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Morgan Stanley to sell its retail businesses to Invesco Ltd.
With the aim of focusing on institutional clients, Morgan Stanley has decided to sell its retail asset management business, including the Van Kampen division, to money manager Invesco Ltd. in a $1.5 billion deal which will include $500 million in cash and 44.1 million shares. The transaction is expected to close in mid- 2010.
“By taking a minority interest in Invesco, Morgan Stanley will be able to realize significant value in partnership with a world-class player,” said Morgan Stanley Co-President James Gorman. “In addition, this transaction will mitigate certain affiliated product sales restrictions faced by Van Kampen portfolio managers since the closing of the Morgan Stanley Smith Barney joint venture.”
Morgan Stanley also said its investment management group will include several institutional-focused businesses, including a long-only business (equity and fixed income), a direct hedge fund business, and a fund of funds business. It also will include a liquidity business and a merchant banking business, with the bank’s real estate, private equity and infrastructure units.
In Japan, Morgan Stanley Investment Management’s (MSIM) equity management operations will be sold to Invesco as part of the transaction, but the bank will retain its fixed income investment team and a sales and client service team to serve Japanese investors.
This is the latest addition to the array of deals which include money manager takeovers of bank assets. Bank of America Corp. last month sold the long-term asset management business of its Columbia Management unit to Ameriprise Financial Inc., a financial planning services firm based in Minneapolis, for up to $1.2 billion in cash. And in June, British bank Barclays PLC agreed to a $13.5 billion offer from U.S. investment manager BlackRock Inc. for its asset management arm, Barclays Global Investors.
Subscribe to the comments for this postBenefits of Portfolio Management
Since the time Portfolio management was introduced in the 1990s, it has benefited the insurance industry as a whole leading to more business for both the carriers and the producers. Portfolio management allows insurance producers to obtain capital in exchange for the sale of certain obligations of existing policyholders’ accounts. In this arrangement, client relationships remain unchanged and the policies unaffected, while producers are provided investment capital based on fair market value of all or part of their oldest policies. They can then use the capital to either reinforce their business or to invest in less risk-averse products.
Portfolio Management is helpful even more during a volatile market as it allows producers to manage a serious future tax bite. Cash that is raised can be earmarked for investment in recession-proof products such as CDs or annuities, products that producers have already been offering their own clients over the years. Capital can also be utilized for a variety of other uses, including:
-Acquisitions
-Lead generation
-Management software and upgrades
-Diversification of new products and services
-Reduce and service existing debt
-Lifestyle changes
Thus, portfolio management has been welcomed with open arms by the insurance industry as it is a win-win situation for every identity involved.
Australia’s Central Bank may raise interest rates
Mizuho Asset Management Co., a unit of Japan’s second-largest bank has intentions to add to its Australian bond holdings. According to Merrill Lynch & Co., Australian government bonds are set for their first annual loss since 1999 and there are speculations that the country’s central bank will lead the Group of 20 nations in raising interest rates. The futures market is pricing in a 40 percent chance the Reserve Bank of Australia will increase its benchmark rate at 2:30 p.m. in Sydney after Australia avoided recession this year.
However, Akira Takei, a Tokyo-based manager in Mizuho Asset’s international bond investment department said, “There are rumors that they will raise rates, but I don’t think they will. Any rise in interest rates after the decision will be just a knee-jerk reaction. Aussie bonds look cheap.” Akira helps oversee 250 billion yen ($2.8 billion) assets.
The Australian economy expanded 0.4 percent in the first quarter and 0.6 percent in the three months ended June 30. As said by Governor Glenn Stevens on Sept. 28 in testimony to the senate economics references committee, “Interest rates will have to “move off their current unusually low levels.”
Higher interest rates in Australia, compared with 0.1 percent in Japan and as low as zero percent in the U.S., attract investors to the South Pacific nation’s assets. Australia’s two-year government securities offer a 3.5 percentage point premium over similar maturity U.S. Treasuries and a 4.13 point advantage over Japanese government debt. , Bloomberg data show that for 10-year notes, the premiums stand at 1.97 and 3.92 percentage points, respectively.
Problems associated with asset management
There are various issues or problems which have to be faced by an asset manager while performing his job. Some of the common problems relating to asset management are:
It is difficult to update the evaluation of assets especially when there is a bog team of asset management because lack of proper communication and difficulty in assignment of specific tasks makes it difficult to establish the updates.
If the members of the asset management team are not properly trained to use the equipments and techniques, the incompetence will lead to inventory problems and management issues. So, it is always better to have few high quality people than many below average ones.
Again, if your staff members are adequately competent but you do not have the technology that matches their qualifications for doing to job, you may still get a below average performance from your asset management team.
Lack of support and co-operation among departments may not be conducive for positive change and objective or honest inventory of assets. As such there is a need for strengthening the ties of the team members via enriching activities.
Lack of balance in the different categories and the figures that represent them in the charts are detrimental to good management of assets in an organization.
Sometimes, there may be a tendency to eliminate the risk altogether in asset management without considering this fact that risks are contributory to the company’s growth and yield good returns.
The above mentioned problems are inherent to asset management business and have been there and will be there in existence. A good team needs to address these problems for successful output.
The emergence of Cushman & Wakefield Asset Management KK
Cushman & Wakefield, the premier Japan asset management firm, has acquired Pacific Investment Corporation, the private fund asset management subsidiary of Japanese real estate fund giant Pacific Holdings Group, and now will operate as Cushman & Wakefield Asset Management KK.
Pacific Investment Corporation currently manages approximately US$2 billion of assets totaling 4.73 million sq.ft of office, retail and residential properties.
Michael Thompson, CEO of Cushman & Wakefield’s Asia Pacific operations, said, “This is an important strategic acquisition for us as it is consistent with Cushman & Wakefield’s vision to strengthen and expand our services to clients in core ‘flagship’ markets. Given the importance of the Japanese economy both regionally and globally we have targeted accelerated growth in this market and this acquisition now provides us with a base to expand our asset management services within Japan and eventually regionally”.
Through this new operation, Cushman & Wakefield will help its clients in exploring investment opportunities as well as provide acquisition, strategic portfolio planning, asset management and disposition services in the mature and sophisticated Japanese real estate market.
Todd Olson, Managing Director for Cushman & Wakefield operations in Japan, said, “This enhancement of our service platform in Japan represents a significant step forward for our clients. The Pacific Investment Corporation team of 35 experienced professionals significantly strengthens Cushman & Wakefield’s existing capabilities in Japan and we anticipate further significant staff growth as we expand our client base in Japan.”
Pacific Investment Corporation’s President, Mr. Akira Yamanouchi, has been named as the new Executive Director of the new entity, and he commented, “I feel privileged to be a part of Cushman & Wakefield. Our clients (including several major institutional investors) for whom we manage US$2 billion of assets in Tokyo, and their lenders (including several leading domestic banks) have enthusiastically welcomed this acquisition.”
Representative Director and head of Cushman & Wakefield Investment Advisors K.K., Mr. Yoshiyuki Tanaka explained, “With the ongoing loss of credibility by many existing asset management firms in the market, there is a large demand from financiers for objective and professional asset management services. Combined with the financial stability, global network, and Cushman & Wakefield’s reputation as the most trusted brand, our new asset management company has the local in-depth experience and is in a market-leading position to capitalize on this opportunity and rapidly increase market share extending our services to both Japanese and international investors in the Japan market.”
Important steps in roofing management systems
One aspect of asset management system is to constantly monitor and assess which facility needs immediate repairs. A commercial roofing contractor has to use this process of constant assessment in order to effectively maintain and repair a facility’s roofing system(s).
The replacement decisions in the roofing system should be eventual rather than sudden and for this there should be a right mix of maintainence of new roofing systems and repairs of older roofing systems.
According to the National Roofing Contractors Association, the service life of a commercial roofing system can be increased by 30%-100%. Thus, it can be said that preventive maintenance costs can be just about half of the repairs cost. One should also regularly inpect the warranty documents in order to comply with the warranty requirements for regular maintenance.
Energy management is another aspect of facility management factor in maintaining roofing systems. is energy management. According to the Building Owners and Managers Institute, good maintenance practices and good energy management go hand in hand. Wet insulation in a roofing system loses energy. Just regular maintenance ensures the highest rates of return on energy conservation.
Professioanls should inspect assets regularly for an effective facility asset management process. Physical rooftop inspections and color infrared camera surveys are the keys to the effective documentation and analysis of energy loss, roof repair and maintenance issues. After the information is gathered during roof inspections, it should also be maintained in order.
Proper repair, maintenance and energy conservation of commercial roofing systems will minimize the cost and help deduce in advance when the roofing system needs to be replaced.
What should your asset manager do?
You need a team of advisors if you are looking at your asset management. When looking out for the best asset management companies to assist you, you need to address these points:
The asset management company you choose should be able to identify your needs and address your goals. You have to make them aware of what you want to do in the long term and in the short term. After this, you need to have an open discussion about how these goals will be achieved.
The asset management team should deal with your retirement planning looking at the savings you have on hand and how you can build it up through further financial planning. Retirement planning should focus around making your assets grow over the longest time period possible.
The amount of savings which seem sufficient now may not be enough for your future. An expert financial advisor can look into the situation and give you wise advice. An experienced and able adviser can help you take care of your tax obligations and take into account bad moves in the market.
With an efficient asset management team, you can get the best interest of your money in mind so that money you’ve invested will be managed well and grown by managements with the best intentions.
To sum up, your asset manager should be able to identify your needs and goals, then look into the amount of assets and savings you have in hand and then advise you the best possible options to optimize your savings for a secure future.
Ireland’s ‘Bad Bank’ scheme to cleanse banking sector of risky assets
Ireland’s has declared that its “bad bank” will be able to raise funds via bonds for viable, partially completed property projects it will acquire under plans to cleanse the banking sector of risky assets.
Ireland will outline on September 16 the probable amount of bonds it will have to issue to pay for taking over tens of billions of euros in property assets as part of its “bad bank” scheme. Around a quarter of the assets being taken over are in Britain, mostly in London and Northern Ireland.
“At the time of the introduction of the legislation, the estimate of the probable amount of bonds will be made public,” Finance Minister Brian Lenihan said after he published draft legislation creating the “bad bank”.
The draft legislation did not disclose anything about the discount NAMA will demand on the 80 billion euros of assets because this will be decided on a case-by-case basis.
The size of the discount demanded will determine whether Ireland’s top two banks, Bank of Ireland and Allied Irish Banks will need further state capital injections on top of an existing 25 percent stake in each lender.
Brendan McDonagh, the interim head of the National Asset Management Agency (NAMA), said the full capital impact of NAMA on the country’s banks would not be known until all 10,000 loans are moved over to the agency by the end of June 2010.
Sumitomo to acquire Nikko Asset Management
In a release, Sumitomo Trust and Banking Co. has announced its plans to buy Citigroup’s Japanese asset management arm, Nikko Asset Management, for a hefty sum of JPY112.4bn (US$1.2bn). The deal is expected to close on October 1, 2009. Sumitomo also disclosed that Nikko’s business is mainly retail and the firm has established distribution relationships with 90% of the country’s regional banks. Citigroup has been shedding its Japanese businesses as it looks to recover from the credit crisis.
After the merger, the combined firm will have JPY34.5trn in assets under management, with JPY8.8trn coming from the Nikko unit. Sumitomo runs JPY25.7trn mainly for private pension funds, public schemes and international institutional investors.
A report of the Japanese asset management industry showed that in June, Sumitomo had edged out Barclays Global Investors as Japan’s largest asset manager, potentially because of government wins from the Government Pension Investment Fund.
Citi chief executive Vikram Pandit said: “With the previously announced sales of our brokerage and trust banking businesses in Japan, this transaction marks another milestone in the implementation of our Citicorp/Citi Holdings strategy.”
He added: “We remain committed to Japan, where we have proudly served clients for more than a century. We can now shift our focus from reshaping our franchise in this very important market to building our core businesses and better serving clients.”
Growth expected in Bangladesh asset management sector
Studies by RACE Management have shown that a promising growth of 40 percent is expected in the next five years in Bangladesh’s mutual fund sector.
RACE Management, a second generation asset management company, forecasts a Tk 10,000 crore growth for 2015, in terms of assets.
“Increasing interests by institutions and retailers to capture stock market returns and the availability of skilled investment officials help such fund grow,” said Hasan Imam, the company’s chief executive officer.
Hasan, who has a 10-year working experience in the US financial sector (Wall Street), sees the local mutual fund industry as ‘massively underserved’ despite its great potential.
Inspite of great potential, Mutual fund’s market capitalisation in Bangladesh is only 2 percent, as compared to almost 50 percent in US and Europe and 24 percent in neighboring India. The reason for the poor growth is lack of knowledge and the dearth of professionals.
However, the scene seems a bit brighter since 2008 when four asset management companies entered the market. The second-generation asset management firms that have been awarded licences in 2008 and 2009 are Prime Finance, VIPB, LR Global and RACE. Earlier, there were only two such companies Investment Corporation of Bangladesh (ICB), a state-run organization, and AIMS Bangladesh, a privately owned one.
The RACE Management has a plan to launch Tk 725 crore mutual funds, LR Global plans to launch Tk 1,300 crore mutual funds and AIMS, a first-generation company, will also come up with Tk700 crore mutual funds.
“Bangladesh market needs a lot of mutual funds to boost the confidence of retail investors,” DSE President Rakibur Rahman told The Daily Star yesterday.
“If we want to strengthen the stock market we need Tk 5,000 crore mutual funds next year,” he added, pointing to the present Tk 1,200 crore funds.
However, the Race Management CEO says, “Educating investors will be a big challenge for any asset management company.” He added that insufficient number of trustees and custodians are other major challenges.