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Seven Things The Chancellor Forgot To Mention
Latin America Where Next?
Compliance Officers The Crackdown Continues
JULY/AUGUST 2015 ISSUE 41
For today s discerning financial and investment professional
STILL THE PLACE TO BE
Cover.indd 1 03/08/2015 15:00
Global Multi Asset Income from BlackRockNo one can predict the future, but there are ways to see several steps ahead.
With knowledge and expertise from the best of BlackRock, backed by industry leading risk management capabilities, our team has the foresight to know when to invest and when not to.
This strategy is now available to UK investors via the BlackRock Global Multi Asset Income Fund
For a compelling balance between income and risk, visit: BlackRock.co.uk/GMAI
1Defined as CCC bonds directly exposed to the shale oil market
The team decided NOT TO INVEST
Oil supply increased, plummeting sale prices and devaluing these bonds by more than 23%
We felt that the level of risk did not reflect the yield available at the time. The team focused on other asset classes
Investors see benefits despite high risk, with attractive income opportunities on offer
MARKET BOOMING for American Shale OilFledgling companies continue to issue low-rated, high-yield bonds1
We knowWHEN TO INVESTand when not to
Professional Clients only
Trusted to manage more money than any other investment firm in the world4
This material is for professional clients only and should not be relied upon by retail clients. Sources: 2. Info Energy Agency Q1 2015. 3. Barclays High Yield Oil Field Services Index 01/01/14 31/01/15, CCC bonds fell by at least 23% (USD). 4. BlackRock as at 31/12/14, AUM based on $4.525 trillion. Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: 020 7743 3000. Registered in England No. 2020394. For your protection telephone calls are usually recorded. BlackRock is a trading name of BlackRock Investment Management (UK) Limited. 2015 BlackRock, Inc. All Rights reserved. BLACKROCK, BUILD ON BLACKROCK, are registered and unregistered trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners. Ref: RSM-0547
C O N T E N T S
CONTR I BU TORS
Brian Tora an Associate with investment managers JM Finn & Co.
Lee Werrell a senior compliance consultant and industry adviser.
Richard Harvey a distinguished independent PR and media consultant.
Nick Sudbury known for his columns in many leading financial magazines.
Neil Martin has been covering the global financial markets for over 20 years.
Michelle McGaghbrings a wealth of experience on industry developments.
Abbie Tanner is Managing Director at Gliocas Consulting.
6 News So what did George forget to mention?
Latin Americas unlikely saviour
14 Crystal Ball, Anyone?Julys a tough month, says Brian Tora
What sorts of patterns will suit your clients?
20 How Many Platforms?Different platforms for different clients
24Asia After the China Upset
Theres still plenty to go for, says HyungJin Lee
28 Powering Ahead We talk to Michael Beveridge at Standard Life
32A Busy M&A Scene
We continue our interview series on exit strategies
36 The Crackdown Continues But keep calm and the regulator will be reasonable
IFA Magazine is published by IFA Magazine Publications Ltd, The Old Wheelwrights, Ham, Berkeley, Gloucestershire GL13 9QH Tel: +44 (0) 1179 089686 2015. All rights reserved
IFA Magazine is for professional advisers only. Full details and eligibility at: www.ifamagazine.com
Editorial advisory board: Richard Butler, Michael Holder, Ian McIver and Mark Pullinger
Editor: Michael Wilsoneditor@ifamagazine.com
Art Director: Tony Merlinitony.email@example.com
Publishing Director: Alex Sullivanalex.firstname.lastname@example.org
THE FRONTLINE: Yes, the China crunch was gruesome, but theres optimism in the air
IFA Magazine is a trademark of IFA Magazine Publications Limited. No part of this publication may be reproduced or stored in any printed or electronic retrieval system without prior permission. All material has been carefully checked for accuracy, but no responsibility can be accepted for inaccuracies. Wherever appropriate, independent research and where necessary legal advice should be sought before acting on any information contained in this publication.
Cover.indd 2 03/08/2015 15:00
The global economy had enjoyed a seven-year bull run which had encouraged millions of investors to forget the panics of the previous decade and to put their hard-earned cash back into a market which, according to the American pundits, was set for ever-greater things. The Dow eventually closed the month 44% up on its year-earlier level.
The hideous oil price spiral of popular memory had turned into a rout, with crude prices halving in a year, while consumer prices and interest rates had moderated and life was really looking pretty good. Even though economic growth had just started to flatten off in the US.
If there was one cloud on the horizon, it was that US government debt had been allowed to balloon during one of the biggest Keynesian experiments of the last quarter-half-century. But hey, that wasnt so bad because it had only helped to reinforce the dominance of the US dollar at a time when European economies had mired themselves in debt that didnt look nearly so attractive. Yes, there were definite advantages to having the worlds refuge currency.
The month of August began well enough.
Or so we thought at the time
The year, of course, was 1987, the Keynesian boom had been started in 1982 by Ronald Reagan, and the problem that had been lurking below the surface since the spring, like a shipwreck in waiting, was that the Fed had quietly conceded that its ability to maintain the strong dollar was looking a little thin. But the shock, when it came, it came, was swift.
The savage events of October 1987 are etched into every stock market veterans memory. The plunge of 2008 was a mere trifle in comparison, although admittedly it certainly wasnt over in a few months like its 1987 counterpart. In a few days Hong Kong was down 45%, London and New York by 27% and 23% respectively, and Australia suffered a crippling 42% blow. All round the world, investors reined in their emerging markets exposure - and ironically, the eventual upshot was that the dollars suction power if anything increased.
And to think, we didnt see a single bit of this coming as we
returned from the August beaches. Even today, no-one is sure whether the October 1987 panic was caused by big-scale fiscal uncertainty, or Iranian gunfire in the Gulf, or program trading (the favourite villain), or a simple bubble that had ignored a lack of market safeguards?
Nowadays, of course, we have those safeguards. Stock markets shut down automatically when prices drop by a certain amount; reporting standards are much better; and corporate governance has improved.
So why does it trouble me that Shanghai should have hit those very trading buffers at the exact same moment that Europe was facing a nine-digit debt write-down over Greece? And what is it about those unusually high p/es that bothers me at a time when profits are moderating?
The odds against an October panic are long. But a short sharp correction might be another matter.
Mike Wilson, Editor
W O R D S O F W I L S O N
Ed's Welcome.indd 3 03/08/2015 09:54
Summer of Discontent
Youll probably have noticed
that this year hasnt turned out
to be the dream ride that the
equity bulls were forecasting
back in January. But cheer
up, Autumns on its way
The expected downturn in the Greek situation turned into a sudden rout as the Syriza government turned upon its creditors with what Finance Minister Yanis Varoufakis was pleased to call Game Theory, and the rest of us would probably call terrible bad manners. It was no great surprise that Germanys Angela Merkel eventually stopped playing the smiling diplomat and unleashed the Dobermans on Greek premier Alexis Tsipras, with an enforced deal that has shaken many international observers with its ferocity. And which may yet prove to be unenforceable in practice - there are few who doubt that Greeces 300 billion debt will ultimately prove unpayable.
All things considered, the European equity markets did well to hold onto any of the years gains at all, and in the event the EuroFirst 300 picked up by 10% in the second week of July alone. A sure sign, if it were needed, that Varoufakiss idea of starting a stock market fire that would scare the Troika into submission had been a ludicrous fantasy.
Meanwhile, on the other side of the planet, Chinas long-awaited equity panic hit the markets just before the June issue of IFA Magazine hit the doormats. (Drat, and wed worked so hard to warn you in advance.) Intra-day price falls of up to 10% in Shanghai were enough to trigger the safety shutdown routines, thank goodness. But
it was notable how the Beijing authorities responded with attacks on short-sellers and hedge funds before they addressed the problems of their own making. As on 16 July, the Shanghai Composite was struggling around th