Leading offshore law firm Harneys is predicting a major upswing in infrastructure investment in Argentina, where legislative changes to promote Foreign Direct Investment are set to unleash over US$80 billion of capital for badly needed improvements to Argentina’s transport infrastructure, as part of a wider US$240 billion national investment plan.
Harneys also expects the Cayman Islands to play a significant role in structuring the investment opportunities for the mammoth infrastructure requirements. With international investors targeted for the vast majority of the capital required, complexities in the local tax and regulatory regimes in South America mean that infrastructure finance deals of this nature are typically structured as Public Private Partnerships (PPP) through project bond issuances in the international capital markets.
Nicole Pineda, partner and head of Harneys’ Banking and Finance Group in Cayman said: “As the jurisdiction of choice for these transactions, the Cayman Islands has played a central role in a number of successful infrastructure investment projects across Central and South America and Harneys’ experts have been instrumental in this market, advising on a number of innovative ‘first-of-a-kind’ infrastructure finance transactions across the region including in Colombia, Peru and Brazil.”
Cayman’s political stability as a British Overseas Territory and its highly regarded legal system based on English Common Law, with the ultimate Court of Appeal the UK Privy Council, has attracted investors around the world for decades when engaging in complex cross border investments involving multiple asset classes.
Business friendly reforms enacted in Argentina since the 2015 election of President MauricoMacri have addressed the critical underfunding of infrastructure after more than a decade of underinvestment. According to a report by Deloitte, the National Government has identified investment opportunities of approximately US$240 billion, across multiple sectors. This includes US$80 billion for Transportation and Infrastructure, US$60 billion for Federal Infrastructure and Public Works, plus over US$35 billion for Power and Renewable Energy.
Argentina’s new highways PPP program, which will invest $26 billion over the next four years, has already begun with the first six upgrade projects currently out to tender worth $8 billion and another two rounds still to come to the market before the end of this year. The program has been designed to address prior concerns from international investors, who had not been comfortable with Argentinian assets due to the political climate and economic performance, with risk reduction measures and a range of guarantees, blending the best practices from successful PPP programs elsewhere in the region and most notably from Peru.
These guarantees include the issue of TPI certificates (títulos de pagospor inversion) which indicate the amount of money due to a developer at various stages of the construction process, which can be cashed in US dollars.
The Cayman Islands’ flexible corporate framework and depth of legal expertise means that highly optimal structuring solutions can be developed for these types of transactions, giving great comfort to investors and banks, when deals pass through a number of different legal systems and investors from many countries around the world are involved.
Nicole commented: “Cayman’s tried and tested regime for cross border infrastructure investment is held in such high regard by the international financial community and customary market practice means that it would be extremely difficult to persuade a major international bank or project sponsor that the SPV issuing the debt should be located anywhere else. Crucially, the Cayman Islands is the only jurisdiction in the world to have enshrined into statute the fundamental principles of Limited Recourse and Non Petition, which provide a level of comfort to investors that is simply unmatched by any other international financial centre.”
Horacio Woycik, head of Harneys’ Montevideo office said: “The reforms from President Macri’s new administration, including the removal of capital controls, resolving the issues from defaulting debt and regaining access to global capital markets, in addition to the PPP initiatives are now paying dividends economically with GDP growth, lower real public expenditure and a reduced fiscal deficit to GDP ratio. The investment climate in Argentina for infrastructure is heating up and the market is ripe for these projects after eleven years of underfunding. It is clear there is a dramatic need for these improvements to the infrastructure and the technical enhancements undertaken to the PPP initiative will make these deals interesting to international investors.”
Marco Martins, head of the firm’s Latin American Group and Cayman Managing Partner added: “The Cayman Islands, with its highly developed financial services sector and strong track record in the region is best placed to take advantage of the resurgence in Argentinian investment and at Harneys we work seamlessly with local tax and regulatory experts, alongside lead US counsel to meet any challenge and develop the optimal structuring solution.”
Harneys’ draws its attorneys form the worlds’ most highly respected law firms. The firm’s South American offering is uniquely supported by its representative offices in Montevideo and Sao Paulo. All of the attorneys in these offices as well as those in the dedicated Latin American Group in Cayman are experts in Latin American structured finance, investment funds, general corporate and private client work and are fluent in English, Spanish and Portuguese. Their experience and expertise in Latin America is truly unparalleled.
What Investors are Looking for in the Next Fintech
By Shaun Puckrin, Chief Product Officer, Global Processing Services
Are investors getting pickier when it comes to fintech? It’s hard to say for sure, but there are recent developments that point towards a shift in investor interests.
Firstly, research from Innovate Finance shows that investment in UK fintech dropped by 39% in the first half of 2020, compared to the same period in 2019. In H1 2020, $1.8bn of venture capital was invested in 167 startups compared to H1 2019, when $3bn was invested in 263 startups.
However, it’s worth mentioning that the $1.8bn UK fintech investment earlier this year was still a 22% increase over the second half of 2019, when funding totalled $1.5bn. Therefore, all signs suggest that investors will make significant increases in capital investments during the rest of the year.
Secondly, it appears that the current investor appetite is for more mature, later-stage fintechs: more than half of the $1.8bn went to just five companies: Revolut, Checkout.com, Starling Bank, Onfido and Thought Machine. Perhaps it is the ongoing economic uncertainty surrounding the COVID-19 crisis that is prompting inventors towards perceived “safer bets”, but what we do know for a fact is that early-stage fintechs raised just 8% of the total investments.
Is there a silver lining? The coronavirus crisis has rapidly accelerated the digitisation of financial services, with lockdown restrictions encouraging those previously resistant to engage with digital financial services. The stage is set for fintechs to thrive and deliver offerings that meet shifting consumer demands. To be in with a shot of wooing investors, fintechs will need to demonstrate certain qualities that set them apart from other companies.
So, what are the four things investors are looking for in the next big fintech?
- A strong, differentiated proposition
The fintech marketplace is crowded and filled with mature innovators setting a high standard for everyone else. Against this backdrop, “challenging the incumbents” is, unfortunately, no longer a USP.
To really catch the attention of investors, you must be addressing a clear, pressing market need that no one else is tackling. Not just that, your proposition must be easily articulated and backed to the hilt with market research that proves the opportunity is worth pursuing.
Ultimately, investors are going to ask the question: why you? What are you doing that’s unique? What do you have that means you – and only you – can do this? They will also want to know how defendable that proposition is once you’ve built it. What is your moat? Getting this right means a foot in the door with investors.
- A path to profitability or exit
This is an extremely pertinent point, especially given recent news surrounding the financial results for many of the big challenger banks, and how they show the route to profitability for challengers isn’t necessarily straightforward or easy.
In the current environment, an attractive fintech must be able to demonstrate a concrete, long-term plan for the financial viability of the business. There are different paths for investors to make their returns, be it a trade sale or IPO, but the fundamentals of securing a successful outcome are usually the same. By being able to demonstrate how you can plot a course to attract and serve your customers for less than you can monetise them will be at the route of any subsequent valuation, no matter how its outcome is achieved.
Whatever the goal, you need a plan to support your ambitions. You need to demonstrate an understanding that building a scalable and sustainable fintech is likely to require significant capital – you must invest in the right people, partners and technology to make money. Developing competitive services, attracting customers and, crucially, monetising your offerings, requires hard work and the ability to adapt to your customer’s needs.
- Strong leadership and core team
Ultimately, securing investment is about building relationships and what often tips the scales is having the right people in the room. This is why a great team is crucial.
A great team means many things: Strong leadership with the vision to build something revolutionary. The skills and expertise to turn that vision into reality. The experience to traverse the pitfalls and opportunities you’ll face. And finally, the ambition and determination to make the business successful no matter what.
Building the right team with the right qualities is often what convinces investors that they’re putting their money in the right place.
- The right partnerships
Partnering with the right organisations can give you strategic access to the solutions that will help build and scale your offering. Their expertise and experience are often invaluable; many partners have been in the game for years and may have already solved problems you might be encountering for the first time.
From an investor’s perspective, seeing that you’re working with credible partners and proven tech helps build confidence. It shows that you’re a less risky investment, and that you respect their investment and are going to be using their money to build real value.
Fintech investment is not dead
After this recent blip, we expect the amount of investment into fintech to continue to be significant, at least in relation to other industries. But there’s no avoiding the fact that investors will be looking to stress test potential investments much more than before.
By creating a differentiated proposition, planning a clear route to profitability, building a strong team, and finding the right partners, fintechs will be in with a shot of securing the funding they need to make their grand vision a reality.
REIT Trends: Innovative Data Strategies for Better Investments
By Josh Miramant, CEO and founder of Blue Orange Digital
Data transformation is this decade’s differentiator for REITs (Real Estate Investment Trusts). Predictive acquisition analytics, occupancy optimization, and rent retention are the dream, but, before that, you need to unify the disparate spreadsheets, one-off databases, and 3rd party apps that cut across the Real estate industry. Building the infrastructure to unify data enables real estate investment funds to find better investments and make better decisions.
In the past decade, data has been at the center of the digital revolution. It has enabled new applications, created new business opportunities, and has enabled innovation across the entire CRE sector. Leading organizations engage in data-driven problem solving on a daily basis. Data has become the compass that is guiding both operational and investment decisions.
However, in 2020, data is ubiquitous. Simply having access to data is not enough for an actual competitive advantage. Making sense of the vast amounts of data available today requires computing infrastructures, flexible processing architectures, and advanced algorithms. Without these, simply having data is useless. Moreover, data could turn into an expense if the appropriate tools are not used for handling it.
Below are some technologies and data strategies for investors to leverage while capitalizing on the opportunity of distressed commercial assets. The foundation of any successful predictive analytics model is a unified data storage solution and machine learning(ML) automation.
How to take advantage of third party data
Traditional data storage tools are built for department-specific data, aggregated in isolated warehouses. Such storage solutions have worked well in the past but only offer access to a limited section of data. To exemplify, the marketing warehouse may contain social media metrics, while the sales warehouse contains prospect company assessments. The lack of overlap of this information prohibits a better understanding of both sets of data.
Modern data storage tools (such as data lakes) work on the idea of unified data. They make it possible to store a large variety of data sources in the same location. This makes it easy to integrate both internal and external data sources and to use ALL data available for analytics.
Storage choices should no longer limit the ability to manage and make sense of your data.
Unified Data Benefits at a Glance:
- Easier data access
Users with different access levels can access both structured and unstructured data across the entire organization
- Faster data preparation
Adequate storage solutions translate to reduced data wrangling and preparation efforts
- Enhanced agility
Query tools enable datasets to be assembled “on the fly”, resulting in datasets that can be repurposed
- Streamlined data exploration and analysis
Larger, broader data sets are easily available for a variety of use cases: from advanced analytics models to basic business reports
Benefits of Unified Data in Commercial Real Estate
Unstructured data turns into more in-depth customer and market understanding
Unified data offers REITs access to a 360-degree market view, by providing access to a variety of real estate features. Rental values, sociodemographic data, and even geographic features of a location can be analyzed simultaneously. Traffic, area walkability, social media reviews of neighborhood amenities, and even IoT sensor data can also be integrated on top. All these different data sources offer the possibility to gain insights at a property-level. Such granular insights can only be gained from unstructured data and enable REITs to minimize risks and deploy capital in the right places.
ML speeds up processes to improve internal decision making
Unified data makes it possible for Machine Learning algorithms to tackle a variety of real-estate tasks: from property management applications to tedious back-office tasks. Remote property monitoring solutions and live tracking of public and private spaces are some common examples of ML-enabled applications. At the same time, automated
property valuation models are nowadays ubiquitous and configured to integrate a variety of data sources. Once in place, such ML-tools can either work autonomously or give suggestions to human decision-makers. Such man-algorithm cooperation ensures increased performance, minimized operational costs, and more efficient, streamlined internal processes.
Predictive analytics for increased ROI
Unified data enables predictive analytics on real-time data and thus enables REITs to identify investment opportunities ahead of their competition. Predictive technologies fill in the gaps where traditional BI tools and descriptive models fail to deliver. Instead of answering questions like “what is happening now?”, predictive analytics helps figure out “what could happen in the future?”. Quantitative evaluations with regards to investment opportunities, risk assessment, and market volatility give REITs a solid base for tackling operational efficiency. When data insights are replacing subjective interpretations, it is ensured that capital is spent in the appropriate places and unnecessary costs are cut to a minimum.
The IDC reports that investments in the new applications can pay for themselves in 9 months and achieve an ROI of 415% over 5 years.
Case Study – Increased Accuracy of Property Valuation Modeling
Research conducted in 2017 tackles “the effects of walkability on property values and investment returns.”. In order to model walkability and to assess its impact on real estate property values, they took into consideration a variety of features characterizing local activity.
“Several different physical and social attributes of the area around a property can affect walkability. As such, it is a multi-dimensional construct composed of different factors which together comprise a single theoretical concept. Contributing attributes include urban density, land use mixing, street connectivity (i.e. the directness of links and the density of connections), traffic volume, distance to destinations, sidewalk width and continuity, city block size, topographic slope, perceived safety, and aesthetics.”
That is an impressive list of features and we can assure you: such attributes would rarely be found in traditional, historical sales datasets. These are features that are known as “alternative” or “orthogonal.”
They originate in third-party data sources and were originally perceived to have little connection to the problem being tackled. However, through machine learning algorithms they were found to be quite influential when taken into consideration for investment properties. While humans may not be able to see all the factors impacting an outcome variable (e.g. property value), algorithms do a great job identifying complex patterns. For this reason, integrating “seemingly unrelated” third-party data for analytics has proven to be the best way to learn from data.
Alternative data completes the image that the traditional data sets are painting. It brings in a fresh perspective, with the possibility of discovering unexpected patterns. Most importantly, orthogonal data is usually data generated by humans and their day-to-day activity. Since this is much closer to how humans make decisions, it only makes sense to look at this data in order to discover buying patterns and real estate trends.
The benefits of alternative data can be seen well beyond this example. With a variety of data sources that are emitting data, state-of-the-art CRE applications have used anything from social media feeds, to geolocation information, and IoT sensor data.
A unified data infrastructure plays a critical role in data transformation strategies. Not only does it bring agility and flexibility to existing data architectures, but also opens up new opportunities for data access and management.
Unified data tools are an investment in the future. As real estate data is becoming more and more diverse, investment decisions will also become more complex. REITs that invest in data processing expertise and modern tools will see their benefits for years to come.
Blue Orange Digital works closely with organizations to identify, plan, and implement data transformation strategies. Our team of Ph.D. data scientists anad engineers has vast experience setting up data-centric architectures and implementing modern analytics solutions.
Blue Orange Digital makes it possible to use the right tools and the right people for your data transformation strategy. REITs now have a chance to not let data turn into waste and actually transform it into a useful asset, that drives strategies and optimizes their investment decisions.
Northern Trust: Outsourcing Accelerates Through Pandemic as Investment Managers Seek to Improve Margins, Enhance Business Resilience, and Future-Proof Operations
White Paper Sees Increase in Managers Outsourcing Middle and Front Office Functions to Achieve Optimal Business Structures
According to a white paper published today by Northern Trust (Nasdaq: NTRS), investment managers of all sizes and strategies have been prompted to undertake a comprehensive review of their operating models as a result of the Covid-19 pandemic which has accelerated existing trends that are compounding cost pressures. This has led increasing numbers of managers to outsource in-house dealing and other functions, such as foreign exchange and transition management, hitherto seen as core.
While cost savings remain a core driver, and indeed are one outcome of outsourcing, costs are no longer the only focus. Far from being solely a defensive reaction to increased pressure on margins, the white paper (‘From Niche to Norm’) describes outsourcing as part of the target operating model, or moving toward the ‘Optimal State’ for many investment managers, and explains how the focus “has expanded to the variety of other potential benefits offered – enhanced capabilities, improved governance and operational resilience.”
Gary Paulin, global head of Integrated Trading Solutions at Northern Trust Capital Markets said: “The pandemic has challenged a range of operational assumptions. Working from home has, for example, questioned the need for a portfolio manager to be in close proximity with the dealing desk. Previously considered essential, the pandemic has effectively forced firms to ‘outsource‘ their trading desks to remote working setups and the effectiveness of this process has disproved the requirement for proximity, in turn, easing the path to third-party outsourcing. Many investment managers are actively considering outsourcing to a hyper-scale, expert provider as a potential, cost efficient solution – one that maintains service quality and, hopefully, improves it whilst adding resiliency.”
Northern Trust’s white paper compares outsourced trading to software-as-a-service stating: “instead of carrying the cost and complexity of running an in-house solution, firms move to an outsourced one, free up capital to invest in strategic growth and move costs from a fixed to a variable basis in line with the direction of travel for revenues.”
Guy Gibson, global head of Institutional Brokerage at Northern Trust Capital Markets said: “The opportunity to deploy capital to build new fund structures, develop new offerings, focus on distribution and enhance in-house research has been taken up by several of our clients to the benefit of their investment approach, and to the benefit of their investors. Additionally, in the last two months alone, many firms have recognized that outsourcing to a well-capitalized, global platform has enabled them to take advantage of cost-contained growth opportunities in new markets.”
A further development, which has echoes of the journey the technology industry has already undertaken, is the move towards ‘whole office’ solutions, which represent the next potential wave in outsourcing.
According to Paulin; “recently we have observed a growing number of managers wanting to outsource to a single, hyper-scale professional service provider who can do everything, everywhere. This aligns with Northern Trust’s strategy to deliver platform solutions for the whole office, serving our clients’ needs across the entire investment lifecycle.”
Integrated Trading Solutions is Northern Trust’s outsourced trading capability that combines worldwide locations and trading expertise in equities and fixed income and derivatives with access to global markets, high-quality liquidity and an integrated middle and back office service as well as other services, such as FX. It helps asset owners and asset managers to meaningfully lower costs, reduce risk, manage regulatory compliance and enhance transparency and operational efficiency.
How can financial services firms keep pace with escalating requirements?
By Tim FitzGerald, UK Banking & Financial Services Sales Manager, InterSystems Financial services firms are currently coming up against a...
What Investors are Looking for in the Next Fintech
By Shaun Puckrin, Chief Product Officer, Global Processing Services Are investors getting pickier when it comes to fintech? It’s hard...
How payments can help streamline operations and boost customer satisfaction in the vending industry
By Darren Anderson, Business Development Manager, Self Service, Ingenico Enterprise Retail The COVID-19 pandemic has had an astounding impact on...
How virtual training is changing the game in remote learning
By Aris Apostolopoulos, Senior Content Writer at TalentLMS and a faithful follower of the eLearning mentality. Along with the latest...
Businesses need to prepare for Brexit transition now
THE Brexit process has been marred by uncertainty and it still remains unclear what our future relationship with the EU,...
How to maximise your virtual communications for effective team meetings
By Tony Hughes, CEO at Huthwaite International leading global provider of sales, negotiation and communication skills development, shares advice on...
Business and data – building better operations
By Bryan Kirschner, Vice President Strategy, DataStax Building your business on data. What have we learned so far? Coming into...
REIT Trends: Innovative Data Strategies for Better Investments
By Josh Miramant, CEO and founder of Blue Orange Digital Data transformation is this decade’s differentiator for REITs (Real Estate Investment...
Financial transformation is the new digital transformation
By Luke Fossett, ANZ Head of Sales for global recurring payments platform, GoCardless The term ‘digital transformation’ has become somewhat...
RegTech 2020: Exploring financial crime and the emergence of RegTech in the USA
with host, Alex Ford, VP Product and Marketing, Encompass, and guests, Dr Henry Balani, Head of Delivery, Encompass; Pawneet Abramowski,...