Global Investing

Good-bye babyboomers, good-buy Generation Y?

London’s premier department store Selfridges has already opened a Christmas shop with festive decorations and accessories (Christmas comes 141 days early), so it is no surprise that some fund managers are already looking ahead for next year onwards.

David Miller, head of alternative investment at Cheviot Asset Management, thinks investment in the period 2010-2012 will be driven by the impact of demographic trends, such as Generation Y — those born since 1978, all of whom grew up with the Internet.

However, as far as investment markets are concerned Baby Boomers (1946-1964) are still in the driving seat both as spenders and savers.

“Their priorities will continue to drive markets for a few more years yet,” he says.

Miller thinks the risk-free rate of return will remain close to zero while governments will underwrite corporate risk for as long as they can afford to and will do nothing to disturb the recovery, which would keep interest rates low for years rather than months.

The case for active/passive investment

Fund managers come back to this recurring question — is it better to invest passively, tracking benchmarks, or manage your money actively, taking risks?

Standard & Poor’s five-year data shows the S&P 500 index — a plain vanilla bet on U.S. stocks — outperformed 62.9 percent of actively managed large cap funds.

The S&P Midcap 400 index outperformed 73.4 percent of active mid-cap funds and the S&P SmallCap 600 outperformed more than one in two actively managed small funds.

Is it time for a Scottish wealth fund?

Oxford SWF Project, a university think tank on sovereign wealth funds, is looking at reports that the latest entry in the field could be Scotland. The project has a new post about the Scottish government floating the idea of an oil stabilisation fund to use oil and gas revenues.  It cites Scottish cabinet secretary for finance John Swinney looking abroad gleefully:

“We want to harness the benefit of oil revenues now for future years. An oil fund can provide greater stability, protect our economy and support the transition to a low carbon economy. Norway’s oil fund is worth over £200 billion – despite the first instalment being made as recently as the mid 1990s – and Alaska’s oil fund even gives money back to its citizens every year.”

The SWF project reckons the idea is a good one, but wonders if something other than meets the eye is at play. It had two questions.

Can domestic demand boost African markets? Duet’s Salami talks to Reuters Television

Direct and indirect foreign investors fled from Africa as the credit crisis sparked a flight to safety, or at least familiarity, but Ayo Salami, manager of the Duet Victoire Africa Index fund believes domestic demand can step in to underpin growth.

from Summit Notebook:

Blackrock sees opportunities in shrinking Japan

Japan's population has peaked and all the projections have it sliding sharply in coming decades, raising questions about investment opportunities when emerging markets, in particular, offer much more obvious growth opportunities.

By 2055 government researchers expect Japan's population to slide 30 percent to below 90 million from around 128 million with mushrooming numbers of retirees to be supported by a dwindling workforce.

Yet Japan will still be an important destination for world investors, argues Hiroyuki Arita, the Japan head of Blackrock, the world's largest money manager.

How green is your investment?

Is your investment green enough?

A survey by consultancy firm Mercer, carbon data provider Trucost and environmental organisation WWF finds that greenhouse gas emissions from 118 UK-based investment management firms, with 206 billion pounds in assets under management, range from 209 to 1,487 tonnes per million pounds invested.

The report showed that the funds hold investment to 1.4 percent of the market capitalisation of 2,380 companies, which accounts for approximately 134 million tonnes of carbon emissions. These equate to 22 percent of UK greenhouse gas emissions.

Nine of the 10 main contributors to the overall carbon footprint of the portfolios are in the utilities and oil and gas sectors. The research includes in-depth analysis of the increasingly negative effects that carbon costs could have on carbon-intensive utilities and oil and gas companies.

Rich people keep passion investing

The credit crisis has hit the world’s super rich, with their financial wealth shrinking by almost a fifth in 2008, but they are flocking to luxury goods and jewellery in a  flight-to-safety.

A survey by Merrill Lynch Global Wealth Management and CapGemini found that the population of high net worth individuals (HNWI), with net assets of at least $1 million, fell 14.9 percent in 2008 from the year before. The population of ultra high net worth individuals, with net assets of at least $30 million, fell 24.6 percent.

Luxury collectibles, which include automobiles, boats and jets, remained the most preferred choice of “passion” investments, representing 27 percent of the portfolio last year, compared with 26 percent the year before.

from DealZone:

“Tourists” arrive in private equity

Opportunistic buyers, lovingly dubbed "tourists" by those in the industry, have moved into the secondary private equity market. They're looThe cruise ship from Mediterranean Shipping Company Musica dwarfs Via Garibald as it arrives in Veniceking for positions in brand-name private equity funds at knock-down prices. As I wrote in a DealTalk today:"Pension funds and wealthy middle-east sovereign wealth funds are buying up investments in private equity funds, pushing up prices and sidelining secondary firms that specialise in acquiring the assets."The market for second-hand private equity assets -- where private equity investors offload assets to specialist buyers -- has mushroomed as the credit crisis has intensified. And increasing numbers of cash-strapped investors are concerned about meeting their future commitments to buyout funds."New investors have been attracted to deals by steep discounts to net asset value, forcing up prices for specialist buyers, such as Goldman Sachs (GS.N) and HarbourVest Partners (HVPE.AS) that last month closed secondary funds after reaching their $5.5 billion and $2.9 billion targets respectively."Read the full piece here.

from MacroScope:

Gold to go

Automatic teller machines (ATMs) -- 500 of them -- dispensing pieces of gold will be available around Germany, Switzerland and Austria by the end of this year.

That at least is the plan of German precious metals online trading company TG-Gold-Super-Markt.de. The ATMs, to be located at airports, railway stations and shopping malls, are intended to accustom ordinary people to the idea of investing in a physical asset such as gold, the thinking goes.
 
Thomas Geissler, the company's chief executive, said the gold ATMs might even improve relations between the sexes.
 
"I have yet to meet a woman who does not like a gift of gold. It's better than flowers. Flowers are more expensive. They wilt and you (as a man) don't get as many points at home as if you bring gold," he said.
 
A prototype ATM on display for a one-day marketing test at the main railway station in Frankfurt, Germany's financial capital, did indeed reward your correspondent with a 1-gramme (0.0353 ounce) piece of gold.
 
It cost the equivalent of $42.25 -- a 30 percent premium over the spot market price.

Dubai dream over for western investors

Real estate prices are in freefall. Billions of dollars worth of projects have been cancelled or put on hold and expats are leaving in droves as they lose their jobs. Once a playground for the rich and super-rich, the seaside emirate — home to palm tree shaped islands, mega malls and luxury sky-rise hotels — has lost its lustre. And bargain-basement assets are not yet cheap enough to tempt buyers back. 

European investors, who once clamoured to Dubai, reckon they can land better deals closer to home or elsewhere in the Gulf. Some analysts are predicting that the more stable markets in Abu Dhabi, Doha and Saudi Arabia to recover faster than Dubai.

 “Dubai is not one for us. I prefer long-term established locations with underlying intrinsic attractions or clear, sustainable competitive advantages,” Bill Hughes, managing director, Legal & General Property, told Reuters.