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March Headlines
Industry Trends and Issues
Investment Planning
Integrated Planning
Managing Risk and Liability Exposure
International Trends
Business Owner Issues
Family Continuity & Governance
Strategic Philanthropy
Lifestyle Management
Technology Trends
Family Education
Industry Trends & Issues
Expanding the Shari’a Compliant Product Universe
Islamic financial markets are developing rapidly from perceived exotic niche to financial mainstream. However, supply side capacity constraints have meant that, until recently, few Shari’a-compliant investment products have facilitated access to alternative asset classes. Deutsche Bank has published an academic paper outlining in detail a structure designed to overcome this shortcoming. Its aim: to help broaden the market for such products while setting a benchmark for quality.
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Mapping Global Capital Markets
The stock of global financial markets soared during 2005, reaching $140 trillion, or more than three times global GDP, according to the McKinsey Global Institute’s third annual update on the performance of global capital markets. Other developments: the eurozone financial markets grew to $3.3 trillion; equities accounted for the largest share of growth in financial markets for the third consecutive year; and global cross–border capital flows reached a record $6 trillion. Interestingly, 80 percent of capital flows are still between the United States and Europe.
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Investment Planning
European Survey of ETFs
Exchange-traded funds continue to grow in popularity as an investment tool for both index management and the construction of benchmarks. Edhec Risk and Asset Management Research Centre presents the findings of its 2006 survey of ETFs and a discussion of the nature of the market for ETFs and their role in core/satellite investment. Overall, the survey points to a disconnect between strong awareness of ETFs among investors and asset managers as well as a common failure to exploit fully their potential as an asset allocation tool.
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Protecting Against Inflation with TIPS
Prolonged periods of low and stable inflation historically have collapsed into periods of rapid price inflation. So, should investors protect their portfolios from inflation – and if so, how? A white paper by JPMorgan Asset Management examines the role that can be played by TIPS, or bonds that offer long-term inflation protection by indexing the principal and coupon payment to inflation. It argues that TIPS provide low-volatility inflation protection to investors while fitting in well with the new pension regulatory framework.
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Academic Paper Finds for Active Management
Numerous academic studies have suggested that most actively managed funds fail to generate alpha on a consistent basis. A technical paper by Martin Cremers and Antti Petajisto of the Yale School of Management actually finds in their favour. It does so by defining active management in terms of "‘active share", or the share of portfolio holdings that differ from the portfolio’s benchmark. Funds with the highest active share are found to significantly outperform their benchmark indexes, while the most active stockpickers tend to generate alpha.
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Making Sense of Private Equity
Private equity does not lack for potential downsides, including long lock-up periods, zero liquidity, limited regulation and low transparency. So, why have wealthy investors been flocking to this asset class? A paper by Ashbridge examines the driving forces behind the boom in private equity, describes the evolution of the industry and suggests how investors can get started.
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Integrated Planning
Review of Legal Issues in Private Banking
Baker & McKenzie has produced a newsletter examining key legal issues in relation to the private banking industry worldwide. Topics include changes to Jersey’s trust laws; the new UK Charities Act 2006; and proposals relating to German tax reform
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Managing Risk and Liability Exposure
Risk and Structured Products
The Global Investment Returns Yearbook, produced by the London Business School in conjunction with ABN Amro, quantifies performance since 1900 of all major asset classes in 17 major markets in Europe, North America, Asia and Africa. A synopsis of the 2007 yearbook highlights the key findings. In particular, the authors find that structured products designed to protect investors against risk tend to harm performance disproportionately.
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International Trends
Focus on China and Asia Pacific
Deloitte has published a paper providing insights into wealth management in Asia. After examining high-level market dynamics, it suggests a number of keys to success: understanding customer perceptions and style, understanding regulatory developments, strength in product offerings and talent development and retention programs.
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It now appears that when China sneezes, world markets get a cold. Knowledge@Wharton asks two experts for their views on recent market volatility, which coincided with a sharp decline in China’s stock market index. The discussion focuses on links between developments in China and the global economy.
- Click here to read the article
Business Owner Issues
Entrepreneurship
Two related items explore the state pf entrepreneurship in the twenty first century:
- The Global Entrepreneurship Monitor assesses the characteristics of entrepreneurial activity in 42 countries.
Click here to read the general findings of the 2006 GEM report
Follow the directions at the attached link to view this report
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- What is entrepreneurship, and what do entrepreneurs do? An article by Rebecca Harding examines the key issues, with reference to GEM findings.
Click here to read the article
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Family Continuity & Governance
Guiding the Family Through a Liquidity Event
Nearly one in three family-owned businesses has experienced some form of liquidity event during the past 12 years, according to research by JPMorgan Private Bank’s Advice Lab. A sale, merger or IPO inevitably will transform the nature of wealth creation through a family firm, in the process potentially undermining a family’s sense of purpose and cohesion, as well as its capital. A paper by JPMorgan Private Bank explores the issues, posing and seeking to answer a number of strategic questions, both financial and in relation to the human element.
Strategic Philanthropy
Involving Advisors in Charitable Giving
Advisors can be slow to ask their clients if they can help with philanthropic planning. In a virtual forum created by The Philanthropic Initiative, published in the Journal of Gift Planning, a panel of senior advisers and gift planners discuss the best methods for starting a discussion of donors’ and clients’ philanthropic goals. Originally conducted online in 2004, this contains food for thought for all advisers today.
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Also from the Journal of Gift Planning, an article outlines recommendations from research on the same topic. After ten years of research, the author argues that there is convincing evidence that effective advisers know the importance of supporting their clients’ charitable giving, and have the skills and resources to do so.
- Click here to read the article
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Lifestyle Management
How to Buy Your Own Private Island
It’s the ultimate form of exclusive isolation – your very own tropical island paradise. FOXConnects rounds up some guidance.
- An article in CDNN describes the pros and cons of rental versus buying an island.
Click here to read the article
- Don’t fall in love with an island without considering the practical considerations.
Click here to read the article
- For those tempted to take the plunge, here is a sample of islands currently on the market.
Click here to read the article
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Technology Trends
Thoughts on I.T. Challenges
A white paper by IBM examines eight key challenges confronting information technology directors: managing the data explosion, finding intelligence in the data, enabling the new work styles, doing more with the same, keeping I.T. safe, acting rather than reacting, getting the details right and implementing service-oriented architecture.
- Click here to read the article
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Family Education
Mapping Family Relationships
Wealth advisors are supposed to take the family dynamic into account with their recommendations. In an article in Wealth Manager, a practitioner describes how he sat down with his elderly parents and captured their recollections and view of life. More than exercising a professional skill, he recommends it as an interesting and moving exercise for other advisors and clients.
- Click here to read the article
- For more information on the genogram, a tool enabling the user to map family relationships and dynamics, visit: http://en.wikipedia.org/wiki/Genogram
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