Skip to main content

Wealth Management & 2014 performance

Several of my friends (all ex-bankers) have been recruited to run family offices -- or at least the investment arm of family offices.  Overall the experience has been good, aside from the last minute: "fly down to Miami to brief me on what's going on" the work is interesting and moving from the sell side to the buy side can also be great.

The overall view of 2014 was that it was a spectacular year.  All three (ok not that many) hinted that performance had been spectacular:  " its a lot easier to make money went you start with a lot".  The figures were simply mind blowing:  21%, 27% and 31%.  So what the encore for 2015?

They are all taking their cash off the table.

Bottom line, although they don't think the market is going to crash, but the odds of a market crash are higher now than they've been in some time; Oil price collapse -- still around $50/bbl is a problem for the debt capital market and housing market (here in Canada), but overall in the US too with about 1/3 of junk bonds being issued by mineral ressources or energy extraction companies -- who are not having a good time. They've all noted a real slow down in China, things in Europe are OK but not great and Greece could prove to be a real problem (it could also fade away-- as some form of agreement is reached with the EU).

But, bottom line they've got an amazing 2014 and there's no pressure to generate big numbers in 2015.  All three have taken the view that after an excellent year, they can afford to hold and wait.  Take it easy (not easy for my friends that are ALL deal junkies!)  Still, I have no idea if this trend is pervasive or its just a coincidence, but it remains amazing that three out of three are taking the cash and going home.

Food for thought

Post Script:  It was pointed out to me over the weekend that as a Canadian wealth manager, a good percentage of these investors' cash would have been invested in USD denominated assets -- and since the CAD as dropped by nearly 15% over the past 12 months, a 21% performance is not that great...


Popular posts from this blog

Trucker shortage? No a plan to allow driverless rigs

There are still articles on how America is running out of truckers -- and that its a huge problem, except its not a problem, if it was a problem salaries would rise to so that demand would clear. Trucking is one of those industry where the vast majority of participants are owner/operators and therefore free agents.

Salaries and cost are extremely well know, "industry" complains that there are not enough truckers, yet wages continue to fall... Therefore there are still too many truckers around, for if there was a shortage of supply prices would rise, and they don't.

What there is though is something different; there is a push to allow automatic rigs to "operate across the US", so to encourage the various authorities to allow self driving rigs you talk shortage and hope that politicians decided that "Well if people don't want to work, lets get robots to do the work" or words to that effect.

This has nothing to do with shortage of drivers, but every…

Every punter says oil prices are on the rise: Oil hits $48/bbl -- lowest since September 2016

What the hell?

How could this be, punters, advisors, investment bankers all agreed commodity prices  in general and oil prices in particular are on the rise...its a brave new era for producers and exporters -- finally the world is back and demand is going through the roof, except not so much!

What happened?  Well energy is complicated, the world operates in a balance -- 30 days of physical reserves is about all we've got (seriously) this is a just in time business.  So the long term trend always gets hit by short term variations.

Global production over the past 12 months has risen by somewhat less than 1.5% per annum.  As the world market changes production becomes less energy intensive (maybe), but the reality is that the world is growing more slowly -- America Q4 GDP growth was around 1.9% (annualized) Europe is going nowhere fast (the GDP growth in Germany is overshadowed by the lack of growth in France, Italy, Spain (lets say 27 Euro members generated a total GDP growth of 1.2…

Paying for research

This morning I was reading that CLSA -- since 2013 proudly owned by CITIC -- was shutting down its American equity research department -- 90 people will be affected!

Now the value of a lot of research is limited, that is not to say that all research is bad. In fact, I remember that GS's Asia Aerospace research was considered the bible for the sector.  Granted, there was little you could do with the research since the "buy" was for Chinese airlines...that were state owned.  Still it was a vey valuable tool in understanding the local dynamics.  It seems that the US has introduced new legislation that forces brokers to "sell" their research services!  Figures of $10,000 an hour have been mentioned...

Now, research can be sold many times; if GS has 5000/6000 clients they may sell the same research 300x or 400x (I exaggerate) but this is the key -- Those who buy the research are, I presume, prohibited from giving it away or selling it, at the same time the same rese…