks by only a few billion dollars.

This has left analysts speculating on whether financial regulators’ next major crackdown will be on the trust industry.

“Trust companies for now I would say present an increasing risk or threat to the stability of the financial system, but it’s still somewhere away from the tipping point,” said Liao Qiang, a Beijing-based analyst for credit rating agency Standard Poor’s. “I would say the government must be very cautious and somewhat worried about the situation right now.”  

What’s not to trust?

Trust companies potentially pose an equal risk to the financial system as wealth management products. A trust company is merely intended to act as an intermediary, connecting investor money to projects that need it without making loans themselves, as banks do. The borrowers – real estate firms, industrial companies, infrastructure projects and others – are often unable to get traditional bank loans because they are deemed too risky. In addition, the lenders often don’t fully understand that they could lose their money if the investment goes bad.

“There’s someone with a lot of money who wants to lend to someone who is in desperate need of money,” said Francis Cheung, head of China and Hong Kong strategy at CLSA. “Why do I know they’re in desperate need of money? Because they’re willing to pay a 10-plus percent interest rate. And the trust company acts as an intermediary.”

Trust companies are subject to different, and less stringent, regulations. The China Banking Regulatory Commission (CBRC) set minimum net capital requirements in March last year designed to ensure that trusts have enough money to meet their obligations. The regulator is still considering further regulation on trusts. Investors in trust products have also long been required to hold a minimum amount of assets to be eligible to buy into trust products.

“You’ve got to be a big boy. You’ve got to have a lot of money, so if things go bad, that’s fine,” Cheung said. “These more institutional investors, these big lenders should be able to take a hit.”

Still, the worry remains that trusts have grown so fast that even these safeguards aren’t enough. Trust assets last year amounted to 12-times what they were in 2007. It’s also often unclear how much liability trust companies themselves hold for the loans they facilitate.

Follow the money

Not only are the dangers of trust products similar to wealth management products – in many cases trust products are actually WMPs. Banks often act as originators of trust products, raising the funds through WMPs and then passing them off to trust companies to invest. CLSA statistics suggest that there is US$326 billion (RMB2 trillion) counted both as bank WMPs and as trust assets, and many suspect more widespread and subtle overlaps in the way the products are sold.

In some cases, trusts are even under the same ownership. Citic Trust, for example, is owned by the same parent as China Citic Bank. Patrick Chovanec, chief global strategist at Silvercrest Asset Management, pointed out that Chinese who want to buy a Citic Trust product can go into a Citic Bank storefront to do it, even if the bank has no other involvement in the trust product. Customers can be left with the false impression that a bank is backing a trust.

Such a close relationship between banks and trusts obfuscates the risk of these products. Roughly two-thirds of trust products are single-unit trusts (sometimes called single-fund trusts), according to CLSA statistics. These product are in theory safer, as they match one investor to one borrower so all involved can more easily understand the relationship and the risk.

However, Liao of SP said that most of these single-fund trusts are actually deriving money from banks acting as the single investors. The banks themselves are bundling the money from many individuals, who often don’t understand or ask what the underlying asset is.

Ultimately, the real danger of trust products, and the reason customers probably don’t pry too much into the underlying assets, is the same moral hazard inherent to the entire Chinese banking system, Chovanec said. Both individual depositors and financial institutions often assume that the government will bail them out if an investment does go bad.

There’s certainly precedent for it – the government allowed the Big Four banks to offload US$169.3 billion in bad loans in 1999, for example. When a US$22.5-million WMP originated by Huaxia Bank blew up last year, the investors were eventually repaid.

“If you don’t face the possibility of loss, why not make the investment?” asked Chovanec.

Half regulation, no results

While the March regulations on WMPs should apply to trust products tied to banks, they fail to limit those trust products originated by non-bank institutions. That could include third-party wealth management companies, large corporations with extra cash to lend out or the trust companies themselves, Liao said.

By only putting the squeeze on WMPs, regulators may be merely pushing investment toward less-regulated trust companies. Bank issuances of WMPs declined 8.8% in April. Yet in the same month, total social financing – one of the broadest measures of credit – grew 21.8% year-on-year in April, the fastest rate since June 2011. Roughly half of that credit growth came from shadow banking, according to Chovanec. With shadow lending still growing at a fast clip despite fewer new WMPs, the growth may be coming through trust products.

Regulators’ goal, and the test of whether rules on shadow banking work, should be to rein in this overall credit growth, Chovanec said. That’s the real threat to the economy: The more credit is fed into the financial system, the less efficiently it is used and the more it is used to rollover existing debt. If that trend is allowed to continue, bad debt could snowball into widespread defaults that in turn would cause massive losses for investors in shadow banking products and cripple the financial system.

“[China Banking Regulatory Commission] can say all that they want about all of the elaborate rules that are going to guide private wealth management products, trust products, etc,” Chovanec said. “The fundamental question is ‘Are they determined to rein in credit in all the forms it takes?’” Regulators may just talk tough while continuing to pump the economy full of credit to try to pin up China’s slowing GDP growth.

The CBRC would do well to slap regulations on trusts to complement those on WMPs and strictly enforce the rules on all fronts. Only then might credit growth actually come down. Otherwise, the shadow hanging over the country will only continue to grow, threatening to plunge the entire country into darkness.

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Friday, May 31st, 2013 EN No Comments

Barclays Boosts Charity Sector Expertise With Senior Hire

Stade Louis II Monaco

Goal-scoring striker who ‘dreams’ of playing for Arsenal might be available

As Radamel Falcao looks set to join AS Monaco, and other big names ready to follow, what next for their current star striker Ibrahima Toure?

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Friday, May 31st, 2013 EN No Comments

Whittier Trust Investment and Wealth Management Hosts Presentation Entitled …

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Seattle, WA (PRWEB) May 31, 2013

Lisa Parker, President of the Lawrence Welk Family Foundation and Vice President of Philanthropic Services for Whittier Trust Investment and Wealth Management will be giving a presentation entitled, “From Lawrence Welk to Lady Gaga; Bridging the Generational Divide in Family Philanthropy” on May 30th and 31st. The event is by invitation only and will take place at the Rainer Club in Seattle. Lisa will provide an entertaining and informative look at the generational personalities that sit across the board table from one another and explore the joys and challenges of multigenerational family foundations. She will also give a preview of the changing landscape of giving for the next generation. “I look forward to sharing with the audience some key insights related to multigenerational philanthropy and how it can make the family foundation experience fun and engaging,” said Lisa Parker, Vice President of Philanthropic Services.

Whittier Trust is an independent investment and wealth management firm that oversees $8.9 billion in assets. Whittier Trust serves more than 300 families and 30 foundations throughout the U.S. The firm has helped individuals and families manage, grow and transfer wealth intergenerationally for seven generations. Whittier Trust is one of California’s oldest wealth management companies, and the only multi-family office headquartered on the West Coast. The firm serves clients across the nation with offices in South Pasadena, San Francisco, Reno, and Seattle. To learn more, visit http://www.whittiertrust.com.

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Friday, May 31st, 2013 EN No Comments

Gottex and Staples Rodway A.M. join to provide multi asset investment solutions …

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Opalesque Industry Update – Staples Rodway Asset Management Ltd (Staples Rodway or SRAM), the investment management subsidiary of Staples Rodway group based in New Zealand, and Gottex Fund Management Sarl, the investment subsidiary of global alternative asset management group Gottex Fund Management Holdings Limited (Gottex), today announce a new joint venture in New Zealand, Gottex SR Funds Ltd (GSRF).

Gottex SR Funds will offer multi-asset investment products to New Zealand investors seeking diversified international investment exposure, combining Gottex’s well-established research, global reach and expertise in multi-asset portfolio construction and management with Staples Rodway’s excellent reputation for providing clients in New Zealand with sound financial advisory services.

Guy Holroyd is the Managing Director of GSRF, and the existing SRF International Capital Growth Fund, established in 2011, is being folded into the joint venture and rebranded as the Gottex SR Multi-Asset Global Fund. Bill Landes, Senior Managing Director and CIO of Gottex Multi Asset business, will be closely involved in the management of the fund.

Max Gottschalk, CEO of Gottex Asia, commented, “This is a further step in delivering our strategy for growth and follows the announcement earlier in May of our new partnership with Astmax in Japan. We have been expanding in the Asia Pacific region for some time and were looking for a partner in New Zealand, where we see significant opportunities for growth. We were attracted by the reputation and governance structure of Staples Rodway and its excellent asset management team. We believe we have found a very solid and talented partner. Together we combine the benefits of a strong New Zealand presence with access to a truly international fund management group.”

Guy Holroyd, Managing Director of GSRF, added, “We are seeing increased interest in our multi-asset fund, particularly from financial advisor groups and institutions who are looking to access reputable international portfolios, backed by the knowledge, expertise and credibility of a fund manager such as Gottex. We consider the products we can now offer through Gottex as being almost unique to New Zealand investors.
“The key differentiator Gottex SR Funds provide is the combination of an international partner and the security of an existing and proven New Zealand operational base that falls under the governance and infrastructure of Staples Rodway – New Zealand’s leading independent accounting practice that has been a trusted advisor to New Zealanders for close to 70 years.”

About Gottex Fund Management Holdings Limited
Incorporated in Guernsey, Gottex is the holding company of a leading independent global alternative investment management group whose core business is providing investment management services to a diversified range of hedge funds, multi manager and multi-asset funds. In this capacity, the Gottex group provides portfolio selection and asset allocation advice, as well as risk management and investment monitoring and advisory services to a broad and diversified institutional clientele. In addition, Gottex group also structures and manages theme and geographically focused fund of hedge funds, multi asset endowment style products, bespoke managed accounts, private equity style real asset funds and provides related services, including a managed account platform and outsourced middle office services, through its subsidiary LUMA GSS.

With offices in Guernsey, Lausanne, London, Hong Kong, New York, Boston, Luxembourg and Zurich, the Gottex group advises funds that are invested with more than 150 managers around the world, investing in a wide range of strategies and geographies on behalf of predominantly institutional investors. As at 31 March 2013, Gottex had USD 6.4 billion of total fee-earning assets. www.gottexholdings.com

About Staples Rodway Asset Management Ltd.
Staples Rodway Asset Management offers specialist investment advice with the key objective to help individuals, families, trusts and charitable bodies create and protect their wealth. SRAM provides a highly personal investment management service to investors who do not have the time, resources or expertise to manage their portfolios.
SRAM is part of the Staples Rodway group, an association of six independent accounting firms through New Zealand, providing businesses and individuals with a wide range of professional accounting advice and business related services. Staples Rodway is also the New Zealand independent member of Baker Tilly International providing its clients with the international links so necessary in today’s business and accounting worlds. www.staplesrodway.co.nz

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Thursday, May 30th, 2013 EN No Comments

Diversified Trust Hires Jennifer L. Callaway as Vice President


Diversified Trust

Diversified Trust (Diversified Trust)

Nashville, TN. – Diversified Trust, a southeast-based comprehensive wealth management firm with more than $5 billion in client assets, has announced the hiring of Jennifer L. Callaway as vice president and trust administration manager.

“Jennifer is a proven leader in our industry and we are thrilled to welcome her to Diversified Trust,� said John Seckman, President and COO of Diversified Trust. “As a licensed attorney, her legal experience in trust and estate planning will be an immediate asset to clients across our footprint.�

Callaway will serve as a member of the Corporate Operations Team, working closely with the company’s General Counsel and Senior Fiduciary Officer and acting as a resource to each office’s Trust Specialist. She will provide leadership in the development and implementation of processes and procedures relating to personal trust administration. In addition, she will be responsible for training company personnel regarding these processes and procedures.

Prior to joining Diversified Trust, Callaway served as vice president and trust officer with Cumberland Trust Investment Company where she was responsible for relationship management and account administration. She was previously vice president and trust officer for Independence Trust Company, administering client trust accounts and advising on compliance and corporate matters. Prior to her work in the trust field, she was an attorney with Stewart, Estes Donnell in Nashville focusing on civil defense litigation.

Callaway received her Bachelor of Arts from the College of Wooster in Wooster, OH and a J.D. from Cumberland School of Law at Samford University in Birmingham. She is currently licensed to practice law in Tennessee and is a member of the Estate Planning Council of Nashville.

Founded in 1994, Diversified Trust is an employee-owned wealth management and financial advisory firm with offices in Atlanta, Greensboro, Memphis and Nashville. Diversified Trust clients include individuals, multi-generational families, single family offices, foundations, endowments, retirement plans, and family-owned businesses. Its comprehensive wealth management services include Investment Management, Trusts and Estates, Family Office and Institutional Advisory Services.

For more information on Diversified Trust and its services please visit diversifiedtrust.com.

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Thursday, May 30th, 2013 EN No Comments

Kleinwort Benson Adds New Head For South Africa

Natasha Taghavi
Reporter in London

30 May 2013

News Analysis

Kleinwort Benson, the London-headquartered wealth manager, has appointed Ron Dicks as head of private wealth management in South Africa.

Dicks, with more than 20 years’ financial services experience, was latterly a partner at Citadel, where he was involved in family office capabilities at the firm, having previously served as a family office financial advisor at Absa. Dicks has also worked across such sectors as legal, financial planning and local and international banking.

In his new role, Dicks will be responsible for managing and developing Kleinwort Benson’s South African private wealth management business. Based in Cape Town, and reporting to Clive Wright, head of PWM offshore, Dicks will work closely with Wright and other colleagues in the Channel Islands and Isle of Man to drive the growth of the international business and support the needs of intermediaries, corporate clients and ultra high net worth individuals, the firm said.

In other hires at the firm, earlier in the year Kleinwort Benson appointed Jeremy Hippolite as executive director for business development and Glenn Baker as director, also in business development.

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Thursday, May 30th, 2013 EN No Comments

Vontobel Asset Management Launches Emerging Market Fund

Natasha Taghavi
Reporter in London

29 May 2013

News Analysis

Switzerland’s Vontobel Asset Management has launched a new emerging market debt fund.

The new fund, Vontobel Fund – Emerging Markets Debt, which is managed by Luc D’Hooge, head of emerging market fixed income, invests in emerging bonds denominated in hard currencies. The fund is actively managed, aiming to outperform the JP Morgan EMBI Global Diversified index by 125 basis points per year over rolling three-year periods, the firm said in a statement.

Luc D’hooge, who has more than 20 years’ experience in emerging market debt, will use an investment approach which is focused on low-risk, high-information ratio trades, based on proprietary models. 

In addition to the Vontobel Fund – Emerging Markets Debt, the company also manages an Emerging Markets Bond (local currency) Fund and an Eastern European Bond Fund.

In other recent developments, last month Vontobel Asset Management US said the total client funds that it oversees stood at $36 billion at the end of last year, up from $20 billion a year before.

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Wednesday, May 29th, 2013 EN No Comments

Julius Baer Expands Its Middle East Operations

Stephen Little
Reporter in London

29 May 2013

News Analysis

Julius Baer is set to launch a new subsidiary in Bahrain, after having been granted an investment firm licence from the Central Bank of Bahrain.

The new subsidiary, Julius Baer Bahrain, will focus on offering wealth management services and advice to private clients in the Kingdom, the firm said.

Julius Baer yesterday announced that it has started to transfer the Hong Kong and Singapore businesses of Merrill Lynch International Wealth Management that it acquired in 2012. For more on this story, click here.

In other news, earlier this month  Julius Baer said its assets under management rose 16 per cent between the end of last year and the end of April 2013, standing at SFr220 billion ($227.9 billion), and total client assets grew by 12 per cent to SFr309 billion.

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Wednesday, May 29th, 2013 EN No Comments

Ashcourt Rowan adds to its team in financial planning push

Ashcourt Rowan adds to its team in financial planning push

Ashcourt Rowan has poached Steven Midgley from National Australia Group as a business director for its financial planning division.

Midgley, formerly a regional director at National Australia Group, will join the board of Ashcourt Rowan Financial Planning.

In the newly-created role, he will report to Jonathan Polin, group chief executive officer (CEO), and will be responsible for providing business and operational support for the management of the financial planning business and its national development.

Commenting on the hire, Polin (pictured) said: ‘Steven has a huge amount of experience and expertise in the financial planning industry, which will be invaluable as we look to develop this part of the business.

He added: ‘This is the latest in a series of senior hires for the company, which includes the appointment of David Palmer as the business director for our asset management business, and ensures we are well positioned to capitalise on the growth opportunities that come our way.’

Midgley was responsible for leading the independent financial advice business and more recently wealth management business across the UK in his former role at National Australia Group, where he designed their retail distribution review (RDR) proposition.

Prior to this, he held various roles at Clydesdale and Yorkshire Bank, including head of financial planning, building a new to bank financial planning capability across South of England.

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Wednesday, May 29th, 2013 EN No Comments

Manager’s Death Shakes Texas Investors

The death of a prominent private wealth manager at an Invesco Ltd. unit has roiled the Texas investment community and sent ripples through wealthy society throughout the state.

It comes soon after Invesco announced plans to sell the unit, Atlantic Trust Private Wealth Management, to Canadian Imperial Bank of Commerce for $210 million.

The head of Atlantic Trust’s Austin, Texas, office, S. Mark Powell, was found dead on May 16.

Since Mr. Powell’s body was found nearly two weeks ago, investors have come forward to say they lent him in total millions of dollars, according to people familiar with the matter. At least some of that money appears to have gone missing, the people said.

An Invesco spokesman said in a statement that following Mr. Powell’s death, the fund-management company has become “aware of unusual transactions Mr. Powell seems to have conducted personally outside of his work for Atlantic Trust.”

Invesco said it has advised authorities of the matter.

“We have no reason to believe that client accounts were accessed,” the Invesco statement added.

A spokeswoman for the Securities and Exchange Commission declined to comment Monday.

The Travis County medical examiner’s office didn’t respond to requests for comment on the cause of Mr. Powell’s death.

The 53-year-old Mr. Powell was a father of three was a well-known philanthropist and passionate golfer. Texas Gov. Rick Perry was among the many prominent Texans to attend his funeral.

Several wealthy investors in the state told The Wall Street Journal over the weekend that they knew of dozens of others like them who invested large sums of money with Mr. Powell, who the investors say often sought loans for a variety of private ventures with promises of large guaranteed returns.

One investor said Mr. Powell guaranteed a minimum annual return of 9%. It isn’t clear how much money is involved, but two people involved in the discussions surrounding the matter said “multiple millions” of dollars were at stake involving dozens of investors in Austin, Houston, Dallas and other Texas cities.

Until Mr. Powell’s death, few seemed to be aware of the scope of his private financial arrangements with a wide array of prominent Texans. Investors who spoke to The Wall Street Journal said they are now in discussions with attorneys on potential legal actions.

The all-cash sale of Atlantic Trust to Canadian Imperial Bank of Commerce, announced last month, is due to be completed in the second half of this year.

Atlantic Trust, which manages about $22 billion assets for clients in 12 U.S. cities, is a small part of the Invesco empire. At the end of March, Invesco had some $729 billion of assets under management, according to its latest financial results.

The Atlanta company targets “affluent individuals,” foundations and endowments, according to its websites. Each new client must have at least $5 million of assets to manage.

A spokesman for Invesco declined to comment on whether the mystery over Mr. Powell’s dealings might affect the planned Atlantic Trust sale.

A spokesman for CIBC didn’t immediately respond to a request for comment.

Mr. Powell lived in an ivy-covered, $3 million home in an area of West Austin, where two of his children used to attend the top-rated Westlake High School. His 20-year-old daughter, Madison, was one of 13 Texas women to attend the International Debutante Ball in New York in March, where she made her “society debut.”

He joined Atlantic Trust in 2002, according to the company’s website, which said he was “instrumental in establishing the firm’s presence in Austin and throughout Texas.” His previous roles in a career spanning more than quarter of a century included being a managing director with Morgan Keegan Co.

Mr. Powell served on the boards of a number of charities, including the Dell Children’s Medical Center of Central Texas, the First Tee of Greater Austin and the Young Life Foundation in Colorado Springs, Colo.

Mr. Powell belonged to multiple golf clubs, including the exclusive Austin Golf Club, about 30 miles west of Austin, where he appeared the day before his death and was “part of the elite few who helped build the club in the early 2000s,” an employee of the club said. His father, Boone Powell Jr., is a leader in the health-care industry and served as president of the $5.3 billion Baylor Health Care System.

Write to Neil King Jr. at jean.eaglesham@wsj.com and Shelly Banjo at shelly.banjo@wsj.com

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Tuesday, May 28th, 2013 EN No Comments