Allocator Quarterly Q3 2016

This AQ focuses on the hedge fund industry holistically, exploring the challenges faced by both allocators and managers.

[CITE AQ – Q3 2016]

At the last count, our textbooks have no mention of how financial theory should play out under a prolonged (sub-) zero interest rate environment. For now, we can conclude it is one of the largest financial services experiments ever seen. And we thought China, opening up its currency and equity markets in a highly controlled manner was an experiment in how to develop a capital market that deserved attention.

Meanwhile, the hedge fund industry is tethering at the edge of a cliff. On the one hand it wants to be recognized as a mature asset class, yet it does not know what adult it wants to be. It reminds us of adolescence, whereby it changes its attitude on a nearly daily basis, experimenting with different outfit, colours, and tone of voice. We continue to stick to our thesis that for it to be a mature asset class it needs to recognise that investors demand more than a star-manager and huge egos.

Investors remain bewildered by industry fees, which remain high despite the more recent compression, and the value creation cycle they promise in return. We have avoided contrasting funds against passive products. This has been done by academics repeatedly. Instead, we play lotto metaphorically and remind investors to take the long view.

With performance being under ever more scrutiny, we are putting forward another thought on business models within asset management. Our key recommendation remains largely the same: corporate governance improvements will remain a key differentiator for early stage asset managers. Inviting independent directors and advisors to the business and being transparent about the business plan is likely to create a stronger relationship with a firm’s key customer base: the investors.


Allocator Quarterly Q2 2016

This AQ has taken a broader view on themes that we feel are not openly debated on the one hand, and are also ripe with confusion on the other.

Another interesting quarter has passed. The not-so-surprising vote by the British public to exit from the European Union has most certainly made the world a less safe place, both in terms of financial market risk, but also in terms of the general uncertainty facing current and future generations. The implications of the vote will be felt, more negatively than positively, for many years to come.

[Full PDF]

Alongside Brexit, the biggest threat in our view to our way of life is coming, to our great surprise, from the largest economy and market in the world, the United States of America, and the potential election of Mr Donald Trump as the US Presi­dent.

Our piece on Women in Asset Management is really aiming to tease out why wom­en of certain stature and experience, are not making a clearer push for entrepreneurial success or aim for the top at institutional financial services firms. What are the barriers women are facing, as the gender balance situation fails to improve over the long term?

Impact Investing: while there is certainly an element of greenwashing that con­fuses the picture, there is a outstanding investment opportunity that could be un­locked. We are looking at the headwinds still facing the asset class, one of which being the myth that the asset class fails to deliver in terms of returns. We also note the recent developments in regulation, which may help the Impact Investing space attract assets.

Lastly, we picked up on trend in the Commodity Trade Finance industry. There is much talk about Basel III and the impact it has on the financial services sector as a whole, and CTF sector specifically. We feel that the CTF sector presents tre­mendous opportunities for yield hungry investors with limited risk appetite. We also highlight that the theme touches on Impact Investing, and presents a natural extension of our Impact Investment debate.

We hope you enjoy our thoughts. As always we are at your disposal if you wish to engage further.


Press Release - CITE announces equity stake in Kilcullen

CITE takes a Board seat at KIM to strengthen corporate governance and better represent investors at the management company level

Click here for PDF-Press Release: CITE INVESTMENTS (“CITE”) is pleased to announce that it has taken a significant minority interest in Kilcullen Investment Management (“KIM”), a Dublin based asset backed Private Equity investor.

CITE will own its interest in KIM via its CITE Venture Capital I (“CVC I”) vehicle. To strengthen corporate governance, CITE will have a Board seat to represent investors best interests.

Collectively, KIM and CITE will collaborate on strategy, business development and future product initiatives.

Colm O’Reilly, CEO of KIM, welcomes CITE’s 360-investment management approach. “CITE demonstrated its commitment to our joint success with their one-day project kick-off workshop to truly understand our strategy and vision. The CITE team’s data analysis provided significant support for our proposal, and we were able to make adjustments ahead of engaging with investors. The fund-raising timetable we set with CITE is tight, but their team co-designed our medium term vision and showed they understand the requirements of our family office sponsors.”

Sascha Klamp, CEO of CITE, sees significant benefits to the partner model. “We first met Colm O’Reilly and Enda O’Coineen in early February. Being able to quickly align interests is relatively uncommon in our industry. Working with a purposeful Due Diligence process enabled us to move fast whilst agreeing on a commercial model that aligns both parties’ objectives. We expect the partnership to be long lasting.”


Allocator Quarterly Q1 2016

Frontier Markets | We invite our readers to move past the artificial segmentation of the various markets and the convenient labels which suggest that some markets are more acceptable than others.

A lot has been and will be written about what happened in the Frontier Markets in 2015 and Q1 2016. We have also spent time discussing the events of 2015 and the challenges ahead. Clearly, the hype surrounding BRICs, N-11 and other elusive acronyms has created awareness of and fashion for a number of emerging and indeed frontier markets. However, it is important to look past the short-term noise and focus on the structural challenges which will impact people.

For the full PDF publication, click here.


The Panama Files - What changes for Family Offices

Transparency, Corporate Governance and CSR are ever more important

Sascha Klamp recently contributed to the Panama Files controvery. In an interview with Campden FB entitled “Panama Papers: Family Offices likely to remain unfazed, reputation biggest threat” (see the full copy here), Sascha suggests that he can only see an impact for multi-family offices or those that oversee third party capital. In a world where transparency, corporate governance and CSR are ever more important, CITE believes that cleaning up the act is now a must for many.


Press Release - CITE signs LR Global ex Rockefeller Family Office Asset Manager

LR Managers chooses CITE Investments and its wholly owned subsidiary iGen Capital as their Investor Relations, PR and Corporate Governance partner

Click here for the PDF Press Release: LR Managers (New York) and CITE Investments (London) have agreed to the terms of a Master Distribution Agreement that will see both entities collaborating on investor relations, PR and corporate governance.

LR Managers is one of the oldest independent Frontier Markets asset management companies. It was incubated out of the Rockefeller Family Office and launched in 1997. The firm quickly demonstrated performance success in the early years despite launching just ahead of the Asian crisis. At peak, prior to 2008, the firm managed $900m in assets. The firm is now seeking to rebuild the business to take full advantage of their core expertise. The team continues to employ 12 research staff in their ‘field’-office in Vietnam whilst the management team is based in New York bringing total headcount to 20.

“We have had a lot to digest over the past few years, not least the passing of four of our key principals during the 2006-2007 period. Despite the various headwinds over the years, we continued to develop the business and we are positive that our continued investment in our business infrastructure as well as the continuity of our team will sit well with institutional allocators. Collaborating with CITE on conveying our refreshed story with renewed focus on Frontier Markets comes at a time when we both believe that these markets will see a strong rebound,” says Don LaGuardia, Founder and CEO LR Managers. “The timing for our engagement could not be better.”

“For CITE, teaming up with LR Managers was an obvious choice”, Anjelika Klamp, Global Head of Portfolio Management, CITE Investments confirms. “The team has significant history, strong legacy relationships in most, if not all, Frontier Markets and a portfolio management history that has demonstrated that they can manage significant assets in small but very nimble markets. We were impressed by their ability to select companies that one would not ordinarily find when allocating to mainstream groups.”

see: http://www.lrglobal.com/


Press Release - CITE to work with Banque Bonhôte

Banque Bonhôte appoints CITE for their Corporate Governance & Due Diligence competence and mandates CITE to support its Acceleration Capital program

Click here for PDF-Press Release: Banque Bonhôte (Neuchâtel) and CITE Investments (London) have agreed to the terms of a Service Level Agreement that will allow both entities to collaborate on asset management company sourcing, due diligence and the provision of acceleration capital by Bonhôte Fund Solutions, a newly created entity at Banque Bonhôte.

Banque Bonhôte will use the relationship with CITE to strengthen its investor relations partnerships and uses CITE as an independent source in identifying asset management talent. It is proud to be an early adopter in asset management companies Corporate Governance, particularly in the hedge fund space.

“CITE has struck a chord with their approach to Hedge Fund Corporate Governance with our investors. For the past six months we have been evaluating our acceleration capital program with CITE and we believe it is beneficial for our clients to engage an experienced team with a strong background in asset allocation for the benefits of our clients. CITE’s sourcing capabilities of emerging asset manager’s fits with our wish to provide acceleration capital to great new talent”, says Steve Métrallet, Head of Bonhôte Fund Solutions. “We expect to engage with CITE across due diligence and corporate governance. Our Program comprises the Bank and a limited number of institutional partners (Private Banks, Family Offices, and Wealth Managers) that collectively manage over CHF20bn.”

“Banque Bonhôte has come up with a novel acceleration capital model. We are proud to have been appointed by such a prestigious bank to support their business development needs”, Sascha Klamp, CEO of CITE Investments confirms. “Banque Bonhôte will be able to build a first class asset manager program. It will be one of the first houses to endorse investor representation via a Corporate Governance code on a larger scale.”


On Bloomberg - Mapping Global Cues

We are finally in line with the market seeing a fed rate rise coming

Sascha spoke on Bloomberg about the luming Fed rate hike decision, December 2015. Further more we commented on potential mutual fund flows into India’s asset management companies 2016/7. Watch the video on Bloomberg here or see below.


CIO FORECITE - India Asset Management Companies

Most recently, Goldman Sachs announced the sale of its unit to Reliance MF for about $37.5m following Deutsche Bank’s unit sale to Pramerica. In contrast, KKR announced the acquisition of a 70% stake in Avendus, valuing the firm at $175m.

What is driving the exodus of foreign AMCs and does it present an opportunity for foreign investors to buy into the Indian equity market in general or indeed look at acquiring a smaller asset manager? Or, more dramatically, should one shun away completely? What is the opportunity cost of omitting such a large market and economy?

Investment Thesis In Brief

 

We suggest that India does present an interesting opportunity for asset managers, both on the mutual fund and alternative investment side. Despite the regulatory and fiscal challenges, the “I” in BRIC is still moving, although at a slower pace, for now. Exposing one’s portfolio allocation to the vast opportunity India offers, provides investors with a great excess return opportunity with some degree of volatility in the medium term. Those wanting to stand tall in the crowd may want to take a look.

To read the full PDF file including our sector inCITE, Data Analysis and Conclusion, click here.


Allocator Quarterly - Q4 2015

"This is a call to those CIOs who wish to discuss our view in more detail, but who would also like to discuss concrete steps that could be taken."

We have always suggested that investors need to take a medium-term, if not long-term, view on their asset allocation. If they don’t, they may run the risk of becoming traders, always arguing with the markets over the next up and down swings. Nothing could suit this view more than the Insurance Linked Securities asset class. A quasi fixed income type product with the added bonus of non-correlation to other major asset classes. At least in theory.

For the full pdf publication, click here.