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November 20, 2009

News Digest

Barclays Wealth launches BETA Portfolios Barclays Wealth has launched a product that implements tactical asset allocation recommendations from the firms global investment strategy group to participating clients portfolios. The Barclays Wealth ETF Tactical Allocation (BETA) Portfolios are designed for clients who seek an asset allocation product that is actively rebalanced as market conditions fluctuate, but who want the advantages of implementation through passive, index-tracking ETFs.

By Verdict Staff

PRODUCTS and SERVICES

Barclays Wealth launches BETA Portfolios

Barclays Wealth has launched a product that implements tactical asset allocation recommendations from the firm’s global investment strategy group to participating clients’ portfolios.

The Barclays Wealth ETF Tactical Allocation (BETA) Portfolios are designed for clients who seek an asset allocation product that is actively rebalanced as market conditions fluctuate, but who want the advantages of implementation through passive, index-tracking ETFs.

Led by Barclays Wealth head of investment strategy Aaron Gurwitz, global investment strategy draws on senior research and strategy professionals from across the Barclays organisation to determine effective portfolio positioning in real-time, as markets and investment opportunities change.

“Our goal is to provide investors with the highest liquidity and the best market tracking available in the most cost-effective manner,” said David Romhilt, head of manager research and selection for Barclays Wealth in the Americas.

The BETA Portfolios’ combination of broad asset allocation with tactical adjustments and passive implementation means BETA may be well adapted to smaller portfolios such as those of clients’ trust beneficiaries, investors with larger portfolios who seek a core/satellite approach, or those who seek an automatic rebalancing of their asset allocation.

STRATEGY

Cantonal banks look overseas

Banque Cantonale de Geneve (BCGE) has opened a representative office in Hong Kong after receiving authorisation from the Hong Kong Monetary Authority. The office will cater to individuals, institutions and companies interested in investing in the Asian financial markets. Swiss Cantonal banks fared well during the financial crisis, benefiting from inflows because of the problems at UBS and, because they are retail banks, deposits with them were seen to have a state underwrite.

The first cantonal bank to expand outside of Switzerland was St Gallen Kantonalbank which set up a Munich branch in June.

The Banque Cantonale de Geneve Hong Kong office will provide offshore banking and financial services to private clients. The institutional clientele will be able to use the office as a conduit, linking to the firm’s financial centre in Switzerland.

REGULATION

FSA guidance on structured products

A Financial Services Authority (FSA) investigation into the sale of structured products in the UK found significant advice failings on the sale of structured products, particularly those backed by Lehman Brothers.

The review of marketing and distribution of the products also criticised the accuracy of marketing literature in most of the financial advice firms sampled.

The FSA, the UK’s financial regulator, was acting on behalf of investors who had bought Lehman-backed structured products and were affected by the failure of the investment bank. These included possible access to the Financial Services Compensation Scheme (FSCS) to investors in Lehman-backed products, and payment of redress by some advisers “where appropriate”.

Additionally, the FSA looked at the wider structured products market. It is writing to the largest sellers of the structures asking them to examine how they have sold them in the past compared to FSA standards.

“The focus of our review has been to achieve the best possible outcome for as many people as possible that invested in structured products backed by Lehman Brothers,” said Dan Waters, the FSA’s director of conduct risk.

“We are also taking decisive action to address issues in the wider structured products market to ensure that all future investors will be treated fairly.”

PRODUCTS and SERVICES

Pictet launches gold fund in Switzerland

Pictet has launched Pictet Precious Metals Fund – Physical Gold, a fund which tracks the price of gold by investing in standard gold bars of 12.5 kilos.

It offers investors the opportunity to own physical gold stored in high-security vaults belonging to the Geneva-based bank. Investors are able to redeem their units by physical delivery, available through sub-custodian banks located in Switzerland.

“During times of financial stress, gold is a safe haven,” said Philippe Pol, an investment manager at Pictet.

“Moreover, gold has consistently proven its ability to hedge against inflation and currency movements, and it can be used as an effective diversifier in portfolios. Physical gold’s fundamentals remain thus highly favourable. Investing through a reputable partner should therefore be very attractive to investors.”

TECHNOLOGY

IT identified as the tool to tackle key problems

The three key challenges for wealth managers are risk, compliance and cost effectiveness, according to research by technology provider Callataÿ & Wouters. The research found that 94 percent of wealth managers stated IT was ‘very important’ and ‘quite important’ in addressing these challenges.

Despite the recognized importance of IT among wealth managers, as many as 63 percent did not know whether their IT systems were based in-house or outsourced. While 81 percent of wealth managers thought that their cost effectiveness was ‘good’ or ‘excellent’, only 35 percent rated their company’s use of outsourcing equally highly. In fact only 35 percent of respondents outsourced any IT at all, with the most commonly outsourced part being the back office at 22.4 percent.

“As wealth managers look to tackle cost, risk and compliance, a better awareness of the benefits of outsourcing is a must,” said Marc De Groote, CEO, Callataÿ & Wouters. “For example, it allows wealth managers to benefit from best in class technologies which provide the flexibility and scalability required to meet customer demands. Furthermore, by enabling shared ownership, it also reduces operational risk and costs.”

REGULATION

Foot review welcomed by Channel Islands

A report setting out a series of standards for tax compliance in the UK’s crown dependencies has been welcomed by the main jurisdictions.

The independent review, conducted by Sir Michael Foot, a former Bank of England official, stated the future sustainability of the jurisdictions depended on them meeting international standards on tax information exchange, financial regulation, anti-money laundering and countering the financing of terrorism.

The crown dependencies – Jersey, Guernsey and the Isle of Man – welcomed the report. Foot recommended “international pressure must also be maintained on competitor jurisdictions to raise standards”.

The jurisdictions are reviewing their tax regimes, and there is speculation the so-called zero-10 corporate tax systems they operate could be abolished (see PBI 253). Isle of Man director of finance John Spellman said no immediate changes were planned.

“As a responsible jurisdiction we continually review international developments on business tax and are committed to remain competitive and maintain international standards,” he said.

“No immediate change is planned in the Isle of Man but consultation with business is ongoing in light of these international developments.”

PORTFOLIO MANAGEMENT

Wealthy families seek transparency

The world’s wealthiest families have significantly changed their investment preferences in the past year, with a shift in interest towards safer and more transparent asset classes.

Research by the recently-launched Family Office Channel, a non-profit online information resource, showed 67.4 percent of families were more likely to invest in gold and other commodities after the financial crisis.

Bonds were also more popular, with 59.3 percent saying families were more interested in them after the financial crisis. Hedge funds suffered the biggest decline in sentiment, with two thirds saying the likelihood of families investing in them had either reduced, or greatly reduced. The funds have become unpopular because of a lack of liquidity in some cases, a lack of transparency and poor performance.

“Qualitative evidence suggested many believe failings are systemic and fear more failures and frauds,” said a spokeswoman.

The research was based on the responses of 100 employees at family offices, private banks, wealth managers and advisers and was conducted in October.

The Family Office Channel is supported by 100 international partners from firms including Butterfield, KPMG, Lombard Odier, New Philanthropy Capital and Withers Worldwide.

PEOPLE

Wilmington hires new MD

Wilmington Trust Corporation has hired Linda Bourn, formerly a multifamily office executive at OmniVest Group, as a managing director for its family-office focused Wealth Advisory Services business. Bourne will be based in New York but will work with Wilmington Trust’s clients throughout the US.

“In the family office services profession, there are few advisers with Linda’s leadership experience and industry stature,” said Mark Graham, head of Wilmington Trust’s wealth advisory services. “We are delighted to have her at Wilmington Trust. I know she will be a valuable asset to our clients.”

Commenting on her appointment, Linda Bourne said: “I am excited to join Wilmington Trust, a firm that was founded more than 100 years ago to serve the needs of high-net-worth individuals and families. With such an esteemed legacy and some of the most respected professional staff in the wealth management industry, I couldn’t be joining a better team.”

REGULATION

UBS fined £8m for rogue trades

The Financial Services Authority (FSA) has fined UBS £8 million ($13.3 million) for failing to curb unauthorised transactions involving customer money on at least 39 different accounts.

An in-house investigation disclosed that the firm’s employees had been making as many as 50 unauthorised transactions a day, trading in foreign exchange and precious metals, using client money and allocating losses to their accounts. The FSA said UBS had failed to manage and control key risks, implement effective remedial measures and provide an appropriate level of supervision.

One employee, Andrew Cumming, was fined £35,000 for helping document false loans to conceal losses arising from unauthorised trading. In addition, UBS has paid-out in excess of $42 million compensation to cover its clients’ losses.

Margaret Cole, FSA director of enforcement and financial crime, said it was one of the largest fines the FSA had levied.

“These employees were able to take advantage of UBS’ inadequate systems and controls, giving them free rein to make unauthorised trades with customer money that they were then able to conceal,” she said.

The unauthorised activity, which took place between January 2006 and December 2007, was brought to light by an internal source.

TECHNOLOGY

Mercer offers wealth research service

Mercer, a consultancy for institutional investors, has launched a wealth management service offering guidance on governance, investment strategy, implementation, portfolio construction and manager research.

Wealth management firms will be able to supplement their own internal research with Mercer’s and tap into the firm’s analytical resources.

“As a global investment advisory firm, Mercer is well positioned to understand and advise on the challenges wealth management firms face in building competitive and lasting investment solutions for the increasing demands of their clients,” said Michael Curtin, head of Mercer’s European wealth division.

“We see a major opportunity to benefit clients through bringing ‘institutional-quality’ research and consulting to the retail world.”

Traditionally Mercer’s client base consisted of large institutional investors, but in recent years the firm has received a lot of interest from financial firms seeking business advice.

STRATEGY

BOC and Rothschild to strengthen co-operation

The Compagnie Financière Edmond de Rothschild Banque and Bank of China are to strengthen their working relationship. They will collaborate on fund selection and management, in product conception and commercialisation and private banking services.

The announcement comes after Bank of China was told by its domestic regulator in April that it was not allowed to acquire a 20 percent stake it had been trying to buy in Rothschild, possibly because it was considered too expensive. It had offered €236 million ($350 million) for the stake in October 2008, at the peak of the financial crisis.

MERGERS AND AQUISITIONS

Deutsche Bank and Sal Oppenheim sign framework agreement

Deutsche Bank has bought struggling German private bank Sal Oppenheim Group for €1 billion ($1.5 billion).

Deutsche Bank will maintain Sal Oppenheim’s asset and wealth management activities, as well as its brand to strengthen its position among high-net-worth private clients in the country.

As of 30 June 2009, Sal Oppenheim Group had around €135 billion in client assets under management and employed approximately 4,400 staff. Deutsche Bank’s Private Wealth Management unit at the end of June 2009 managed invested assets of roughly €171 billion.

The purchase of Sal’s Luxembourg-based holding company, all activities of the German subsidiary and Sal Oppenheim Private Equity Partners (SOPEP), means Deutsche Bank will have a dominant position in the German market and is likely to become the fifth-largest wealth manager globally.

TECHNOLOGY

Abu Dhabi Bank selects software provider Advent

Abu Dhabi Islamic Bank, one of the largest in the Middle East, has selected Advent Software, a software service provider for the global investment management industry, to supply the firm with the technology to support its new global wealth management division.

Advent Portfolio Exchange (APX) management system will enable Abu Dhabi Islamic Bank to expand their services in order to meet a wider range of their clients’ financial goals and objectives.

“A key component of Abu Dhabi Islamic Bank’s objectives is to use state-of-the-art technology to develop and deliver our banking products and services,” said Malik Sarwar, executive vice-president of global wealth management, Abu Dhabi Islamic Bank.

“APX gives us the capabilities we require to meet the wealth management industry’s best practice requirements, as well as the scalability to grow the business in line with our vision of being a top-tier Islamic financial services group.”

STRATEGY

QNB launches outfit in Switzerland

Qatar National Bank (QNB) has launched a new Swiss private banking subsidiary called QNB Banque Privée, based in Geneva. The unit is an extension of QNB Group’s existing private banking services in Europe, where it has branches in London and Paris.

Swiss financial regulator FINMA made QNB Group one of a handful of GCC financial institutions to establish operations in Switzerland.

Led by a team of senior bankers QNB Banque Privée will offer services to QNB’s longstanding Qatari customers looking to expand their investments internationally, as well as cater to the needs of high-net-worth individuals throughout Europe.

QNB Banque Privée will work closely with QNB Private, the private banking arm of the QNB Group in Qatar, in order to offer clients international expertise and a local banking relationship.

PRODUCTS and SERVICES

Coutts & Co launches charitable account

Coutts & Co has launched the Coutts Charitable Giving Account, allowing clients to more easily track donations in monthly statements and claim back tax relief.

A bank spokesman said it operates in the same way as a regular Coutts bank account, except transactions can only be made to charitable causes. Mark Evans, head of philanthropy at Coutts, said every major financial institution would be offering some kind of charitable giving account “in the not too distant future”.

“Instead of trawling their bank and credit card statements at the end of each tax year, Coutts clients will be able to see how much they have given at a glance, creating a bigger incentive to reclaim the difference between the higher and basic rates of tax. And what’s more there are no administration fees,” Evans said.

Clients receive a cheque book and cash card and are able to make their donations by telephone or online.

“The Coutts Charitable Giving Account is a valuable new tool from which I’m sure charities will benefit,” said Martin Brookes, chief executive at consultancy New Philanthropy Capital.

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