2011 | World Finance

Innovating Islamic ETFs

Posted on June 24, 2011August 6, 2019 by

“Our home is where our heart is. The home market is our biggest opportunity. From the beginning we have been focused $600bn of the $1trn dollar Islamic finance industry” says Adeeb Al Solwailim, chief executive officer of Falcom Financial Services.

The young investment bank began operations just as the financial markets around the world witnessed their biggest crisis ever, and required a courageous act of leadership to be established. Today, Falcom is a leading new player in local brokerage and has beaten some of the established players with its online decision-making tools and client services. It has also been recognised for its work internationally, winning nearly 30 international awards.

Its model of empowerment and innovation is also paying off. The launch of an exchange-traded fund (ETF) during very challenging economic times is a bold move; Falcom was the only bank to come up with two ETFs to enable international investors to participate in the Saudi growth story – in so doing also inventing an ETF risk management tool.

Falcom’s local equity fund beat the Tadawul Index by 37 percent, and having put in a superb performance for the last three years in Saudi Arabia has gone on to become the best Islamic fund in the region.

Falcom’s investment banking group has also been active, handling two IPOs in a market which did not see too much action. The team has however stayed focused and our brand has gained the trust and confidence of our clients.

With its corporate office based in Riyadh, the bank has eight investment centres situated in Saudi. With a well-spread regional footprint, the bank is in an excellent position to take advantage of the common currency, fast emerging capital markets and cross-border deal flows. The founders started with a capital base of SAR1bn ($267m) making it one of the largest start-up investment banking operations in the region.

Falcom has also established itself as a major player among the newly-licensed investment banks and has championed investor empowerment. The bank has gained significant market share in its local brokerage business and its online services are among the best in the region.

GCC leadership
Falcom’s leadership began by spotting and filling out the gaps in investor knowledge and their hunger for information related to the capital market. Catering to this, it created an investor information portal, falcomwatch.com, well before launching products and services.

The second aspect of Falcom’s leadership is built around its delivery channels for trading. No other financial institution has invested in six fully-fledged delivery channels for the benefit and convenience of the investor.
Its online trading platform provides automatic and integrated information on investors’ portfolios; clients now have real-time awareness and much needed accuracy for their market positions to support real time decision making under volatile market conditions. Falcom’s asset management team’s innovative sukuk fund was a first for the GCC region as well, and its local equity fund has returned nearly 37 percent since inception.

Falcom is a client-centric organisation which promises intelligent investment ideas. Technology has played a major role is orchestrating innovative solutions as more and more clients get online. Falcom has been providing clients with six delivery channels to trade well before the established banks woke up to it. On the investor empowerment front, its online information portal has gone through a comprehensive upgrade. Now, more and more investors are using the Falcomwatch website for corporate information. Falcom is also at the forefront of index development, with the first licensed index by the Saudi stock market.

Falcom provides a significant contribution to the private equity space, incubating companies ranging from logistics to consumer finance to insurance. It has also pioneered the launch of two shariah complaint ETFs in the MENA region. With the ETFs, Falcom had to invent as well as invest in a whole new risk management tool: classical models all fell short, as derivatives and other hedging instruments are not allowed under Shariah law.

As a pure play investment bank, Falcom’s business lines are corporate finance, brokerage and asset management. The bank has a fully-fledged treasury operation and has one of the biggest buy and sell research teams in Saudi. The bank’s premises are all designed to seamlessly deliver bespoke service to top tier clients.
To be ready for emerging opportunities, it is important for the bank to stay ahead of the competition, with ideas that perform and a brand that is respected by its clients. Falcom responds to the changing times with innovation and is constantly looking for ideas that will deliver value to customers.

Client relationships drive success

Posted on June 24, 2011 by

BMO Harris Private Banking (BHPB) – winner of the World Finance award for Best Private Bank in Canada, 2011 – is part of BMO Financial Group (BMO), a highly-diversified North American financial services organisation. The World Finance judging panel cited BHPB’s excellent knowledge of local markets, its wide range of investment management services, its customised private banking solutions, and its strong client relationship management culture.

BHPB provides a broad range of wealth management and banking products and solutions.

Unique client-centred principles
The business formula behind BHPB, BMO’s private banking arm in Canada, centres on a straightforward idea based on the complexities that wealth can present: while affluence does bring opportunities and advantages, it also brings responsibilities and, of course, can also inspire the occasional conflict. The bank recognises that the benefits of wealth rarely come without complications and challenges, and that families sometimes underestimate the emotional complexity of their wealth issues. BHPB see it as their responsibilty to challenge their clients so that they are prepared for critical periods of transition.

BHPB knows that the successful management of wealth, and the opportunities and challenges it provides, requires a coordinated approach by a team of experienced professionals covering the disciplines of banking, investment management, estate and trust, and wealth planning.

The key to BHPB’s operational approach is ensuring that clients are involved in running their accounts as much as possible. “Our clients are in the driver’s seat. Our role is to co-pilot, helping our clients navigate as they plan their future,” says Andrew Auerbach, Head and Senior Vice-President of BMO Harris Private Banking. “The way many banks and financial institutions work with clients makes it sound like a one-time event, with rigid steps. In our opinion, that approach places too much emphasis on what the banks see fit, and not enough emphasis on what the client wants and needs,” he says.

To avoid the client management pitfalls many banks face, which can ultimately leave the client feeling left out, BHPB describes its process as “the client’s process.” Clients are invited to help customise the process to reflect their personal priorities, timing preferences, and personal style. More importantly, because BHPB sets out to build long-term relationships with its clients, their unique guidelines require a thorough discussion between the bank and client at least once a year in order to revisit their plan, and account for any changes. This allows the bank to continue to deliver value on the client’s terms.

Talent at the heart of BMO Harris Private Banking
Rating intellectual capital as one of its most critical assets, BHPB’s competent, caring team of professionals is at the heart of its success and also provides a distinct competitive advantage. To nurture this talent, BHPB invests considerable time, money and effort to attract and retain employees whose values align with the company’s and who create a positive impact on the lives of the families that rely on BHPB’s services.

New employees receive training on the values and brand history of BMO in order to provide them with a clear sense of what the bank is about and what differentiates it in the marketplace. To keep up with the growth of the company, BHPB grew its workforce by over 20 percent last year.

The bank of knowledge
BHPB believes in educating its clients and providing financial education to the whole family. It hosts a number of events catered to clients, their children, and other family members to equip them to better understand the basics and even become comfortable with some of the more complex aspects of sound financial management.
One such course is the Financial Fluency programme – a one-day event targeting young individuals looking to gain basic financial knowledge and learn about investment principles to develop their personal finances and family wealth. Participants get insight into how to build a balance sheet, the four asset classes, investment risk and opportunities, managing a complex portfolio, and the psychology of investing.

Another popular course is the Financial Focus programme, which targets the less active financial decision maker. The course sets out to explore financial and investing fundamentals that can be applied to the participants’ own personal situations. It covers all the basics and some of the more complex aspects of managing personal finances.

Aside from financial expertise, BHPB provides its clients with insight on the national and international charitable giving sectors, and is the only private bank in Canada with an experienced staff in private foundation granting. BHPB’s philanthropic services ensures that clients receive comprehensive counselling, banking and investment services that support their philanthropic goals and overall financial plan.

BMO Harris Private Banking on its four-step client-centric process
1 Tackle the critical aspects first
Most new clients have an urgent need or a nagging problem they hope we can solve better than anyone else. We’re confident that we can, so we always start every new client relationship with looking into their most pressing needs and problems. Thereafter, we challenge the client to go deeper.

2 Articulate what’s important to you
To help clients make the most of the opportunities their wealth offers, we ask them to think hard about what’s important to them. We begin with not so simple questions to open this discussion. We also think it’s critical to explore the same questions each year. Our clients’ lives, concerns, and goals aren’t standing still; we make sure that their wealth plan isn’t either.

3 Take action
Next, we help clients build a plan that protects and enhances whatever they value most, and we’ll rally our best people around them to make it happen. We’re different in that our experts will not only help our clients build this plan, they’ll execute it by bringing all the right disciplines together. And, if they have other advisors they’d like to get involved, our team will integrate them into the plan.

4 Repeat, revise, repeat again
A plan is dated the day we stop revising it. A plan must keep up with the changes in our client’s life. We challenge our clients to revisit their plan regularly, using our questions to determine what’s changed, if anything, in their priorities, and sense of well-being. We encourage our clients to keep these questions at hand and check-in with us when something changes. That way, we can continue to contribute value.

A solution for our times

Posted on June 24, 2011 by

Every time the euro rises or falls – and there’s been a fair amount of both lately – it asks tough questions of traders of what action to take. This is where white-label providers such as Saxo Bank play an increasingly important role. Specialists in online trading and investment, they plug the gap between knowledge and action: between reading the situation and pressing the button.

Copenhagen-based but with offices around the world, Saxo Bank has worked with hundreds of institutions in the last decade to provide the proprietary technology and insights necessary to ride the forex storms. As co-founder Lars Seier Christensen says: “We see the thorough due diligence process done into our business by large institutions as a form of documentation of the quality of our white label solution.”

The spate of accolades recently won by Saxo Bank can also be seen as a form of documentation. At Euromoney’s 2011 forex awards, it scooped six prizes: best improved market share by volume in two categories, best speed of execution, best effective risk management and execution strategies, best research and analytics, and best integrated workflow and compliance solutions. Arcane as they may sound, these are much-valued capabilities; the tools that make forex trading more efficient.

Saxo Bank has grown rapidly on the back of internet-based trading in what is surely the age of forex, as observers of the troubles in the eurozone will vouch. With European sovereign currencies punished by lenders in the wake of the financial crisis, the markets have been in turmoil as traders seek safe havens or, more commonly, look to achieve profits from the general mayhem while central bankers and regulators try and restore some semblance of order.

But it’s not just the eurozone. Never have global forex markets been busier, more volatile or more challenging. The old rules are ripped up almost on a daily basis by developments in literally scores of currencies that until recently were very much on the sidelines of world markets. Even the most experienced traders have been caught out by unexpected movements that defy conventional analysis.

Yet during this turbulence forex has steadily established itself as an asset class in its own right, one that requires all the tools of the trade necessary for traders to find their way in what looks at first sight like a labyrinthine maze of complex and interlocking relationships, unpredictable outside forces and exotic currencies that are relatively new to this fast-moving yet fascinating universe.

Currency demand
To name a few recent upheavals, it’s only in the last few months that corporates have been able to deal in China’s renminbi. In the wake of the financial crisis many sub-Saharan currencies now offer more attractive returns than western ones do. BRIC nations’ sovereign bonds have established their own presence in the markets. And the warning of a downgrade of the US dollar rocked long-held assumptions about the greenback as the world’s fall-back currency.

Thus a deep knowledge of the forex markets has become even more obligatory for exporting companies, corporate treasurers, financial institutions and a fast-growing body of individuals who deal in currencies in much the same way as other investors buy and sell equities or any other asset. It’s also a multi-faceted market, with many different niches.

“Currently, spot is experiencing high demand from investors,” points out other co-founder Kim Fournais. “However, as retail clients become more aware of the advantages of using options, we expect to see significant growth in the option space.”

Overall, forex is a vast market. Daily average turnover hit a staggering $4trn last year – 20 percent higher than four years ago, according to a survey by the Bank for International Settlements. Although that’s down on the unprecedented high levels of trading in the years leading to the financial crisis, volumes are expected to grow in the future. Much of that furious growth is down to the financial sector which accounted for 85 percent of the increase in turnover.

“This growth was driven mainly by high-frequency traders, banks trading as clients of the biggest dealers, and online trading by retail investors,” explains Mr Christensen, a 25-year veteran of the industry. “But a rise in trading by small retail investors has made a significant contribution to growth in spot forex and this was made possible by the spread of online trading.” He is convinced that this kind of retail trading will continue to grow as the internet becomes an indispensable tool.

And with the market deepening year by year, almost month by month, the thirst for higher-quality information grows. “Clients want more transparency, better products, pricing and services,” adds Mr Fournais. “Modern traders and investors demand usability, mobility, performance, and service when executing online trades.” Saxo Bank therefore continuously rolls out new products; tools, technical studies, charts and anything else that will help take clients’ trading to the next level in this turbulent market.

Future of the eurozone
As a global investment bank involved in international markets, Saxo Bank has a close interest in the entire eurozone debate. Indeed one of the group’s European offices is in Athens – currently at centre stage in this highly charged debate. And it’s a debate that requires careful analysis. Almost as a philosophy, the bank prides itself on developing independent, rational opinions on important topical issues. Originally called Midas, the institution acquired its current name in 2001 when it was awarded a European banking license. The unusual title comes from Danish folklore – Saxo Grammaticus was a medieval historian famous for his Story of the Danes, the basis for Shakespeare’s Hamlet. And clearly, rational analysis pays off – Saxo Bank’s profit before tax in 2010 was 913.8m Danish kroner (approximately €122.5m), representing nearly quadruple the 2009 figure.

The institution has prospered through the rapid expansion of the forex universe. A vast alternative network of information has rapidly developed in the form of investor communities and financial news portals where institutional and retail traders swap insights and tips. The 1.8m users of Saxo Bank’s recently acquired European portal, EuroInvestor.com, provide plenty of evidence of this flood of interest in the asset class. “We want to bridge the online universe of the communities and the trading platforms of Saxo Bank,” says Mr Fournais. “This way we can support investors who lost trust in advisors from the traditional banks and brokerage houses during the financial crisis.”

Although hit by the crisis like most other asset classes, forex has bounced back better than most. Forex was one of the banking sector’s most profitable divisions before the crisis and during immediate fall-out. At the time of the bankruptcy of Lehman Brothers, forex activity hit a near all-time high in October 2008 before falling suddenly until October 2009 when it began a recovery. Right now, activity is steady.

However the numbers remain impressive, even in a recovering market. At Saxo Bank alone for example, monthly average trading has been running at about DKK 1.3trn (US$240bn). Although that’s down from an average DKK 1.7trn a month (US$320bn) in the first half of 2010, it still represents a lot of trades as well as a new-found respectability.

“The perception of the forex industry has most certainly changed internationally,” says Mr Christensen. “It’s considered an asset class on its own rather than as a necessary add-on to cross-border transactions. More and more traders recognise the opportunity to make a profit in what is a volatile asset class.”

Rise of white-label
Saxo Bank’s rapid rise reflects the growth of the asset class itself. Launched by Messrs Fournais and Christensen in 1992, it now boasts over a thousand employees in offices all over the world, including Australia, the Czech Republic, France, Greece, Italy, India, Japan, the Netherlands, Singapore, Spain, Switzerland, the UK, Ukraine and the United Arab Emirates. Along the way Saxo Bank has become perhaps the leading global provider of white-label trading solutions. That is, the purchase by the financial sector of proprietary intellectual and technological platforms developed by outside specialists. Increasingly, this is seen as preferable route to forex-trading than the burden and cost of developing such complex expertise in-house.

As Mr Christensen explains, white-label platforms make sense on several levels: “Both large and small institutions are asking themselves why they should waste valuable time and resources on building their own online trading platform when they can get a proven platform like SaxoTrader [the award-winning solution largely devised by Mr Fournais, the bank’s online and IT expert]. Instead of starting from scratch, they benefit from decades of expertise and development.”

Specialists such as Saxo Bank underpin the trading function. It has, for instance, many smaller banks as clients, which in turn make markets for their own clients trading in local currencies. Adds Mr Christensen: “This hybrid role allows these banks to add value to their own clients by profiting from their local expertise and comparative advantage in the provision of credit, but without the heavy investment necessary to compete in spot market-making for the major currency pairs.”

Regional and local banks, brokers and global giants including CitiBank – a Saxo Bank client – are turning toward white label solutions. Indeed hundreds of financial institutions have collaborated with the trading specialist since it won its banking license in 2001. “With such a broad range of white-label clients, we have been able to acquire a very deep experience across the entire trading value chain,” says Mr Christensen.

Paradoxically, as the market deepens the technology becomes simpler to use, more helpful and richer in options that allow traders to express their currency views. No firm can afford to mark time in such a fast-moving universe, and in mid-June Saxo Bank will launch two highly exotic technologies – a one-touch option and a no-touch option. Despite the complexity of the design process underpinning, it’s a straight forward, easily understood, functional technology that allows clients to execute a position for a directional currency movement.

A big attraction of white-label trading platforms is their affordability. For Mr Fournais, it’s a win-win situation seldom seen in the financial industry, where the reverse is commonplace and banks and corporate customers can fall out in a welter of litigation over expensive solutions that proved to be anything but. “A white-label solution is extremely cost-efficient and requires very little upfront investments by the bank or broker,” he explains. “For Saxo Bank, the return on the investments comes over time from trading income. The situation is even better for the white-label clients because the trading activities create earnings but require none or minimal investment.”

Using the platform
But what criteria should buyers look for in a white-label platform? Interestingly, Mr Christensen doesn’t cite wondrous technologies, but simply “a good chemistry between the two organisations.” In practical terms, that means a happy match in terms of culture, values and strategy. Without all three, the technology is unlikely to meet its full potential.

White-label trading works best as a mutually beneficial partnership. “The choice of white label solution is an important strategic decision for both large institutions and smaller banks and brokers,” explains Mr Fournais. “The provider must be able to support the current online trading business as well as guide its future development.”
Yet it’s a balancing act too between support and guidance on the one hand and too close an involvement on the other. “The bank or broker must remain in control of the business,” insists Mr Fournais. “It would be a mistake for the provider to force second-best decisions on the client just because of the white-label relationship. We work hard to support the business of our white-label clients, but we definitely don’t try to run it for them.”

A crucial element of that relationship is the enhancement of the client’s ability to adjust to often rapid and hectic changes in the trading environment. “A good white-label provider should constantly present new opportunities rather than locking the bank into an inflexible solution that may work for today but not for tomorrow,” adds Mr Fournais. “This is a highly competitive environment.”

In short, the onus is on the provider to help the business grow. Although it has made its mark as a forex firm, Saxo Bank offers multi-asset trading platforms on which the client institution can add more products to its offerings, either for itself or for its own clients.

Impressive as some of the trading technology may be, back-office functions remain crucial because they underpin the integrity of the whole process. Thus Saxo Bank provides its white-label clients with a number of operational services that are integrated into trading applications, such as the extraction of end-of-day files for further use and support for the burden of regulatory or management reporting. This is done without breaching confidentiality. “All our back-office processing is done using anonymous customer identification,” explains Mr Fournais. “That ensures Saxo Bank has no record of customer contact details.”

Strategic vision
Saxo Bank’s journey began in 1992 when the partners opened for business with little more than a phone book and a telephone as their prime business tools. However, they had a clear idea of the mission. “Our objective was to provide private investors with the same opportunities as professionals,” remembers Mr Christensen. “We later recognised that only through the internet could this be achieved.” They saw that better technology could differentiate them from competitors and launched an online trading tool in 1998. They also saw that white label was the way forward and their first customer was a 150 year-old Portuguese securities dealership that signed up in 2001.

Saxo Bank’s secret weapon is that it is a facilitator. Namely, a trading platform that is integrated into the exchanges and allows orders to be routed directly to them with the support of large financial institutions that provide liquidity and the essential infrastructure.

So far, so good. What lies ahead in this exciting asset class? Messrs Christensen and Fournais identify three major trends – transparency (“driven by regulators and pure self-interest”), self-empowerment (“following the crisis many clients think they can do as well as the professionals”), and networks across industries (“communities and news portals will play an even more important role”).

Take transparency. As the co-founders describe it, only transparent white-label providers will cut it in the post-crisis, highly regulated world with increasingly sceptical clients. They also predict an increase in litigation between disappointed clients and inadequate providers.

Take self-empowerment. As Mr Christensen summarises it, “Clients are saying: ‘I want to understand what happens and I want to have influence on at least a part of the portfolio. I understand that there is more than stocks and bonds out there, and I want to learn more. I increasingly have a view on oil, gold, the US dollar, the Swiss franc, and the politics, economic and market conditions that affect these assets. And I want to do this when I have time – evenings, weekends, 24/7.’”

And take networks. “The best way to enhance understanding and increase access to information [in addition to what the banks provide] is through the media, financial sites, social networks like Twitter, Facebook, linkedin and online communities with people that you trust or respect,” concludes Mr Christensen. “I would rather get my information from people in my own situation, with the same interests as me, than from a salesperson. And the information sites need to drive real revenues, not just advertising. Information and software price is going towards zero and these need to be combined with trading revenues.” He cites MSN Trader and Euroinvestor.com as stand-out examples.

Saxo Bank’s co-founders believe that white-label forex finds itself in a different environment after its first flurry of growth and after the turmoil of the financial crisis. “The tail wind has gone and only real quality, real competence and real common sense will replace the sophisticated but inefficient models and complicated and, in many cases worthless, financial structures that defined the past decade.” As the forex markets never sleep, the development here is likely to continue at a considerable rate.

The new imperatives for mobile business

Posted on June 24, 2011 by

Mobile technologies are changing how enterprises run their business processes and interact with consumers. In my experience from designing and deploying mobile business solutions to large and influential companies like Citibank, Santander, Visa, MasterCard, Itaú and Bradesco, there are five imperatives that are shaping the new mobile enterprise landscape. These imperatives will directly influence how companies will be able to leverage mobile technologies as a key competitive advantage.

Mobile is mainstream
In the early 2000s, mobile technologies were seen as a promising area with a bright future – but still not mature enough for mass use on enterprise-grade applications. Accordingly, most projects were classified as innovation initiatives and not deployed at core functions.

This picture has changed substantially over the last 10 years. Today, 30 percent of the 500 million users of Facebook (the most visited site in the world) are mobile. This means consumers are most likely already engaged with mobile technologies. Is your company ready to serve them through this new interaction channel?

Measurable investment returns
Companies which have utilised mobile technologies are capturing considerable value on automated and redesigned field processes, including marketing, sales, distribution and service areas.

For example, a leading retail bank increased the number of available sales hours by 20 percent, creating a unique opportunity to increase revenues through serving more customers with the same sales force personnel.
On the consumer front, mobile finance represents an additional area where companies are capturing significant value too. A leading financial service institution applied personal lines payment reminders and follow-ups through SMS alerts. They reduced the number of borrowers who reach 90 days past due by 10 percent, thereby reducing the overall risk to their operations.

Employee/consumer similarities
In a first wave of mobile deployments, companies used to manage employee-facing and consumer-facing applications as disparate silos running on different business and technical platforms. It’s time to change this approach. In most industries, the relevant touch points happen outside company boundaries. So consider that your mobile marketing campaigns are generating market intelligence data directly delivered to marketers, and they could seamlessly share insights with sales agents working on pushing target products.

The new mobile landscape
The enterprise market used to drive and lead the adoption of new information technologies, but not anymore. Today, the consumer market is moving first and faster, as exemplified and accelerated by search engines, social networks, cloud computing and mobile software and hardware advancements. Combine this trend with two game-changers on the mobile OS landscape, iOS and Android, and you have your users (both workers and consumers) driving which smartphone you’re going to support and deploy.

Incumbents like Microsoft and BlackBerry still have a chance to play a relevant role in this game, but they are not going to be the first choice from a user perspective – even if your IT administrator or information security expert do not agree.

Application-oriented platforms
At the end of the day, all these imperatives rely and run on a common foundation: your mobile enterprise platform. So, what are your options in terms of platform approach?

One is to select individual pre-built applications for each business process or interaction channel you want to mobilise. It works well for one or two applications, but presents significant scaling issues for both business processes and support. Disparate technical foundations increase the combined total cost of ownership and limit how common data can be shared among these applications.

A second option is to select a single development platform and build all applications from scratch. However, although this approach solves the problems above, all the advantages of working with pre-built applications – like faster implementation cycles – are lost.

A third option would be the most powerful: combining the strengths of the previous two approaches. This approach relies on a single technical platform with pre-built and configurable applications on top. The key capability here is configuration, as it enables new applications to be created much faster than on traditional ‘coding-compiling-debugging’ cycles we see on traditional software development.

Additionally, configuration enables the same application to run on different mobile devices and operating systems, on multiple screens. Business workflows and rules are represented by universal database parameters instead of source code compiled for a specific platform.

Implementing your solution
Planning a strategy for applying mobile technologies to your business is crucial, as is having an integrated vision and plan. Going further, ask: What will be your roadmap for enterprise mobility? What applications should you invest in first? How will you ensure that a common foundation and data repository will be shared? Answering such questions is the starting point to strategically engaging your company in the rapidly changing world of mobile technologies.

And don’t forget the five points above. They will enable you to set a strategy that works for the future even as technology evolves.

As a final thought, consider how much time you spend at your desk and on your smartphone today. That is the same challenge your employees and consumers face. They want to interact and transact with relevant data from your company, and they want to do that on the go, in a convenient and responsive fashion – just like you.

Cristiano B. M. Oliveira is Chief Technology Officer at Spring Wireless. Email: cbmo@springwireless.com, or follow @cbmo on Twitter.

Rewards from systematic trading

Posted on June 24, 2011 by

The Rothschild name is synonymous with the successful management of money. For more than 200 years the Rothschild business has been at the centre of the world’s financial markets, and to this day it remains under family control. For investors, this means the firm is neither driven by the short-term desires of shareholders nor distracted by the demands of financial analysts. “As a family-owned firm, we are able to take a long-term view, providing our clients with a service that is independent, stable and discreet,” says Baron Eric de Rothschild, Chairman, Private Banking and Trust.

The Rothschild family has retained its wealth by diversifying its investment interests; and hedge funds, which were introduced 60 years ago, formed and continue to form an important part of this diversification. In 1993 the Rothschild Group set up Guernsey-based Blackpoint Management Limited to focus exclusively on managing funds of hedge funds. Since its launch, the firm has grown steadily, and the Funds of Funds business (long only and alternative investments) represents more than $4.2bn managed by Blackpoint Management Ltd and Rothschild & Cie Gestion in Paris.

From the outset, Rothschild Blackpoint has had a diversified client base, which includes private clients, Rothschild partners and large institutions. As the business has expanded its client base has grown alongside, and now encompasses a broad range of investor types and far-reaching geographical scope. Approximately one third of invested money is with long term Rothschild clients, giving funds the stability needed to weather troubled economic conditions.

Award winners
In recent years, the Blackpoint funds have received industry recognition for their long-running superior performance and commitment to investors, winning awards in 2009 and 2010 from two separate industry bodies: Best Fund of Hedge Funds 10 Year Performance and Best High Net Worth/ Private Client Fund of Hedge Funds Provider.

Its Nemrod and Blackpoint Global Trading funds have been shortlisted for numerous awards over the years, and continue to be recognised by industry professionals and investors alike. In 2010, Nemrod received a highly recommended status from another industry body.

Launched in 1994, Blackpoint’s flagship multi-strategy fund of hedge funds, Nemrod Diversified Holdings, was nominated in 2011 for a World Finance award. This should come as little surprise, as the fund returned 10.05 percent last year, significantly outstripping the average fund of hedge fund returns of 5.42 percent. Over the past 15 years it has achieved an annual compound return for investors of 10.5 percent with an annualised volatility of 6.6 percent.

Performance on this scale is the product of a solid team and investment strategy. CIO Pierre de Croisset is a hedge fund pioneer, with over 20 years’ experience of investing in hedge funds. Indeed, the funds at Blackpoint have been managed by the same core team since inception, making the firm one of the most stable in the industry.

The investment team, based in Paris, New York and London, is supported by Rothschild’s global infrastructure, which provides dedicated marketing support, back office, compliance, IT infrastructure and legal services. In 2003, Blackpoint Management sponsored the launch of Blackpoint Advisory, a New York office specialising in hedge fund research, analysis and selection. Then, in 2004, the firm established an FSA-registered London subsidiary, Blackpoint Limited, to provide marketing and investor services to Blackpoint Management.

In hedge fund investing, experience matters – and Blackpoint’s investment philosophy, which has evolved over 17 years, is focused on achieving the greatest possible risk-adjusted returns with an emphasis on long term capital preservation and diversification. The team uses bottom-up manager selection and thorough research of investments based on qualitative analysis with quantitative and operational inputs. Allocations are made to funds whose managers are flexible and can adapt to different market environments. Capital is rarely allocated to thematic or sector specialists, helping to avoid overconcentration of the portfolio, and ensure a smoother, more consistent return profile.

The Blackpoint team is constantly on the lookout for profitable ideas. “At times, market conditions create unique opportunities to find asymmetric trading opportunities – such as shorting the technology bubble in 2000, or shorting sub-prime credit in 2007,” says Pierre de Croisset. “Participating in these trades through superior manager selections is essential to outperforming markets generally and our peers. We have consistently been able to identify some of the world’s best performing hedge funds throughout our long history.”

The team has maintained a commitment to macro and systematic hedge funds, having held these strategies in the flagship Nemrod portfolio since inception in 1993 (today they compose 46 percent of Nemrod’s portfolio). In January 2005, Blackpoint Management launched Blackpoint Global Trading (BGT), a specialist fund of hedge funds, which is the winner of the award for Best Specialist Fund of Hedge Funds, Europe 2011, in the 2011 inaugural World Finance Hedge Fund Awards.

With over $110m of assets under management, BGT combines pure systematic hedge funds with global macro managers (who have a more discretionary trading style), adding an opportunistic component to hedge tail risk. This focus aims to deliver returns that are less correlated to equity and bond markets, while blending the managers to reduce volatility. BGT has achieved this aim, with average annual returns since inception of 7.96 percent, and volatility of 5.45 percent. BGT has a correlation since inception of -0.02 to global bond markets and of 0.59 to the MSCI World index.

The managers’ extensive experience with these strategies has resulted in a well diversified portfolio, which breaks away from the pack by avoiding the ubiquitous longer-term trend followers and instead seeking less obvious CTA candidates, such as short and medium term trend followers.

The BGT fund managers are enthusiastic about the future for systematic investing as part of a balanced fund, pointing out that systematic strategies have evolved from a universe populated by simple trend followers to a heterogeneous marketplace with a high degree of diversification in style, strategy and instruments traded. Systematic managers are able to exploit investment opportunities through their ability to trade a broad range of asset classes, and their agnosticism for market direction.

Systematic funds clearly state their risk management and volatility parameters, unlike many discretionary funds, and their models are rule-based, which removes the influence of human emotion and bias on investment decisions. For example, in 2010, the BGT systematic manager book benefited from trends and avoided some of the pitfalls of discretionary trading, which hurt macro funds that same year.

Future challenges
Rothschild Blackpoint predicts that global imbalances are likely to persist for an extended period of time. The risk of policy error is and will remain elevated and the recent trend of divergent views among countries is likely to continue as unique economic circumstances, not to mention local politics, result in varied policy.

“Our outlook is for a more precarious environment, with elevated levels of volatility,” says Diego Fluxa, senior portfolio manager. “We anticipate that macro forces will be the primary determinant of asset prices for the foreseeable future. It is becoming increasingly important for a money manager to have a solid grasp on the global macro forces that are becoming more significant drivers of localised markets and securities. We believe that a more gradual elevation in volatility will benefit systematic managers. However it is important to note that the commonly held belief that systematic managers are long volatility is mistaken; it would be more accurate to say that systematic managers are ‘volatility friendly.’”

Lower correlation in down-markets and higher volatility periods ensures better capital preservation in comparison to most other strategies. A diversified portfolio of hedge funds is well-equipped to capture the upside in risk assets while providing a reasonable protection against volatility and dislocating events.

“You only feel liquidity when it’s not there”

Posted on June 24, 2011 by

Liquidity is a key factor in all markets. And it is often more elusive and fragile than it appears, as recent events in the commodity markets have emphasised.

“Obviously liquidity is a very relevant subject,” says Peter Billington, Head of FX Trading at Commerzbank. “We’ve had a timely reminder of the importance of liquidity in the markets, when you look at what happened to silver on the CME [Chicago Mercantile Exchange] after they changed the margin calls, and how quickly positions can be forced to be liquidated or squeezed. And certainly with some of that spill-over, we have seen the dollar impacted in the FX markets.”

The decision by the CME to raise margin requirements for silver futures four times in just a couple of weeks meant traders had to sell positions to raise cash for margin calls – the commodity price falls, and a cycle of further calls and price falls ensues, impacting the amount of available liquidity. However, it is not just silver: CME has raised the margin requirements on energy futures too.

Fortunately, when it comes to foreign exchange trading, the forex market is the most liquid in the world. Nevertheless, service providers such as Commerzbank are acutely aware of the importance of liquidity, and how changes in the foreign exchange markets can (and are) affecting its provision.

Gerald Dannhaeuser, Head of FX Sales at Commerzbank, aptly states how this translates for market participants: “You only feel liquidity, when its not there.”

A changing market
As well as the general market news, says Mr Billington, there are a lot of changes in the $4trn a day global foreign exchange market that potentially affect the amount of liquidity being provided, how it is provided, and how stable that liquidity is.

“It is going to be very interesting to see how the market develops over the next year or so,” he says. “There are a lot of people who seem to be providing liquidity to the markets in terms of high frequency trading and intermediary providers. It will be intriguing to see how much of this is real liquidity.

“When you’re providing liquidity across a variety of platforms, single bank platforms, brokers, and so on, it’s good to step back and think about how much liquidity you are providing to the market on any one price at any one time,” he says. “For example, when you have one liquidity provider providing liquidity across a whole host of platforms, in good times there is a sort of relaxed attitude in terms of how much liquidity is out there, but then when an event happens you begin to see how skinny the market can really be.”

A broad client base
Commerzbank provides FX services for a broad client base. “As an overview, the way we segment the clients at Commerzbank is that we have non-financial corporations and then the broad area of financial institutions,” says Mr Dannhaeuser.

“While there are some corporations that do act more like financial institutions, and vice versa, generally the corporate business is very much driven by cash flow hedging needs, certain and uncertain cash flows, as well as by more translation risk hedging needs and also special situations, such as mergers and acquisitions.”
With many non-financial corporations, where they are importing and exporting, for example, the transaction is naturally in one direction or the other – and arbitrage doesn’t really play a big role.

“Generally speaking these clients can be very price sensitive,” says Mr Dannhaeuser. “Liquidity is, of course, important, but liquidity and price are not the only factors that play a role or that make a difference here. It’s in addition to the advisory part, about structuring capabilities, and whether you have an existing lending relationship with these accounts.”

On the other hand, he notes, there are the financial institutions – banks and non-banks. “With banks, there is certainly the need for liquidity, and also commercial facilities,” he says. “Then there is the big segment of non-bank financial institution clients such as the asset managers, for example, and hedge funds. There it is probably a mixture between hedging needs and the search for alpha, i.e., through currency overlay programmes, but there might be as well high frequency traders looking purely for liquidity and liquidity arbitrage.”

Commerzbank advantage
So what advantages does the Commerzbank FX operation offer its clients? One advantage, says Mr Dannhaeuser, is that there is a very strong client focus. “It’s the client that we centre our activities around,” he says. “We are not engaged in proprietary risk-taking. So our client is not competing with any other activity of the bank. We are there for our clients five days a week, 24 hours a day, with full attention to clients’ positions.”

Mr Billington agrees. “Trading and sales work together, making sure that we’re actually providing liquidity for a reason and for our customer base, and we make sure that we understand how we use it,” he says. “So the risk systems are on a 24 hours a day, five days a week basis. We’re keen to understand the risk that we take on board and have flexible risk systems that can respond to any changes that happen in the market, so we can help ensure the customers are taking on the right amount of risk, at the right time.”

Another advantage is the bank’s specialist knowledge of particular regions. “There is deep market knowhow with regard to special currency pairs in particular regions, for example Eastern Europe, and in facilitating global trade flow between Germany and Asia,” says Mr Billington. “Also, we can give the client the choice regarding which channel they need or want to access liquidity via – whether it is an ecommerce platform, voice sales coverage, or any kind of multi-bank platform that we service. So again we provide the flexibility the client requires and we can centre our offerings on the client’s needs.”

Clients expect creativity and innovation, research, knowhow and market intelligence. And of course, adds Mr Dannhaeuser, it is important to be competitive. “But competitiveness does not only mean having the best price at a certain millisecond, but rather competitiveness means being a good, consistent, reliable partner as well in challenging markets and across timezones. It may not sound new and ground-breaking but these are the kinds of things that are easy to say but are more difficult to implement and to get right.”

Tech talk
Leveraging the latest technology to provide the best service possible is essential. Commerzbank was one of the first banks to offer an online FX trading platform and Application Programming Interfaces (API), and it builds on that expertise with its Click&Trade FX platform.

“From a trading side the key technology is the e-platform offering which is all our own in-house technology. Meaning we don’t have to go to outside vendors and we’re very much in control of what we’re doing, and how we’re doing it. It’s a definite advantage, for example when EBS changed the number of decimals on their currency pricing, we were able to react quickly to that, for our clients,” says Mr Billington.

“So the e-offering on that basis is something where we can be in control of what we offer our customers, and are able to expand the platform into what they need. In the e-space, it’s very easy to spend a lot of money developing a lot of items, but unless they’re what our customer will use it’s not a very wise investment.”

There is also the multi-bank versus single bank platform debate, although Mr Dannhaeuser believes that there is room for both. “For some client segments, i.e. the ones that are required to do best execution, a multi-bank platform is attractive. We certainly see demand for our prices and liquidity on the multi-bank platforms.
“But clients in other jurisdictions may require more of a multi-product, research, support and advice kind of approach, and then the single bank platform still plays a major role. The market is so big that there is room for both types of channel. In a way you can compare it to when eplatforms were supposed to put an end to voice business – but they haven’t.”

Challenges ahead
Messrs Billington and Dannhaeuser see a number of challenges ahead for the FX market.

“For a start, the FX community is looking to Asia with the diversification of reserves, and relaxation of some trading restrictions there, there’s going to be a huge market,” says Mr Billington.

“Probably, with the further development of the Asian fixed income market, there will be greater demand for currency overlay, for more currency pairs, and a much higher liquidity. Plus there is also the decline in the importance of the dollar as a proxy as correlation to the US-Dollar becomes more volatile,” adds Mr Dannhaeuser. “And regulation will certainly have an impact on the FX market; firms will need to be agile and flexible in response to any rules and regulations that may or may not come in.”

Whatever the challenges, Commerzbank is well placed to deal with them. “I think we’ve got the right platform in terms of global setup and coverage,” says Mr Billington. “The globalisation of our clients’ business is increasing, as is the demand for clients to have access across a whole host of currencies, not necessarily in their time zone, depending on world trade and acquisitions. Finding these trends and expanding upon them is going to be the key.”

“There is a lot of transparency and pricing in the market,” he continues. “We really have to differentiate ourselves in terms of the relationship and the service that we provide to the customer. The service we provide covers all aspects, so its sales, research, structuring and trading all working together; it all operates under the one umbrella at Commerzbank, and one client experience – characterised by reliable and robust liquidity.”

For more information: www.commerzbank.com

EU leaders agree to Greek bailout 

Posted on June 24, 2011 by

Europe’s leaders agreed late on Thursday to release a fresh €12bn bailout for Greece provided it passes an austerity package before its parliament. 

Greece is expected to introduce strict measures of €28bn in tax rises and spending cuts and in addition will have to commence a €50bn programme in privatisations of state assets. 

“Greece must finalise the package as a matter of urgency in the coming days to qualify for the new bailout,” a statement read. The bailout contributions will come from 17 eurozone countries and the IMF but will not include direct aid from the UK.

Inspiring confidence

Posted on June 23, 2011 by

National Commercial Bank Jamaica Limited (NCBJ) was the most profitable listed company on the Jamaican Stock Exchange last year. Its capital ratios far exceed minimum regulatory requirements and new unit trust products are currently in development.

While much of the global financial industry is still finding its feet, the Jamaican economy is increasingly eyeing opportunities for prosperity, despite recessionary concerns. Credit agencies like Standard & Poor’s share the optimism, recently upgrading the country’s economic outlook to ‘Stable.’

How did NCBJ, winner of the World Finance award for Best Banking Group, Jamaica, 2011, do so well in the last financial year – especially when many other financial institutions reeled from a global lack of credit and confidence?

It certainly didn’t have much help from the domestic economy, explains Patrick Hylton, managing director of NCB Group. “These results were achieved in a year of unprecedented developments in our nation’s affairs,” he says, “highlighted by a Government of Jamaica debt exchange programme, which significantly impacted our operating income. Given the impact of the debt exchange programme, we were proactive in undertaking a number of initiatives to enhance revenue, contain costs and maintain a strong capital base and liquidity.”

The recent drop in market interest rates, plus a subsequent narrowing of spreads, means the business remains highly focused on growing its loan and credit card portfolios, diversifying into non-interest market products such as unit trust and other collective investment schemes.

“[The World Finance award] reflects the confidence our customers, regulators and all stakeholders have in our institution and the way we do business,” says Mr Hylton. “It endorses the strength of our organisation which enhances our reputation and bolsters consumer confidence in our ability to effectively service their financial needs. We are very grateful for this award as it represents a positive outcome of our collective expertise and our continued efforts to be the best in our business.”

Pension priorities
The company is increasingly focusing on the pensions market. Though some pension plans have existed in Jamaica for many decades, less than 10 percent of the labour force is covered by a formal pension plan.
According to the most recent data from the regulatory authority, published in October 2010, there are some 487 active pension plans with asset values totalling approximately $228bn. Approximately 47 percent of these funds is self managed, with the balance of pension assets managed by institutional managers such as the NCBJ bancassurance subsidiary NCB Insurance Company (NCBIC).

Indications from the government that greater focus on retirement planning for the population is needed will increase in future. This is expected to include arrangements for members of the public sector to join contributory pension schemes that ultimately lessen the burden on the public purse.

“The real growth in the pension industry in Jamaica is expected to come from enrolment in the Approved Retirement Schemes,” says Mr Hylton. “This pension arrangement is attractive as administration is simple and cost efficient. The real challenge will be to convince those individuals not currently part of a pension fund to recognise the value of tax efficient saving towards retirement.”

IMF support
Overall it’s a bold, exciting strategy that also has IMF backing. The fund’s representative to Jamaica, Dr Gene Leo, has called for pension fund managers to take on more risks for higher yield returns, while exercising good governance – a strategy NCBJ is closely adhering to.

Meanwhile the economic background is challenging. A recent interest rate drop was considerable: weighted average deposit rates fell from 5.47 percent in January 2010 to 2.92 percent in January 2011, while the weighted average lending rates moved from 23.10 percent to 20.04 percent over the same period.

Contrary to expectations that a low interest environment would be inflationary, headline inflation for the 2010-11 fiscal year was relatively low at 7.8 percent, closer to the lower end of the central bank’s target range (7.5-9.5 percent) compared to 13.3 percent for 2009-10.

“This was as a result of the low aggregate demand given the double digit unemployment rates that is estimated at 12-13 percent for 2010,” says Mr Hylton. “However, in the near term domestic inflation is expected to be adversely impacted by the pass-through of a significant rise in commodities prices on the international market.”

Exiting recession
Officially, the Jamaican economy remains in recession. As at December 2010, the economy contracted for the 13th consecutive quarter. So the primary economic challenge continues to be how to stimulate growth.
A key part to stimulating the economy lies with the professional middle class – many of whom are now home owners – who are seeking more cutting edge, sophisticated products that allows them to manage their own levels of risk. Hence the increased focus on unit trusts products.

“This will enhance the number of investment alternatives available to our customers and help to diversify our revenues away from interest sensitive products,” says Mr Hylton.

“In addition we will be focused on rounding out our suite of credit card products to ensure that we have a suitable and value added product for each key customer segment. We will also be tailoring existing core products – i.e. loans, deposits – to support the needs of young professionals, small and medium enterprises, women in business etc.”

That route is of course being supported by considerable investments in technology – and NCBJ view technology as a critical business enabler. They are making investments in technology that will facilitate seamless interactions for customers between many areas of the bank.

“As with most financial institutions globally, we are leveraging IT to move away from business silos toward more customer friendly organisational structures,” says Mr Hylton.

Power of the brand
Of course, a key component of NCBJ’s marketing mix is branding. This has been built on a careful foundation of innovation, including IT, client relationships and market strength, says Mr Hylton. “We’re using innovation and technology to provide financial solutions to meet the needs of our customers in addition to driving operational efficiencies.”

Expertise – through superior relationship management skills – is where NCBJ builds trust and loyalty, he says, “via NCBJ professionals possessing and demonstrating knowledge in the relevant areas of our business.”
Solid, unquestioned financial strength is the cornerstone of NCBJ’s brand mix. This is managed within a framework of sound and prudent management while observing all proper ethical, regulatory and financially responsible practices. Indeed good governance plays a big role in NCBJ’s wider business model.

Its financial clout should not be underestimated. As of the last 30 September 2010, stockholders’ equity stood at JMD 49bn ($579m) – an increase of 19 percent on the previous financial year. “Our return on average equity ended the year at 24.7 percent,” says Mr Hylton. “And net worth to total assets ended the financial year at a robust 14.57 percent, further highlighting our strength.”

Added to this are its social responsibilities. Because NCBJ is Jamaica’s leading financial institution, it is committed not just to creating financial prosperity but “instilling social consciousness through nation building activities.”

Mr Hylton explains: “Through the relationships with our employees, customers, shareholders, suppliers, regulators and the wider public, we are focused on and known for sustaining our strength and helping to build a better Jamaica.”

First rate governance
NCBJ has adopted all major international principles and guidelines on corporate governance to guide it and its subsidiaries across its responsibilities. These principles and guidelines are founded in its tradition of integrity and core values.

“The bank has a code of business conduct which speaks to conformity with the law, ethics, proper use of assets, confidentiality, reporting requirements and avoidance of conflicts of interest,” says Mr Hylton. “Members of staff and directors are expected to be conversant with code and strict adherence is mandated.”

To implement such principles, the bank’s board is charged with guiding and monitoring the business and affairs of the bank to ensure the interests of all stakeholders are protected. “Great efforts are made to provide a balance of independence, skills, knowledge, experience, and perspectives among directors to allow the board to work effectively,” says Mr Hylton.

Rules around directors taking on other directorships must be disclosed to the board and where there remain potential conflicts of interest, these are always declared. And the board has established several standing committees – including an asset and liability committee, audit committee and strategic planning committee – with their own terms of reference.

All these moves will inspire confidence in the NCBJ brand. The word ‘confidence’, Mr Hylton knows, is key. And he believes it’s a word NCBJ has truly earned.

Best Pension Fund Manager 2011
NCB Insurance was voted best Pension Fund Manager, Caribbean 2010 (for the second consecutive year) in recognition of the service provided by it and through the NCB Group for more than 49 years. It is now the largest segregated pensions fund manager in Jamaica with funds under management of approximately $48bn split between Defined Benefit and Defined Contribution Pension Plans. The company provides insurance products as well as a full range of products to support retirement planning for groups and individuals. NCB Insurance offers pension administration and investment management services for employer sponsored pension plans; it also sells annuities and in 2010 it introduced an individual retirement product called the SMART (Secure Money At Retirement) Retirement Plan.

Investors look to Istanbul

Posted on June 23, 2011 by

Founded in 1997, Esin Law Firm has over the past 14 years grown to become one of the premier corporate law firms in Istanbul. Esin Law Firm’s main practice areas are M&A, corporate law, dispute resolution, competition law and real estate, and the firm works with prominent counsels and advisors in other areas of activity. The firm is creative, dynamic and solution-orientated and uniquely combines solid legal knowledge with its capacity for understanding business matters to serve its clients in the most effective manner. The firm has a passion for excellence in legal services and strives to create added value for its clients.

In 2010, among others, the firm received awards from the Financial Times, Mergermarket and this magazine, recognising it as the best M&A law firm in Turkey. As well as dealing with domestic clients, it acts as a local partner for international law firms carrying out transactions in Turkey thanks to its fully independant and long-standing relationships with those law firms. Consequently, it is ideally positioned to assist clients in cross-border transactions.

Before establishing Esin Law Firm, Dr Esin studied law at the University of Istanbul, before undertaking his LL.M degree at Tubingen University Law Faculty, Germany. He subsequently returned to Istanbul as a teaching assistant at the university, where he remained for four and a half years. He then decided to gain a PhD, where the focus of his research was the liability of the seller in mergers and acquisitions. With this expertise he returned to Turkey in 1997 and established Esin Law Firm with two partners – both of whom remain with the company today. He lectured on Civil Law and Law of Obligations between 1992 and 2004 at the Marmara University Law Faculty and gave graduate lectures on M&A transactions at Galatasaray University in 2005 and 2006. He also lectured at Bilgi University on M&A between 2001 and 2009. Since 2008, he has lectured at Bahcesehir University on financing models at graduate level.

Focus for understanding
Dr Esin makes a point of underlining the fact that Esin Law Firm is not a full service firm. Instead it is concerned entirely with corporate law, with a particular focus on mergers and acquisitions. “60 percent of our income is purely from M&A transactions, with 60 percent of our lawyers handling these cases at any one time,” Dr Esin says. “We take interest in both domestic and international litigation and arbitration in this area, as well as competition law and real estate law. Of course, we sometimes have to deal with related areas too, such as capital markets, acquisition finance and so on, but these are only in relation to M&A.”

This is an important point of differentiation for Esin Law Firm: focusing on this area of speciality has allowed it to develop a deep technical knowledge that surpasses many competitors. Indeed, the knowledge of the firm in this field is so respected that three of the four partners are either currently university lecturers, or have taught at that level in the past. “Thanks to this level of engagement not just at a practical level but also at a theoretical level, we as a firm are able to see and analyse the legal landscape better than many others. This allows us to identify changes, opportunities and potential challenges ahead of a number of our competitors,” explains Dr Esin.

A second point of differentiation that Dr Esin is particularly proud of is the amount of time given over to the training of young lawyers at the firm. “One of the main things we try to avoid and try to discourage in our junior associates is a ‘copy and paste’ mentality, where large sections of old documents are simply imported into a new one,” he says. “We insist that they think before they act and this is the foundation of our training. The phrase ‘but we have always done it that way’ is forbidden here! If you keep that mentality, then accidents and mistakes can end up becoming ‘truths’ that are repeated again and again without thought.”

The mantra of not doing things in a certain way simply because that is how it has always been done and giving attention to detail is also important with regard to due diligence. Of course, this is a crucial part of an M&A transaction, but confounding factors can rise up and derail a deal if everything is not carefully scrutinised. There are basic elements such as laws regarding tax liability and whether it falls to the buyer or the seller to pay this duty. There is also a problem in Turkey with companies not necessarily maintaining their documentation and tax records in the way that they should be – pieces may be missing, or it may not be up to date. “In these situations, it can be a real headache trying to get a meaningful due diligence done. This is the first challenge we face at the initiation of an M&A transaction,” explains Dr Esin.

Devil in the detail
While this is a challenge and an inconvenience, there are even greater issues that can arise. Occasionally, a company may be in the position where it has more than one share ledger, with each one listing different shareholders. “The question in this situation is, well, which share ledger is the buyer purchasing? Which of these three or so ledgers has the correct share listing? You do not want to be in a position where, a few months down the line, a third party appears saying ‘Ah no, my friend – according to this ledger I am the majority shareholder and it is I who owns the company, not you.’ So attention to detail is vital.”

Because of these possible issues, Dr Esin also emphasises the importance of co-operation and communication between the takeover negotiators and the firm carrying out the due diligence: “If there is no link between these two sets of people, it can cause real problems.”

While the firm is very well versed in its business, the recent introduction of two new legal codes will have an effect, to a greater or lesser extent, on M&A transactions. “The Turkish Code of Obligations will not really have a big impact on us, as it is mostly concerned with banking elements. It is also not dissimilar to the existing regulations,” says Dr Esin. “The Turkish Commercial Code, however, does represent a real change in the legal landscape. It will have a significant impact especially on the shareholder agreement structures.”

This particular code drastically changes the rules governing company structure, operations and corporate governance. As a result, all Turkish lawyers have had to go back and ‘re-learn’ their own laws as this code is a complete revolution on what came before. “Within Esin Law Firm, we have developed some training programmes for our lawyers with the atendance of professors of the highest calibre,” says Dr Esin. “We have also hired some counsels who worked on the drafting of this code to help ensure all our staff are up to speed. Basically, we are ensuring that we are well prepared for when these two codes come into effect next year.”

And what does the future hold for a law firm that is internationally recognised as one of the best in its field? Well, growth is on the cards, but not at any cost. “We have always maintained that we would rather have to turn down work than ruin our reputation. In this business, reputation is everything and that is what will bring clients to your door, even if you have to turn them away sometimes due to our workload. While everyone working at Esin Law Firm is expected to work very hard, we take care not to overload ourselves, as that is when mistakes happen. Esin Law Firm’s quality orientated approach with respect to rendering legal services distinguishes the Firm from its tiers. In order to ensure such quality, partners lead every transaction in detail and are involved in every meeting, conference call and thus fully focus on each and every detail of the projects.”

Nevertheless, the firm is expecting a 43 percent increase in the number of deals it closes by the end of the year. “In 2010 we closed a total of 14 deals. This year we have already completed eight transactions and expect that number to rise to at least 20 by the end of the year.”

Over the next five years, Dr Esin is expecting an increasing number of big international law firms to set up offices in Istanbul – but he’s not worried. “In terms of competition, even if 10 or 15 global firms enter into the Turkish market, there will still be at least another 20 without a local office who will want assistance from someone like us on a transaction. The most important thing is for us to ensure that we are in a strong position with excellent staff and a reputation for outstanding service every time. You can never look too far into the future, but with that as our foundation we are confident of our success.”

Inbursa: Growth with profitability

Posted on June 23, 2011 by

The bank has a very strong balance with a 20.5 percent tier one capital ratio, and its loan loss reserves cover 5.4 times the non performing loans. The strength is reflected in the BBB rating that Standard & Poor’s has given Inbursa – the highest rating in Mexico.

Low operating costs is a key principle for Inbursa with an efficiency ratio of 40 percent – comparing positively to a market average of 74 percent – which translates into higher profitability, flexibility and more competitive products to its more than eight million clients.

Inbursa’s management structure is very lean in order to be as close as possible to its clients, allowing the institution to have a very fast decision process. The main benefits for its clients are the quality of service and the quick response to their needs.

Business services
Commercial lending has been a core business for Inbursa, providing financing solutions to large corporations as well as to small and medium enterprises. The loan portfolio has grown consistently during the last 16 years at a yearly compound average growth rate of 33 percent, reaching the equivalent of $15bn in 2010.

This gives Inbursa a 14 percent market share in Mexico. The majority of its portfolio is denominated in Mexican pesos, and 26 percent is denominated in US dollars; 18 percent of the total portfolio has been lent outside of Mexico.

Inbursa’s loan portfolio is highly diversified with exposure in some of the most dynamic sectors of the Mexican economy, including infrastructure and real estate related projects that demand long term competitive funding, both in pesos and in dollars.

Retail banking
Inbursa’s clients find a tailor-made solution to their financial needs, as Inbursa is able to provide them with loans ranging from very short term working capital needs up to complex, long term structured deals, as well as all a range of products related to cash management, foreign exchange, treasury, investments, leasing and hedging, among others.

Innovation is always in Inbursa’s strategy. A good example has been the development of a deposits product that provides all the transactional capabilities of a chequing account, while at the same time paying a competitive interest rate that compares more to competitors’ fixed income funds than chequing accounts.

Retail banking represents an important growth opportunity for Inbursa, so in 2008 a strategic alliance was reached with Criteria, a subsidiary of La Caixa de Barcelona, which acquired 20 percent of GFI shares through an equity increase. La Caixa is the largest retail bank in Spain, with more than 5,500 branches and close to 11 million clients. Their expertise in the retail business has contributed to accelerate the growth of Inbursa in this market.

In terms of branches, Inbursa has grown from the 98 it operated at the end of 2008 to 271 at the end of 2010 – 173 new openings in two years. With branches in major cities throughout Mexico, Inbursa has a strong presence for supporting the transactional banking needs of its more than eight million clients around the country.

In terms of lending, Inbursa developed a parametric product for selected SMEs that has benefited more than 32,600 companies as of the end of 2010, providing financing where liquidity and availability of funds had previously been very restricted.

Diversification
In June 2010, Banco Inbursa concluded the acquisition of an auto loan portfolio of approximately $500m with around 62,000 clients, from Chrysler Financial Services Mexico (CFSM). With this transaction Inbursa also acquired 100 percent of CFSM shares. With this acquisition Inbursa strengthens its participation in the automobile sector in Mexico – both in credit and insurance – and has a solid platform for future growth in the retail sector.

Since 1965, Inbursa has been an active participant in the financial markets through its different subsidiaries, reaching a portfolio of $92.3bn assets under management.

Among the funds managed by Inbursa, Fondo Inbursa, an equity mutual fund, has generated a compound annual average growth rate of 20.44 percent in dollars, over the last 30 years (up to March 2011).

Through its continued growth and consolidation, Inbursa is one of the most solid financial institutions in the world. It is now in an outstanding position to meet the current challenges, having taken advantage of opportunities to continue growing in operating efficiency and profitability. Today it offers an attractive alternative for its customers and while simultaneously contributing to the impressive economic development of Mexico.

New growth frontier for Islamic finance

Posted on June 23, 2011 by

In Islamic banking, traditionally banks do not invest in interest bearing instruments like treasuries or bonds, which means all deposits collected are transferred to the real economy as “murabaha” loans. Besides supporting real businesses and production, it protects the borrower from financial shocks in crisis situations.

Furthermore, in the Islamic system, banks cannot call back the loans or change the pre-agreed rates – thus Islamic banking stabilises the financing conditions for debtor firms.

Realising the virtues of these practices, Bank Asya was established in 1996 in Turkey in accordance with the principles of interest-free banking. Since then this young and energetic bank has become the leading player of this sector in Turkey, and ranks 13th in assets among the 48 nationally operating banks.

Bank Asya gained its respected position in the banking and financial services sector thanks to its growing capital, strong profitability, solid funding and high quality service. The bank’s most important goal has been adoptting a customer-focused approach, offering its clients the best service possible along with the most advanced technology available, hence being able to bring interest-free banking to the masses.

International confidence
In this process, Bank Asya became the first participation bank in Turkey to go public and has been listed on the Istanbul Stock Exchange with the ticker ASYAB. At 2010 year-end, the free float reached 53 percent of its capital; today 59 percent of ASYAB shares are hold by international institutional investors.

In March 2011 Bank Asya received over $300m in a murabaha syndicated loan from 26 international financial institutions, marking the largest such loan ever extended to a Turkish bank. This is the third loan Bank Asya has received of this kind, which proves the international markets’ trust in Bank Asya. Last year, the bank secured another $255m in a murabaha syndicated loan from international creditors.

International activity
With more than 1,300 correspondent banks all over the world, Bank Asya can facilitate business over 100 countries. Bank Asya is the first participation bank in Turkey to be assigned to act as an intermediary bank for the GSM 102 and GSM 103 programmes of the Commodity Credit Corporation of the US Department of Agriculture. Furthermore, Bank Asya is authorised to conduct international trade activities under Export Credit Agency (ECA) coverage such as US-Exim, Hermes, SERV, Finnvera and ONDD. The outstanding risk of Bank Asya at different ECAs is around $300m.

Extending interest-free banking abroad has been Bank Asya’s vision since the beginning. In 2009, Bank Asya acquired a 40 percent stake in Senegal-based Tamweel Africa Holding SA. Tamweel Africa Holding was owned by the Islamic Corporation for the Development of the Private Sector, a subsidiary of the Islamic Development Bank. The holding either fully owns or has controlling shares in the Islamic Bank of Niger, the Islamic Bank of Senegal and the Islamic Bank of Guinea. The holding has plans to acquire the Islamic Bank of Mauritania soon. Besides investments in Africa, Bank Asya is planning to open a branch in Erbil, Iraq, and a representative office in Mumbai, India, to reach Middle Eastern and Far Eastern markets.

Retail banking
Bank Asya provides its individual, small business and corporate clients with services to meet all their banking needs, while meeting and exceeding their expectations. Besides the traditional in-branch access channels, Bank Asya provides internet banking, ALO ASYA telephone banking, mobile banking, ATMs and POS terminals. All methods are fast and effective with no interruption.

With 1.7 million issued credit cards, Bank Asya is the leading participation bank in Turkey in retail banking. Its contactless credit card AsyaCard DIT has received three awards: the Retail Banking award from the sixth Active Academy International Finance Summit; Best Cash Displacement Initiative in the Visa Europe Member Awards; and Best New Credit Card Product Launch in the Cards and Payments Europe Awards. Following the success of AsyaCard DIT, Bank Asya launched DIT Pratik, Turkey’s first pre-paid contactless card.

Innovation
Bank Asya has a pioneering role in innovative financial services as well. Considering the rapid growth in the mobile phone sector, Bank Asya is generating its latest product: DIT Mobile.

With DIT Mobile technology it will be possible to purchase a hamburger with your mobile phone. Making payments (as well as utilising other financial applications) using mobile phones is inevitable, and Bank Asya is always planning for future generations, with continuous effort to provide award-winning innovative products and services to its customers.

SME banking
Since its establishment, Bank Asya assists the Turkish real economy with more than 100 percent loan to deposit ratios and providing $13bn of cash and non-cash loans to SMEs and corporates in 2010. Bank Asya aims to target its various products especially to SMEs, helping them grow and expand from local markets to national and international ones. Bank Asya provides them consultancy services as well to help them become a brand name. The “Coban Yıldızı” project, named after the Turkish word for lodestar (traditionally a star which allows lost travellers to find their direction), aims to give direction to SMEs in their search to become bigger and better companies.

Bank Asya is actively financing projects on both the international and domestic level. It has issued guarantees for many of the largest projects in Turkey and has clients that are involved in development projects throughout the world. In project financing Bank Asya offers various services to the parties involved in the project. In the case of a real estate project for instance, Bank Asya provides services to the owner, construction company, contractors and individual homebuyers – through purchasing the land, accomplishing the construction, and assisting with final sale and purchase – from the beginning to the end of the project.

Brand name
With $229m of brand value, Bank Asya ranks among the top 500 banks in the world, according to London-based brand valuation company Brand Finance – and it is climbing the ladder every year. Besides the superlative services it provides, Bank Asya invests its brand value through social responsibility programmes and sub-brand names, such as Bank Asya 1.Lig, Coban Yıldızı and DIT Card.

Bank Asya 1.Lig is the secondary Turkish football league, which Bank Asya has sponsored for the last four years. This sponsorship is very well suited for the bank, as the secondary football league hosts the Anatolian football teams – and Anatolia hosts the SMEs to which Bank Asya provides $13bn loans.

Coban Yıldızı is Bank Asya’s corporate project, where its top management reaches out to inner cities of Turkey, listens to the questions and comments of local SMEs and provides advisory services to them. DIT Card is Bank Asya’s award-winning contactless card with 1.7 million subscribers. The name DIT has become the brand name for all contactless cards.

Lebanon bank adopts ‘green’ model

Posted on June 23, 2011 by

Headquartered in Beirut, BankMed is one of the top five banks in Lebanon. Established in 1944, its market share − measured by total assets − has grown over the years to comprise more than nine percent of Lebanon’s banking system. BankMed, through its 54 branches spread throughout Lebanon, and one in Cyprus, offers a wide range of innovative products and quality services tailored to individuals and corporations needs. In Q1 2011 BankMed’s total assets stood at around $12.1bn; customers’ deposits totaled approximately $9.8bn and total loans reached $4.3bn. BankMed has a client-portfolio currently exceeding 130,000 customers.

In 2007, BankMed’s regional presence expanded to Turkey following the purchase of MNG Bank jointly with Arab Bank and was consequently renamed Turkland Bank or T-Bank; a subsidiary commercial bank. T-Bank has implemented an ambitious growth strategy over the last few years seeing its assets increase from $549m in 2007 to $978m in 2010, deposits from $286m to $740m, loans increased from $361m to $661m, branches from 16 to 27 and staff from 390 to 510 employees. T-Bank is currently focused on the Small and Medium Enterprise (SME) sector, and is hence acting more like a niche bank. The group of the bank’s shareholders also has a large presence in Turkey through a controlling stake in the country’s biggest company, Turk Telecom, thus making the group the largest foreign investor in Turkey. The expansion was realised based on our firm belief in the growth potential of the Turkish economy; one that materialised given that Turkey is the fastest growing economy in Europe, and ranks as the 16th largest economy in the world. With the stronger economic integration between Turkey, Syria, Lebanon and Jordan, BankMed’s early entry into Turkey gives it a strong advantage in comparison to other regional banks that are now seriously considering the Turkish market.

Strategically, BankMed has opted to expand only in selected markets, where it could add value. BankMed’s private bank in Switzerland, BankMed Suisse, is engaged in asset-management and advisory banking services. BankMed (Suisse) is reinforcing its private banking product offering across different markets, encompassing traditional banking services as well as innovative products, such as its own funds (BankMed Cedar Funds) as well as internally engineered structured products.

In addition to private banking in Switzerland, commercial banking in Lebanon, Cyprus and Turkey, BankMed has expanded its activities to investment banking. In 2008, the SaudiMed Investment Company was launched in Riyadh, providing investment and corporate advisory services to a growing base of customers in the Kingdom of Saudi Arabia (KSA) and elsewhere in Middle East. The Group has substantial presence in the KSA through Saudi Oger, one of the largest conglomerates in the region with interests ranging from contracting and maintenance, to telecoms and printing. The presence in the KSA allows for great synergy opportunities in the largest economy of the Arab world, which constitutes roughly 50 percent of total Arab GDP. The ambitious public works and infrastructure investments outlined by the government of the KSA in response to the global crisis provide great opportunities for growth and financing activity in this key Arab market.

Diversified banking
BankMed has been built around transparent business practices, responsible lending policies and careful investment strategies, all of which have allowed the formation of a clear and effective risk governance structure at the board and management levels. Our systems, codes of conduct and internal controls are designed to meet the requirements of the stringent international standards and adapt to the new Basel III regulations. BankMed is exposed to a broad range of risks in the normal course of its business. The policies are designed to identify and quantify these risks, set appropriate limits in line with the defined risk appetite, ensuring control and monitoring adherence to the limits. BankMed maintains an adequate capital base to cover risks inherent in its business operations. The adequacy of capital is actively managed and monitored using, among other measures, the rules and ratios established under the Basel Accord, as adopted by the Central Bank of Lebanon. The primary objective of BankMed’s capital management is to ensure that the bank maintains a sufficient level of capital to exceed all regulatory requirements and to achieve a strong credit rating, while optimising shareholder’s value.

BankMed has always had a distinguished presence in the corporate banking business, where it has a well-established franchise, providing funding and other services to most of the top corporate names in Lebanon. BankMed has also strengthened its SME unit, and its portfolio has significantly increased in this crucial market for what we consider to be a necessary “balanced” growth of the Lebanese economy. In addition to corporate finance, brokerage services − available 24 hours a day – have been boosted through MedSecurities, the brokerage arm of the bank which was established five years ago.

Trade Finance at BankMed is one of the key revenue generating businesses. BankMed continues to demonstrate excellence in the trade finance area, by providing distinctive and customised services to its clientele. With the growing needs of Lebanese corporates to expand their businesses locally as well as overseas, BankMed has been a reliable provider of trade finance solutions; one that corporate customers can count on. Despite the financial crisis during the past few years, and despite the challenging moments that Lebanon and the region have experienced, BankMed was able to grow its trade finance business, and to expand its regional and international Financial Institutions network of more than 70 prime correspondent banks in 55 countries. This has enabled the Bank to cater, in a timely and professional manner, to its clientele’s trade finance needs in virtually every corner of the world. BankMed’s main trade finance products include: letters of credit, letters of guarantee, documentary collections, standby letters of credit, etc. BankMed was also able to successfully work on trade finance opportunities, such as the risk participation and forfeiting areas. This has enabled the bank to increase its trade finance business and enhance its capabilities. More specifically, BankMed’s main capabilities in the Trade Finance area are as follows:

– Letters of Credit: On the import side and through its wide network of correspondents, BankMed is one of the main players of LC issuance for imports into Lebanon. With more than 90 percent of the local corporates dealing with our bank, our trade volumes have significantly increased over the past few years and we have been able to conclude a number of large trade ticket transactions for prime customers and in challenging geographies (Africa, South American, Latin America, MENA). On the export side, BankMed has been involved in a number of export finance transactions involving the discount of export LCs and the handling of door-to-door transactions tailored specifically for some of our large corporate customers. This has enabled our customers to hedge the various risks associated with the export activity.

– Letters of Guarantee: Given the nature of the contracting business and the fact that we bank with most of the large contractors in Lebanon including names with regional/international reach, we have been approached for the financing of large contracting projects overseas. This involves the issuance of large tickets and long term LGs (such as performance bonds, advance payment bonds, etc.), which would not have been possible without our wide network of FI relationships and the confidence that our correspondents had in BankMed.

– Risk Participation and Forfeiting: As part of our business development initiative, we have grown the bank’s revenues by developing our trade finance/sales desk capabilities. In addition to our standard channels of trade finance, we have created our own network of correspondents for dealing in primary/secondary market trade finance assets. A number of successful transactions have been closed and we expect to close more in the future.

This activity requires specifically tailored programmes and structures for investing in both import and export activities. This includes risk participation, risk sharing, LC discounting, promissory note discounting, acceptance discounting, purchasing of notes which are all associated to trade finance activities. This has enabled the bank to increase its trade finance business as well as its sophisticated capabilities, and to diversify its portfolio by investing in different transactions and geographies.

With the significant growth of retail banking in Lebanon, BankMed developed further its retail banking services, and introduced unique retail products to continuously meet growing client demand. New branches have also been added, providing presence in the most remote areas of Lebanon.

A sustainable banking model
Sustainability for BankMed is a 360 degree vision. To start with, BankMed has always believed that a thriving Lebanese economy is the best possible environment for a successful bank. Indeed, BankMed’s role in financing commercial, industrial, and contracting activities has contributed to the growth of these sectors and the resurgence of the Lebanese economy since the early 90s. In addition, we believe that an institution should continuously reassess and reinvent itself in order to meet the needs of a fast changing world. As such, BankMed went through a major reorganisation campaign between 2006 and 2008, consolidating the three banks within its banking group into one universal bank: BankMed. This has created great efficiency gains in terms of operations and customer service. BankMed thrives to assure the best quality banking service.

Sustainability prompts the bank to always adopt the latest in technology by constantly upgrading its systems to keep up with the fast pace of technological innovation. Since the completion of the reorganisation and rebranding phase, profits have been steadily increasing.

BankMed has been unaffected by the global financial crisis, mostly due to its conservative banking culture which keeps leverage down and implements all the stringent regulations of the Central Bank. In addition, the practice of internal self-regulation and highly reliable risk management policies, have further shielded the bank. The liability side of BankMed is dominated by deposits which have been a stable source of funding.
On the asset side, BankMed keeps high liquidity ratio with loans to deposits ratio among the lowest in emerging markets. BankMed realises that its most valuable asset is its human resources, and thus the emphasis on human resources training and development.

In addition, BankMed’s belief in sustainable development and green banking has prompted the institution to launch a very effective environmental initiative, or the Happy Planet campaign, to raise awareness about issues pertaining to the environment. This project includes funding of specific environmental programmes. BankMed has undertaken various projects in collaboration with government departments and ministries, NGOs and educational organisations, to preserve Lebanon’s natural environment. BankMed launched its Happy Planet website in an attempt to educate the community about preserving the environment. It also launched, for the second consecutive year in a row, its Green School and Student Competition to raise environmental awareness among Lebanese youth.

BankMed has taken another major step to ensure a better world for tomorrow’s generation by being the first Lebanese bank to have taken concrete steps to assess, measure, and offset its Corporate Headquarters’ carbon footprint. The bank assigned Sustainable Environmental Solutions (S.E.S.) to audit and offset the Bank’s direct and indirect emissions of greenhouse gases in 2009. By becoming carbon neutral, BankMed solidifies its position as a leader in Lebanon in taking environmentally friendly initiatives.

Ideas-based trading

Posted on June 23, 2011 by

Forex gained the confidence of active people investigating avenues of generating additional income long ago. Distance methods of earning are the most popular ones and attract the attention of the majority. Their unquestionable advantage is that they do not require any initial expenditure and time for transfers – trading on forex meets these requirements.

At present hundreds of brokers offer their services on the foreign exchange markets, including both small- and large-scale international brokerage companies offering a whole range of services. One such company offering a comprehensive service is InstaForex, a broker actively acquiring cutting-edge technologies.

A relatively new company, it has been operating on the market since 2007 and is now entering the constellation of leading brokers of the foreign exchange market. As of spring 2011, the company’s number of the clients ran to more than 350,000 people from 60 countries, with nearly 100 offices for the company all over the world. World Finance magazine has recognised InstaForex with the award for Best Forex Broker in Asia twice – impressive results for a four year old company.

Investment ideology
What are the prerequisites to such success? Definitely, the high quality of services rendered, considerable initial investments and a highly qualified team are all aspects of this successful business. Yet, all these factors are secondary; the primary one is the ideas. And for InstaForex, this is the foundation to a successful business.
The idea at the heart of InstaForex is to offer the most convenient, clear and safe trading in the world. These are the three pillars supporting positive relationships between a prosperous broker and a content client. If the trader is confident in their brokerage company, the brokerage company will be able to expand its clientele, strengthen its position and offer its traders more and increasingly innovative technologies.

Today, apart from a wide range of trading instruments, InstaForex provides its clients with many market opportunities which are not offered by other full-service brokers. First, every InstaForex client receives a 30 percent bonus to deposits to their trading account, regardless of the volume of funds invested or that client’s success record. No other broker offers such substantial bonuses.

Second, every InstaForex trader has access to up-to-date trading technologies such as PAMM system, One Click Trading, InstaWallet, Option trading and InstaForex Mastercard system. All client trading operations and funds are protected by a multi-level security system analogous to that of large international banks. In order to ensure its customers high quality and rapid trading, the company launched seven trading servers and 25 data centres in various points of the globe, with the number of servers increasing to match customer numbers and maintain excellent service.

All this ensures convenient, transparent and secure trading on forex, with traders provided with all the conditions necessary for successful working. They don’t need to think about security of their funds or execution times, or be concerned about keeping pace with new technologies appearing on the market.

The fun in forex
InstaForex cares for those who consider trading to be fun, not mere work. In 2009, the company started a series of campaigns within the framework offering automobiles as prizes. So far two cars have been raffled to the company’s customers: a Hummer H3 and a Lotus Elise. Two more car draws are coming soon.

The Miss Insta Asia beauty contest, a second social campaign, proved to a very popular and successful event. The second season of the beauty contest is now being held with over 400 women from across the globe getting involved.

Additionally, InstaForex has organised many other events and competitions, with an annual prize pool totaling over $500,000.

In 2010 the company created an InstaForex VIP trading community. Called InstaForex Club, its members enjoy more opportunities and preferences, including more favourable terms of participation in automobile draws, supplementary bonuses on every deposit, analytical support, consulting on trading issues and much more.
As evidenced, there is a never-ceasing flow of fresh ideas that drives InstaForex forward. This is what makes it one of the leaders in forex and a reliable partner for hundreds of thousands of traders all over the world.

InstaForex in numbers
– over 350, 000 clients around the globe
– over 150 representative offices in the world
– over $500, 000 annual prize pool in contests
– over 200 new clients daily
– over 10 awards in the financial sector

Downgraded dollar is well deserved

Posted on June 23, 2011 by

Uncle Sam’s credit isn’t what it was. When Standard & Poor’s put a question mark over the medium-term future of the dollar by placing it on negative watch, it meant the greenback could lose its historic triple A status if the US economy isn’t restored to rude health within two years. In practical terms that means a convincing reduction in America’s chronic deficits.

Unfortunately, recent history isn’t on America’s side in this. Washington’s record on deficit reduction varies from the woeful to the half-hearted, while its stewardship of the greenback’s role as the world’s reserve currency has usually been neglectful or indifferent.

The essential problem is that the dollar’s triple A rating requires a matching sense of obligation in its management. After all, about $4.5trn is held outside America and a downgrading would hurt investors badly.

The fix for a return to a clean triple A isn’t a mystery, but the roots of the problem go back a long way.

President Eisenhower was the last incumbent of the White House to apologise for running a deficit, even though it was a statistically insignificant $3bn.

President Kennedy changed all that with his $10bn tax cut, signed into law by LBJ after JFK’s assassination in 1963. It was the biggest single tax cut in American history and it set a profligate pattern. By the time Ronald Reagan took office in 1981, the economy was running out of control and it took Paul Volcker, the new chairman of the US Fed, to rein in the money supply in the teeth of the furious protests from the business community that always seem to accompany a bout of fiscal discipline in America.

The economy was corrected by the middle of Reagan’s first presidency, but then he spoilt it all by opting for towering deficits again (economics bored the former actor to tears).

When George Bush became president in 1989, he kept up the bad work, running annual deficits of an average $150bn-plus and forcing treasury to plug the gap by raising loans at great cost to the general economy.
Populist politicians with an eye on local votes must take a lot of the blame. When the Fed tightened rates in 1994 during Bill Clinton’s first term, one leading senator got a few headlines by likening this highly responsible action to “a bomber coming along and striking a farmhouse.”

The common denominator in most Americans’ economic views, such as they are, is myopia and insularity. As former Fed chairman Alan Greenspan notes in his fascinating and highly revealing book The Age of Turbulence, “Americans have always resisted the idea that a foreign country’s problems can have major consequences for the United States.”

Rare among presidents, Clinton was a champion of fiscal discipline. By his second term the surpluses were so huge that debt was down to zero. Sure enough, Republican congressmen demanded $800bn in tax cuts over 10 years. Clinton vetoed the bill.

Then George W Bush undid all the good work, declaring “Tax cuts, so help me God,” when he took office in 2000. Within six months federal spending was rampant and the US economy was in the red.

Today, the net result is painfully visible in America’s current account deficit – in effect the reflection of its dollar dealings with the rest of the world. In 1991, the measure stood at zero. By 2006, it was 6.5 percent. This year it will be 10.8 percent, by the IMF’s reckoning.

Here’s a number to ponder. Boosted by massive bouts of economy-pumping quantitative easing, America’s net government debt now stands at 70 percent of gross domestic product, higher than some of the most troubled European economies. It’s little wonder that the BRICS, complaining of “the deficiencies of the current international monetary system,” launched in April a structure for bilateral trading in their own currencies rather than in the dollar.

A crack has been opened in the greenback’s global role, and it can only widen.

Adapt and thrive

Posted on June 23, 2011 by

Kuwait Investment Company (KIC) is a public shareholding company, incorporated under the laws of the State of Kuwait on 25 November 1961 and listed on the Kuwait Stock Exchange. The company has been a leading player in the investment industry in Kuwait and the GCC over its 50 years of operation, passing through numerous economic cycles and lasting through a host of crises.

For example, the 1982 Al-Manakh crisis brought the national economy to a standstill and helped to push the whole region into recession; while the 1990 Iraqi invasion had a similarly disastrous and long-term effect. Despite these local seismic economic shifts – and global trends such as the 2007 crisis – KIC’s sustainable management and innovative strategies have ensured its position as a sustainable leader in the investment sector.

High diversification
KIC’s processes and focus on training have been key to its success – not least of which has been the company’s ability to strategically restructure and rehabilitate itself to cope with the continuously changing and developing national economy.

The company has ensured that its performance and profits are market-proof, relying on real profits that result from operations and effective performance, as opposed to speculations and market fluctuations. This means variations in stock prices and market volatility do not affect the company’s performance or rating.

This is accomplished through the sheer power of diversification. KIC carries out a wide range of investment and financial activities, providing a diversified package of local and international investment and financial products to a local and international customer base.

KIC introduces this unique blend of best-in-class financial and investment products and services via a specialist network of cross-discipline professionals. These highly skilled and motivated teams are committed to building on the company’s historic success – by producing the best investment suite in the region and therefore the best operating results for the company’s shareholders and customers.

The company has focused its activities in the past year on restructuring its investment portfolio and developing an appropriate strategy to cope with the changing market. Under its new ‘training, rehabilitation and development‘ framework, the company is geared up to take advantage of the global economic instability while looking for safe global investment opportunities. This strategy has given KIC a remarkable flexibility, readiness to market and the acumen to nimbly adapt to any situation.

Institutional recognition
It was this strategy and KIC’s long term leadership position in the investment sector that caused Capital Standards Credit Rating to award KIC a long-term rating of BBB and a regional rating of Akw. This in addition to Moody’s Credit Rating Agency awarding KIC BAA3, reflecting the company’s credit worthiness relative to its peers and competitors.

As of 31 December 2010, the company’s total assets were valued at KD 257m ($771m) and its net assets stood at KD 119m ($357m). The company’s total assets under management were a substantial KD 2.518bn ($7.55bn).

The funds managed by KIC both locally and internationally have consistently achieved positive results and beaten market performance. During 2010, for its local funds and portfolios, KIC’s investment strategy yielded results outperforming most other funds and the market in general.

All KIC’s funds performed exceedingly well, with many surpassing the performance of the index of the Kuwait Stock Exchange. This was largely due to the proprietary formula – based on price momentum and earnings – that was adopted by KIC, and which has yielded many rich dividends and outperformed the market.

The Al-Raed Fund, for instance, achieved 14.88 percent, and the Al-Atheer Telecommunication Fund beat most Arab markets in the region, at 11.50 percent. As for KIC’s international funds, the Global Bond Fund achieved a return of 6.20 percent, while the Pacific Equity Fund aggregated a return of 17.78 percent. The Diversified Fund posted net returns of 9.95 percent, the North American Equity Fund yielded returns of 12.66 percent, and the European Equity Fund gave a return of 10.30 percent. As a group, all of KIC’s funds were rated above average and generated above average returns for the period in question.

Following the global financial crisis, KIC implemented a large-scale operation to renew the organisational structure of the company, restructuring the workforce to enhance its performance. This new strategy focuses on harvesting the strength of the company to achieve enduring success.

Enabling sustainability
KIC has been one of the pioneers in the industry, establishing a risk management office to help create a culture of sustainability. The risk management office was set up primarily to enable the company to sustain its performance, manage growth, and shield the company from risks in the economy. KIC aims to focus on growth by managing risk prudently and thus provide value to its shareholders and clients.

Another striking feature of KIC’s success is its CSR activity. This has been one of the company’s main focus areas throughout its 50 years of operation. The company carries out its CSR activities through a multichannel, multipronged approach. At a national level, it caters to the funding needs of societies such as the Kuwait Handicap Society and several hospitals; while at an international level it extends financial aid in response to natural disasters, such as the flooding in Pakistan. KIC dedicates $150,000 annually to CSR-related activities.

Receiving the World Finance award for Best GCC Fund Management Company 2011, a spokesperson for KIC said, “None of the company’s achievements would have been possible without the trust and steadfastness that its clients and shareholders have bestowed upon it. We would therefore like to express our gratitude to our board of directors for their guidance, our shareholders for their continued trust and complete confidence in us, our customers for their support and loyalty, and our employees for their dedication and tireless efforts in making us what we are – not only in Kuwait but in the whole region.”

For more information: www.kic.com.kw