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Trading on Your Assets

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By Jackie Maguire, CEO, Coller IP

Interest in securing value from intangible assets through strategic management of intellectual property has grown considerably in recent years. This is partly because of the growing awareness that typically,up to 80% of most companies’ value* now evolves directly from intangible assets, including intellectual property (IP) – and also because of the rapidly increasing threat from counterfeiting.

The threat to the financial services industry – as well as businesses more generally – from continuing economic uncertainty and increased regulation makes consideration of the strategic use of intangible assets imperative. Some firms are starting to realise that IP is a way to differentiate themselves in this sector and that intangible assets can play a major role in raising funds and finance.

The number of patent application filings in the financial services sector in the US from fiscal years 2002 to 2010 increased from 7,400 in 2002 to 17,231 in 2010 while the number of insurance patents has increased by over twenty times from a rate of around 15 in 2002 to 332 in 2012.**

However, because it can be challenging to manage intangible assets effectively in a business, including determining who is responsible for them, intangible assets are often misunderstood and therefore undervalued on the balance sheet.

Intangible assets can be considered in three main groups.Intellectual Property means protection of your products, services and brand by patents, trademarks, copyright, designs and trade secrets. Intellectual Assets (IA) relate to the people-based assets of a company, including key skills, know-how and processes; the way your people do business. And finally, Intellectual Capital (IC) encompasses the other intangible assets of a company, including relationships, branding, reputation and contracts which provide the route to market (see diagram).

trading-on-your-assets

As with other assets, IP can be valued, bought, sold or leased. Many companies have significant intangible assets not currently recorded on their balance sheets. These can include trade marks, domain names, websites, order books, customer lists, copyright in training materials, software, and patents. In many cases these are tradable commodities with an associated cash value. In addition, intangible assets can allow (in certain circumstances) for the trustees of a pension fund to purchase and lease back an asset from the company releasing cash to the company and providing a return for the pension fund. It is possibly a strategy, too, for retirement, since patents can (in certain circumstances) continue to provide licensing revenue.

Many organisations are struggling to secure capital to invest in the growth of the business and many pension funds are struggling to make good returns on their investments so using IP can be a good solution. This option is still not widely realised.

As Clifton Asset Management says,
“Around 40 per cent of the UK’s SME owners have funds in pension schemes which could be immediately deployed through IP and pension-led funding. This would create an estimated cash injection of £100 billion into the UK’s SME economy.”

Some companies may use IP-based pension-led funding as their only source of business finance while others find that it works well alongside traditional lending options. Organisations such as Clifton Asset Management work closely with bank advisors to encourage them to add pension-led funding to their portfolio. Such companies can help organisations comply with HMRC rules on utilising an independent IP valuation in order to arrange a lease with a pension fund.

To quote Clifton Asset Management’s sister company, Morgan Lloyd, “Investment in Intellectual Property can create an alternative type of business funding whilst creating a safe haven for tax efficient growth. By transferring Intellectual Property into a SIPP, it is protected from creditors and competitors and the client’s pension fund also receives a substantial investment return for the usage of the Intellectual Property.”

In order to use IP assets as collateral to obtain finance, organisations need to be able to prove they have a cash value which is lasting and with a realisable market value. All this depends on a properly established valuation. While it may seem obvious that organisations selling or acquiring a company or portfolio, or those wanting to use IP as part of a pension fund should establish what intangible assets exist, whether they are live and valid, their value, and whether they are fully protected in all jurisdictions, unfortunately this does not always happen as well as it could.

Even if the assets have been included on a balance sheet, IP is often not valued accurately enough, in part because it is not always straightforward to do so. Identifying the intangible assets usually involves carrying out an audit to identify them and working out which of them are of significant value. A number of different approaches are used to measure value. Examples include the cost approach, the market approach, the income approach, or a combination of each.

Following an audit, IP specialists will undertake a landscaping exercise in order to understand the intangible assets that are of value. This includes assessing the company’s position vis a vis existing or potential competitors, as well as identifying possible opportunities for further exploiting any IP.

Not all IP assets are appropriate for raising funds, and a valuation and assessment process may reveal that it would be better to use IP assets deemed as not core to the business to raise cash, for example by selling them.
The monetary value of the assets will depend on how securely the assets have been protected. It is important therefore that protection is as robust as possible.

Business Action To Stop Counterfeiting and Piracy (BASCAP)***claims that the total global economic value of counterfeit and pirated products is as much as $650 billion every year, with international trade accounting for more than half of counterfeiting and piracy estimated at $285 billion to $360 billion.

Research from The Intellectual Property Crime Group (IPCG) has revealed that 40% of businesses surveyed took no practical action such as trade mark registration or employee training to ensure their IP and that of others is protected.

**** It is important to consider the protection of all relevant trade marks, which can of course include words, logos, sounds, colours, gestures, brand names and slogans—in fact, any distinctive feature which can be represented on paper and which can distinguish the goods or services of one business from those of another. They can even consist of 3D shapes.

Patents that protect the functionality of new inventions – including processes or devices – can add real value.
In addition, copyright, registered designs, database rights, and trade secrets can also play an important role in protecting intangible assets.

Intellectual Property is a powerful, flexible and effective business asset, and like other assets it needs to be understood, protected, and reviewed regularly. It needs to be used judiciously – using it as a financial vehicle for example may not be right for all organisations depending on their circumstances. But applied appropriately, the outcome can be highly beneficial to all parties.

*Figure quoted in ‘Making the Intangible Tangible’, a report prepared by PWC for the Australian Copyright Council

**Source: United States Patent and Trademark Office

*** Source: Estimating the Global Economic and Social impacts of Counterfeiting and
Piracy – A Report commissioned by Business Action to Stop Counterfeiting and Piracy (BASCAP) February 2011

****Source: IP Crime Group 2008/9 Crime Report -http://www.ipo.gov.uk/ipcreport08.pdf

Coller IP – www.collerip.com – specialises in helping organisations protect, understand, value and commercialise all aspects of intellectual property/intellectual capital. The CEO, Jackie Maguire, has extensive experience in IP and is a founder of Coller IP. In 2009 she was listed by Intellectual Asset Management magazine as one of the top 300 IP strategists worldwide – and in the top ten in the UK and each year since she has been voted once again into the top 300. Her founding partner, Jim Asher leads Coller IP’s valuation practice.

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Investing

What is the procedure for proving a missing or lost Will?

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Intermediaries will be key to Investment Houses navigating the Covid19 crisis

By Alexa Payet, Partner at Bolt Burdon and listed specialist in the Certainty

Contentious Probate Hub & Area

Initial steps

When an individual dies it is necessary to search their paperwork to establish whether they made a Will and gather information regarding their estate. This is important because the personal representatives of the estate have a legal duty to distribute the estate correctly and could be held financially responsible for any mistakes made through any breach of duty.

Where a Will cannot be found but is believed to exist there are a number of steps that can be taken to help confirm its existence, including (but not limited to) the following:

  • making enquiries of the deceased’s family and friends;
  • making enquiries with the deceased’s professional advisors;
  • instructing The National Will Register to undertake a Certainty Will Search.

Presumption of revocation

Where the original Will is known to have been in the testator’s possession before their death and cannot be located afterwards, there is a rebuttable presumption that the Will was destroyed by the testator with the intention of revoking it. If an order for the proof of a copy is to be obtained then this presumption must be rebutted.

Procedure for proving a copy Will

The procedure for proving a copy Will is set out in Rule 54 of the Non-Contentious Probate Rules 1987 (‘NCPR’).

The application is made to the Probate Registry at which the application for the grant will be made and the order can be made by a district judge or registrar.

The application must be supported by evidence in the form of an affidavit (although during the global pandemic the rules have been amended by the Non-Contentious Probate (Amendment) Rules 2020, SI 2020/1059, to provide for the use of witness statements as an alternative to affidavits).

The evidence must set out the grounds of the application and any available evidence that the applicant can adduce as to the Will’s existence after the death of the testator or, where there is no such evidence, the facts on which the applicant relies to rebut the presumption that the Will was destroyed by the testator during his/her life.

The applicant must ensure that the Court has the best available evidence of what happened to the testator’s Will in order that effect may be given to his/her testamentary wishes.

It is important to understand that the applicant does not need to demonstrate that the Will has been lost (it is the fact of its loss which gives rise to the presumption of revocation). Instead, the applicant must establish, by evidence, that the Will was not in fact revoked.

What is a Certainty Will Search and why is it necessary?

A Certainty Will Search searches for Wills that have been registered on The National Will Register (circa 8.7 million Will registrations in the system) and for Wills that have not yet been registered in geographically targeted areas where the deceased used to live and/or work. A Certainty Will Search is extremely important as it will be necessary to notify the probate registry of any persons who would be prejudiced by the grant if the copy Will is proved. If no such person exists then the registrar is more likely to grant the application. Alternatively, if such a person does exist then you should seek to obtain their written consent to the application. The written consents can then be lodged with (or following) your application.

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Oil prices rise as investors look to higher demand seen in second half

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Oil prices rise as investors look to higher demand seen in second half 1

By Shadia Nasralla

LONDON (Reuters) – Oil prices climbed on Tuesday as optimism that government stimulus will eventually lift global economic growth and oil demand trumped concerns that renewed COVID-19 pandemic lockdowns globally are cooling fuel consumption.

Brent crude futures for March rose 72 cents to $55.47 a barrel by 1152 GMT after slipping 35 cents in the previous session.

“The perception that any retracement will be quick as confidence in economic and oil demand recovery is unlikely to fade away,” said PVM analysts in a note.

U.S. West Texas Intermediate crude was at $52.65 a barrel, up 29 cents. There was no settlement on Monday as U.S. markets were closed for a public holiday. Front-month February WTI futures expire on Wednesday.

Investors are upbeat about demand in China, the world’s top crude oil importer, after data released on Monday showed its refinery output rose 3% to a new record in 2020.

China also avoided an economic contraction last year.

Investors are watching out for U.S. oil inventory data from the industry association API, due on Wednesday, the same day U.S. President-elect Biden’s inauguration speech will likely give details on the country’s $1.9 trillion aid package.

The International Energy Agency cut its outlook for oil demand in 2021, but pointed to a recovery in demand in the second half of the year to an annual average of 96.6 million barrels per day.

“Border closures, social distancing measures and shutdowns…will continue to constrain fuel demand until vaccines are more widely distributed, most likely only by the second half of the year,” it said in its monthly report.

(Additional reporting by Florence Tan, editing by Louise Heavens)

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Can Thematic Investing provide investors with growth opportunities in uncertain times?

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The impact of COVID-19 on the investment market

New whitepaper from CAMRADATA explores

CAMRADATA’s latest whitepaper on Thematic Investing, considers the role this type of investing can play in asset management and explores trends that can permeate society and traverse sectors. The whitepaper includes insights from guests who attended a virtual roundtable on Thematic Investing hosted by CAMRADATA in November, including representatives from CPR Asset Management, Sarasin & Partners, Impact Investing Institute, PwC, Quilter Cheviot, Scottish Widows and Stonehage Fleming.

Sean Thompson, Managing Director, CAMRADATA said, “In these seminal times, thematic investing has the potential to shape how the future unfolds. Yet running a successful thematic fund is no easy feat – it is a bit like navigating unchartered waters trying to identify the trends and the long-term opportunities.

“Trends such as AI and biotechnology are still in their relative early days, for example, and global economies are undergoing dramatic changes. But mapping out certain trends, identifying potential sustainable returns through a unifying thread that spans multiple sectors, could help future-proof investments. “Our roundtable guests considered current key themes, which themes worked well, and which have not and how thematic investors could identify trends with the potential to offer future growth.”

The guests named themes they currently like which included artificial intelligence, China, climate change, clean energy, automation, evolving consumption, ageing, digitalisation, water, waste management, biodiversity, and board diversity.

After discussing themes that have worked or not, the guests looked at total allocation to themed funds, and whether clients might be blinded by themes to the overall risk exposure in their portfolios.

Key takeaway points were:

  • Themes have a habit of coming and going. One guest recognised that automation and robotics, for example, were cyclical, which means that investors will have to think carefully about entry-points.
  • It was agreed that the commodities ‘super cycle’ of the 2000s came about with the economic development of China. Many commodities-based products found their way into mainstream investing, but this is unlikely to happen again.
  • One guest was surprised by some of the themes that interested their customers; with their research showing that Board Diversity was almost the lowest-ranking concern among the ESG choices they listed.
  • There was correlation between environmental impact and social benefits to investing. The theme that concerns the Impact Investing Institute, which is less than two years old, is improved measurement of such relationships.
  • In terms of successful themes, one clear winner due to COVID had been digitalisation.
  • One theme that has not done so well is the Ageing theme focused on older people travelling and enjoying experiences abroad later in life.
  • One guest said their firm used themes for ideas generation, not as a shortcut for portfolio construction. They said themes lead to good ideas, but they then spend at least three months researching a stock, so that the best themes are represented by the best investments.
  • The final point was that there are sensitivities for any global investor in allocating to themes, even the biggest one of all, Climate Change.
  • But on a positive note, one guest added if all stakeholders can resolve their differences on definitions such as impact and ethical investing, then more capital will be readily transferred into opportunities.

The whitepaper also features two articles from the sponsors offering valuable additional insight. These are:

  • CPR Asset Management: ‘Central Banks: leading the path towards Impact Investing’
  • Sarasin & Partners: ‘Theme or fad? How to invest for the long term’

To download the Thematic Investing whitepaper, click here

For more information on CAMRADATA visit www.camradata.com

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