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October Headlines
Special Topic: Emerging Economies
Industry Trends and Issues
Investment Planning
Managing Risk and Liability Exposure
International Trends
Business Owner Issues
Family Continuity & Governance
Strategic Philanthropy
Lifestyle Management
Technology Trends
Family Education
Special Topic
Emerging Economies
US FoxConnects rounds up some contributions showing how emerging economies are reshaping the global economy, along with views on the case for business and equity investment.
India and China both have massive populations, but their economic structures, sources of growth and areas of competitive advantage are quite different. A paper by Deloitte offers thoughts on the future direction of India and China, the risks and opportunities of doing business in each country, and the likely impact they will have on the global economy.
- Click here to read "China and India: The Reality Beyond the Hype"
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A paper by PwC estimates GDP growth rates to 2050 for a number of emerging countries. It finds that "E7" economies (China, India, Brazil , Russia, Indonesia, Mexico and Turkey) will be around 25% larger by 2050 than the current G7 at market exchange rates. The paper also contains thoughts on opportunities and challenges confronting the OECD.
- Click here to read "How Big Will the Major Emerging Market Economies Get and How Can the OECD Compete?"
[Note: may require (quick and free) registration].
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A report produced by KPMG International draws on interviews conducted by the Economist Intelligence Unit with executives to reveal how they believe Latin America compares with other emerging markets. It also sheds light on some of the business strategies that are succeeding in what remains a testing region for investors.
- Click here to read "The new reality"
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Despite an improvement in openness and macro-economic stability over the past decade, reforms have not helped Latin America fulfil its potential. A working paper by the IMF asks why, and examines the prospects for future reform and growth in the region.
- Click here to read "Growth and Reforms in Latin America: A Survey of Facts and Arguments"
With many emerging economies in a state of transition, characterised by financial reform, increasing transparency and reasonable asset valuations, Ashbridge Investment Management argues the case for making opportunistic growth-oriented investments. It cautions against a permanent allocation to emerging equity markets, however, and recommends highly liquid and diversified positions.
- Click here to read "Emerging Markets: Policy, Tactics and Manager Selection at Ashbridge"
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Industry Trends and Issues
Venture Capital Continues To Go Global
A global survey on venture capital, sponsored by Deloitte Touche Tohmatsu, offers insights into the attitudes and intentions of venture capitalists around the world. It paints a picture of an industry in robust health, characterised by increased cross-border cooperation and investment. Over half of all respondents stated they were intent on global expansion in the coming year - although among European respondents, the overwhelming interest was to invest in Continental Europe.
- Click here to read "Global Trends in Venture Capital 2006 Survey"
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Investment Planning
Investing to Mitigate Climate Change
Investors are becoming increasingly aware of their responsibilities to the environment. The Institutional Investors Group on Climate Change recently published a statement of intent describing its view on how investors can respond to climate change. A reported 15 institutional investors, managing assets worth £850 billion, have so far signed the statement.
- Click here to read "Investor Statement on Climate Change"
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A paper by New Energy Finance examines trends and issues in the financing of renewable energy and low-carbon technology. It describes how all financial asset classes are seeing rapid growth in this area, particularly IPOs / Secondary Offerings, venture capital, private equity and project finance. Also details ten areas for action to ensure investment continues to grow.
- Click here to read "Global Clean Energy Investment Overview"
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A Guide To Mezzanine Investing
Mezzanine investors typically seek to invest in securities that have the downside protection of bonds, coupled with the upside potential of equity. A paper by PCG Asset Management offers an introduction to the mezzanine market which, the authors argue, is currently seeing a compression of returns as a result of surplus capital supply. At least in the short term, PCG believes that the risk reward profile of mezzanine investment will remain unattractive.
- Click here to read "Mezzanine Market Overview 2006: Clowns To The Left Of Me, Jokers To The Right"
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The Importance of Real Estate as an Asset Class
More than half of all the assets in the world are estimated to be in real estate. A special paper by Deutsche Bank Private Wealth Management argues the importance of real estate as an asset class and portfolio building block around the world. In particular, it highlights investment vehicles characterised by low correlation to traditional asset classes such as equities and bonds, allowing investors to improve the risk-return ratio of their portfolio by adding real estate.
- Click here to read "Real Estate - A Versatile Investment Building Block"
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Managing Risk and Liability Exposure
Insurance Portfolio Protection
Diversifying a financial portfolio by adding international investment improves its risk-return characteristics. A technical academic paper by Kate Phylaktis of the Sir John Cass Business School examines the relative importance of benefits arising from country-specific factors (such as different policy and legal regimes) and national industrial compositions. The authors find that industry effects have been growing in importance relative to country effects - suggesting that diversification across sectors may offer more benefits than compared to regional diversification.
- Click here to read "Where's the Risk? Safeguarding Insurance Portfolios - Documenting Active Stewardship"
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Managing Aviation Insurance
Private air travel offers a host of conveniences to business and personal travelers, but aviation insurance suffers its limitations. HUB International Northwest offers a checklist to serve as a diagnostic tool in evaluating aviation insurance.
- Click here to read "Aviation Risk Management Checklist"
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International Trends
US Falls in World Competitiveness League Table
An annual study by the World Economic Forum, based on economic data and the forum's annual Executive Opinion Survey, provides a ranking of the competitiveness of countries. Its rankings for 2006 see Switzerland taking the leading position, overtaking Finland and Sweden, and overtaking the US, which dropped to sixth position.
- Click here to read the executive summary of the Global Competitiveness Report 2006-07
- Click here to read more detail about its findings and methodology
- Click here to listen to a webcast interview with Michael Porter, co-author of the Report
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Business Owner Issues
Governance in Successful Family-Controlled Businesses
A paper originally published by the Family Business Review seeks to understand why some major, publicly-traded family controlled businesses outperform other types of business, while others perform poorly. Its analysis is based on four governance choices facing family businesses: level and mode of family ownership; family leadership; the involvement of multiple family members; and the participation of later generations.
- Click here to read "Family Governance and Firm Performance: Agency, Stewardship, and Capabilities"
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Guide To Managing Risk Following an IPO
All businesses must manage risk, but newly listed companies confront additional risks - ranging from presenting unexpected results to the markets, uncertainties relating to new initiatives, and infrastructure, systems and compliance issues. A short paper by Ernst & Young discusses the key issues.
- Click here to read "The Essential Guide to: Risk Post-IPO"
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Family Continuity & Governance
Dividing The Family Business Between Heirs
Passing business interests to family members is tricky. But even trickier is the question: how should a retiring owner divide up a company when some kids work there, and others don't? A report in the Wall Street Journal Online examines the issues. The key: pre-empting problems by starting discussions early on.
- Click here to read "Sibling Rivalries"
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How to Avoid the Midas Curse
It has been estimated that 90% of affluent families squander their wealth by the end of the third generation. A paper by Northern Trust discusses the best way of ensuring that the family preserves its wealth for generations to come. The key: a family's "financial values", which should be passed on to future generations as well as financial assets.
Strategic Philanthropy
The Power of Philanthropy
The Clinton Foundation is not a foundation in the traditional sense, because it has no funds of its own. What it offers is the motivational and "convening" power of the former President, coupled with a business-like, entrepreneurial approach to philanthropy. An article in Fortune takes a look at his unique approach to tackling global scourges including poverty, climate change and HIV/AIDS.
Evidence of Renewed (But Not Recovered) Confidence in US Charities
Controversy surrounding the disbursement of September 11 relief funds led to a fall in confidence in charitable organizations in the US in the last five years. A survey conducted on behalf of The Wagner School of NYU finds that, while still not restored to pre-September 11 levels, there has been a recent rebound in confidence. An underlying scepticism towards charities remains, however, indicating an ongoing need to invest in performance and communication.
- Click here to read "Confidence in Charitable Organizations, 2006"
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Family Office Practice Management
An Heir and Practitioner Advises on Strategic Wealth Management
Stuart E. Lucas sees wealth management from both sides of the fence: an heir to the Carnation fortune, he also advises families on managing wealth. In an article published in Knowledge@Wharton, Lucas describes his eight guiding principles for effective long-term wealth management. A useful frame of reference for anyone seeking to safeguard and grow family wealth.
- Click here to read "Eight Principles of Strategic Wealth Management"
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Technology Trends
Misconceptions About Computer Security
A paper by Risk Control Strategies examines some popular misconceptions among computer users who believe they are protected against viruses and other online threats. Its conclusion: rather than any one piece of software, it is "vigilance and education" that are key to protecting yourself.
- Click here to read "Five Misconceptions Relating to Computer and Information Security, and How You Can Protect Yourself"
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According to HUB International, over ten million individuals experienced some form of identity theft last year, with cyber crime a major contributing factor. It has produced a check list of steps to reduce the risk identity theft, along with advice on what to do if you are unfortunate enough to suffer this loss.
- Click here to read "Identity Theft and Cyber Security Check List"
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Family Education
Negotiating in Three Dimensions
Negotiation, argue James Sebenius and David Lax, is an important core competence for life, "not merely an important skill to be wheeled out for special occasions". In a Q&A session in HBS Working Knowledge, they describe the drawbacks of a typical one dimensional approach, whereby the negotiator focuses solely on tactics. The key to success, according to Sebenius and Lax, is to operate in three dimensions - in addition to tactics, also considering deal design, and set-up moves away from the table.
- Click here to read "Negotiating in Three Dimensions"
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