Sabtu, 30 Agustus 2014

An accounting is due on wrap accounts

An accounting is due on wrap accounts

SEC is following through on its promise to investigate use of these products, and advisers should take heed.

Aug 31, 2014 @ 12:01 am

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(Roger Schillerstrom)

Wrap accounts, through which a portfolio of investments is managed for a bundled fee rather than individual trading commissions and other costs, aren't exactly new. They've been around for a few decades. But make no mistake, the Securities and Exchange Commission is examining these products — and advisers' use of them — with fresh eyes.

In fact, the industry regulator included wrap fee programs in its 2014 exam priorities under the category “New and Emerging Issues and Initiatives.”

That document, released in January, laid out the SEC's intention this year to take a closer look at advisers' recommendations of these products and whether they meet “fiduciary and contractual obligations to clients.” Notably, the document also mentions “related conflicts of interest.”

While an impetus for creating these products was to diminish the churning of accounts to boost trading commissions, in fact the opposite can be true. If holdings for a client are simple and activity is minimal, the additional cost for managed accounts — up to a few hundred basis points per year — cannot be justified.

The SEC is following through on its promise to investigate use of these products, and advisers should take heed. In Mark Schoeff Jr.'s Aug. 14 story, “SEC cracks down on wrap accounts,” Patrick J. Burns, an attorney who specializes in investment advisory compliance, warned in relation to these accounts, “It's definitely going to hit firms by surprise that that level of focus is being placed on just one issue.”

But should it be so surprising? The amount of assets in these accounts has grown phenomenally — reason enough to catch a regulator's eye. According to Cerulli Associates Inc., total managed-account assets hit $3.46 trillion in 2013, a 25% increase over their 2012 level of $2.76 trillion.

And the SEC has shown it means business. The latest instance was on Aug. 13, when it won a case against Benjamin Lee Grant, an investment adviser who faced charges that included improperly placing his clients' assets in wrap programs. Damages in the case are yet to be announced.

CLIENTS FIRST

“This case sends an important message to investment advisers that they must put the needs of their clients before their own,” Andrew Ceresney, director of the SEC's Division of Enforcement, said in a statement.

When advisers face the SEC at exam time, those who universally place clients in wrap accounts — regardless of suitability to individual circumstances — will find themselves on the hot seat. They will be given an “information request list” with 21 questions about use of the products, including account activity, transaction fees, best execution and client disclosures.

If you include wrap accounts among the products offered to clients, you'd better be sure you have the right answers at the ready.

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Closed nonlisted REITs still suffering financial crisis hangover

Closed nonlisted REITs still suffering financial crisis hangover

A review of second-quarter performances of nonlisted REITs

Aug 31, 2014 @ 12:01 am

By Michael Stubben

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(iStock)

While certain recently closed nonlisted REITs, such as Industrial Income, Griffin-American Healthcare REIT II, Cole Credit Property Trust IV and Corporate Property Associates 17 Global have shown strong operating performance throughout their history, the majority of closed nonlisted REITs have seen significant negative impacts to their real estate operations.

Both the commercial real estate capital markets pricing bubble (2006-08) and the commercial real estate property market recessionary phase (2008-10) have led to a widespread and significant decrease in distributions and valuations among closed nonlisted REITs.

Non-listed REITs that took on short-term debt risk, overleveraged, or invested in high risk alternative assets suffered more severe declines and losses. As a result of the market adjustments, the reported market values of their assets have declined, and these closed nonlisted REITs have experienced declines in occupancies and rents.

While some REITs will see further improvements in 2014, many REITs will continue to face distribution and valuation issues due to operational challenges and debt maturities. In 2013 & 2014, several closed non-listed REITs listed on the stock exchange or were sold to publicly traded REITs, including Inland Diversified, Cole Credit Property Trust II, Cole Credit Property Trust III, and Columbia Property Trust, formerly known as Wells REIT II.

Open nonlisted REITs enjoy 9% gain in fundraising

The top 20 nonlisted REITs raised $4.4 billion in the second quarter, which represented over 95% of all nonlisted-REIT fundraising.

Fundraising in the second quarter increased 9% from the first quarter, largely due to the close of ARC Global Trust, ARC Healthcare Trust II, and Carter Validus Mission Critical REIT, each of which acquired over $500 million.

Net lease REITs continue to dominate fundraising in the non-listed REIT space led by programs such as ARC Global Trust, Carter Validus Mission Critical REIT, Corporate Property Associates 18 Global, and Griffin Capital Essential Asset REIT, which are four of the top five fundraisers.

Funds from operation payout ratio is an important non-listed REIT performance metric established by the National Association of Real Esate Investment Trusts that serves as an industry-standard for publicly listed REITs. While FFO is an accrual metric that includes some non-cash components such as straight-line rent, FFO payout ratio provides important insights into distribution sustainability. Nonlisted REITs should have a FFO payout ratio below 100%, as they deploy their equity capital and build up their portfolios.

Michael Stubben is the president of MTS Research Advisors.

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Nonlisted REITs ranked by 2Q invested assets

Nonlisted REITs ranked by 2Q invested assets

Aug 31, 2014 @ 12:01 am

Closed REITs

Company 2Q invested assets ($M) Original share price Current share value1 Original distribution rate Current distribution rate 2Q14 FFO 2 payout ratio
Inland American Real Estate Trust $10,128.5 $10 $6.94 6.20% 5.00% 75%
Corporate Property Associates 17 Global $4,564.7 $10 $9.50 6.50% 6.50% 81%
Apple Hospitality $3,960.0 $11 $10.10 8.00% 7.25% 83%
Industrial Income Trust $3,747.6 $10 $10.40 6.00% 6.00% 100%
Tier REIT $3,455.8 $10 $4.20 7.00% 0.00% N/A
CNL Lifestyle Properties $3,343.4 $10 $6.85 6.25% 4.25% 108%
Griffin-American Healthcare REIT II $3,056.2 $10 $10.22 6.50% 6.65% 143%
Monogram Residential Trust $2,879.1 $10 $10.03 7.00% 3.50% 189%
Cole Credit Property Trust IV $2,833.0 $10 $10.00 6.25% 6.25% 145%
KBS Real Estate Investment Trust II $2,714.1 $10 $10.29 6.50% 6.50% 98%
Cole Corporate Income Trust $2,606.3 $10 $10.00 6.50% 6.50% 94%
Hines Real Estate Investment Trust $2,422.1 $10 $6.40 6.00% 2.90% 88%
American Realty Capital Trust V $2,233.5 $25 $25.00 6.60% 6.60% 86%
KBS Real Estate Investment Trust $2,058.0 $10 $4.45 7.00% 0.00% N/A
Landmark Apartment Trust $1,889.4 $10 $8.15 6.00% 3.00% 38%
Phillips Edison - ARC Shopping Center $1,846.9 $10 $10.00 6.50% 6.70% 129%
Steadfast Income REIT $1,592.7 $10 $10.24 7.00% 7.00% 165%
Strategic Storage Trust $731.5 $10 $10.79 7.00% 6.50% 120%
Signature Office $676.4 $25 $25.00 6.00% 6.00% 83%
Lightstone Value Plus REIT $643.2 $10 $11.80 7.00% 7.00% 69%

1 As of June 30 2 Funds from operations is based on NAREIT-defined funds from operations. N/A = not available. Source: MTS Research Advisors

Open REITs

Company 2Q equity raised ($M) 2Q invested assets ($M) Original share price 2Q portfolio cap rate Current distribution rate 2Q14 FFO payout ratio *
ARC Global Trust $1,036.5 $809.1 $10 7.94% 7.10% 241%
ARC Healthcare Trust II $722.2 $185.8 $25 7.61% 6.80% 1826%
Carter Validus Mission Critical REIT $670.9 $1,431.7 $10 7.83% 7.00% 188%
Corporate Property Associates 18 Global $398.7 $633.3 $10 7.42% 6.25% 374%
Griffin Capital Essential Asset REIT $297.0 $1,759.9 $10 7.55% 6.75% 132%
ARC - Retail Centers of America $177.4 $200.7 $10 7.36% 6.40% 281%
Phillips Edison - ARC Grocery Center REIT II $138.3 $28.7 $25 7.03% 6.50% N/A
NorthStar Healthcare Income $134.2 $274.9 $10 6.82% 6.75% 659%
Carey Watermark Investors $101.6 $1,316.1 $10 N/A 5.50% 74%
KBS REIT III $97.4 $1,485.1 $10 6.92% 6.26% 84%
CNL Healthcare Properties $91.6 $1,272.5 $10 7.06% 4.00% 79%
ARC Realty Finance $73.9 $156.1 $25 N/A 8.25% 118%
Cole Office & Industrial REIT (CCIT II) $68.6 $214.9 $10 6.78% 6.30% 125%
ARC New York City REIT $63.1 $7.3 $25 6.65% 6.00% N/A
Apple REIT Ten $56.7 $958.5 $11 9.86% 7.50% 78%
Hines Global REIT $54.8 $4,385.1 $10 7.20% 6.25% 87%
Inland Real Estate Income Trust $50.4 $237.6 $10 6.91% 6.00% 108%
Industrial Property Trust $47.0 $65.6 $10 5.30% 4.50% 100%
NorthStar Real Estate Income II $44.5 $158.0 $10 N/A 7.00% 491%
Jones Lang LaSalle Income Property Trust $26.1 $944.1 $10 N/A 4.26% 57%

*Funds from operations are based on NAREIT-defined funds from operations and adjusted for acquisition costs and expenses. N/A = not available. Source: MTS Research Advisors



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Jumat, 29 Agustus 2014

3... 2... 1... We have lift off

Recipes for Outer Space is a new Collection on IFTTT that is out of this world!

A collection that's out of this world!

Follow Astronauts as they enter and leave space, the International Space Station as it orbits overhead, and the extreme seasonal changes on Mars.

:)

—The IFTTT Team
 

P.S. An exciting company announcement.

This newsletter was automatically sent to bocahmalo3@gmail.com because you signed up for IFTTT with that address. To disable this communication, you can manage your email settings or unsubscribe from the IFTTT Newsletter.
 

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Vanguard urges caution on liquid alts

Fund company says performance has not been living up to the billing.

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Ignore the bond bubble at your own risk

Breakfast wtih Benjamin: The case for reducing fixed income exposure gets more vivid, markets react to Pres. Obama's 'no strategy' remarks regarding ISIS, another perspective on income inequality, and more.

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Kamis, 28 Agustus 2014

Smart beta, by any other name, is still smart

Plus: The performance-killing fees of active management, another type of corporate inversion, consumer confidence scraps the bottom, and look before you leap into the next good-will festival

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Rabu, 27 Agustus 2014

Schorsch REIT board member recommends 30% alts exposure for retirees

Bob Froehlich says the industry needs to catch up with the pressing demands of a yield-starved world.

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Warren Buffett's tax fairness doublespeak

In today's Breakfast with Benjamin, Warren Buffett's fails to put his money where his mouth is, Canada finds a sensible way to stop corporate inversions, the Fed pushes rate-hike rumors out to the end of next year, and more.

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The Fed should raise rates, but it won't

Breakfast with Benjamin: The Fed should raise rates but... Plus: Financial advisers turn to options investing; the French government calls it quits; the SEC goes after asset-backed bonds; another Obamacare surprise; and what is really the most important meal of the day

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Schorsch REIT board member recommends 30% alts exposure for retirees

Schorsch REIT board member recommends 30% alts exposure for retirees

Bob Froehlich says the industry needs to catch up with the pressing demands of a yield-starved world



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Selasa, 26 Agustus 2014

Warren Buffett's tax fairness doublespeak

In today's Breakfast with Benjamin, Warren Buffett's fails to put his money where his mouth is, Canada finds a sensible way to stop corporate inversions, the Fed pushes rate-hike rumors out to the end of next year, and more.

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Senin, 25 Agustus 2014

The Fed should raise rates, but it won't

The Fed should raise rates, but it won't

Plus, The French government calls it quits, the SEC goes after asset-backed bonds, another Obamacare surprise, financial advisers turn to options investing, corporate inversions go silent, and breakfast is not the most important meal of the day



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Minggu, 24 Agustus 2014

Greenback rallies ahead of the Fed minutes

Breakfast with Benjamin: The dollar rallies ahead of Fed news. Plus: Stocks historically love the Fed's Jackson Hole meeting; Argentina's latest gambit; insurance companies create new asset management opportunities; and regretting not buying Google at the IPO.

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Evaluating liquid alts? History offers some lessons

With so many funds out there, these four lessons are worth keeping in mind.

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Barclays rains on the equity market parade

Breakfast with Benjamin: Barclays warns on stocks. Plus: Gold finds some safe-haven love; how the Fed is off target; Argentina uses social media to attack creditors; Nasdaq's version of déjà vu; and what people buy when money is no object.

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Former Behringer Harvard apartment REIT seeking listing

For former fundraising powerhouse that fell on hard times after the real estate crash, a share listing could be “good event.”

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Liquid alts to get their own benchmarks



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Rabu, 20 Agustus 2014

U.S. Dollar rallies ahead of the Fed minutes

U.S. Dollar rallies ahead of the Fed minutes

Plus: Stocks historically love the Fed's Jackson Hole meeting, Argentina's latest gambit, insurance companies create new asset management opportunities, and regretting not buying Google at the IPO



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Selasa, 19 Agustus 2014

Evaluating liquid alts? History offers some lessons

Evaluating liquid alts? History offers some lessons

With so many funds out there, these four lessons are worth keeping in mind



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Barclays rains on the equity market parade

Investment Insights: The Blogblog

Jeff Benjamin breaks down the game for advisers and clients.

Barclays rains on the equity market parade

Plus: Gold finds some safe-haven love, how the Fed is off target, Argentina uses social media to attack creditors, Nasdaq's version of déjà vu, and what people buy when money is no object

Aug 19, 2014 @ 7:51 am

By Jeff Benjamin

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Senin, 18 Agustus 2014

Former Behringer Harvard apartment REIT seeking listing

For former fundraising powerhouse that fell on hard times after the real estate crash — burning handful of IBDs — a share listing could be “good event.”

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(no subject)

I have a project worth $5.2, if interested​, reply to
(patricia.ash55@hotmail.com)
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Sabtu, 16 Agustus 2014

Proliferation of ETFs both good and bad

Proliferation of ETFs both good and bad

Issue for advisers and investors is the ever-expanding universe of ETFs

Aug 17, 2014 @ 12:01 am

+ Zoom
(Roger Schillerstrom)

Just when one might have thought all the available niches for exchange-traded funds had been occupied, a couple new ones appear on the market. The most recent one tracks the stock holdings of 10 highly successful investors, such as Warren Buffett, David Einhorn and Carl Icahn. The Direxion

iBillionaire Index ETF identifies the holdings of these iconic investors by examining their quarterly 13F filings in which investors overseeing more than $100 million in U.S. equities must list their equity holdings. The filings are due no later than 45 days after the end of the quarter.

The ETF then invests in the 30 stocks the investors have the most combined money in, and it is re-balanced quarterly. The stocks are equally weighted in the portfolio.

The fund is similar in concept to the Global X Guru Index ETF, which looks through dozens of hedge fund portfolios to determine its holdings. The idea, of course, is to ride the coattails of investors who have been successful over many years.

REARVIEW INVESTING

The problem with both of these new ETFs is that, in effect, they are investing by looking in the rearview mirror. The funds buy the stocks held by the noted investors during the previous quarter. That might not be significant in the case of Mr. Buffett who is a buy-and-hold investor, but it could be significant in the case of activist investors, such as Mr. Icahn and hedge fund managers. By the time the ETFs re-balance their portfolios they could be buying stocks some of the gurus are dumping.

REDUCING DIVERSIFICATION

In addition, because the iBillionaire ETF focuses on large-cap holdings of the billionaires, its holdings might overlap other large-cap holdings of the clients, reducing diversification.

Another issue is that because of all the publicity surrounding Mr. Buffett, Mr. Icahn and the successful hedge fund managers, investors might have inflated ex-pectations of what returns they can expect from these ETFs.

No doubt inv-estment advisers who might use these ETFs for their clients, or who might recommend them, will be aware of these issues and will address them with the clients.

A bigger issue for advisers and investors is the ever-expanding universe of ETFs. There are now about 1,200 ETFs with about $1.2 trillion in assets, and there seem to be ETFs in almost every possible market sector.

There are broad market equity funds, index-tracking funds, large-cap, midcap and small-cap equity ETFs, broad international ETFs and country-specific funds. There are bond ETFs and commodity ETFs. There are leveraged and short ETFs. There are asset allocation ETFs and actively managed ETFs.

GOOD AND BAD

In one way, this plethora of ETFs is good for investors, particularly those who truly understand their risk tolerances and have rational return expectations.

They can find just the right vehicles, with the help of their advisers, to structure exactly the portfolios to meet their needs in the least expensive way. ETFs offer a means for investors to get diversification inexpensively while still keeping maximum liquidity.

On the other hand, academic research has shown that when investors are offered too many choices, they often over-diversify, taking a little bit of every item offered rather than selecting the few funds that best meet their needs.

With 1,200 ETFs it is difficult for investment advisers to weigh all the likely options for their clients. They must use all the research services available to whittle down the number of ETFs they might recommend to clients to a manageable number.

Also, advisers must educate their clients that while ETFs can be used for trading and market timing, both are difficult to do successfully over the long run.

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