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Making investment migration fair for all

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Making investment migration fair for all

Bruno L’ecuyer, Chief Executive, Investment Migration Council

Immigration is a widely talked about topic. Whether it’s discussing the Trump administration, or more recently, the Windrush Generation, it’s normally a topic that features at the top of the news agenda. However, when immigration is talked about, the narrative surrounding it rarely focuses on high-net worth individuals; and when it does, it’s seldom positive.

Let’s not get it twisted. It’s widely noted that immigrants can make incredibly contributions to the countries they decide to reside in, whether it’s from an economical standpoint or cultural standpoint, to name just a couple.

For example, the passion and support shown for immigrants of the Windrush Generation has proved that the British public, and British media, are slowly understanding the many benefits of immigration.

However, when it’s concerning immigrants that have obtained citizenship through investment, it’s a different story. Often the media’s perception is that those purchasing Tier One visas are skipping the immigration queue, as well as the security checks and adequate vetting protocols. This simply isn’t the case. Let’s look at the statistics.

In the third quarter of last year the Home Office issued 114 Tier One Investment Visas – a rise of 24 per cent over the previous quarter, and an astonishing increase of 247 per cent on the previous year. Simple maths will tell you that is just under a quarter of a billion pounds of investment into the UK economy, and that is before you consider visa extensions that cost up to £10 million. And then there is the investment made by individuals into the UK property market, the stock market, bonds or businesses. The list is endless.

Before we go into this in more detail, let’s be clear what the process actually entails. Investment migration enables anyone with £2 million to invest in the UK economy to be granted a Tier 1 Investment Visa. This money needs to be invested in a limited number of ways: in UK Government bonds, or share or loan capital in active, trading and UK-registered companies.

Naturally, this represents an important economic opportunity for the UK, especially at a time of such political and financial uncertainty. The money, which immigrants needs to invest within three months of landing in the UK, brings a major cash injection to the economy, helping to create jobs, sustain start-up businesses, and improve our productivity.

It’s not just the UK that runs investment migration programmes. By the end of 2017 there were over 80 active programmes in most major world regions. Citizenship-by-investment is a $3bn global industry (residence-by-investment being worth considerably more), bringing major benefits to countries around the world. To take just one example, impoverished Greece has enjoyed a windfall of €1.5bn thanks to its own Golden Visa programme.

And we do these migrants a disservice if we only focus on their money. Along with their investment, they can bring a wealth of knowledge and contacts with their home countries that can be of enormous help to business and government.

Of course, having any unchecked investment migration programme is open to abuse, and without oversight and a rigid code of ethics it leaves itself open to claims of corruption, or the potential to circumvent global regulation standards, such as The Common Reporting Standard (CRS), in addition to others.

Where does one start with a code of ethics? We believe that such a document should cover such issues such as integrity and ethical practice, competence and objectivity, confidentiality, conflicts of interest and regulatory compliance – among other issues.

Who should be involved in drawing up this code? In our view, it’s everyone’s business – from government to business to academia, all should pitch in to give their viewpoint on how we can make investment migration both ethical and effective.

And once drafted, will these be adamantine rules – fixed for all time? It’s hard to see how they can be. Investment migration is a relatively new idea, and as we grope towards a truly ethical way of managing this process across different countries and jurisdictions, we will have to accommodate new viewpoints and adapt to changing economic and political circumstances and realities.

In fact, we’ve have made a start on this issue with our Code of Ethics and Professional Conduct: the first stab at creating a worldwide framework for industry best practice. To create the code, we consulted with external academics and professional practice experts to give as well-rounded a view as possible – but we don’t believe that this document puts an end to all debate on the ethics of investment migration.

Rather, we see it as the first draft of a living, evolving document – one that every stakeholder from business, government and academia needs to help extend and improve.

The ultimate goal is to ensure that investment migration brings value to countries of destination and investment, and that the price for residence or citizenship ends up not in the pockets of kleptocrats, but invested in a way that will bring value to ordinary citizens.

Take the recent Roman Abramovich case. The issue is, when politicians see cases like this, their immediate reaction is to call for regulation, without any guidance from experts. We at the Investment Migration Council want to work more closely with politicians to ensure that the industry is indeed monitored closely, and that best practice is applied throughout. However, we also need to ensure that any more stringent regulation will not impact the contribution the industry has on a states GDP. Ultimately, we have a common goal, and the only way we’re going to achieve this goal is through cooperation.

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Cannon Wealth Solutions Discusses The Need to Rebalance  Portfolios and  Monitor Risk

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Risking a repeat of 2008

By Robert Cannon, the CEO of Cannon Wealth Solutions.

  • The world in 2021 is significantly different after a year of pandemic-related changes in how people live, work, and consume. This has a profound effect on S&P 500 companies and the performance of various asset classes.
  • When you do your annual portfolio checkup, you might find that you need to rebalance. Rebalancing your portfolio – buying or selling asset classes to reimpose your portfolio to your original target allocation – is a vital step in controlling and monitoring risk.
  • Buying investments in the asset class which is currently out of favor will require you to sell investments from the asset class that is performing well, and will furthermore represent an increased percentage of your portfolio’s overall value.
Robert Cannon, the CEO of Cannon Wealth Solutions

Robert Cannon, the CEO of Cannon Wealth Solutions

Robert Cannon, from Cannon Wealth Solutions, will be discussing the need to rebalance portfolios and monitor risk; and although it may seem counterintuitive, you are in fact taking profits from winning asset classes that may have reached their peak and buying other asset classes that have performance potential – in effect, you’re selling high and buying low.

Rebalancing for the Future

Determining your rebalancing strategy will ultimately result in a more consistent level of portfolio risk by buying low and selling high. The purpose of this is to create sustainable long-term value and consistency will help with setting more effective risk and return expectations – a key to maintaining patience under challenging markets. Cannon states that “it is important to rebalance your portfolio because it is essential for matching your tolerance risk as well as your sector concentration which is a form of Credit Risk Concentration”. So, if you are wondering how often you should rebalance your portfolio in order to minimize your risk, then Cannons’ advice would be to do it when your asset class is over 5% or every six months which has also been confirmed by UBS who have also “recommended a fairly simple 5% deviation rule-of-thumb for rebalancing: If the stock/bond component of your portfolio has shifted more than 5% from your target, then rebalance”.

Here are some frequently asked questions about the rebalancing of portfolios, answered by Robert Cannon:

Does portfolio rebalancing actually improve returns?

The rebalancing of portfolios can lower risk and often lower returns.

Is auto rebalancing a good idea?

Yes, auto rebalancing can help reduce risk and can potentially also enhance your returns.

How do you manage rebalancing in a recession and when conducting your simulations, do you also test your model in extreme market conditions?

During a market sell-off, it is usually not a good idea. For example, during extreme market volatility, retirement accounts and taxable investments accounts can quickly drift from the original target allocation as the value of the holdings increases or decreases sharply relative to the rest of your account. Because of this we always test each model in every market condition.

Monitoring Risk for the Future

In order to understand how your investment has performed, you should compare its results to an appropriate benchmark. Cannon reiterates that portfolio risk is measured by checking for the stock standard deviation of the variance of actual returns of the portfolio over time and will then proceed to implement a tactical asset allocation, thus avoiding portfolio volatility. Credit Suisse has also said in conjunction with Robert’s claim that “if the portfolio risk exceeds the risk ability, it can have a far-reaching impact on the assets of those beneficiaries or insured.” The report continues, saying “with a stricter rebalancing approach, investors can better estimate in advance whether their investment strategy will also enable them to survive difficult crises”.

Here are some frequently asked questions about monitoring risk, answered by Robert Cannon:

If rebalancing happens on a regular basis, do you monitor the funds’ performance in between?

Yes, all the time. By practicing a strict approach, investors can better estimate in advance whether their investment strategy will survive tough economic times. With consistent monitoring of funds and a solid rebalancing strategy, it is easier to determine the right size of a reserve or buffer for such negative events than it is using a buy-and-hold strategy. This ultimately will reduce the risk of having to make adjustments in asset allocation in unfavorable markets.

Final Take

The global pandemic of 2020 has caused investors to adhere and refocus their strategies by consistently their rebalancing portfolios, which have most likely paid off. The key to being successful is by planning for the future, regardless of the fluctuating economic market. Navigating the current investment climate can be very challenging, yet the process of rebalancing is a natural opportunity to switch up your asset allocation if you have not been confident in your original strategy and it is in the hands of your investors to think a few steps ahead to ensure proper action can be taken when current conditions change.

About the contributors:

By Robert Cannon is the CEO of Cannon Wealth Solutions. He has more than a decade of experience in wealth management.

 

Produced in Association with

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France announces loan plan to spur post-COVID business investment

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France announces loan plan to spur post-COVID business investment 1

By Leigh Thomas

PARIS (Reuters) – The French government on Thursday launched a new programme to relieve small and mid-sized firms’ strained balance sheets with quasi-equity debt partially guaranteed by the state.

After months of tough negotiations between the finance ministry and EU state aid regulators, firms will be able to tap up to 20 billion euros ($24 billion) in loans and subordinate bonds from early next month, Finance Minister Bruno Le Maire said.

“This will be an unprecedented raising of capital for investment in Europe and it should be a model for other European countries,” he said during a presentation of the programme.

French firms went into the COVID-19 crisis last year already with a record level of debt, and they took out an additional 130 billion euros in state-guaranteed loans from their banks as cashflow collapsed during France’s worst post-war recession.

Under the new programme, the debt will be junior to all claims other than a firm’s equity, it will have a longer maturity of eight years and must be used specifically for investment rather than refinancing existing debt.

The new debt is also more flexible, with a four-year grace period on principal repayments, but will also carry higher interest rates of 4-5.5% to cover the greater risk.

The scheme is innovative as banks will extend the loans to firms and then sell them on to institutional investors such as insurers through private investment vehicles, whose potential losses will be covered up to 30% by the state.

HELPING SMALLER FIRMS

While bigger companies have long had access to the high-yield debt markets, smaller firms in Europe have until now had to rely on shorter-term financing largely from banks, unlike in the United States where more flexible options have long existed.

France has in the past struggled to get a market off the ground for small-firm financing and hopes are high that this time the state guarantee will give an extra boost.

European firms’ heavy debt burden has fuelled concerns among economists and policymakers that they will not have the financial strength to carry out the investments needed for a strong recovery from the coronavirus crisis.

EU competition enforcers cleared the scheme on Thursday after lengthy negotiations to get the right risk-reward balance while not giving French firms an unfair advantage over their European rivals.

The onus will fall on banks to ensure through their client relationships that the loans are extended to firms strong enough to make good use of the funds.

“By taking 10% of the loans on our balance sheets without a state guarantee, that implicates us in the quality of these instruments,” said Credit Agricole Chief Executive Philippe Brassac, who also heads the French banking federation.

The state had originally planned to offer a guarantee of only 20% but had to increase that to 30% to attract institutional investors into the new market.

($1 = 0.8294 euros)

(Reporting by Leigh Thomas; additional reporting by Foo Yun Chee in Brussels, Editing by Gareth Jones)

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Bond scares linger, investors look to Powell

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Bond scares linger, investors look to Powell 2

By Tom Arnold and Hideyuki Sano

LONDON (Reuters) – Worries about lofty U.S. bond yields hit global shares on Thursday as investors waited to see if Federal Reserve Chair Jerome Powell would address concerns about a rapid rise in long-term borrowing costs.

The spectre of higher U.S. bond yields also undermined low-yielding, safe-haven assets, such as the yen, the Swiss franc and gold.

Benchmark 10-year U.S. Treasuries slipped to 1.453%. They earlier touched their highest levels since a one-year high of 1.614% set last week on bets on a strong economic recovery aided by government stimulus and progress in vaccination programmes.

“Equities and yields continue to both drive and thwart one another,” said James Athey, investment director at Aberdeen Standard Investments.

“Fed speech continues to express very little concern and certainly is not suggestive of any imminent action to curb the rise in yields. The Powell speech today is hotly anticipated, but I fear more out of hope than rational expectation.”

The Euro STOXX 600 was down 0.5% and London’s FTSE 0.6% lower.

The MSCI world equity index, which tracks shares in 49 countries, lost 0.5%, its third day running of losses.

The MSCI’s ex-Japan Asian-Pacific shares lost 1.8%, while Japan’s Nikkei fell 2.1% to its lowest since Feb. 5.

E-mini S&P futures slipped 0.2%. Futures for the Nasdaq, the leader of the post-pandemic rally, fell 0.1%, earlier hitting a two-month low.

Tech shares are vulnerable because their lofty valuation has been supported by expectations of a prolonged period of low interest rates.

But the market is focused on Powell, who is due to speak at a Wall Street Journal conference at 12:05 p.m. EST (1705 GMT), in what will be his last outing before the Fed’s policy-making committee convenes March 16-17.

Many Fed officials have downplayed the rise in Treasury yields in recent days, although Fed Governor Lael Brainard on Tuesday acknowledged that concerns over the possibility a rapid rise in yields could dampen economic activity.

In addition, anxiety is building over a pending regulatory change in a rule called the supplementary leverage ratio, or SLR, which could make it more costly for banks to hold bonds.

“The market is likely to be unstable until this regulation issue will be sorted out,” said Masahiko Loo, portfolio manager at AllianceBernstein. “There aren’t people who want to catch a falling knife when market volatility is so high.”

The market will also have to grapple with a huge increase in debt sales after rounds of stimulus to deal with a recession triggered by the pandemic.

The issue is not limited to the United States, with the 10-year UK Gilts yield on Wednesday touching 0.796%, near last week’s 11-month high of 0.836%, after the government unveiled much higher borrowing.

On Thursday, Germany’s 10-year yield was down 2 basis points to -0.31% after rising 5 basis points on Wednesday, still moving in tandem with U.S. Treasuries.

Currency investors continued to snap up dollars as they bet on the U.S. economy outperforming its peers in the developed world in coming months. [FRX/] The dollar rose to a roughly seven-month high of 107.33 yen.

“U.S. dollar/yen has been on a one-way trajectory since the start of 2021,” said Joseph Capurso, head of international economics at the Commonwealth Bank of Australia. “The brightening outlook for the world economy is a positive for both U.S. dollar/yen and Australian dollar/yen.”

Other safe-haven currencies were weakened, with the Swiss franc dropping to a five-month low against the dollar and a 20-month trough versus the euro.

Other major currencies were little changed, with the euro flat at $1.2054.

Gold fell to a near nine-month low of $1,702.8 per ounce on Wednesday and last stood at $1,714.

Investor focus on a U.S. economic rebound was unshaken by data released overnight that showed the U.S. labour market struggling in February, when private payrolls rose less than expected.

Oil prices rose for a second straight session on Thursday, as the possibility that OPEC+ producers might decide against increasing output at a key meeting later in the day underpinned a drop in U.S. fuel inventories. [O/R]

U.S. crude rose 0.6% to $61.65 per barrel. Brent crude futures added 0.7% to $64.54 a barrel,

(Additional reporting by Koh Gui Qing in New York; editing by Sam Holmes, Richard Pullin, Simon Cameron-Moore, Larry King)

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