Archive for October, 2013

Baird takes over consultant

Alpha Financial Markets Consulting, which provides management consultancy services to the asset and wealth management sectors, has been sold in a £28 million deal.

Founded in 2003 by Nick Kent, Alpha provides a range of consulting services and employs nearly 100 consultants in Luxembourg, New York and Paris. Clients include Aberdeen Asset Management, BNY Mellon, BNP Paribas and Northern Trust.

Baird Capital, the UK private equity division of Robert W. Baird Co, bought the majority stake in Alpha and intends to expand its European customer base and develop its business in the United States. Andrew Ferguson and Chris Harper,


Sunday, October 27th, 2013 EN No Comments

Fami targets P20-billion AUM for next year

Fami targets P20-billion AUM for next year


Category: Banking Finance

Written by Genivi Factao

Taking care of the wealth of Filipino savers and ensuring the funds generate even more value for clients is the goal the First Metro Asset Management Inc.(Fami) has set for itself for 2014.

A key Fami executive said on Sunday they look forward to posting a 42-percent growth in assets under management (AUM) to P20 billion by next year from P14 billion this year.

Fami President Augusto Cosio said Fami is very focused on growing the business in all their products.

“We want to grow our assets under management [AUM]. We want to be at par with our competitors in the industry,” he said.

“We want to grow our AUM above P20 billion by next year because, currently,  we are at P14 billion,” he added.

Fami has a client base of about 25,000, with the smallest investor typically investing P5,000 and the biggest investor with as high as P500 million.

“We have a very wide client base and we’re expecting also a positive growth next year,” he said.

Fami is engaged in the mutual fund business, which pools a number of individual savers whose aggregate investments make for a powerful investment tool that generate far more interest return than any single member can generate on his or her own.

Fami said its various funds have consistently posted superior performance relative to competing products since their inception.

“We have equity mutual fund, fixed income fund and we have a balanced fund. In all of these we have a very good track record,” Cosio said.

Fami is an award-winning asset-management franchise of First Metro Investment Corp.

All four First Metro Save Learn mutual funds won Philippine Investment Fund Association (PIFA) top awards in different categories.

The Save Learn Fixed Income Fund, for instance, won first place in the one-year, three-year and five-year categories.

The Save Learn Equity Fund won first place in the three-year and five year categories.

The Save Learn Balanced Fund won first place in the three-year and five-year categories,  and second place in the one-year category.

Last, the Save Learn Money Market Fund won third place in the one-year and three-year categories.



Sunday, October 27th, 2013 EN No Comments

Offshore investing – risks, asset selection and the future

Making the decision to invest offshore can be overwhelming for South African investors due to the sheer size of the investment universe with all of its various products, asset classes and service providers, coupled with the associated risks.

Carolyn Levin of Foord Asset Management advises that the first step is to ensure that the motivation for offshore investing is not merely because of a negative view on the local currency.  This incorrectly predicated investment strategy is unlikely to provide a sustainably satisfactory outcome. 

The currency risk is another factor that needs to be given careful consideration. South Africans tend to become fearful when the rand blows out and choose this as the time to send their money offshore. However, many investors have been burnt this way and it is best to invest offshore when the rand is strong or stable.

Diversifying offshore investments

Levin says that in terms of diversifying offshore assets investors need to remember that the selection of an asset class is a question of value and conviction and this mindset must not alter whether investing locally or offshore.

“A diversified portfolio should be considered in aggregate and not on a geographical basis. The selection of assets in a portfolio is also a function of an investor’s risk appetite and particular requirements.  However, in the current low interest environment with poor medium-term prospects for bonds, equities remain the asset class of choice.”

“The equity markets have had a good run this year with the SP up appreciably to date,” says Levin.  “However, the recent turmoil in emerging markets has seen certain markets plummeting by double digit percentages in the past few months, even more when one takes the related currency depreciation into account. This creates opportunities in certain markets.  Nevertheless, it is far more preferable to buy a good company at a fair price than a bad company at a bargain.”  

When it comes to accessing offshore investments Levin advises that investors wanting direct offshore exposure, given the plethora of international choice, should consider the offshore offerings of local fund managers that they have come to know and trust.

“There are two main ways of using local fund managers to invest offshore, depending on the size of the investment. For smaller amounts, South African investors might do well to access offshore markets via a local feeder fund or via a global asset allocation fund. Any money invested in this manner does not form part of an individual’s offshore allowance.”

“For large sums, investors can obtain a SARS tax clearance certificate and invest directly in the offshore fund, in foreign currency. “

What does the future hold for offshore investing?
Levin looks ahead and says that offshore assets (as part of a diversified overall portfolio), and particularly equities, are likely to remain an asset class of choice for South African investors.

“Global interest rates can be expected to rise, which will be negative for bonds. Political uncertainty in South Africa is likely to continue to underpin rand weakness. Globally, a lot depends on the timing and extent of US stimulus tapering. We expect volatility to continue until there is clarity on this.”

* This report was prepared by Foord Asset Management


Saturday, October 26th, 2013 EN No Comments

Wealth managers say they hear ‘nary a tweet’ for Twitter’s IPO



–> Twitter Inc has set a relatively modest price range for its closely watched initial public offering, but some financial advisers say their clients are not clamouring to invest in the social media phenomenon. “Nary a tweet,” says William Baldwin, president of Pillar Financial Advisors in Waltham, Massachusetts, when asked about client interest in the deal.

Out of 29 broker-dealers and independent advisers contacted by Reuters, 23 said they are not recommending Twitter shares. Only one said he would recommend it – and only to certain clients. Five others said they would wait to snap up the stock if it plunges after it begins to trade on the New York Stock Exchange. While retail interest might be low, tech industry analysts say there is expected to be a good appetite for Twitter stock from institutional investors at the current valuation. Actual institutional investor sentiment still remains unclear. Retail investors typically account for 10 to 15 percent of IPOs.

Twitter said on Thursday it will sell 70 million shares at between $17 and $20 apiece, valuing the online messaging company at up to about $11 billion, less than the $15 billion that some analysts had been expecting. If underwriters choose to sell an additional allotment of 10.5 million shares, the IPO could raise as much as $1.6 billion. Blame last year’s botched Facebook Inc IPO for the diminished interest from Mom and Pop in Twitter.

When the social networking giant’s stock hit the market in May 2012, it encountered allocation problems, trading glitches and a selloff – shares did not recover their IPO price until a year later. “People are still smarting from that experience,” says Ren? Nourse, a financial adviser at Urban Wealth Management in El Segundo, California. Part of the problem is that investors do not understand Twitter the way they “got” Facebook, Nourse and other advisers say.

Three brokers with Morgan Stanley, which was lead underwriter on the Facebook IPO, said clients are showing little or no interest in Twitter. “With the debacle over Facebook, I haven’t had one client ask about it,” said one of the brokers, based in the south-east. The broker asked not be identified because they were not authorised to speak to the media. Another broker, based in northern California, said, “Silicon Valley deals have been super-red hot, but I’ve had no inquiries from clients” about Twitter.

All in all, Twitter is no Facebook. While Twitter relies on advertising like Facebook to make money, it is not profitable. Twitter also has a smaller, less-engaged audience and it is not issuing as much stock, argues Kile Lewis, co-chief executive and founder of oXYGen Financial, an independent financial advisory firm that focuses on clients in their 30s and 40s, also known as Generation X and Generation Y.

“In spite of the ‘glow’ from most on Wall Street, I find it hard to make a recommendation for a company that is running a…loss,” Lewis says. “Until they have a clear plan to monazite their product it seems too risky.” Twitter more than doubled its third-quarter revenue to $168.6 million, but net losses widened to $64.6 million in the September quarter, it disclosed in a filing earlier this month.

Since its creator Jack Dorsey sent out the first-ever tweet in March 2006, the micro-blogging platform has grown to more than 200 million regular users posting more than 400 million tweets a day. Twitter is expected to set a final IPO price on November 6, according to a document reviewed by Reuters, suggesting that the stock could begin trading as early as November 7.

For individual investors, however, the pendulum is swinging the other way. An online poll conducted through Friday morning on found that 57 percent of 225 respondents want to invest in the IPO at the range of $17 to $20, while 28 percent are not interested in the stock. Fifteen percent say they are waiting to buy the shares on the open market. One cautious investor is Betty Tanguilig, a 75-year-old retiree and mother of eight. Back when Facebook launched, she was furious that her financial adviser Alan Haft, with California-based Kelly Haft Financial, could not get her more than $46,000 worth of shares from a $400,000 account to buy shares of the social networking site.

Now, Tanguilig is taking a more measured approach to the Twitter IPO. Even though her investment in Facebook is up 40 percent, she says she wants to wait and see how Twitter performs before jumping into the stock. Tanguilig’s hesitance about Twitter is not the result of a lesson learned from the mishaps of the Facebook IPO, but because like many of her peers, Tanguilig does not quite get Twitter.

Copyright Reuters, 2013


Saturday, October 26th, 2013 EN No Comments

How much should you invest as a small investor?

How much should you invest as a small investor?

Q: It is not an environment where we have too many new fund offers while we had the bull run, 2007-2008 we might be revisiting those lessons in the future where you had a lot of new fund offers. Can you go in for a new fund offer because you have sectoral funds, you have theme specific funds. What has been the experience with those and how much, if at all should you be investing in it if you are a small retail investor?

A: Stay away from sectors, themes because they are largely momentum driven and it is not right for the fund houses also to be following that momentum and offering something which is hot at that time. We saw that in the dot com era when everybody launched infotech funds and we had very bad experience. In 2007 when everybody launched infrastructure fund, agricultural commodity funds, a lot of fund houses came out that we will not diversify; we will give you a very concentrated kind of a portfolio. So, all let to grief.

So, I would say for the lay investor, retail investor stay as diversified and stay on the largecap portion or to a large proportion of your funds. You can keep 5 to 15 percent in midcaps but also depending on where the economic cycle is, because midcaps have smaller holding capacity, they are the ones that lose out faster and the impact cost is very high, they could be wiped out in a downturn so you could lose the entire principal in midcaps. So, best is to stay largecap in the major portion of your portfolio because they tend to weather any economic cycle better.


Saturday, October 26th, 2013 EN No Comments

Bankers Or Bandits? New Rules On Tax Evasion Put Singapore Bankers In The …

Marina Bay Sands, Singapore

Singapore is set to overtake Switzerland as the world’s wealth management center. (Photo credit: Wikipedia)

On July 1, a new law came into force in Singapore, without much fuss or fanfare. All financial institutions are now criminally liable and risk hefty penalties or even closure if they shelter tax cheats.

Singapore wants its private bankers to screen their customers, ensure their money is tax-paid, alert suspicious accounts and send clients packing if guilty.

Clearly, it wants to protect its banks from the kind of fate that brought Switzerland’s oldest bank, Wegelin Co., to its knees for tax evasion, forcing it to close early this year or UBS UBS that was fined $750 million for tax evasion.

But the question on everyone’s mind is how do these new rules tie in with Singapore’s ambition to be the wealth management center of the world?

Everyone knows the basic timber of the rich. They are loaded, and they hate paying taxes. It’s a legitimate desire. Why would any multimillionaire or billionaire who made money with his own blood, sweat and tears, or even plain good luck, want to give away 50% to 70% of his income to the government and relinquish control on its use? Even the venerable businessman Ingvar Kampard of Ikea, as respectable as they come, fled his home country Sweden 40 years ago for Switzerland to avoid high taxes!

The rich also seek secrecy, and hate public glare. In fact, when Singapore embarked on its journey to be the world’s wealth management hub, post the Asian financial crisis, it beefed up its account secrecy protections, changed trust laws and opened up its land and residency controls so the uber rich could come here to “live, work and play.” So long as there was no drugs or terrorist money involved, Singapore asked few questions. It was much like the doctor-patient or attorney-client confidentiality.

That’s how money flowed in from China, India, America, France, Russia and even Switzerland, so much so that Singapore is now the fastest growing wealth center with $550 billion assets under management, with 75% being from overseas. It is set to outpace Switzerland as the world foremost wealth management center by 2020.

The new rules, however, may change some of that. Sure, money has acquired a dirty color with Ponzi schemes, billionaire swindlers, and insider trading, but governments beset with ballooning deficits are thirsting for the blood of tax evaders.

However, bankers are not bandits. By putting the onus on banks for tax evasion by clients, the new rules are putting bankers in the dock. They fear spending more time looking over their shoulders than servicing their clients. Many fear they will spend more time learning compliance and risk management instead of developing new products or services for their clients.

Detecting and deterring illicit activities is also not an easy affair. The rich have always held their wealth in complicated and layered structures with the help of smart accountants, attorneys and counsels for slashing tax bills. Looking for tax-risk indicators, sufficient to set alarm bells or probe into wrongdoing, requires expertise that bankers do not have.

Tax evasion also calls for judgement calls into the intent of the corporate entity or client, reputational risk, the extent of client or his family’s involvement and other such qualitative aspects that most bankers say they are not equipped to handle. 

Besides, the new rules means an actual increase in operational costs that could affect profitability and erode the already thin margins of private banks here, say the experts.

Not to say, clients would welcome the new rules that put them under the scanner. After all, clients coming from another country to Singapore are doing so to escape the specter of being haunted and harassed or penalized for their riches in their home country. If they face the same scrutiny, rigmarole of rules and time-consuming procedures with high costs of operation, they would much rather find simpler alternatives elsewhere.

In the world of borderless international banking and technology, the reality is that money flow can shift as quickly out from Singapore as it came from Switzerland, Luxemburg, Bermuda or Jersey in the English Channel. From the Cayman Islands to the Virgin Islands to the Cooks Island, it is estimated that there are 50 to 60 offshore financial centers between $8 trillion to $ 32 in private global wealth.

Clearly, the line between tax avoidance and tax evasion is thin and in preaching the morality of money, Singapore is walking a tight rope.



Saturday, October 26th, 2013 EN No Comments

Markets give managers nice boost in quarter

Publicly traded money managers saw modest gains in assets under management for the quarter ended Sept. 30, helped generally by rising equity markets.

BNY Mellon Asset Management,

BlackRock (BLK) Inc. (BLK), T. Rowe Price Group Inc. and Northern Trust Corp. reported the biggest asset gains from the previous quarter, but all traditional asset managers tracked by Pensions Investments that had reported by Oct. 25 showed AUM increases in the Sept. 30 quarter.

BNY Mellon, New York, reported $1.5 trillion in assets under management as of Sept. 30, up 7% from the second quarter and up 13% from a year ago. New York-based
BlackRock’s AUM of $4.1 trillion was up 6% from the previous quarter and 11.5% from a year ago. Northern Trust, Chicago, had $846 billion in assets, up 5.4% from three months earlier and 12.9% for the year-earlier quarter. T. Rowe Price Group’s $647 billion in assets was a gain of 5.1% from the previous quarter and 10.9% from a year earlier.

In the quarter, the Standard Poor’s 500 stock index gained 5.25%, the Russell 1000 gained 6.02%, and the MSCI All-Country World index, ex-U.S., gained 10.23%. In comparison the
Barclays Capital U.S. Aggregate Bond index posted 0.57%.

But the asset gains did not necessarily coincide with net inflows. Baltimore-based T. Rowe Price reported net outflows of $7.4 billion; the firm had $8 billion in net outflows for the quarter ended June 30.

T. Rowe Price was particularly hard hit by outflows from non-U.S. institutional investors, including sovereign wealth funds. These investors withdrew $9 billion in the third quarter after pulling out $8 billion in the previous quarter, said Brennan Hawken, equity analyst with
UBS Investment Bank, New York.

“It’s a total disaster,” he said, adding non-U.S. investors are responsible for 7% of the firm’s AUM.

Still, the asset growth was enough to increase profits for T. Rowe Price and most other managers that experienced outflows. In the third quarter, T. Rowe Price reported $270.3 million in profits, up 9% from a year earlier.

The one exception to the increased profit picture in the third quarter was
Federated Investors (FII), Pittsburgh. The company reported net income of $37.7 million, down 32% from the second quarter and down 7% from a year earlier.

Federated Investors reported assets under management of $366.7 billion at Sept. 30, up 0.8% from three months earlier and up 0.7% from the same period a year earlier. Federated said it had $521 million in net equity outflows and $321 million in net fixed-income outflows in the quarter.

Janus Capital Group, Denver, also saw net outflows of $4.2 billion in the third quarter, the 17th straight quarter of net outflows. But again, assets overall increased because of market gains. The company reported assets of $166.7 billion, up 2.2% from the prior quarter and 7.8% from a year earlier.

Franklin Resources Inc., San Mateo, Calif., experienced net outflows of $2.9 billion in the third quarter, but market gains increased assets to $844.7 billion, up 3.6% from the previous quarter and a 12.6% gain from a year earlier.

Legg Mason (LM) Inc. (LM), Baltimore, also was in this category, reporting $1.4 billion in net outflows; the firm’s equity strategies saw $4 billion in outflows.

Company CEO Joseph Sullivan said in a conference call with analysts on Oct. 25 that the equity outflows included a large global equity redemption from an institutional client at its Batterymarch Financial Management Inc. unit and $700 million in outflows from the closing of the company’s Esemplia Emerging Markets unit.

Legg Mason still managed to see a small increase in AUM because of market performance in the Sept. 30 quarter, up 1.8% from the previous quarter and 0.8% from a year earlier.

Focus on Invesco

Meanwhile, analysts are focused on what the future holds for
Invesco (IVZ) Ltd., which does not report its results until Oct. 31. Preliminary results look positive for the Atlanta-based company. Mr. Hawken said
Invesco is expected to have a strong third quarter, with net inflows of $18.2 billion helping bring total assets to $745.5 billion, a 5.7% increase from the third quarter of 2012.

But a big concern is the Oct. 15 announcement that star portfolio manager Neil Woodford, head of
Invesco’s U.K. equity business, is leaving. “He is like the Warren Buffett of the U.K.,” Mr. Hawken said. The pending departure has put “an overhang” over
Invesco’s share price, he added.

Christopher Shutler, an equity research analyst at
William Blair Co., Chicago, said in an Oct. 17 report that the announcement won’t have an immediate impact because Mr. Woodford is staying until April, when he will start his own firm. But later on, all bets will be off.

Mr. Woodford manages about $50 billion or 7% of
Invesco’s total assets under management, said Mr. Shutler. He estimated
Invesco will see $7 billion in institutional outflows and $7.5 billion in retail redemptions because of Mr. Woodford’s departure.

“In addition, we project some sales headwind from Mr. Woodford’s pending departure,” said Mr. Shutler in his report. “Between now and then, we expect modest outflows, primarily from retail investors. We then expect outflows to pick up in the mid- to latter part of 2014, particularly once Mr. Woodford’s new firm is up and running.”

Based on those assumptions, Mr. Shutler forecasts an annualized net revenue impact (net of distribution expenses) of around $140 million, or about 4% of total company net revenue in 2014.

Good quarter for BlackRock

BlackRock (BLK), the world’s largest money manager, the third quarter was a good one. Asset gains of 6% from the previous quarter helped the company cross the $4 trillion mark.

BlackRock’s gain was helped by its iShares exchange-traded funds business, which had $20.3 billion in net inflows.

BlackRock’s institutional business saw net outflows of $3.3 billion for the quarter, but net inflows in
BlackRock’s retail products increased 7.5% in the nine months ended Sept. 30. That pace is more than double the 3% increase for calendar-year 2012, said David Chiaverini, an equity analyst at BMO Capital Markets, New York.

He said this is good news for
BlackRock because retail assets, despite being only 11.5% of
BlackRock’s $4.1 trillion in assets, account for 34% of base fees collected from clients. “It goes to show how profitable the retail segment is to asset managers,” he said.

Mr. Chiaverini said institutional assets make up $2.5 trillion of
BlackRock’s AUM, but account for 31% of base fees because many institutional strategies are passive and some investors get volume discounts. IShares, with $857 billion in assets, accounts for 35% of base fees, he said.

Mr. Chiaverini said
BlackRock’s massive scale gives the manager advantages over other firms, citing its advertising on nationally televised sporting events and prime-time programs, which is designed to boost its retail business.

Robert Lee, equity research analyst at Keefe, Bruyette Woods in New York, said
BlackRock’s sheer size and breadth give it the ability to counterbalance strategies that are losing assets. As an example, he cited overall net inflows in the third quarter based on the strength of its ETF business, which offset outflows in the institutional business and active equities.

“The company’s multiline investment capabilities give it a long-term advantage,” he said.

One firm yet to report but with expected strong results is Affiliated Managers Group Inc.

Mr. Shutler of
William Blair said he expects that when the holding company reports its third-quarter results on Nov. 5 it will show $10 billion in net inflows.

Mr. Shutler said AMG’s expected growth is driven by a combination of strong performance of many of its largest affiliates, increased reach through the firm’s global distribution network, and being in the right asset classes at the right time.


Friday, October 25th, 2013 EN No Comments

Taking Aim at Your Investing Goals

“Goals-based” investing is a hot topic among financial advisers. The approach: Encourage clients to focus on achieving specific aims instead of beating the market.

Firms are increasingly pitching investors on the idea that amassing wealth should be a means to an end and that defining their individual ends should be a top priority.

The shift is changing the conversation by putting specific objectives center stage. Those goals can range from funding a child’s college tuition to making a large gift to an alma mater.

It can work for investors, experts say—so long as they keep in mind that some advisers might use the term to advance their own goals, such as charging steep fees and selling unnecessary products.

Advisers and wealth managers say clients welcome the change. A 2012 Northern Trust survey of 1,700 U.S. households with $5 million or more in investible assets found that just 11% have developed a financial plan as a step toward fulfilling life goals.

Investors can benefit from a realistic assessment of what they can afford and how much risk they need to take, experts say. But they need to be sure that adopting a goals-based approach doesn’t provide cover for expensive strategies or chronic underperformance.

“You have to make sure it’s not just a sales pitch,” says Allan Roth, who advises on nearly $2 billion in assets as a principal of Wealth Logic in Colorado Springs, Colo.

Here are some questions wealth managers who embrace goals-based investing are asking their clients, and some questions investors should be asking too.

Before, an adviser might have focused on generating the highest returns. Now, he figures out how various investments will work together to reach specific goals.

That means finding out what makes the client’s list of priorities—even if the client has trouble narrowing it down.

Bank of America Merrill Lynch clients fill out an “investment personality assessment,” questions that help them define their feelings about money, investing and what matters to them.

Clients can mark “strongly disagree,” “disagree,” “agree” and “strongly agree” to statements like: “The charities and nonprofits with which I am involved are the most important part of my life.”

Merrill Lynch uses broad indexes such as the SP 500 and the Barclays U.S. Aggregate Bond Index as benchmarks for measuring clients’ returns. But, says John Thiel, head of Merrill Lynch Wealth Management, “we woke up and found out the benchmark wasn’t enough to accomplish a client’s goals.”

Northern Trust slots goals into four areas: lifestyle, family, capital assets (such as a second home) and philanthropy.

Investors need to respond thoughtfully, as advisers will use the answers to help set the investment strategy and prioritize goals.

Advisers then try to figure out what types of risk are necessary and appropriate to achieve those goals.

For many investors, for example, maintaining a certain lifestyle is a top goal. To do that, Northern Trust creates a fixed-income portfolio that will cover expenses for a set number of years, says Deiken Maloney, the firm’s Chicago-based regional director of goals-driven investing.

After that, the firm may choose to fund lifestyle spending with stocks or private equity, for example.

Investments in stocks, real estate and alternatives such as hedge funds will go toward funding longer-term goals such as college tuition, he says.

An investor’s risk tolerance also is important to consider. At Raymond James Financial, advisers show clients how deep losses could affect their ability to achieve their goals. Advisers “stress test” portfolios by projecting losses of, for instance, 20% or 30%—the kind of decline that was all too common during the financial crisis.

“When you show the client they can lose $300,000 in value and they can see how that directly affects their goals, they think, ‘Maybe I’m not comfortable with that much risk,’” says Patrick O’Connor, senior vice president of wealth, retirement and portfolio solutions at the firm.

Investors also should keep in mind that as they achieve their goals, they might not need to take as much risk, Mr. Roth says.

David Loeper, chief executive of Wealthcare Capital Management in Richmond, Va., which has $750 million in assets, says clients need to be flexible.

They need to think “relative to other goals,” he says, and “identify ideal dreams and acceptable compromises.”

Inherent in goals-based investing is the concept of trade-offs, says Jeff Ladouceur, director of SEI Private Wealth Management in Oaks, Pa., which has $1 billion in assets under advisement. If your dream is to own a second home, that might require putting less money away for philanthropic endeavors.

If you opt for goals-based investing, ask a few questions of your own, say some consumer advocates and wealth managers.

One risk: Brokers could try to sell more products or conduct more trades to rack up fees “in the name of reaching your goals,” says Don Blandin, president and chief executive of Investor Protection Trust, an investor education nonprofit in Washington.

Mr. Roth says investors also should be wary if advisers want to use goals-based investing as an excuse to stop benchmarking their performance.

“Many financial advisers don’t want a benchmark, because their performance might not look good,” he says.

As with other strategies, Mr. Roth says investors shouldn’t abandon them because of short-term market moves. “Pick an asset allocation plan to meet those goals,” Mr. Roth says, “and stick with it come hell or high water.”

Write to Julie Steinberg at


Friday, October 25th, 2013 EN No Comments

Cerulli on Managers Who Are ‘Very Relevant to a Few’

Cerulli on Managers Who Are ‘Very Relevant to a Few’

Oct 22nd, 2013 | Filed under: Institutional Investing, Today’s Post | By:

twofaceConsider those familiar images that can be seen in either of two ways, foreground becoming background and vice versa. So in the asset management world there are specialist images and generalist images: the very advantages of the generalist approach can turn out to look a lot like its disadvantages.

Cerulli Associates has devoted the fourth quarter issue of its The Cerulli Edge – Advisor Edition to a consideration of that “minority of investors who choose to narrow their universe of potential clients” by offering a targeted service to a specific clientele: institutions; retirement plans; or perhaps high net worth individual investors.

“The vast majority of financial advisors are generalists,” says Cerulli Director Scott Smith.  One understands the appeal of this generalist stance: why turn away business? Why not accept the money of anyone inclined to invest it with you?

There’s an answer to that, though, and one of the advisors anonymously quoted in the issue makes it in a concise way, “I would rather be very relevant to a few than moderately relevant to many. “ An asset manager who caters to institutions, for example, can increase the value of his practice by providing support for proposal production.  It can become very relevant to those few.

Numbers indicate that specialist advisor firms manage nearly twice as many assets as the industry average, and as Cerulli observes, this “validates the strategy.”

Institutional Specialists

One of the articles of this issue of The Cerulli Edge, “Friend or Foe?” looks at the asset managers who specialize in serving institutions (often endowments or foundations) as consultants and as outsourced CIOs. It makes the following points:

  • Forty percent of the institutional specialist portfolios are within mutual funds and separate accounts.
  • Such specialists account for less than 2.5% of industry advisors, but they punch well above their class, controlling $740 billion in assets.
  • They have great success with small and mid-sized institutions, contexts in which they can leverage ”personal relationships and local reputation.”

So: how does an advisor become a specialist? Happenstance often plays a part. The specialty may come about because the exploitation of connections – a friend on the board of an endowment, for example, – leads that way. Though such “first victories” toward successful specialization may be chance, over time the building of a specialist practice requires sophistication and focus. In terms of resources, it also requires that the advisor put together the appropriate support services.

Business development must also address the sourcing mandates. After all, a common means of growth within the institutional world involves the targeting of small mandates that fly under the radar of the larger managers and their consultants. Almost 70% of the business of institutional specialists arises out of mandates with $100 million or less under management. Most frequently, much less: between $15 and $50 million.

Incubators and Match-Ups

In another of the articles in this issue, “Will the Real Wealth Managers Please Stand Up?” Cerulli adds that broker deals could “further the incubation of specialist practices” by for example providing business specialists who can coach asset management teams “that have the potential to evolve into a specialized practice.”

A related point is that “advisor productivity increases with teaming.” Broker-dealers may want to reach out to solo practitioners in order to “spark conversations” about their willingness to team.” The teaming-up – in asset management just as in l’amour – has to be a matter of compatibility, so the B/D should be in the business of “facilitating thoughtful matches.”




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Author Bio:
Christopher Faille is a Jamesian pragmatist. William James has taught him, for example, that “you can say of a line that it runs east, or you can say that it runs west, and the line per se accepts both descriptions without rebelling at the inconsistency.”


Wednesday, October 23rd, 2013 EN No Comments

Three top stock picks from Northland’s David Cockfield

David Cockfield is managing director and portfolio manager at Northland Wealth Management. His focus is on Canadian equities.

Top picks:

Bell Aliant

Bell Aliant is a previous subsidiary of BCE and still 44-per-cent owned by BCE. The company offers telephone wire line service and TV services in the Maritimes, Quebec and Eastern Ontario. With 5.3 million customers, the company has been very successful in growing its fibre optics penetration and thus billings. The stock presently yields 7.03 per cent – the best of all the telecoms.

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A producer and distributor of a wide range of products, mainly fertilizer, sold to the agricultural industry, Agrium company operates globally with its major facilities in North and South America and Australia. The recent collapse of the potash cartel has driven the share price down sharply despite the fact that potash is only part of their fertilizer line. As world population expands, so will the demand for agricultural products and thus for products that Agrium distributes. The P/E ratio of the stock is under 10 times with a dividend yield of 3.45 per cent.

Crescent Point Energy

Crescent Point is one of the best-managed Canadian oil companies focused in the Bakken oil play in Saskatchewan and North Dakota. The company has been quick to ship oil via rail by building oil shipping facilities and production has again increased ahead of projections. The company has made no major acquisitions recently, responding to investor concerns about share dilution. The stock provides a generous yield of 6.80 per cent.

Past Picks: Oct. 19, 2012

Pacific Rubiales
Then: $24.91
Now: $22.58
Total return: -7.00 per cent

Baytex Energy
Then: $47.60
Now: $42.91
Total return: -4.04 per cent

Then: $38.25
Now: $43.11
Total return: +15.20 per cent

Total return average: +1.39 per cent

Market outlook:

The SP/TSX composite index recently penetrated the 13,000 level with little difficulty, although this market level was expected to offer resistance. With the U.S. debt ceiling limit, budget problems, and Federal Reserve tapering postponed for the time being, equity markets should move higher. Canadian equity markets have significantly under-performed U.S. equity markets in the first half of 2013. However, since early July, the TSX has out-performed the Dow Jones industrial average by 6 per cent and the SP 500 by 2 per cent and has been less volatile. We expect this pattern to continue through the fourth quarter.


Tuesday, October 22nd, 2013 EN No Comments