All articles by PBI Editorial
PBI Editorial
Running out of alternatives
After several years of fine-tuning asset allocations to accommodate both an equities boom and the rise of alternative investments, 2007 somewhat inevitably saw shifts in HNW investment strategies, with safer assets such as cash and fixed income securities the beneficiaries.Allocations to alternative investments dipped in 2007, accounting for nine percent of HNWI assets compared with 10 percent in 2006 The World Wealth Report noted that this reduction may have been limited by the fact that some hedge funds which accounted for 30 percent of alternative investments froze client withdrawals in the latter half of the year in reaction to market difficulties.Investors also retrenched geographically in 2007, with most favouring the safe havens of domestic markets For Latin America and the Middle East, typically heavy investors in North American markets, this has led to a scaling back of such interest by nine and five percentage points respectively.Globally, HNWI allocations to North America fell from 43 percent in 2006 to 42 percent in 2007, a trend that is expected to deepen
Competition heats up
Credit Suisse has just launched its wealth services as more large domestic rivals also enter the countrys projected $1 trillion wealth sector. Credit Suisse has officially unveiled its wealth management business in India, joining rivals like Citigroup, Morgan Stanley and Merrill Lynch in seeking out wealthy clients Credit Suisse (CS) is targeting individuals and family-owned businesses that have a net worth of at least $3 million, according to the banks India country head Mihir Doshi. CS, which already has investment banking and securities operations in India, plans to offer advisory services for domestic equity and debt staffed by as many as 40 wealth management staff by the end of 2008, he said.
Asia private banks triple business
Private banks in Asia have accumulated $600 billion in client assets under management between them, tripling their wealth business in the region over the last five years.The leading force remains UBS with an estimated $100 billion of client assets at the end of 2007, followed closely by Citigroup with $80 billion, according to an Asian private banking league table produced by Roman Scott, a regional wealth expert.But that $600 billion total, up from $200 billion five years earlier, underlines just how little classic Western private banking services have penetrated the high net worth markets in Asia
Crossing the pond
In a deal marking the first high-profile expansion of a US-registered investment advisory firm to Europe, Focus Financial Partners, the largest independent wealth management network in the country, is to buy a UK-based wealth adviser.The arrival in the UK of Focus Financial, with its finely marketed approach to fiduciary-based financial planning, marks a real turning point in the global registered investment advisory (RIA) market, and could open the door to a new wave of cross-border investment
UK hedge fund managers snapped up
With the addition of Marble Bar, EFGs total client assets relating to hedge funds will be in the region of CHF15 billion ($13.3 billion) or around 18 percent of total revenue-generating clients AuM.The latest transaction involves an initial consideration of $517 million in cash, with expected future payments in the region of $300 million to $800 million, subject to performance over six years
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Benchmarking the wealth players
The US banks are trying to raise their game but seem to be falling behind. The European advisory model of private banking, as opposed to structures in wide use in the US and elsewhere that depend on transaction-based securities brokerage, continues to significantly outstrip its cross-Atlantic peers, based on a range of key performance indicators. European players as a whole continue to enjoy superior gross and pre-tax margins Indeed, with their full-service fee-based model, the European players are pulling away from their US rivals. For example, pure play Swiss bank EFG International posted a gross margin on assets under management (AuM) of a class-beating 123 basis points in the first-half of 2007 (albeit with a slower performance in the third quarter as the subprime crisis unnerved investors).
Baer hits the acquisition trail
More buys in the offshore sector and staff hirings will be the order of the day.Swiss private bank Julius Baer has acquired Capital Invest (Monaco), a Monaco-based advisory firm, for an undisclosed sum, in line with its strategy to increase its presence in key private-banking markets worldwideCapital Invest offers management services and advice to rich clients and has more than CHF400 million ($340 million) in assets under management (AuM) The Swiss bank plans to rename the acquired business Julius Baer (Monaco), keeping keep the companys existing team to ensure continuity of service for its clients.Vontobel analyst Claudia Meier estimates the takeover price to be between CHF12 million and CHF20 million, noting that it filled in a blank spot on the map for Baer.This acquisition ideally complements our presence in Europe by enlarging our footprint, said Alex Widmer, chief executive of Baers private banking business
It’s 2002 all over again
Ominously, this marked the first fall after six years of uninterrupted growth.The number of high net worth individuals in the European Union declined by 0.83 percent in the fourth-quarter of 2007, marking the first quarterly decline since 2002 when investment markets were still being sideswiped by the great dotcom technology bust.Still, the number of wealthy people in Europe increased by 7.41 percent in 2007 as a whole to reach 2.76 million by January 2008, according to Market Dynamics Research & Consulting (MDRC), a UK-based wealthy consultancy.In a new report, Dimensions of European Wealth 2008, MDRC found that the sharp decline in asset values during the second half of 2007 put a brake on the growth in the number of rich individuals.Among individual countries, the UK remains the home for the largest number of rich, accounting for 20 percent of Europes wealthy
Creative chaos
Indias wealth management marketplace is in a state of chaos and that provides huge opportunities for players, from home and abroad, to win business in a rapidly evolving marketplace that could be worth $1 trillion by 2012. Private client assets under management (AuM) available to wealth managers in India will quadruple to some $1 trillion by 2012, according to new research that confirms the attractiveness of the Asian economy to the private banking business. Products, providers, distribution lines, client segmentation and the regulatory environment are all evolving simultaneously on the lines of developed economies. The resulting chaos is full of promising opportunities, declares US consultancy Celent, in a sweeping new analysis of the countrys personal wealth prospects.Currently, total AuM in organised Indian wealth management are estimated at $250 billion, and are growing at a rate reckoned to be 32 percent, Celent suggests.There is momentum towards more sophisticated customer segmentation, products and delivery channels, says Ravi Nawal, analyst at Celent and author of its new report.Personal wealth is being driven by Indias huge economic development
Wealth management head Krawcheck exits Citi
Krawcheck is understood to have been arguing for continued autonomy for Citi wealth operations, including retaining an open-architecture approach to client investments.The wealth unit, which has some $1.8 trillion of client assets under management globally, will now come under the control of Citis investment banking division as it attempts to more closely integrate various parts of the bank as well as cut costs.Significantly, Citis Smith Barney wealth arm is undertaking a number of structural changes now that Krawcheck is exiting