Five things you need to know before investing in liquid alternatives
Thinking of getting your clients into liquid alts? Read this first.
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Senin, 31 Maret 2014
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Minggu, 30 Maret 2014
The perfect storm: Why alts make sense
The perfect storm: Why alts make sense
High equity prices, low bond yields and geopolitical risk all make this once-shunned allocation a new staple
Mar 30, 2014 @ 12:01 am (Updated 11:44 am) EST
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Sabtu, 29 Maret 2014
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Jumat, 28 Maret 2014
Zuckerberg to Buffett show wealthy owners dominating big M&A
Zuckerberg to Buffett show wealthy owners dominating big M&A
The megarich are dominating U.S. megadeals.
Mark Zuckerberg (Photo: Bloomberg News)
The megarich are dominating U.S. megadeals.
Seven of the 15 U.S. takeover bids worth more than $10 billion since January 2013 were initiated by firms founded and controlled by one of the 200 wealthiest men in the world, according to data compiled by Bloomberg. Last month Facebook Inc.’s Mark Zuckerberg, who has a net worth of $27.1 billion, made a $19 billion offer for messaging service WhatsApp Inc., and this week agreed to buy virtual reality firm Oculus VR Inc. for at least $2 billion.
Controlling shareholders aren’t subject to the same pressures that in recent years have inhibited corporate boards from pulling the trigger on major transactions, said Frank Aquila, a partner at New York-based law firm Sullivan & Cromwell LLP. U.S. companies have done 48% fewer large deals compared with 2007, according to data compiled by Bloomberg.
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“Even as the economy has strengthened, boards and management have been risk averse,” Mr. Aquila said. “The companies that have been willing to take greater risks are those that have a controlling or significant shareholder.”
In some cases stockholders don’t look kindly on those risks. SoftBank Corp.’s stock tumbled 17% on Oct. 12, 2012 after the company, controlled by billionaire Masayoshi Son, confirmed that it was in talks with Sprint Corp.
Controlling CEOs tend to ignore such short-term moves, in part because they are less worried about losing their jobs, said Paul Parker, Barclays Plc global head of mergers and acquisitions. The freedom allows them to look for opportunities that may take years to produce results, unlike companies controlled by a diversified base of shareholders, he said.
When Michael Dell, worth about $15.4 billion according to the Bloomberg Billionaires Index, took his computer-maker company private last year with Silver Lake Management LLC, he said the strategic changes he wanted would take too long to sit well with public shareholders. Dell owned about 16% of the stock.
“Large individual shareholders typically take a meaningfully longer-term perspective, especially if they can buy against a market that is moving in the opposite direction,” Mr. Parker said in an interview.
They’re also more willing to take bigger bets because their nest eggs are so large.
Dell’s leveraged buyout was challenged by Icahn Enterprises LP, founded by Carl Icahn, the world’s 33rd wealthiest man with a net worth of $21.9 billion. Mr. Icahn owns 88% of Icahn Enterprises’s outstanding shares.
Last year, the world’s fourth-richest richest man, Warren Buffett, teamed with 3G Capital to buy HJ Heinz Co. for about $27.4 billion including debt. Mr. Buffett, with a net worth of $63 billion, controls about a third of the shareholder voting power for his Berkshire Hathaway Inc.
CABLE WARS
Wealthy founders have been especially active dealmakers in the telecommunications industry, often dueling each other. Last month Brian Roberts and John Malone jockeyed to acquire Time Warner Cable Inc.
Mr. Roberts, with a net worth of about $500 million, controls Comcast Corp. with a 33% voting stake. Malone controls Liberty Media Corp, which is Charter Communications Inc.’s largest shareholder. Malone is the world’s 199th wealthiest man with a net worth of $6.7 billion.
Mr. Roberts won the battle as Comcast agreed to acquire Time Warner Cable for $45.2 billion in stock, trumping a bid from Mr. Malone in a surprise offer. Comcast shares have risen 3.5% since the takeover bid was made public in November.
“It’s easier to progress deals internally when your founder gets behind it, so they may not bog down as frequently,” said Marco Sguazzin, principal at Deloitte Consulting LLP who consults on M&A in the technology, media and telecommunications industries.
Another billionaire bash occurred last year when Dish Network Corp. challenged SoftBank for Sprint. Dish co-founder Charlie Ergen, who controls about 90% of the voting rights for the second-largest U.S. satellite-TV provider, has a net worth of $17.6 billion, ranking him as the world’s 42nd wealthiest person.
Masayoshi Son owns more than 19% of SoftBank and has a net worth of $17 billion, at No. 47. SoftBank won, paying $21.6 billion for 70% of Sprint.
‘STRONG PERSONALITY
Mr. Ergen is sniffing around another possible multibillion- dollar deal, having contacted DirecTV Chief Executive Officer Mike White to discuss a merger of the two satellite-television companies, people with knowledge of the matter said March 26. Dish and DirecTV have a combined market value of about $68 billion.
“A strong personality is more likely to get something done,” Jeffrey Rosen, a partner at law firm Debevoise & Plimpton LLP, said yesterday in an interview at a conference of M&A experts hosted by Tulane University Law School. “Many of these guys have a high degree of self-confidence.”
CEOs of companies without controlling shareholders remain hesitant to borrow billions to do a big deal amid uncertainty about whether the Fed will increase interest rates, Aquila said. Still, now that the Fed is cutting the $85 billion it had been pumping into the U.S. economy, and the European debt crisis has subsided, large deal flow may improve in 2014, he said.
Making multibillion dollar offers for companies isn’t necessarily something investors should be cheering, said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. If only founders cushioned by dual-class share structures are making big bets, it’s possible some of those risks aren’t worth taking, he said.
Facebook’s stock, for instance, has declined 10 percent since the company announced it was buying WhatsApp.
“No one is infallible, and there are a lot of very smart CEOs out there,” Mr. Elson said. “Simply because the founder made a good bet at one point doesn’t mean he’ll always make a good bet. Everyone should be accountable to someone.”
(Bloomberg News)
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Advisers brace for onslaught as Tax Day nears
New tax laws mean new and perhaps unexpected liabilities for clients – and even some advisers
Buffett rakes in $123 million as firms boost dividends
He won't pay one for his shareholders but welcomes them from companies he invests in
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Kamis, 27 Maret 2014
Kitces, Alan Moore to launch XY Planning Network
Kitces, Alan Moore to launch XY Planning Network
New network will support advisers who work with Generation X and Y clients
By Joyce Hanson
Mar 27, 2014 @ 2:02 pm (Updated 2:20 pm) EST
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The pursuit of happiness: Savings and income for a lifetime - InvestmentNews
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The pursuit of happiness: Savings and income for a lifetime
By Franklin Templeton Investments
March 27, 2014
Meeting income requirements throughout a lengthy retirement may require looking beyond traditional short-term and fixed income assets and considering equities, global investments and specific strategies such as product allocation to broaden income sources and match sources of income to expenses.
Share your research with the investment community and stand out as a thought-leader.
For more information on posting your research on our website, contact Ayana Reid at (212) 210-0774 or areid@investmentnews.com.
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Rabu, 26 Maret 2014
BlackRock's Fink urges CEOs to focus capital on long-term growth
BlackRock's Fink urges CEOs to focus capital on long-term growth
BlackRock's Laurence D. Fink Bloomberg News
BlackRock Inc.'s Laurence D. Fink, whose firm is the largest shareholder in companies from Apple Inc. to JPMorgan Chase & Co., is repeating his call to chief executive officers to engage with shareholders and be more transparent about balance-sheet decisions.
Following up on a January 2012 letter in which he urged 600 of BlackRock's largest holdings to adopt shareholder-friendly practices, Fink wrote last week to the heads of all companies in the Standard & Poor's 500 Index, asking them to focus on sustainable returns and not give in to short-term pressures.
“I write today reiterating our call for engagement with a particular focus on companies' strategies to drive longer-term growth,” the 61-year-old CEO and co-founder of New York-based BlackRock, wrote in the March 21 letter. “It concerns us that, in the wake of the financial crisis, many companies have shied away from investing in the future growth of their companies.”
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BlackRock is the world's largest money manager with $4.3 trillion in assets, and stands out for its approach, as traditional fund firms aren't usually as vocal about corporate practices at companies whose shares they hold. The firm has a 20-person corporate-governance team that seeks to protect investment assets and increase client returns. BlackRock owns stock through its active funds as well as index products via iShares, the world's largest provider of exchange-traded funds.
'BALANCED' STRATEGY
Mr. Fink's letter was motivated in part by the large amount of cash companies have on their balance sheets, Michelle Edkins, the firm's global head of the corporate governance group, said in a telephone interview from San Francisco. BlackRock wants to make sure that executives think carefully and then communicate to shareholders what they plan to do with their cash as the economy continues to recover, she said.
“We certainly believe that returning cash to shareholders should be part of a balanced capital strategy,” Mr. Fink said in the letter. “However, when done for the wrong reasons and at the expense of capital investment, it can jeopardize a company's ability to generate sustainable long-term returns.”
The letter followed conversations Mr. Fink, BlackRock mutual- fund managers and the corporate-governance group had with executives, according to Ms. Edkins.
Activist investing, in which shareholders take stakes and push for changes at companies they see as underperformers, affects a “tiny portion” of firms BlackRock is invested in and wasn't the trigger for the letter, she said. The firm owns shares in almost 4,000 companies in the U.S. and only about 50 of them are in dialog with activists, said Ms. Edkins.
“Our starting point is to support management, but that's incumbent on management saying to us and setting up very clearly what they plan on doing with the client money we entrust to them,” she said. “The 'Trust us, we know what we're doing' approach to management is very old-fashioned.”
(Bloomberg News)
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Small-cap watchers warn investors to moderate expectations
The rally might not last forever as interest rates rise
Pimco chases BlackRock in ETFs as money returns to bonds
Pimco is playing catch up to competitors in the growing market for ETFs
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PE giant Carlyle Group is eyeing the retail investor market and liquid alts
Breakfast with Benjamin: Private equity giant wants in on liquid alts. Plus: QE might have a fueled high-inflation cycle, the small-cap stock ride is ending, time to get some defense in that portfolio, and the poor outlook for the long-term unemployed
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Selasa, 25 Maret 2014
Small-cap watchers warn investors to moderate expectations
Small-cap stocks have been going gangbusters, but market analysts say it's time for those companies to start earning their keep.
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As liquid-alt mutual funds proliferate, some question their value
As liquid-alt mutual funds proliferate, some question their value
Mar 25, 2014 @ 10:40 am (Updated 2:52 pm) EST
When the news broke this month that $24 billion hedge fund firm Grosvenor Capital Management was breaking out of its otherwise secretive shell with plans to launch a registered alternative strategy mutual fund, it was generally interpreted as just the latest evidence of a continuing trend.
Grosvenor is simply following the likes of Arden Asset Management, The Blackstone Group, and K2 Advisors by migrating downstream toward an expanding and increasingly curious investor base, which includes financial advisers.
Five years ago, such a move by a hedge fund shop like Grosvenor might have triggered several enthusiastic hours or even days of financial news analysis.
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Fifteen years ago, a move by such an off-limits hedge fund shop was virtually unheard of because it would represent a violation of that invisible but well-understood wall separating hedge fund investors from the great unwashed, otherwise known as mutual fund investors.
But, even though it would be easy to argue for portfolio diversification through the use of alternative strategies, there is scant evidence that the flood of liquid alternative products now pouring into the mutual fund market is doing much more than confusing investors and frustrating financial advisers.
“It's a generalization, because there are some decent portfolio managers out there, but I don't believe the mutual fund space is jam-packed with rock star hedge fund managers,” said John Shearman, chief executive of financial advisory firm IV Lyons.
Mr. Shearman is not anti-alternatives. In fact, he allocates between 20% and 30% of his clients' assets to alternative strategies.
But, as a former hedge fund consultant, he is savvy enough to recognize what is being created in the alternative-strategy mutual funds space.
“We know that accessing the best managers is difficult even if you're representing a multi-billion-dollar Harvard endowment,” Mr. Shearman added. “You have to ask why anyone would manage a mutual fund if they could be managing a hedge fund.”
Part of the answer to that question boils down to simple economics. As alternative strategies become more liquid, hedge funds are having a harder time charging the industry standard 2% on assets and then taking a 20% performance fee.
The mutual fund industry, meanwhile, has been carving out its own piece of the action.
By the latest count, according to Morningstar Inc., there are now 429 distinct alternative-strategy mutual funds, representing nearly $145 billion.
That includes 70 new funds and more than $40 billion added just last year.
As recently as 10 years ago, there were only 116 alternative-strategy mutual funds, representing less than $22 billion.
“The good news for investors who believe in using alternative investing tools is that they are now more readily available, because the strategies are no longer reserved for the Yale endowments and pension funds of the world,” said John Nersesian, chairman of the Investment Management Consultants Association.
“The bad news is, more does not always equal better,” he added. “With so many more products now available, the investor and the adviser need to be that much more discerning.”
Earlier this month IMCA partnered with the Chartered Alternative Investment Analyst Association to launch the fundamentals-of-alternative-investments certificate program to help better equip advisers to use alternative strategies.
As the hedge fund industry and traditional mutual fund industry continue to crank out products designed to attract the growing appetite for alternatives, financial advisers will need all the help they can get.
“Right now across the liquid alts space the offerings have been so inferior,” said Dan Thibeault, president and chief executive of GL Capital Partners, a firm that manages both a hedge fund and two alternative-strategy mutual funds.
The regulations governing mutual fund trading and operations will restrict most alternative strategies from perfectly replicating a pure limited-partnership or hedge fund strategy, but that's not even the biggest concern, according to Mr. Thibeault.
He cites the common gripe of higher fees, which average 1.87% across the liquid-alternative market, or about 65 basis points above that of the average actively-managed mutual fund.
On top of that, most liquid-alt funds charge some type of sales load.
The fees obviously contribute to a performance lag that can't always be explained away by correlation principles.
In theory, a strategy designed to hedge the risk of the broader equity market would underperform the S&P 500 Index during a bullish run like last year's, when the index gained more than 30%.
But since the market has been charging almost straight up for most of the past five years, the majority of alternative strategies that were launched in the past few years have yet to be fully tested.
“We start with the notion that if you're going into an alternative you have to have a high degree of potential to get non-correlated returns,” Mr. Thibeault said. “But we looked at the universe and found that only nine funds out of more than 400 have negative beta over the past five years.”
Further, Mr. Thibeault found that the average beta of the liquid-alt-fund universe is 1.06, and that 75% of the funds have a beta of more than 0.7, both of which imply a lot more market correlation than most alternative investors probably want.
“The first condition you should satisfy is lack or market correlation, and once you get that you hope you could at least get risk-adjusted returns or alpha above market returns,” he said. “If you just start with that notion, I'd say the liquid-alt sector in general fails miserably.”
Jeff Benjamin covers investment strategies in his award-winning column, Investment Insights, and also dives deep into the minds of leading portfolio managers in his regular column, Portfolio Manager Perspectives.
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Could hedge fund net inflows triple this year?
Investors may almost triple the amount of capital they put into hedge funds this year, an annual survey by Deutsche Bank AG showed.
Regulators train a close eye on alternatives
SEC and Finra pledge increased attention to alts and complex products
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How much gold should be in your clients' portfolios?
How much gold should be in your clients' portfolios?
Study says gold should make up as much as 10% of a well-diversified portfolio
Mar 25, 2014 @ 10:51 am (Updated 2:09 pm) EST
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PIMCO chases BlackRock in ETFs as money returns to bonds
PIMCO chases BlackRock in ETFs as money returns to bonds
PIMCO is playing catch up to competitors in the growing market for ETFs
Bloomberg News
Pacific Investment Management Co., the envy of the bond world when it tripled assets following the financial crisis, is finding itself in an unusual role: Playing catch up to competitors in the growing market for exchange- traded funds.
As ETFs receive an increasing share of money going into bond funds, Pimco is adding strategies, with 19 new funds announced in January. Cushioned until a year ago by deposits into mutual funds such as Bill Gross’s Pimco Total Return, the world’s largest bond fund, the firm didn’t enter the ETF market until 2009 and has stayed away from broad passive funds, which are dominated by established ETF providers such as BlackRock Inc.
The push allowed Pimco’s 20 fixed-income ETFs to take in $1 billion in ETF deposits this year through March 21, according to data compiled by Bloomberg. BlackRock received $2.3 billion from clients, and Vanguard Group Inc. got $2.5 billion. Pimco trailed in part because it didn’t offer some of the most popular targets for investors this year, such as short-term investment-grade company debt.
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“Most investors are drawn to plain vanilla, super-low-cost fixed-income products,” said David Nadig, director of research at San Francisco–based ETF.com. “Pimco is not playing that game, and to me, it’s a miracle they are getting any flows.”
BOND DEPOSITS
Bond ETFs gathered a net $10 billion this year through last week, according to data compiled by Bloomberg. Fixed-income mutual funds have recovered from redemptions last year to take in $14.9 billion in 2014 through March 12, according to the Investment Company institute.
The long-term trend shows ETFs, which typically track a basket of securities and trade throughout the day like stocks, grabbing a bigger proportion of bond fund deposits. Fixed-income ETFs took in a net $9.7 billion in 2013, even as bond mutual funds lost $83.4 billion to redemptions.
Catching a larger share of these deposits would help Pimco, based in Newport Beach, Calif., as it’s fighting redemptions from the $236 billion Pimco Total Return Fund, amid underperformance in the past year and a shakeup of the firm’s management.
Clients pulled $1.6 billion from the fund in February, leading the way as the company’s mutual funds lost $2.49 billion to redemptions in the month, Morningstar Inc. estimated. Pimco was the only U.S. mutual-fund provider among the industry’s top 10 with net withdrawals in the month, Morningstar’s data show.
The Total Return Fund, run by Mr. Gross trailed 88% of similarly managed funds in the past 12 months, according to data compiled by Bloomberg.
That performance hurt the Pimco Total Return ETF, a variation of the mutual fund. It lost $159 million to withdrawals this year.
Pimco has pursued a strategy of offering either ETF versions of its active bond mutual funds, or narrowly focused passive funds, rather than broad index products. The firm in January asked the Securities and Exchange Commission for permission to open 19 actively managed ETFs. Those would include ETF versions of mutual funds such as Pimco Income, Pimco Unconstrained Bond and Pimco Municipal Bond, according to a regulatory filing.
DELIBERATE APPROACH
“We have applied a deliberate approach to the ETF market, focusing on active management and the unique value that Pimco can bring to ETFs through our investment process,” Natalie Zahradnik, an ETF strategist at the firm, said in an e-mailed statement.
Pimco is also making more from every dollar put into its bond ETFs than its rivals. The firm charges an average expense ratio on its ETFs of 0.36%, and 0.51% for its actively-managed products, according to data compiled by Bloomberg. BlackRock charges an average 0.26% and Vanguard 0.13%.
Eight of Pimco’s existing ETFs are actively run. Funds that track an index account for more than 99% of U.S. ETF assets.
Pimco, which oversees about $1.9 trillion in total, is still only a fraction of the size of more established managers in ETFs. Its bond ETF lineup in the U.S. holds a combined $14.4 billion, according to data compiled by Bloomberg. BlackRock’s iShares unit runs 66 fixed-income products in the U.S. holding $135 billion. Vanguard manages $52 billion in 15 U.S. bond ETFs.
“Pimco came in a bit late and they are considerably smaller,” Todd Rosenbluth, director of mutual-fund and ETF research at S&P Capital IQ in New York. “If they’re shifting within fixed income, investors are more inclined to go with BlackRock or Vanguard.”
This year, ETFs that can protect investors from interest- rate jumps have proved popular. Short-maturity funds captured $4.5 billion, or 66 percent of all deposits to ETFs targeting a specific maturity band.
Pimco’s $4.6 billion 0-5 Year High Yield Corporate Bond Index ETF is its only fund among the industry’s top 10 fixed- income gatherers in 2014. BlackRock, the biggest ETF provider, has five of the top 10, led by its iShares 1-3 Year Credit Bond ETF.
Pimco could have done better with additional short-term funds, or from an earlier introduction of its Low Duration ETF, Mr. Rosenbluth said. That fund, which opened in January, has about $23 million in assets.
“Had it launched a year ago before rates moved higher, it’s a product that would have been positioned to gather assets,” Mr. Rosenbluth said.
(Bloomberg News)
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Record small-cap rally sends valuation 26% above 1990s
In one corner of the U.S. equity market, investor enthusiasm is exceeding the frenzy of the Internet bubble.
Wall Street ties to Putin threatened as sanctions ratchet higher
Wall Street leaders including Lloyd Blankfein and James Gorman are facing a dilemma as tensions over Ukraine escalate.
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Mar 25 10:17AM
FSI opposes Finra proposal for automated account information collection http://t.co/BUfvAcUUI3
Mar 25 10:16AM
Chart on tax benefits for #401k plans. Access to plan in first place is key, tho. #401ksummit http://t.co/PFwPoVD7kM
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